All posts by Peter Murray

CSE Issuer Stories, Magazine

Friday Night: Focus on specific US markets reflects outlook for national, regional catalysts

Brayden Sutton is one of the pioneers of the modern Canadian cannabis industry and is also fast becoming an authority on the business in the United States, where he believes resources are currently better deployed in most cases.  Public Entrepreneur spoke with Sutton, Chief Executive Officer of Friday Night Inc. (CSE:TGIF), recently about the different outlooks for the two markets.

We’ll get into the US regulatory environment around cannabis and your opinions on cannabis stocks in a moment, but first can you explain what Friday Night does and why you chose the US market as your focus?

Friday Night’s primary asset is the very first cultivation license for cannabis in Las Vegas.  We bought this asset early in 2017 and took it public in June of that year.  It was July when things went recreational, and since then we’ve experienced very good growth.  It was all a function of making sure we were ahead of the trends, not chasing them.

I’ve always been one to go where the puck is going to be, not to follow others.  I was a first mover on the investment banking side of the cannabis space with my own capital in 2013, and then in cultivation and later in various forms of extraction and processing.  I have been fortunate to be able to get in front of trends and I knew that Las Vegas was going to be a great market to be in.

One staggering statistic is that the US cannabis market is estimated to be over $75 billion, and yet not one group controls even 1% of that market.  Now that is the opportunity of a lifetime for investors.  I was personally invested over 10 years ago in the Canadian cannabis industry, as the MMAR (Medical Marihuana Access Regulations) eventually gave way to the MMPR (Marihuana for Medical Purposes Regulations), and I co-founded Supreme Pharmaceuticals in early 2014.

I began to feel that from 2014 to 2017 things had become stretched on the Canadian side.  Canada has a very limited market in all aspects.  Despite it leading the world in capital for cannabis initiatives, there are only about 7 million cannabis users coast to coast, so it is a tiny market versus a state such as California or somewhere such as Las Vegas, regardless of whether you are talking adult use or medical.

I know the company has holdings in businesses outside cultivation.  Can you talk about those as well?

We own 91% of a company called Infused Manufacturing, which operates as Cannahemp, and they are solely a hemp-derived CBD business.  It doesn’t come with the same restrictions and the products appeal to a much broader base.  From tinctures and creams to bath bombs and lip balms – there is a very impressive list of products that apply to far more people than cannabis does on its own.

More recently we have acquired Spire Secure Logistics, a Canadian company focused on due diligence and security in the cannabis sector.  That branches us into exposure to Canada and once again a growing trend – there is a major lack of discussion around infiltration of organized crime, diversion of product, internal theft of product, products making it into stores when they should not be there, and many, many other issues.  It gives us a magnifying glass into the operators we are considering and the ones we have in terms of ensuring we are only working with top-notch business people who put shareholders first – and as important, don’t bring with them any negative history.

What are some of the unique aspects of operating in the US market and how do you make the most of them?

One big one is the opportunity today.  With Canada, everyone took at face value Prime Minister Trudeau’s promise of legalization by July, which will not happen.  It remains to be seen if it will even happen this year.

If you go south of the border, however, you’ve still got many federal catalysts to come.  I would argue that Canada has had its primary growth in the space already from 2013 through 2017 as far as investment is concerned.  Now it’s all about market share and who will ultimately shake out as the “Big 5” to serve a recreational market and a much less fragmented medical market.  It is much like when people buy a stock on the rumour and sell when the news comes out.  In Canada, I feel if cannabis were to become legal tomorrow a lot of people would sell on that catalyst and look for the next big thing.  That’s the nature of venture capital; it gets bored easily and needs new opportunities and to blaze new trails.

Just recently there was a conversation between President Trump and the Governor of Colorado, which sent US cannabis stocks higher.  There is so much to look forward to and I really see America today much like Canada was in 2013 in terms of the financial opportunity that exists right now.  It has years of accelerated growth ahead, and as people wonder if they have seen the peak, it just continues to get bigger, as it did in Canada for the last five years.

As far as operating in the US, I have enjoyed it and our partners municipally and locally are far better to deal with than Health Canada in every way.  There is much more of an entrepreneurial mindset in the US.  It’s just a lot more enjoyable of an environment, and people seem to be more accommodating to this business, be it construction companies or bankers, they all seem to be happier to have the business.  My experience in Canada was people were more hesitant and unsure of the muddy legal landscape.  In Nevada, it’s black and white.

Observers are aware of the conflicting positions of US state governments and the federal government.  How does that environment get reflected in your corporate strategy?

What if the United States suddenly voted on a rescheduling of cannabis this year or next?  Something to consider.  Big Pharma spends more money lobbying than any other industry in the US, by far.  Big Pharma has an interest in not missing the boat.

Just take Merck, Ely Lilly and Pfizer as examples.  Think of the money they are losing every day because this drug is Schedule 1 (no currently accepted medical use in treatment) and not Schedule 2 (has a currently accepted medical use).  There is going to be a major push from them and it is already happening behind the scenes.  I continue to be of the opinion that we may see more federal catalysts in the US before we do in Canada and for that reason as a company we are very much focused on Nevada and we are fairly confident in an overall softening on the Federal stance, allowing the sector to mature further.

So to answer your question, on a state versus federal level we very much enjoy where we are and are perfectly happy to paint within the lines of the state.  One thing I admire very much about the US is the Tenth Amendment and individual states’ rights, and with that we are very confident in our strategy that we will be able to take full advantage federally, once able to do so.

What is the difference between doing business in the various states?  Why would you choose one jurisdiction over another?

Nevada has been extraordinarily regulated for decades, and it has to be for things like gambling.  Compare Nevada to other states; Washington has thousands of cultivation licenses, as does California, as does Oregon, as does Colorado.  Nevada has less than 200.

Colorado legalized the plant in 2014 and the cartels involved in trafficking cannabis moved back into the state because there was an economic point at which they could still be in business.  So the state was forced to lower taxation by a couple of dollars per gram and immediately the economics shifted for organized crime and they left.

Nevada was forward-looking in saying they want to ensure illegal players are pushed out and that their new licensees are not going to be underwater in 12 months.  I would point to Canada again, where we have over $15 billion of market cap making up the public companies in the space, never mind the private ones, and they are fighting over a total market share of only about $200 million a year in business right now.  To me, that represents a bubble in the truest sense.  Yes, legalization will launch that number to more like $5 billion-plus, but legalization is not guaranteed.

Look at Nevada versus Canada, Canada probably has 50 times the square footage in terms of canopy space and it has perhaps a fifth of the user base.  It is just back of the napkin math.  If Canada flicked a switch tomorrow and said it was legal tomorrow, what are they going to do with the surplus product?  Export to Europe? In one or two years Germany, Australia and other countries will be caught up and won’t want or need imported weed.  Canada will not be important at that point from a global supply standpoint.

I still scratch my head and wonder why there are millions of square feet of canopy on the way for a country as small as ours.  Particularly when THC will more than likely eventually come from a petri dish, not a flower pot as the trend moves further and further from the combustion of flower to get THC in your body.

From an investor standpoint, anyone owning US assets in any form needs to have a far greater risk profile than one owning only assets in Canada.  The general consensus could be said that Canada is safer, but has far more downside than upside, whereas the US is far riskier, but brings much higher upside potential.

Tell us about the feedback you get from investors and financial professionals on the cannabis sector and Friday Night in particular.

Investors are always hungry for the next thing to get excited about – the next catalyst.  We have always been focused on revenue and profit.  We are currently at a run rate of well over $10 million a year, which I think is notable in less than 12 months of being in business.  Shareholders are very picky nowadays and they demand perfection, as they should.  But there is no such thing as a perfect company, so all we can do is our best.  And right now I would say we are extremely pleased at our progress to date as well as our trajectory and future prospects.

We are always looking to improve.  We are looking at vertical integration, and right now we are looking at owning a strong retail presence, so that is taking a lot of my time, to determine what the best course of action is regarding final sale of the product.  Once we are fully vertically integrated we can be exposed to that seed-to-sale margin that so many others enjoy.

There are certain things that are hard to invest in.  I am not going to spend CDN$25 million on 20,000 square feet which is the going rate on a Canadian ACMPR grow, when I could spend US$5 million and buy something that is already doing a million dollars a month in sales.

