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

Women in weed: meet four women helping to shape Canada’s cannabis industry

It’s a common story thread: women entrepreneurs blazing the way for cannabis, taking over the sector and inserting themselves into a market that is booming, complicated and fast-evolving.

Stop. Back it up. Wait a moment. This is not one of those stories.

It’s an easy – perhaps a bit lazy – trend to latch onto, one that weaves itself through the cannabis daily news cycle. “Women in weed: charting change for male-dominated cannabis culture,” blared a CBC headline earlier this year.

This is not to say that women aren’t powerhouses in the world of cannabis. They are: just like they are in each and every other sector, when put in positions of power to do so.

In order to survive in this sector, you have to have strong chops, a killer resolve and the tenacity to do whatever it takes. It’s that entrepreneurial spirit that is key. Being a woman just happens to be one part of the equation.

Proactive Investors spoke to four women who touch different corners of the cannabis industry. From financiers to investment bankers, from equipment manufacturing to recreational advocates, we chatted about their past, predictions and what might roll out ahead.

Interviewees:

Meris Kott – CEO at Redfund Capital Corp. 

Redfund Capital (RFND:future symbol) is a cannabis merchant bank that provides an alternative source of capital through a debt facility to bridge finance and helps revenue producing cannabis related companies build their valuation, and grow their company without diluting their equity prematurely, while helping move them toward being publicly listed.

Yasmin Gordon – Senior Investment Advisor at Canaccord Genuity

Yasmin Gordon is co-founder of the Gordon Group, as part of Canaccord Genuity Wealth Management, and advises private clients, corporate entities and institutional investors.

Rosy Mondin – CEO at Quadron Cannatech Corporation (CSE:QCC)

Quadron Cannatech (QCC) is a market and technology leader in end-to-end automated processing and extraction laboratory solutions for the international cannabis industry. QCC also provides a range of innovative value added services including custom ancillary products and cannabis accessories.

Ria Kitsch – VP Human Resources at Hiku Brands Company Ltd. (CSE:HIKU)

Hiku is a cannabis house brand. Hiku’s subsidiaries include Tokyo Smoke, DOJA, Van der Pop and Maïtri.

Q: Tell me about how you got into this industry. What led you here?

MK: I come from an investment banking family, which funded emerging market growth companies. About 12 years ago, we started looking at the cannabis industry, and we didn’t touch it, figured it wasn’t ever going to happen. We got into the industry in 2012, after Amendment 64 passed in Colorado. We’re now launching the first debt facility merchant bank, Redfund Capital Corp., focused on funding cannabis related revenue producing companies.

YG: I am a Senior Investment Advisor with Canaccord Financial, specializing in non-traditional wealth management strategies with a niche in providing financing opportunities. I came into the cannabis sector, quite honestly, out of necessity – I could see there was a shift occurring as we got more clarity with regard to full out legalization in Canada. I saw the opportunity and decided to add exposure in a more significant way. It’s been an exciting ride.

RM: As CEO of Quadron Cannatech, and a leading advocate for the legalization of recreational cannabis in Canada, I’m thrilled to be at the forefront of this emerging industry. I’m the director for the Cannabis Trade Alliance of Canada (CTAC) and I also serve as a Special Advisor to the Canadian Association of Medical Cannabis Dispensaries (CAMCD). In my role with CTAC, I work with industry leaders, government legislators and educators to develop an inclusive, safe, and ethical cannabis industry.

RK: I’m the vice president of HR at Hiku. Back in 2013, we saw an opportunity in getting into commercial cultivation, so we put in our application. We received our license to sell just this year. It’s been a long road but here we are. We merged with Tokyo Smoke in January. We then just recently merged with WeedMD in a pretty transformational transaction: combining a premium cannabis brand house and retail-focused operator.

Q: For some women, this might not be a sector that immediately comes to mind as a place to be. What advice would you give others who may not have considered this sector as a career path?

MK: Jump in! Because right now we’re creating a whole new industry. That said, it has changed and it’s become harder to break into the industry as a woman because it’s becoming more mainstream. Women are generally the chief medical officer in their family and looking at cannabis products more closely. I also think because it’s such a new industry people don’t consider it as a career path and it is still a risky avenue for work to some women.