On the banking side and institutional side, they are more pragmatic and see things on a numbers basis.  What is our maximum funded capacity, what is the maximum money we can make relative to our current market cap if everything goes as planned, and where would we be in the worst-case scenario?  Shareholders tend to be younger, more astute and better educated, but since there is so much misinformation out there, they are looking at it as more of a land grab, which is not the way to look at it.  You want to consider if a company is sustainable and profitable many years out, and what they are spending today to get there.

We are generating a million a month and moving towards profitability.  All we can do is block out the noise, build value and continue to do what we’re doing.  I see a lot of companies buying smaller companies for the sake of owning more companies, mostly due to investors and I think that’s a dangerous strategy long-term.

Any other thoughts you want to leave us with?

I have been an investor for 14 years.  When you hold a stock, if you hold XYZ company, you should ask yourself every night when you go to bed if the state or country I am in goes legal, how will I do?  If it does not go legal, how will I do?  If there is an influx of competitors, how will I do?  If key management leaves, how will I do?  Just make sure you check all those boxes.  If 30 months from now nobody is buying flower, will this company survive?  When Merck and Eli Lilly and Pfizer step into the scene, they could literally make this plant obsolete within decades.  What I mean by that is that a tiny fraction of the world rolls cannabis and smokes it.  But, for example, if and when a 50mg THC/CBD capsule is made for 10 cents in a lab and sold for $5, good luck to the company growing $2 grams and selling it at $6.

So, just make sure that whatever stock you hold does not have any one lynchpin.  Know what will happen to that share price in any environment.  If someone came along who was stronger and better than me, I would be gone in a heartbeat.  I am not a lynchpin for this company.  If I ceased to exist tomorrow, the company would still flourish.  Those are the type of companies you want to own.

This story was featured in The Public Entrepreneur magazine.

Learn more about Friday Night Inc. at http://fridaynightinc.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/friday-night-inc.

CSE Issuer Stories, Magazine

Sunniva: Groundwork laid for cannabis production “at Scale” in Canada and the US

Sunniva Inc. (CSE:SNN) Chairman and Chief Executive Officer Dr. Anthony Holler remembers well a lesson from his success building ID Biomedical, a vaccine manufacturer acquired by British pharmaceutical giant GlaxoSmithKline: produce at low cost, at a high level of quality, and at scale.

These guidelines play an important role at Sunniva, which is moving quickly to initiate production of cannabis at facilities in both Canada and the United States.  Dr. Holler offered insight on the company’s marketing and risk management strategies in a recent telephone discussion with Public Entrepreneur.

Sunniva is progressing toward large-scale cannabis cultivation in both the United States and Canada.  Let’s start by reviewing your basic business approach.

Sunniva is focused on the two largest cannabis markets in the world – Canada and California.  Our concept involves large-scale, high-technology facilities in a greenhouse format.  That means we can be a low-cost producer, also producing at the highest quality and at scale.

Our facilities, when fully completed and operational, will produce about 100,000kg of dried cannabis per year in each location.

Pre-selling a significant portion of our production is also an important pillar of the business plan.  We have announced that in Canada we have pre-sold 90,000kg of dry cannabis to Canopy Growth.  The idea is to de-risk our business model.

In Canada, we also plan to grow the Sunniva brand through our specialty cannabis clinics, where we have about 95,000 patients registered with Health Canada.  And as that number builds we expect that some of those patients will be taking a Sunniva-branded product.  We are primarily focused on the medicinal market.

Importantly, our facilities meet GMP (Good Manufacturing Practice) standards, so we will be producing pharmaceutical-grade products.

Can you give us timelines to production on each side of the border?

We’ll start commercial production in California probably in the third quarter of 2018, which means we have the potential to harvest our first crop by year-end.  After that we scale up the facility over a period of about eight or nine months.  By the end of 2019, we should be in full production on our initial Phase 1 in California, that will produce about 60,000kg.  And I’d see us starting on Phase 2 almost immediately after Phase 1 is completed.

In Canada, we are just breaking ground right now, and construction is expected to take eight months.  At the earliest, production will start in the first quarter of 2019.  And similarly, it would take eight or nine months to get to full scale.  My estimate is that Canada reaches full production in 2020.

Take us back to your initial decision to produce in the United States and how you first recognized the opportunity.  What has been required to develop the business to its current status?

In California we saw a very large opportunity and we travelled throughout the state looking at lots of facilities.  Our conclusion was that California was about five years behind Canada.  It is a very fragmented industry with many small growers, lots of dispensaries, and, at that time, no regulation.

We realized that regulation would be coming, both legalization for adult use as well as medicinal cannabis.

This meant a couple of things.  The first is that quality of product would become important, and the second was that there would be a scarcity of safe products that would meet California laws once they were enacted.  That is why we decided to build this 500,000 square foot high-technology facility for growing cannabis.

Things have been moving along quite quickly.  We now have all of our temporary licenses in California that allow us to be compliant with California law.  And recently you saw that the Trump administration is basically saying that they will let the states regulate their use of cannabis and the federal government will not interfere with that as long as they are not breaking federal laws through such activities as exporting across state lines.

Looking ahead we are preparing for what is called annual licensing.  At the end of the day you need annual licensing to be compliant in California.  The state decided it would be a two-step process.  It would start with temporary licensing so they could get compliant production and sales going.  A lot of people have not done that, so they are going to be offside with California laws.

You are going big into production in both the US and Canada, and the countries have two very different operating environments.  Can you give us some insight into those differences?

In the US, everything has to be done within the state – you cannot ship product out of state, you cannot export it to other countries.  You have to grow and sell everything right in California, in our case, and the other states are like that as well.

In Canada, you can ship your product across the country, and if it is GMP-compliant you can ship it to the European Union.  The other difference is that in Canada there is clear delineation between medical use and adult use.  Licensed producers can deal directly with medical patients, whereas adult-use will go through provincial authorities and they will regulate provincially.

Can you walk us through the business components generating your revenue right now?

Currently, our revenue comes from two areas.  One is our device company, FSD.  They produce vaporizers and cartridges.  Smoking of cannabis is becoming less common and use of vaporizers and other devices is becoming more common.  And our entry into this business was strategic, as we saw it being more valuable once we are producing cannabis ourselves.

The business currently sells empty devices to a variety of brands across the US.  It is a relatively low-margin business, but it is profitable and brings us significant revenue.

The real opportunity for us is that once we are producing our own oils and other products, we can go to the customer and offer not only to sell the cartridge and pens, but a loaded cartridge with the component of oil you want.  If someone wants a high-THC oil we can do that, or if they want pure-CBD oil we can do that.  The high value part of the business is filling the device, packaging it and then giving it to the brand.

That was our strategy right from the start.  What’s happening in California is that a lot of the brands just want to be marketers and sellers, but they need a reliable source of flower, oils and devices.  We fit that niche for them.

The other component of our cash flows are natural health services, which have seven clinics across Canada.  We have doctors, nurses and highly educated helpers who take care of patients when they come to our clinics.  The doctor will make recommendations, we educate the patient, and then we connect with a licensed producer from which they can buy their cannabis.

The business generates healthy revenue already, and we generate revenue through licensed producers – we have 25 signed up to our software package.  We get paid based on their use of the software.  It allows the doctor and our clinic to communicate directly to the producer, so patients can literally get their delivery a day later.  It automates the whole ordering system.

And when we are in production, some of those patients will be using Sunniva-branded products.

Let’s look at the financial market side of things.  How are investors and financial professionals reacting to your story?

What we hear from analysts is they like the approach of de-risking the business by forward-selling the product.  The question in investors’ eyes is that it is great companies can produce cannabis and dry product and oil, but can they sell it?  Where is the market going in terms of pricing?

Our view is that if we can lock in some pricing on the sale of a majority of our production, it safeguards the whole business strategy.

The fact we are selling pharmaceutical-grade product also means we can sell it in Canada, or we can sell it internationally.  And the fact that we are a grower at scale of high-quality cannabis, that’s what people like.

Can you tell us what your competitive advantages are beyond the strategy you have laid out so far?

Sophisticated management.  My background is from the pharmaceutical industry.  I was a founder of a company called ID Biomedical and that was purchased by Glaxo Smith Kline for a total of about $2 billion.

We built one of the largest flu vaccine manufacturing facilities in Quebec City.  We produced at low cost, high quality and at scale.  We could then go to the big distributors and ask them how much they wanted.  We pre-sold about 40 million doses in the US and supplied about 75% of the Canadian marketplace.

We have those types of people in our company who went through that.  Similarly, our CFO was the finance person for Lululemon as it went from $150 million in sales to $1.5 billion in sales and became a $12 billion market cap company.

One of our big advantages is that people look at our team and see that we have executed on a number of very significant companies, and expect that we should be able to do it again.

Are there any closing thoughts you would like to offer?

We have been judicious with raising capital.  We have been able to finance our facility in California through a large developer out of Los Angeles, Barker Pacific Group.  And that has enabled us to not have to raise that $50 million to build that facility.

Fully diluted we only have about 40 million shares outstanding, and I think our shareholders appreciate that we are very careful about issuing shares.  At some point we will issue more, but we are going to be careful because we don’t want to dilute our shareholders.

I also believe our shareholders appreciate that management and board members are significant owners in the company, too.  Shareholders see that we are invested and that we need to make this a success for ourselves as well, and then we can all succeed together.

This story was featured in The Public Entrepreneur magazine.

Learn more about International Sunniva Inc. at https://www.sunniva.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/sunniva-inc.

 

CSE Issuer Stories, Magazine

Phivida Holdings: Outstanding team with a vision for international CBD leadership

It was insights earned from years of hard work and dedication that led Phivida’s senior management team to choose a greater vision.

Founded in 2014, Phivida has shifted its focus from a pure-play wholesaler of CBD (cannabidiol) hemp-oil extracts into a premium portfolio of CBD-infused clinical and consumer brands, offered in a variety of formats, and formulated to serve the needs of patients, practitioners, professional athletes, and active professionals.

President and Executive Chairman of Phivida Holdings Inc. (CSE: VIDA) John Belfontaine has moved as fast as anyone to take advantage of the growing interest in all things hemp/cannabis, as legalization efforts – and greater acceptance of the plant’s medicinal properties – continue to progress in North America, and around the globe.

Belfontaine, working with key advisors, first saw the opportunity, brought it to the capital markets and quickly found himself fully capitalized, with an all-star line up of experienced executives.

Fast-forward to Q2 2018 and the company has a flush treasury and a newly evolved senior management team with proven success in taking products through regulatory labyrinths – plus a vision to build a CBD brand which appears destined for success.

The Phivida executive team now includes Chief Executive Officer Jim Bailey who, with his team, built the energy drink category in Canada from scratch, taking Red Bull Canada to over $150 million in annual sales. Energy drinks such as Red Bull were not even approved for sale in Canada when Bailey agreed to head the Canadian operations of what is now a household name.  There are clear parallels to his success in that role with the quickly evolving regulatory environment within the global CBD hemp and cannabis industry.

Bailey is new to the team, having joined Phivida in mid-March, following the appointment of Michael Cornwell as Chief Marketing Officer.  Cornwell’s vast experience in brand marketing and sales for top CPG (Consumer Packaged Goods) companies includes his former role as Business Unit Director for Red Bull.

The most recent addition to the executive team is another top Red Bull alumni, former Red Bull USA Director of Sales Doug Campbell. Campbell joined the team in early May in the role of Chief Commercial Officer, now overseeing international distribution and sales.

Clearly, Bailey and his new teammates qualify as star power for a company of virtually any size but for one at Phivida’s growth stage their leadership is truly remarkable.  Their decision to join was based on a clear potential to grow the company into a leading brand in a product category in which they all share a common passion: functional foods, beverages and natural health products infused with CBD from medicinal hemp.

The Phivida product line currently encompasses CBD capsules and tinctures both for consumer and clinical markets, as well an appealing selection of CBD-infused beverage innovations. Phivida’s CBD beverages use encapsulation technologies which make the CBD oils faster acting, longer lasting, and soluble in a fluid format. Perfect for CBD beverages, higher than average consumption rates, and a USA health and wellness market that tends to place a premium on price and convenience.

The company is continuing to innovate on new CBD-infused beverage brands and formulations, and the finer details of its marketing strategy, ahead of a USA roll out.

As a first order from the new chief executive, the creative vision for the future of the brand is now led by award-winning creative agency Sid Lee. This is the same creative agency that assisted Red Bull’s launch in Canada, as well as other notable names in their portfolio, such as North Face and Grey Goose. Phivida has also engaged world-renowned brand designer Brian Schmitt to act as a creative director in the evolution of the brand, with a portfolio of work that includes global brand juggernauts like Nike and Apple.

“The consumer beverage side of the business is what we are really going to focus on,” says Bailey.  “We are going to start with a launch in the United States in four major metropolitan areas: Seattle, Portland, San Francisco and San Diego.  We’ll begin with a targeted approach and then look to broaden distribution nationally.”

Bailey came to believe in the potential of cannabinoid-infused products during his recovery from a cycling accident several years ago.  The hospital that performed his surgery had him on opiates while under its care, but even before being discharged he was looking for natural alternatives.

“I did a lot of research on cannabinoids and their potential for helping with pain management,” Bailey explains. “Knowing Phivida was in the CBD-hemp space really intrigued me.  In food and beverage, distribution and retail are both looking for natural alternatives right now.  People are more aware of what they are putting in their bodies and are seeking healthier choices, so for me this sector is ripe for growth.  I know we have the potential to equal the success we had with Red Bull.”

Both Belfontaine and Campbell share similar stories, and one that many relate to.

Bailey says the only way to beat competitors in the current environment is to “out-market them and out-professionalize them.” He explains regional distributors are forced to operate in somewhat of a wild west environment for the time being, often turning to manufacturers making small batches and selling product on the fly.

“They see that we are very different, the investment we are making in the consumer, and the investment we are making on the creative side,” notes Bailey.  “And working with top quality ingredient suppliers that bring authenticity for each product is important.  Everything we use is premium quality, professionally manufactured, and thoroughly tested for purity, safety and function, putting Phivida in a class above.”

Ensuring reliable supply of high-quality ingredients and at the same time opening a new potential market in Canada is par for the course for Phivida. However, the company’s biggest move to date is one the capital markets have, arguably, yet to fully appreciate.

Phivida’s prospective foray into the Canadian cannabis market is through a joint venture agreement with licensed cannabis producer WeedMD (TSXV:WMD) in what would be a co-owned company called Cannabis Beverages Inc., or “CanBev”.

WeedMD is fast becoming a major cannabis producer under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations), with a 26,000 sq. ft. facility operating with annual production capacity of 1,500 kg of high-quality cannabis.

Their second facility has an estimated 33,000 kg of capacity with an option that could take it over 50,000 kg. This 14 acre (609,000 sq. ft.) expansion project in Strathroy Ontario boasts world class genetics, top-tier management and the infrastructure to support large-scale growth, with a low cost of production, by using state-of-the-art greenhouse technologies, yet maintaining premium quality production standards.

WeedMD also recently announced a merger agreement with Hiku Brands (CSE:HIKU) which may add recreational THC brands to the CanBev project, as well as west coast licensed production with their ownership of DOJA, and a national network of retail locations for cannabinoid infused products through their ownership in Tokyo Smoke.

“Our joint venture with WeedMD is designed to build and operate the first ever federally legal cannabis-infused beverage production facility in Canada,” explains Belfontaine.

The CanBev joint venture also enables Phivida to bring their products home to Canada by navigating an important aspect of the Canadian regulatory environment.

“Industrial hemp is not an option for us in Canada,” explains Belfontaine in discussing legal sources for the oil Phivida needs to make its products.  “The WeedMD partnership provides sufficient supply of high-grade CBD from a legal source. We are partnering with an ACMPR licensed producer to source cannabidiol in Canada, and we are thrilled to joint venture with what we consider to be the ideal partner in the Canadian market.

In the US, Phivida products use full spectrum hemp oil extract, with 0% THC, “for all of the health and none of the high,” Belfontaine says. To date, Phivida has focused on the medicinal CBD market and the Phivida brand in Canada will remain true to this ethos.

As a complementary partnership, the WeedMD-Hiku collaboration also opens a whole new market to the CanBev project in the adult-use recreational side of the sector.

“Phivida will maintain CBD-only, THC-free products under our brand labels,” says Belfontaine.  “But with a Red Bull pedigree at the helm, and a solid operations team, we will also be assisting in the manufacturing, marketing and retail distribution of THC products with WeedMD/Hiku under their premium adult-use brands, and labels.”