RM: We are building a new industry – we currently have just over 100 Licensed Producers across Canada. If you think about most industries, 104 commercial licensees nationally in the sector is not a true industry. We are slowly seeing more ancillary businesses coming into the fold: legal, accounting, marketing, government relations, business development, branding, packaging – and banking (slowly). In addition, the cannabis industry has been operating in an under-regulated space (as there was no other option). Now there’s a lot of opportunity during this transition into the regulated market. There’s just so many areas that you can jump into as we build a whole industry so it’s really up to your own imagination as to which way you want to go and how to get your feet wet.

Q: What trends do you expect to see when recreational comes online later this year?

RM: I think the biggest shift will be the consumption of cannabis moving away from smoking traditional flower to products that are extract-based. Extracts form the basis for the majority of cannabis products outside of smoking: vapor-oils, capsules, tinctures, sublinguals, transdermal patches, edibles, topicals, suppositories, infused beverages. I have no doubt that we’ll see different consumption methods and further product innovation. I think the sky’s the limit.

MK: I’m going to wear my American hat here. I think we’re going to see a huge influx of American companies that have already been working with Canadian companies on many of their products, move more into the market. I think the Americans are going to flood our market with new brands, technologies and licensing agreements, as well as other countries who have approved recreational cannabis already. It can only help create a successful global marketplace.

YG: I see a shifting consciousness as to what legalization means for cannabis as many people will be forced to redefine what they know about the potential benefits of cannabis as a therapy option.  You know I find it very interesting with my clients. There’s a divide in my book of clients: there are those that are for investment and those that still believe it’s a gateway drug. I believe perceptions will swing more positively as the public receives further education about the medicinal benefits of cannabis.

RK: It’s interesting when we talk about recreational. It’s a national movement that’s going to have so many ripples of effect. I’ve always believed that vaping and very clean, efficient methods are going to be preferred. However, we also believe that there’s a segment of the market, maybe 10% or so, that wants a curated strain and they want it in its entirety. It’s similar to going to a winery. You want to talk to a winemaker about how it’s grown, what it looks like, feels, tastes, etc.

Q: We’re seeing a lot more mergers and consolidations in the space. How do you differentiate yourself in a crowded market?

MK: In Canada, the companies are much smaller than other global players, although they are financed with plenty of capital. That said, you will see more consolidation between U.S. and Canadian companies. It is going to be about a recognized branded product first off.

RM: Like any industry, we’ll see consolidation, mergers, acquisitions and we’re going to see some businesses that will not make it – it’s the nature of any business. Look at the restaurant industry. It’s one thing to have a good idea: it’s another thing to actually execute it, using the restaurant example, understanding how to run a kitchen, avoid food-waste, or manage front-of-the-house. There will be consolidation, as licenses get scooped up through mergers. It’s just the normal course of a new and growing industry which continues to shift and evolve.

RK: There’s room for a range of different products in the competitive landscape. At the end of it, it’ll be key to have a really quality product, and maybe do fewer things but do them really well.

Q: If there’s one lesson you’ve learned in the industry, that you think other women should know, what would it be?

YG: Being aware of trends as an investor in the industry. It’s shifting so quickly. It’s almost mind-blowing. Retail investors need to be aware of how quickly the industry is transforming and the trends that are coming out that make a buy and hold strategy not likely the most effective way to play this market given the volatility we are witnessing.

RM: This is a 21st-century industry and women can play a leadership role from day one. For example, as a business leader in a new industry, I don’t think sitting back and just accepting the regulations at the government tables is acceptable. We’re getting out there and helping define the rules as the country moves forward. I think this kind of thing is really important. How do we encourage business investment and faith into the industry? I think having strong leadership, especially more women, can help.

MK: When I started in the industry it was two camps: medical marijuana and marijuana. Then we started talking about cannabis. It’s an industry now, a true marketplace. I think that from an entrepreneur’s point of view it’s become a cannabis investing haven. Just the fact that there are so many people involved, and that you can go on the CSE website and find a company directory in cannabis is exciting. There’s a mining sector, and now there’s a focused cannabis sector. Welcome to the industry.  It’s not going anywhere.

RK: Don’t be afraid to be visionary.  The industry is moving so quickly. Look to something you think you understand or that you can replicate with confidence. Another country, another model, don’t be afraid to try unique things. Don’t feel that you have to do what everyone else is already doing. The future is ours to create.

CSE Issuer Stories, Magazine

Canamex Gold: Gold-backed tokens start this company’s cryptocurrency revolution

Cryptocurrencies remain a hot topic in financial markets in the opening quarter of 2018, and Canamex Gold Corp. (CSQ) is moving to become the first company to issue a crypto-token backed by gold, and from its own project in Nevada no less.  The team is also looking at working with other companies in or near production to help them finance with crypto-token gold and silver royalty streams, instead of traditional debt and/or equity financing.