Looking to ensure every possible base is covered, Phivida has its eye on a launch across North America, while preparing for expansion to new and emerging markets overseas.

“We have secured distribution partnerships across the western United States, as well as in Japan through Asayake,” says Belfontaine, adding that a deal with Namaste Technologies provides exposure to UK, German and Australian markets via online sales.

Phivida has completed two major financings in the past five months, including its long form prospectus IPO in December 2017.  The appreciation in share price out of the gate resulted in the company having almost $7 million worth of warrants exercised. In April, they completed another prospectus offering in bought deal which grossed $8 million.

“As of May, Phivida has just over 60 million shares outstanding with over $16 million in the treasury,” points out Belfontaine. “We now have expert management, a solid structure, tier-one supply and manufacturing partners, and the capital we need to execute our plan. There is now very little standing in the way of the Phivida brand becoming synonymous with leadership in the CBD sector internationally.”

CSE Issuer Stories, Magazine

International Cobalt strategy takes shape following $10mln financing

International Cobalt Corp. (CSE:CO) focuses on primary cobalt projects, and while it has a couple of good land packages under its control in Idaho, a recently closed $10 million financing means the company now has the wherewithal to consider additions to its portfolio as well.  Chief Executive Officer Tim Johnson explains the outlook for cobalt, why supply constraints are here to stay, and how International Cobalt is positioning itself to take advantage of the favourable supply/demand environment.

What outlook for the cobalt market do you hold at International Cobalt and how does that shape your strategy in terms of project acquisition and allocating human and capital resources?

We think prices will remain strong both near term and long term.  Basically, we just cannot see anything on the horizon that’s really going to change the amount of cobalt coming on line.  In December 2017, Glencore announced it was going to double their production in the DRC (Democratic Republic of the Congo) and there was no effect on the market whatsoever.  As long as the battery space stays strong, we think cobalt will stay strong.

This environment really puts us into acquisition mode – we are actively looking for new projects in the space.  Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years.  We want to be right in the middle of the mix.

Walk us through the components of your project portfolio.  What has you the most excited and what work is upcoming?

We’ve got two projects in the Idaho Cobalt Belt and we bracket eCobalt Solutions’ advanced project.  Although there has been a fair amount of historic work done on our landholdings, the majority of it by Noranda in the 1980s, our team has not really had boots on the ground yet except for a site visit.

We anticipate doing a full geological work-up on both projects, to include extensive soiling and mapping.  I’d say half of our Blackbird project has not been mapped geologically.

So, we are excited to get to work on the projects and because there are many companies in the belt, including us, there is going to be a lot more exploration.  It is a world class belt as far as cobalt goes, so you are going to see lots of news coming out of it.

You mentioned that you are in acquisition mode.  What types of additional projects would appeal to you, and how do you assess them?

We are looking for primary cobalt.  We are not as interested in nickel secondary cobalt or silver secondary cobalt.  Primary cobalt projects are few and far between and we are doing a lot of digging to find good ones, looking mostly in North America.  We have feelers out in Africa as well, but any acquisitions we make in the near term are likely to be North American.

Cobalt really is an underexplored mineral.  It is not like the molybdenum days of the early 2000s, when once moly started to rise in price everyone had a near-term moly mine.  A lot of work will be needed to bring supply on line.

Does that mean most of the projects are early stage?

Right now, most of the cobalt supply is from secondary sources such as nickel and copper.  There hasn’t really been a focus on looking for primary cobalt projects, so anything you find is quite early stage.  It is not like you are going to find something that was almost a mine and didn’t make it because of prices and now it is coming back up.  And if you do find that it is most likely in the DRC.  You know anything you get into is going to be a long-term project and you’ll have to structure your efforts to support that.

The financial markets are supporting mining exploration companies once again.  What observations do you have on the current health of the market, and particularly with regard to the cobalt space?

Cobalt is definitely popular.  There are a lot of financial professionals we have talked to who would like to get in on the space, but there are limited opportunities to do so.  It has to do with the maturity of the exploration cycle – there really aren’t a lot of high-quality projects out there and the price of cobalt does not seem to be going down.  Any decent projects have high valuations, and those are the projects the money is looking for.

What kind of timeline are you giving interested parties in terms of the work you have planned.  And are you only interested in projects you can own 100%?

We are open to looking at other opportunities, whether it be joint ventures or strategic investment.  Because we are an early entrant into the Idaho space you kind of wait to see how things shake out.  I think the belt will potentially see consolidation, as there are some smaller players getting good results but there are no majors there yet.  Once some of the juniors have more success the majors will come knocking.

Cobalt is hot and there are lots of entities jockeying for position.  Are they mostly Canadian companies or are some from other jurisdictions?

There are a few Australian companies in the space, and money is coming out of Australia as well.  We got some backing out of Australia and other companies we have seen did as well.  Some groups that had success in the DRC are starting to look for safer jurisdictions.

How are you going to pay for the acquisitions and work on the project portfolio?

We recently closed a $10mln financing.  Our plan is that the new capital would support at least two years of exploration.  We are talking all of our ground proofing this summer, a potential initial drill program in the fall, followed by another drill program in 2019.  That is the plan with our existing assets, so things could change, of course, if we completed acquisitions.

International cobalt has enjoyed a good start to 2018 in the markets and on the corporate front.  Is there anything else you’d like to comment on?

Just that we are very happy with our land position in the Idaho Cobalt Belt.  The historic data we are turning up is proving our theory right.  There are new reports being made available by the Idaho Geological Survey all the time and each time we find one we get excited again.  Most of the work is by Noranda so we have high confidence in its quality and really want to get boots on the ground and follow up on everything.

This story was originally published at www.proactiveinvestors.com on March 2, 2018 and featured in The Public Entrepreneur.

Learn more about International Cobalt Corp. at http://internationalcobalt.com/ and on the CSE website at http://thecse.com/en/listings/mining/international-cobalt-corp.

CSE Issuer Stories, Magazine

Bunker Hill Mining: One of America’s most historic mines is ready for a comeback

Mining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream – the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District.

Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR). Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021). Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades.

“I tried twice in the last 20 years to get Bunker Hill but wasn’t able,” Reid explains. “When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”

Sure enough, he got it, although the deal originally agreed with the heirs of the long-time owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE.

The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981. For many years early in its life it was said to be one of the largest mines in the world.

“Bunker Hill leads the way as one of the most important mines ever in American history,” says Reid. “It produced over 35 million tons of high-grade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver. When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined.

“Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.”

That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical. Just US$15mln would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid.

Why, then, if all that ore is just sitting there has the mine remained inactive for so long? The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the Mine itself was not involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA Superfund. That is mostly completed now as the Valley is in much better condition.

The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for US$25mln over 10 years. Another US$20mln would go to the EPA, this amount a partial acknowledgement of costs accumulated for clean-up over the years. An operating Bunker Hill Mine would also pay the EPA $1 million per year to continue operating the wastewater plant.

“The EPA has proven to be a good partner — they are reasonable,” says Reid. “People want to see the mine back in production for a number of reasons, one of them being jobs. But also, this mine, if left alone, will only get more troublesome as parts internally break and water starts leaking from different areas. If it’s in production, however, we’d have the cash flow and earnings to build up the closure bond, and to take care of many longer term problematic areas.

Reid is not only a formally trained geologist, but also a former analyst and successful investment banker. He thus has detailed insight into the metals markets Bunker Hill would once again serve.

“Zinc is in a deficit in terms of the raw metal,” Reid explains. “We are still losing production even with the price being up, and some mines that have been dragged back into production are running out of ore. The zinc concentrate market is even tighter – it looks like concentrate could be in deficit for another three years.”

And while one might think the omnipresent talk about future battery technologies would undermine the lead market, Reid says it is “amazing” how tight the lead concentrate market is right now.

Details regarding the path to production for Bunker Hill are still to be decided but could entail initially toll milling (utilising another entity’s mill), although ultimately the company will want to build its own mill plant.

“My estimate is that starting the mine utilising a toll milling arrangement is estimated to be about $10 million including working capital,” explains Reid. “I’m in active discussions with a number of financiers and toll milling partners and we hope to be in production in 2018. The longer term goal, though, is to build our own expandable process plant right on site, which is also part of the Patented Land package involving the entire Bunker Hill Mine site.”

It is an amazingly near-term timeline for a small company that began trading less than a year ago, but given the Bunker Hill Mine’s size, grade and favourable jurisdiction, plus the strength of Reid and his team of local professionals, the market is buying in, having taken the company’s share price as high as $3.15 since its debut.

Also amazing to observers who know how the financial markets work is that Reid, his team and that the one large shareholder have put their shares into a voting trust and none of the shares can be sold until there is a change of control, which is another way to say that Reid must sell the entire company for the insiders to ever realise on their share positions. We’re talking approximately 15 million shares out of the company’s 33 million outstanding.

That lock-up suits Reid just fine. He knows he has a monster by the tail and his track record suggests that few people could be better at finding a buyer when the time comes.

“This is one of the most important lead-zinc resources in the Americas that is not producing currently,” Reid concludes. “And then once we put it into production we’ll follow up with a drill programme to beef up reserves and resources. Bunker Hill is a big one. It will outlast us all.”

This story was originally published at www.proactiveinvestors.com on March 5, 2018 and featured in The Public Entrepreneur.

Learn more about Bunker Hill Mining Corp. at http://www.bunkerhillmining.com/ and on the CSE website at http://thecse.com/en/listings/mining/bunker-hill-mining-corp.

CSE Issuer Stories, CSE Quarterly

DOJA Cannabis building value quickly with artisanal quality, expert branding

If there is one thing that Trent Kitsch ingrained in himself while building SAXX Underwear into a multi-million-dollar company, it was the value of a brand.

SAXX entered the men’s underwear market with an innovative line of undergarments sold online at higher than average prices and margins.  The premium quality appealed to plenty of men who were willing to pay a little extra to take care of their bodies, with clothing they felt was made with more care and attention than they could find elsewhere.

It is precisely this approach that Kitsch and his team at DOJA Cannabis Co. (CSE:DOJA) intend to follow in building their newest venture: a collection of cannabis and lifestyle products created with  meticulous care.

“Our background is building brands in the fashion and wine worlds,” says the DOJA CEO, who founded not only SAXX Underwear but also award-winning Kitsch Wines.

“DOJA is a brand built around the uncompromising quality of its product.  We do things differently than most of our peers in how we cultivate, hand-trim and cure the cannabis we grow.”

Kitsch explains that hand-trimming retains the look of the flower better than the more popular approach of machine-trimming, while keeping more of the terpenoids and other desirable components machines tend to rustle off.  Rather than removing buds from plants the moment harvesting begins, DOJA hang-dries and cures its product on the stalk.  “You get a better finish that way,” says Kitsch.  “It brings out superior flavors, trichomes and aromas.”

DOJA is headquartered in British Columbia’s picturesque Okanagan Valley.  With 2mln visitors that come to the region each year, the company plans on leveraging the vibrant tourism market to build a far-reaching brand.

The company also believes it will soon have the opportunity to show the rest of Canada the difference its artisanal approach makes.

DOJA received its license to cultivate under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations) framework on June 16 of this year.

Soon after the first harvests, a request to Health Canada for a Pre-Sales License Inspection was submitted.  The inspection is the final step ahead of the government issuing DOJA a Sales License under the ACMPR.

With license in hand, DOJA’s primary distribution channel would be online sales direct to the customer.

“Channel two will depend on how the provincial governments announce their planned sales structures,” says Kitsch, alluding to the expected legalization of cannabis in 2018.  “We are hoping some of the provinces see opportunities similar to those in the wine industry or agriculture tourism and that some of those channels open up to us.”

DOJA is planning for its products to be very popular, having already invested in a second growing facility that will expand its overall production capacity by more than 700% to just over 5,000kg of dried cannabis per year.  The new 22,580 sq. ft. Future Lab facility, located close to the Kelowna International Airport and the University of British Columbia’s Okanagan Campus, will be home to DOJA’s research into new and unique cannabis strains, processing, as well as exploration of the edible and oil extract markets.

The proximity of the Future Lab to the airport will not only reduce both cost and time required for delivery but the 60,000 travelers who traverse the road in front of the facility each day will be exposed to the DOJA brand on their commute.  Estimates around permitting and construction time have DOJA intending to open the Future Lab in the summer of 2018.

There is one other DOJA initiative helping to create awareness around the brand and the various aspects of cannabis. The DOJA Culture Café in downtown Kelowna will act as a hub for cannabis information within the community.  Here, customers can have a coffee or a meal, while also learning how to access and use cannabis safely, depending on their particular needs.

DOJA, whose shares began trading on the CSE on August 9 of this year, is well capitalized to execute on the first phase build-out of the Future Lab.  Plans also call for borrowing against their newly acquired facility to further bolster the company’s working capital position.

When asked about the outlook for DOJA, Kitsch responded, “The sky is the limit.  Our brands and unique advantages will differentiate us from the pack, and in one to three years I could see us being acquired by a larger company who wants to have a B.C. footprint and a premium lifestyle brand in their portfolio.”

Near term, though, Kitsch believes the investment community would do well to keep some potential share price catalysts in mind.

“Once we receive our sales license I would say we’d be quite undervalued at our current share price and there would be a strong investment thesis for DOJA on a relative valuation basis,” says Kitsch.  “Ahead of legalization, I think positive sentiment will continue to pick up and an increasing number of people will start to see cannabis as a viable investment opportunity.”

This story was originally published at www.proactiveinvestors.com on December 6, 2017 and featured in The CSE Quarterly.

Learn more about DOJA Cannabis Company Limited at https://doja.life/ and on the CSE website at http://thecse.com/en/listings/life-sciences/doja-cannabis-company-limited.

CSE Issuer Stories, CSE Quarterly

Ortho Regenerative looks to prevent surgery by turbocharging joint recovery process

Innovation is oftentimes the result of people approaching a problem from an angle that others haven’t considered.  That’s precisely what the team at Ortho Regenerative Technologies (CSE:ORTH) is doing as it tackles some of the world’s most common surgeries – tendon, meniscus and cartilage repairs in shoulders, knees and other joints.

Chief Executive Officer Brent Norton explains that the long-term result of removing damaged cartilage or meniscus is about the same as not having any procedure performed at all.  Similarly, studies show that shoulder tendon repairs fail at an alarming rate.  Missing its natural elasticity and shock absorber, a joint can deteriorate to the point that arthritis sets in, and if things get bad enough movement is very limited and full joint replacement often becomes necessary.

Ortho’s technology is all about leaving these soft tissues in place and treating them so they repair themselves.

“Long term, if we can treat injury versus treating the complications of the injury, that’s the better way,” says Norton.  “The opportunity is to heal the soft tissues, and the result is that we no longer treat complications such as pain and arthritis, have people miss work and be inactive, nor have to bear the expense of introducing an artificial joint.”

Tendons, cartilage and meniscus are close to the last in line to receive blood supply in our bodies and are relatively avascular, meaning they have few blood vessels. The bottom line is that because blood gets little chance to bring revitalization to these body parts, they do not heal well and thus need assistance.

There are medicines that promote healing in tendons and meniscus but they have to remain in contact with them for a meaningful period of time.  Not only do joints naturally involve internal motion, they also contain lubricants, which usher medicines away from the locations that need them.

Ortho’s solution is to apply what in industry parlance is called a scaffold to hold the medicine in place long enough for it to work.  Essentially, it is a special compound made from a naturally occurring protein that a surgical team mixes with a patient’s blood to ensure efficient delivery.

The scaffold will remain in place for several weeks before naturally dissolving, but in the meantime it ensures the medicine is hard at work on the body part that needs to heal.

“Years ago, when we took pills we took them several times a day,” says Norton in drawing an analogy.  “Then someone invented the sustained release formulation, which allowed you to take a pill only once or twice a day because it was sustained release.  It is a similar principle.”

The technology was borne of studies conducted by two of the world’s most prominent researchers in soft tissue repair: PhDs Michael Buschmann and Caroline Hoeman.  Their initial scaffold for joints had promise, but it took 30 or more minutes to prepare for use when the patient was in the operating room, a factor reducing efficiency and contributing to it being cost-prohibitive.

Norton is a medical doctor himself who practiced largely in the field of sports medicine.  Early on, though, he knew that he wanted to mix actual practice with directing innovation to have the greatest impact.  “I decided to do an MBA at Western University because I wanted to be a driver of technology rather than a clinician seeing one patient at a time,” he says.