It is a new concept and takes some explaining, but the potential to eliminate further dilution for equity holders and create new models for valuation is both vast and fascinating.  Canamex Gold Corp. Chief Executive Officer David Vincent recently gave Proactive Investors a look inside this new funding paradigm.

Canamex Gold Corp. is literally taking currency back onto a gold standard with the introduction of its gold-backed token with an offering currently underway.  We’ll get to your pioneering business structure in just a moment, but first, the Bruner gold project underlies the token.  Tell us about Bruner and the plans there.

We’ve got Bruner to the stage where we need to complete the engineering studies, the environmental permitting and then we should essentially be at the Preliminary Feasibility Study stage, for a mine financing decision.  We hope to be at that point around the fourth quarter of this year.  At that time, we will make a funding decision to construct the operation.

The intention is to use the crypto-token model as the funding mechanism for the mine construction, which means it would be a non-dilutive financing for shareholders.  So instead of doing a traditional equity and/or debt financing, we’ll be doing a crypto-token financing, backed by a gold royalty stream off the project

It’s a win-win situation for shareholders and for token holders.  Token holders will be buying the tokens at a significant discount to the spot gold price, and the tokens will be tradeable on the Ethereum blockchain, potentially at a significant premium to their issue price, including a speculative premium that we can’t define until it’s actually trading.

This is a pioneering concept and has not been done by anyone else to my knowledge.  Where did the idea come from?

It came from looking at gold streaming royalty models, which traditionally is an agreement between two parties: one is the project owner and the other is the royalty buyer.  Royalty buyers include such companies as Franco Nevada, Silver Wheaton Precious Metals and Royal Gold.

Our concept is to take a gold royalty on the Bruner property, which has a small portion of the PEA defined resource, and tokenize it.  Instead of the royalty being purchased by one party, it is purchased by many parties who hold the tokens and these will then have liquidity on the Ethereum blockchain.

You announced an offering earlier this month for US$5 million.  Are you at liberty to give us some insight on how that is going?

It is going very well.  There is a lot of interest, particularly out of the United States and Europe.  We are receiving application forms and cheques.  We’ll keep the private placement offering open until the full amount is raised and then launch a pre-ITO (Initial Token Offering) on the back of it.

The advantage of coming in on the token offering now is that the buyers get a priority allocation into the pre-ITO  at a discount.

For those new to the cryptocurrency world and the concept of this offering, can you walk us through the steps?  An investor commits to the current private placement offering and you are talking about an ITO.  How do the two fit together?

They are similar in many respects.  The current private placement offering is more of a traditional financing mechanism under the current regulations and instead of being issued gold royalty crypto-tokens they will be issued a gold royalty token certificate.  The names and details will be held in a register.  Then the difference with the ITO is that the certificates can be converted to crypto-tokens at a price discount into the pre-ITO, and then they become tradeable on the Ethereum blockchain.  And at that point the tokens have liquidity.

So, chronologically, you close the offering and then there is an ITO.  What happens next, and what will you use the proceeds for?

The intention is to close the offering and go into pre-ITO, which would be priced accordingly and dependent on the spot price of gold at the time.  But again, the pre-ITO offer price will be at a significant discount to the spot price.  Looking at the monthly price chart of gold it appears very bullish.  We expect that the price of gold could be over $1,400 an ounce in two or three months, then it means the pre-ITO price would be higher than the current private placement offering.  Perhaps 10% higher.  So, coming in now has distinct early mover advantages.

The funds from the private placement and pre-ITO will be used to fund the company for the balance of this year to get to the mine financing stage in Q4.  We may not do the main ITO until the third quarter.  The advantage is that by that time we will know what the speculative premium is for these tokens on the blockchain, and then we can price the tokens according to the market price, and not the spot gold price.  If there is a significant speculative premium the price of the tokens in the ITO won’t be anywhere near the levels we are offering in this private placement.  Investors coming into the current placement are coming in at what could prove to be a very low price.

The work you have done on the token to date affords you rights to do this for other asset owners, does it not?

Correct.  We are looking at a number of possible business models.  We might set up a subsidiary newco, for example, that becomes like a royalty company and it raises capital via crypto-token issues.  It might have a number of royalty streams in North America and other safe jurisdictions and the capital raised to purchase those royalties would be via crypto-token issues, backed by the gold and silver royalty streams.