Norton’s career path would lead him to be that driver in several corporate settings, including with Novadaq Technologies, a medical imaging solutions company acquired in 2017 by Stryker Corp.

“With Novadaq, at times I felt like I was the coach, and was a founding director,” says Norton. “I helped with strategy, building the shareholder base, the board, hiring a professional CEO, recruiting the investment banks to take it public, and ultimately helping to lay down the strategy to get third-party validation and revenues.  We created multiple partnerships, got FDA approval and a TSX listing and then it went on to have a Nasdaq listing and was sold to Stryker for C$900 million.”

All of which, including the chance to return to his career starting point in Montreal, would seem to make Norton a good fit at Ortho.  “When I took this role, I got messages from friends and colleagues saying ‘right back to your roots’.  It is more than coincidental, it’s optimal,” he observes.

Ortho’s product performed well in pre-clinical studies and is now in the final stages of animal studies, with expectations that it will move to human trials in 2018.

Given that Ortho’s product is in the biologic category, the first step with human studies requires the company to prove that it is safe to use, something Norton expects the product to achieve with ease.

The second study in a biologic is the main study, or pivotal trial, which regulatory bodies use as the basis for their effectiveness assessment.  The pivotal trial would likely begin within two years from now.  After that the company would apply for FDA (US Federal Drug Administration) approval.

But that timeline hardly means investors will be left without milestones to cheer on in the near future.  When asked, Norton lays out a pretty full slate.

“This is the first fully patented product of its type in the world and we have an evolving patent family for it,” Norton explains.  “Over the next year we expect to see patents issued around much of the world for this product.”

“Key studies have also been accepted for publication in multiple scientific peer reviewed journals.”  Norton says this means that some of the images and information on the product will take center stage in the related scientific community.

“In my experience, having five papers in the queue to be published is something I have never heard of,” he says.  “In the next short while we will have multiple papers and studies published, and we can anticipate our approval to begin human studies, which typically drives a lot of corporate value.”

Norton emphasizes that it is up to the researchers to assess whether a product works, whereas management’s role at a biotech company is to minimize other risks and drive the strategy.  He points to responsibilities such as making use of capable intellectual property firms, bringing in skilled accountants and hiring an experienced management team.

“In Ortho’s case, the risk profile of getting through to a pivotal trial is nominal,” Norton concludes.  “You can never guarantee biology or the ultimate results, but our goal is to optimize the process in the most cost-effective manner to get through to an FDA approval in the next three to four years.  We are managing the company to reduce the risk of everything else, so that the only thing we are betting on is the results.”

This story was originally published at www.proactiveinvestors.com on December 7, 2017 and featured in The CSE Quarterly.

Learn more about Ortho Regenerative Technologies Inc. at http://www.orthorti.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/ortho-regenerative-technologies-inc.

CSE Issuer Stories

Interview with Tom Rossiter, Chief Executive Officer, RESAAS Services Inc.

In late July, Peter Murray of Kiyoi Communications sat down with Tom Rossiter, Chief Executive Officer of CSE-listed RESAAS Services Inc. (CSE:RSS) to discuss his perspective on opportunities in the real estate sector and RESAAS’s unique platform. Below is the transcript of their discussion.

Peter Murray (PM) RESAAS offers unique services to the residential real estate industry, a massive market if there ever was one.  Can you begin by walking us through what the company does at a high level, and given all the pivots that seem to take place at technology companies, has your mission changed along the way?

Tom Rossiter (TR) Our mission hasn’t changed along the way, it has evolved.  If we rewind to the beginning of RESAAS (Real Estate Software as a Service), we set out to create an online platform that aids the existing practices of the real estate industry.  We all know that real estate agents are social professionals – maybe the most social group of professionals that exist.  When you are together with them in real life it is amazing to see the knowledge sharing, the education, the tips and tricks, and the deals that get done.

We thought that should be supplemented digitally so the value of a professional circle could transcend a local market and put an agent or organization on the map not just locally but nationally, and maybe even overseas.  You can think of RESAAS as an online destination for real estate professionals to act as they do in real life.

Eventually, the networking effect kicked in, which means the bigger the network, the greater the value to those in it.  Word got out about all the great content, and data, and deals, and leads, and listings that were happening inside RESAAS amongst the agents using it.  Leading organizations with extensive footprints in terms of agent count and office locations began to catch wind of what was going on and thought, “Wow, we have this large physical presence.  What would happen if we embraced this RESAAS model to be our digital complement?”

A big part of our business now is working with these larger brands and organizations and supplying our technology and services to their networks.  We provide a white-labeled platform so they can give their agents a way to interact digitally, and ultimately do more business.

(PM) 2. What tools are you providing and what makes them unique?

(TR) The tools are really just an extension of what the agents are already doing.  Every agent either has listings or wants to find listings for buyers, so we provide an easy system for listing sharing amongst agents.

Buyer needs is a particularly important aspect.  In hot markets, there is less inventory and more demand.  Where listings are scarce we provide a buyer needs experience so that agents can signal they have a buyer and detail that buyer’s requirements.  While RESAAS works very well across buyer’s markets, seller’s markets and neutral markets, we’ve become particularly popular in seller’s markets, where there is that supply issue.  What we have been able to do is to create a new way for the industry at large to organize and visualize listings.

The way the industry works is that it can take up to five days between the time an agent signs a listing agreement and the time a property is listed on the MLS with pictures and other information.  During that period, agents might communicate the listing to others and transactions can thus occur pre-market.  And those that do are outside of the MLS.

For local organizations charged with governing their respective local real estate markets, this is a big problem because they need to know everything about the market so their database, their analytics and their comparables are accurate.

Last year in the US about 22% of properties that sold never got to the point of having an MLS listing.  And in hot markets, that can reach 40%.  To bring that back to RESAAS, we have created a way to capture listing data pre-market that is structured, organized, clear and compliant.  Agents love it because it levels the playing field.  But even more important is that our clients, the local real estate associations and boards, can finally visualize and track activity in its pre-MLS phase.

Because of varying regulations and bylaws in individual markets, RESAAS sometimes has data for days, or even weeks, before any other destination online has it.  Ours is the first platform of its kind and has been termed extremely disruptive.  We are marching out across the US and activating different markets every week.

(PM) 3. Would you say that locating senior management and most of the technology team in Canada has been the right decision for RESAAS?

(TR) We are fortunate to be based in Vancouver, which has become what I consider to be the Silicon Valley of the north.  It is a thriving destination for technology companies to base an office in or establish their headquarters.  I have been here for 10 years and watched the city transform from a technology reception standpoint such that there is now an understanding of how a company like ours needs to be supported, financed and communicated.

There is an amazing community in Vancouver amongst technology companies.  Even though companies might compete with each other, there is collaboration and innovation.  And given the variety of companies that exists here – private, public, start-up, emerging, well-established, large and small – there are so many industries serviced by them that the thought-leadership and mentorship opportunities are tremendous.

Importantly, Vancouver has a buoyant investor scene that supports and understands technology companies.  As a public technology company on the CSE, we could not be more grateful to be in such a dynamic environment.

(PM) 4. Take us inside the RESAAS strategy.  How did you develop your game plan, and what are the keys to executing effectively?

(TR) RESAAS started as a freemium platform.  We opened the gates to a network we had built and did so without putting up a paywall.  We wanted to minimize the barriers for busy professionals to use and believe in our platform.

The strategy all along was to build a critical mass of users and analyze what they did – what they talked about, what they wanted and how they used what we had created.  We didn’t put a timeline on it.  Our approach was to launch the platform and once we felt we had enough information, analytics and patterns to understand the behavior, then we’d be informed enough to build solutions that we could sell.

As a result, everything we are doing now and everything we have created is based on industry activity and demand.

Really, it is consistent execution of the game plan.  Run something for free, analyze the patterns and data, build solutions that represent what people are crying out for, then monetize it at scale to an industry in need.  We are now in the last phase of that four-pronged strategy.  By spending time up front to understand exactly what different facets of the industry require, when we build a solution and take it to market the reception is fantastic from the get-go.  We are not finding our way or having to pivot on the fly because we have gone to market with a polished solution we know is in high demand.

(PM) 5. Some technology companies become profitable early on but others achieve very high valuations with hardly any revenue at all.  What is your take on this, and where is RESAAS on the earnings versus valuation continuum?

(TR) We view RESAAS as similar to a Silicon Valley company mentality.  By that I mean that the process is to assemble a team and raise capital, build a product and run it for free, and then based on the data you subsequently monetize it.  We have chosen to do that in Canada, we have chosen to use the CSE as our vehicle to raise our capital, and we have spent time, capital and resources to build something that has longevity and scalability.  And the product is in high demand now that we are selling it.

During the early days, people got excited because when you assemble a brilliant team trying to tackle a problem in an industry as large as real estate, it is natural for people to dream big.  During the development/pre-revenue phase, people get excited and imagined the blue sky.  But when you turn on the revenue, that aspect of the business is beginning from a cold start.

What can happen is that people start to look at you from a current revenue standpoint and forget about the blue sky.  It happens to a lot of companies in Silicon Valley, too.  We are in that phase where we must push revenue growth month-after-month, quarter-after-quarter, geared around a recurring revenue model.  We know where we are going with this, we know how big the market is, we know how many customer types there are, and we have created a model that enables us to monetize a single agent multiple times.  That, combined with the intrinsic value of the data we are gathering, puts us in a strong position for robust valuation in the near term.

(PM) 6. Tell us about the technology and user base you have built to date.  What comes next?  How does it grow in new ways and monetize from here?

(TR) RESAAS attracted almost half a million agents in the first 24 months of operations.  From that we learned, through analytics and behavioral analysis, what we felt different groups in the industry needed and would buy, and we built those solutions.

We started taking our solutions to market in 2016 and are already working with some of the biggest brands in the space.  The top two global real estate franchises are RESAAS customers and run on our technology.

In 2017, we judged that the role of the free network for real estate agents had played its part.  As I’ve already mentioned, the years we spent gathering data and analyzing behavior formed the basis for the products we subsequently created.

We have thus decided to add a paywall to RESAAS, which means the free version is no longer available.  Going forward, all users will be paid for either by the brokerage they belong to, their local association, or by themselves.  It will mean a reduction in the number of users we have but the revenue per user will increase dramatically.  This is a tactical part of our strategy that we began executing this year and we are very happy with the early conversion numbers.

(PM) 7. You have raised over $30 million since debuting on the CSE in February 2011.  What types of investors back a company like RESAAS and what can you tell us about your relationship with shareholders?

(TR) RESAAS is fortunate to have an enlightened, supportive and loyal group of shareholders who have invested from our IPO in 2011 all the way up to our most recent financing.  That is a tremendous asset for our company and something we are very grateful for.  It has allowed us the time, bandwidth and resources to build the company we envisioned, to take the time to professionally execute on our vision, and to take our strategic plan to market in exactly the way we wanted.

The result is that we have come to market with a product and set of services the industry has never seen before and clients are calling out for.  The entire process has been made a lot easier by being listed on an exchange like the CSE.  It provided a tremendous amount of assets, tools, resources and connections outside the network we have within our own company.  The CSE has proven to be a fantastic capital markets partner and facilitated the timeframe we needed to build a world class technology company here in Vancouver.

(PM) 8. Looking at life in the public markets, what are some of the positives, and what has been your biggest challenge?

(TR) RESAAS has found the public markets, on balance, to be extremely advantageous for our company’s growth.  They provided a vehicle to raise a tremendous amount of capital.  They provided us an avenue through which to meet influential, informed and intelligent investors across Canada, and they furnished our company with enough capital to execute our vision.  We have been able to build a better business because of this.

Going public pre-product is somewhat unconventional in North America and definitely made us refine our communication style.  We communicate corporate updates clearly and more regularly than is perhaps the norm, to give investors insight into the direction the company is heading.

Typically, a company would be private and build something and would go to market.  They would have all the right components in terms of revenue growth and then they would IPO.  RESAAS chose to IPO early and use that time to build a product from nothing, but having spent the hours and airmiles to understand industry needs.

We were fortunate enough to have a shareholder base that believed in our vision and supported our direction.  And here we are six years after our IPO in a position where all of our early shareholders are still supporting the company.  They are extremely happy with what we’ve created, and they are over the moon with the opportunity before us.  We could not be happier or more fortunate to have such a supportive group of investors behind the company.

(PM) 9. What would you tell the next generation of growth companies about going public?

(TR) As an emerging tech company, a listing on the public markets provides a proven platform to raise capital, whilst retaining more control than perhaps the alternative of remaining private would allow.  In addition to the financial benefits that a public listing can bring there is greater awareness, credibility, investor confidence and use as a sales tool.  I have to say that the public markets have been fantastic.

(PM) 10. Finally, can you speak about the achievements investors can look forward to in the coming 12 months.  Why should people be excited about RESAAS?

(TR) Well, I would say that 2017 is RESAAS’s breakout year.  It’s the year we finally recognize the effort our company has put in over the last six years to monetize our solutions.  We already work with national brokerages and franchises.  We already work with major and progressive real estate associations and boards across North America.  And most excitingly for this year, we launch our newest solution aimed at the brokerage network, targeting over 120,000 independent brokerage firms across North America with a solution we spent more than a year building based solely on input from the people who run those brokerages.

This is the year that RESAAS becomes “SAAS-ified” and we could not be more excited about the direction the company is heading, our growth potential, and ensuring that we remain number one in this industry from a B-to-B technology standpoint.

CSE Issuer Stories, CSE Quarterly

Maricann looks to replicate Canada success in newly legal German cannabis market

Anyone looking for a model company in the medical cannabis sector would be well advised to consider Maricann Group Inc (CSE:MARI), as thus far it seems to have done everything right.

With a green ethos that drives both product development and corporate efficiency efforts, Maricann succeeded in becoming one of the first companies in Canada approved to cultivate and sell medical cannabis.

Not content with being an early mover in just its home market, Maricann was quick to stake its claim in another jurisdiction largely overlooked by its peers: Germany.

On the verge of turning a profit

The combination has the company predicting profitability by the second quarter of 2018. Its top line is off to a good start, with sales currently running at $450,000 per month. And having just announced a $42.5mln non-dilutive stream financing that will fully fund its German plans, Maricann is positioned to really put its foot on the accelerator.

The strategic mix of Canadian and European markets notwithstanding, Maricann chief executive officer Ben Ward sees the company’s key point of differentiation being technology for extraction and product formulation.

“We have locked up two groups with preparative chromatography expertise in cannabis and this means we have the only ability in the industry to get all the cannabinoids, terpenes and flavonoids,” says Ward. “To formulate the plant, you first have to be able to deconstruct it to make sure you get the active pharmaceutical ingredients.”

Ward explains that there are 500 terpenes – an organic compound found in numerous plant-based products – specific to the cannabis plant, and that companies looking only at cannabinoids or THC are missing much of what cannabis has to offer. “We are focusing on whole-plant medicine, which is done by extracting all of the different isolates.”

This approach to the industry reflects the direction set for the company early on by founder Dr Eric Silver. An assistant professor and clinical teacher in the Department of Family and Community Medicine at the University of Toronto, Dr Silver knew first-hand the benefits that alternative medicine employing cannabis could have on patients. The next step was to gather colleagues from the industry with capital and know-how and begin the search for a facility to purchase.

Eventually, the team settled on the Langton facility, which had been operating under the MMAR (Marihuana Medical Access Regulations) regime established in 2001.

The facility was approved under the more robust MMPR (Marihuana for Medical Purposes Regulations) in March 2014, with a license to sell product grown at the facility arriving in December of the same year.

A green ethos going hand-in-hand with the commercial imperative

A brief analysis of the facility indicates Maricann is committed both to being a custodian of its environment and running its business with an eye on costs. Langton has its own co-generation plant to help with electricity needs and there is even a natural gas well on the property to provide some of the fuel. Other efforts include equipment to capture rainwater for use in the fertigation process.

These and other efforts lead the company to believe that it is among the most competitive producers on the Canadian landscape, with per-gram costs estimated at just $1.37. That should translate into healthy margins that really make their presence known as sales continue to ramp up.

“Our revenue generating capacity right now is restricted only by our footprint of 34,000 square feet,” says Ward. “We are building a 216,000 square foot facility and that will be able to produce another 20,000 kg of dry flower starting in the first quarter of 2018.”