We’ve already deployed six exclusive token names on Ethereum.  They have been deployed but not issued yet.  So, we could use those tokens to fund additional royalties in the future through a royalty aggregation model.

You are also a highly respected technical analyst of financial markets.  What do you see for gold, and why?

I look at long-wave analysis and currently we are in what is called a fifth K-wave, which is a Kondratieff wave.  K-waves last 60 years, so we are on the fifth one of the last 300 years.  This wave should peak in 2027, which is where I expect this current gold bull cycle to start topping out.  We should see a mid-cycle correction in 2023.  I suspect the price will move up toward the previous high of around $1,900 over the next five years, correct and then in the last part of the cycle into 2027 move much higher than $1,900.  Basically, a full-on bull market. The fifth wave of the fifth K wave, which should generate a big move higher.

And if you look at the fundamental background it is not good.  Interest rates have been too low for too long and there is lots of debt out there, much of which will not be paid back, so defaults are on the horizon.  Interest rates thus rise because of a global debt default scenario, where lenders demand a higher interest rate risk premium.  What’s this going to do to the gold price?

And silver is even more undervalued than gold.  Silver has greater leverage to the upside.  You could see Canamex launch a silver crypto-token before long, again using a royalty streaming model.

Aside from Bruner, are there any projects in the Canamex portfolio investors should be aware of?

We have the Silverton gold exploration project.  It has similar geology to Newmont’s Long Canyon in Nevada.  Long Canyon is a dolomite breccia.  Our geologist Greg Hahn, who has built three mines in his career, thinks Silverton has tremendous upside and part of the money raised in this placement will be used for an initial drill program on the Silverton project.

Any other insights from the intersection of cryptocurrencies and hard assets before we bring our discussion to a close?

Just that I think we have tremendous value inherent in Canamex Gold Corp.  We have three pillars to the business model: the Bruner gold development project, the Silverton gold exploration project and the cryptocurrency model for funding.  Based on our updated Preliminary Economic Assessment, which came out in January 2018, the net present value (NPV) at the current gold price of Bruner is about $1.60 per share, using the current shares on issue.  The stock trades at around $0.20, or an 88% discount to NPV.  Where are you going to find better value than this in the market?

This story was originally published at www.proactiveinvestors.com on March 6, 2018 and featured in The Public Entrepreneur.

Learn more about Canamex Gold Corp. at https://canamexgold.com/ and on the CSE website at http://thecse.com/en/listings/mining/canamex-gold-corp.

CSE Issuer Stories

Interview with John Belfontaine from Phivida

Earlier this year, Peter Murray of Kiyoi Communications, sat down to interview the President of Phivida Holdings Inc. (CSE:VIDA), John Belfontaine, to discuss how the company was launched, what the drivers were behind going public, where Phivida sees opportunities in the cannabis space and more. Scroll down to read the full interview.

Peter Murray (PM) Talk to us about the genesis of Phivida.  How did you choose your focus with the CBD-infused consumables market still in its infancy?  And as you built the company, what measures did you take to establish the right corporate culture?

John Belfontaine (JB) We have an interesting origin story.  We began as a wholesale company that would broker CBD (cannabidiol) hemp oil from a European supplier to packaged goods companies and fell in love with the idea of creating a whole-plant nutraceutical company, taking our base oils and putting them into packaged goods both for the mass market and the professional clinical market.

Our team consists of consumer packaged goods experts, so it was natural to transition to that type of company from the wholesale realm.  We then renamed the company Phivida and created a three-division structure.  Phivida Organics continues the wholesale, Phivida Nutrition creates functional foods and natural health products that incorporate CBD using a non-encapsulated CBD hemp oil, and Phivida Enhanced is for professional clinical grade products.

As we built the company, we wanted to never lose the spirit of health and wellness – our slogan is Health and Wellness and Harmony.  We have a philosophy of goodwill and benevolence and want to maintain and never lose our original intention, which is to help patients.

We are a company of doctors, a company of functional food and natural health product specialists, and nutritionists.  We want to always keep the focus of Phivida’s direction on bettering the lives of our patients and giving practitioners the tools they need to give their patients a product which will help in their everyday lives.

As a result, we developed a platform called Phivida Families which focuses on education, research and sponsorship.  It underpins our education efforts and marketing for all products.  Every single one of our executives and operational personnel and partners subscribes to that goodwill community-based spirit.