As far as near-term trends are concerned, Ward is in the camp of industry executives who believe smoking cannabis will give way to ingestion in other forms over time. “We think users will come to prefer extract-based products, which is the experience in more mature markets such as Colorado and California,” Ward notes. “Once people can access a product with a consistent extract in a dose they are used to, they will opt for that. We think that is when the real adoption will take place.”

Maricann is ready with its own line of gel caps, which it developed in partnership with another company, to help that trend along.

First we conquer Canada, then we take Berlin

The Canadian operations are clearly well on their way to developing serious momentum, and the plan is to create the same success in the German market.

It was only in January of this year that Germany’s lower house of parliament, the Bundestag, voted to legalize medical cannabis. The drug will be available from pharmacies to patients with a prescription, and importantly for companies serving the market it looks like it will be covered by German health insurance.

“I think we will see almost a carbon copy of the Health Canada program as far as cultivation and regulations are concerned. The difference will be in distribution,” posits Ward. “It won’t be supplied directly to patients but through major pharmaceutical companies or wholesalers, or distribution through pharmacies. Germany’s market will likely remain medical for a long time, but from an ease of access standpoint I think it will move ahead of Canada because of the German population’s propensity to seek alternative therapies.”

Ward explains that companies hoping to grow cannabis in Germany need to possess over three years of cultivation experience, a benchmark that the team at Maricann is able to meet. The company is currently preparing an initial 150,000 square feet of space in a facility that it has the option to purchase. “All we have to do is install the tables, the fertigation system and the lights and we will be operational,” says Ward. “We are moving through the licensing process there right now.”

Ward comments that the team is happy working in jurisdictions where legalization is uniform on a federal level, contrasting the environments in Canada and Germany to that in the United States, where cannabis is illegal federally but many states have passed laws to make it legal.

“Much of the rest of the world, and especially western Europe, is moving forward with legalization in some way,” observes Ward. “There is a much larger population that Canadian companies can export our experience to, and in doing so create best in class companies that compete globally. We might only be talking five or six years, but that is a lifetime of experience in the cannabis sector. I see Canadian companies moving into other markets and helping governments with regulatory issues so that their citizens can look forward to safe, reliable access to high-quality cannabis.”

This story was originally published at www.proactiveinvestors.com on May 10, 2017 and featured in The CSE Quarterly.

Learn more about Maricann Group Inc. at https://www.maricann.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/maricann-group-inc.

CSE Issuer Stories, CSE Quarterly

The Canadian Bioceutical Corporation profits from shift to US cannabis market

Technology companies often attribute their success to a strategic “pivot” that saw them de-emphasize an early business in favour of what ultimately proved to be a better idea.

The burgeoning cannabis sector now has its own example in the form of The Canadian Bioceutical Corporation (CSE:BCC), which shifted its focus to the United States after identifying cultivation opportunities it could advance much more quickly than its founding project in Canada.

Through a strategy of acquiring existing businesses and providing capital and management expertise to accelerate their growth, the company has positioned itself to be profitable early in its young life.

With its first acquisition, completed in January 2017, The Canadian Bioceutical Corporation acquired highly profitable assets in Arizona. These were only consolidated as of January 1, so their contribution to the company’s full financial year, which ended March 31, will be limited. Still, they will provide a good indication of what can be expected in coming quarters.

The Arizona assets are the first of several that chief executive officer Scott Boyes is working to bring under the company’s umbrella. The plan is to move quickly, setting up shop in states where risk is quantifiable and businesses are available at valuations that allow for multiple expansion as capacity is expanded on both the production and distribution fronts.

Unlike Canada, the US cannabis cultivation market is fragmented

“The market in the US is highly fragmented, characterized by a landscape with thousands of small producers,” explains Boyes. “This contrasts with Canada, which has a much more concentrated landscape with fewer but larger players.”

Boyes shares that the Arizona deal cost US$25mln, and was concluded at around 1.5 times revenue and 4 times cash flow, undeniably reasonable metrics for a business in the super-hot cannabis sector.

The Canadian Bioceutical Corporation gained more than just operating assets, as Boyes was eager to work with the executive who had built the Arizona business, Beth Stavola – so much so that Stavola is now president of the company’s US unit, CGX.

Purchasing the Arizona assets was an easy decision based on the results of extensive due diligence, which included an audit by a Canadian accounting firm and other assessments.

“The business checked every box,” says Boyes. “It was in a state where the regulatory authority is friendly. Also, when you obtain a license in Arizona you get seed-to-sale capability, with the right to operate a dispensary, to have one on-site cultivation, one off-site cultivation, run a full concentrates operation, and do your own packaging.”

Boyes explains that Arizona laws dictate medical cannabis operations must be owned by non-profit organizations, and therefore The Canadian Bioceutical Corporation does not cultivate or sell cannabis products itself in states with this type of legislation. Rather, the company purchased management, real estate leasing and other entities providing support to the licensed cultivation and retail operations under long-term services agreements. Because the owner of the license and facilities is a non-profit, the cash left over after operating costs flows to the service providers.

The company also holds another license that will enable it to open a third Arizona dispensary, which is currently in development. All three will operate under the Health for Life (H4L) banner and carry, among other products, the award-winning Multiple Extracts (MPX) brand Stavola established.

One final note on Arizona is that legalization for adult recreational use is off the table right now, following a November 2016 vote on Proposition 205, which proposed legalizing cannabis use for people 21 years of age and older. The “No” victory was far from overwhelming, with the vote decided by a margin of fewer than 3 percentage points.

After praising Arizona, the company is turning its focus to Massachusetts

The company’s second big acquisition of 2017 is taking place in a state where voting in November approved recreational use. In early April, The Canadian Bioceutical Corporation announced a Letter of Intent (LOI) to purchase a 51% stake in Massachusetts-based IMT LLC. The deal will take place via CGX using a services company structure similar to that employed in Arizona.

Assets include a 40,000 square foot facility zoned and licensed for cannabis cultivation and a license to open up to three medical cannabis dispensaries. Annual capacity is an impressive 2,500 kg of cannabis and 500,000 g of concentrates. The first dispensary, in the city of Fall River, will be adjacent to the cultivation facility.

The acquisition calls for a US$5.1mln cash payment to IMT LLC and a further US$2mln in capital to build the second and third dispensaries. Massachusetts could begin licensing dispensaries for recreational sales as early as January 2018, with preference given to medical-use locations already up and running.

In early May, The Canadian Bioceutical Corporation announced it is moving into a third market, as it is acquiring 100% of GreenMart of Nevada, a licensed cultivation and wholesaling business based in Las Vegas.

The growing facility is fully operational and can produce 1,600 kg of dried cannabis per year plus 85,000 g of concentrate. Total cost is US$19mln, payable half in units of the company and half as a non-interest bearing promissory note.

Boyes notes that while Nevada’s population is less than three million people, over 42 million tourists visit each year, so with voters having recently given the green light for recreational use the total market could be very large.

Completing over C$50mln in acquisitions during the first half of 2017 would be quite a feat, and a US$25mln line of credit the company secured in May will play an important role. It will also help to limit dilution; the company stated its intent in late March to raise US$20mln by issuing new shares but decided to raise less (the book was closed at US$11.2mln) because the line of credit can cover a substantial portion of near-term spending.

While Boyes says the Canadian cultivation license for its facility in Owen Sound, Ontario, is still something the company would like to obtain, the focus for now is definitely the US, where he says more acquisitions can be anticipated this year.

The company is undervalued relative to many other cannabis players in Canada

Boyes has been somewhat surprised that his company has not achieved the valuation multiples enjoyed by some other public cannabis issuers in Canada, but thinks this will correct itself over time as investors become more comfortable with businesses operating south of the border, where on a federal level the possession of cannabis remains illegal.

“There is a degree of concern about the political environment in the US, but the more you are involved down there the less you see it as a risk,” Boyes concludes. “Some states may need to tighten their regulations, but overall the industry is growing too quickly and simply creating too much employment and tax revenue. We may see some speed bumps along the way but, in my opinion, the US is a good place to be growing a business such as ours.”

This story was originally published at www.proactiveinvestors.com on May 8, 2017 and featured in The CSE Quarterly.

Learn more about Canadian Bioceutical Corporation at http://www.canadianbioceutical.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/the-canadian-bioceutical-corporation.