As an example, we launched a subsidy program where families with children under 18 or parents over 65 with a diagnosed disorder can receive free product if they share their experience with us.

And a key reason we were able to assemble such a strong team is that we all have a story where cannabinoids have helped a loved one.  This affects us personally and makes it more than an individual pursuit – it’s a crusade.  And really being part of a paradigm shift, a shift away from pharmacology and back to our roots of traditional plant medicine.  Nothing heals like Mother Nature.

(PM) Tell us about your products and how you differentiate them and the brand now and into the future as the momentum of legalization draws new players into the hemp/cannabis marketplace.

(JB) Phivida has a strategic portfolio of full-spectrum CBD hemp oil extract-based products.  Phivida’s nutrition line focuses on preventative health, using functional foods and natural health products as a vehicle to prevent hospitalization and reduce chronic inflammation for everyday consumers and active individuals.  Phivida Enhanced, on the other hand, creates clinical grade products for professional practitioners.

In terms of our key differentiators, the first is quality standards.  We have dedicated ourselves to GMP (Good Manufacturing Practices).  All of our products are quality and safety tested, both at the batch level and finished stage.  All ingredients are premium, certified organic ingredients.  We try to adhere to a no-sugar-added approach, and if there is packaging better than what we are using we will adopt it.  So, we are looking to develop a product that is the most professional, premium quality product in the industry – the global golden benchmark for quality standards.

Ours is still a cottage industry and not all manufacturers hold themselves to the high standards we are used to.  We apply Health Canada-based standards to a US-operated company with no real regulation.  So, the quality assurance is where we set ourselves apart.

Beyond that we use a special technology with our products called encapsulation.  We use both micro and nano-encapsulation.  Encapsulation simply means that cannabinoids, which we derive from hemp, are lipid-based – they are a fat.  And fats are not soluble in water, but when you encapsulate these molecules on a nano-molecular level, we create a polymer shell around each molecule and it protects that it as it is ingested orally, into your gastro intestinal tract.

The benefit is that the product becomes soluble, so we can put it into a functional beverage format which creates ease of use and a more enjoyable delivery method.

But more importantly, encapsulated cannabinoids are faster acting and longer lasting.  They bypass first-pass metabolism and have a higher uptake into the bloodstream.  They penetrate the blood-brain barrier at a rate up to 600% higher than normal.  So, you receive five to six times the medicine for the same price at a higher quality standard.  That is the Phivida promise – that we give you more medicine, more value, and the highest quality products in the marketplace.

(PM) Tell us about a few products in detail.

(JB) In the consumer line we have created a holistic mind-body-soul line of CBD-infused vitamin juices, and these target certain conditions – from cognition to the immune system to moods.

Phivida Protect is an immunity booster that has a high level of antioxidant and anti-inflammatories.  Phivida Relax brings down anxiety and induces healthy sleep.  That would be the most popular in terms of where our distributors are demanding product for consumers.  And the products are all vegan-based.

On the clinical side, our hard cap pills have a special blend for muscle, bone and joint placement.  We put cannabidiol in with MSM chondroitin and glucosamine to repair and rebuild muscle tissues, which is ideal for patients with osteoporosis or those going into a later stage of their life with deterioration from chronic inflammation.

Those are our two flagship products at this point.  But we are really focused on innovation and building our portfolio of SKUs.  We are at about 30 now and see product innovation as a key component of our long-term growth.

(PM) Discuss your experience dealing with investors in a private setting, and then during your effort to go public.

(JB) We are extremely fortunate to have a strong, sophisticated and well-connected shareholder base.  Our shareholders are the who’s who of the cannabis industry.  Our go-public round could not have gone better.  We facilitated the go-public strategy through a long-form prospectus offering, which is not the fastest or easiest way to go public.  But we feel the hard way is sometimes the right way.

You save dilution by not doing a reverse takeover with an existing public vehicle.  And we were beholden to a higher level of disclosure, which we welcome because we know we have done our homework, we have a strong business plan, a strong team, and our business model is contrarian to the typical cannabis story you see.

We owe a lot to our investment bankers.  We were led by Canaccord Genuity in a syndicated offering with Mackie Research and Haywood Securities, and they did an excellent job of stewarding our story into the retail marketplace.  But we also owe a lot to our key strategic advisors, John Di Girolamo at Liberty North Capital, as well as Donato Sferra and Mark Attanasio, principals of Hillcrest Merchant Partners, who were responsible for leading us through the capital markets strategy and navigating us through proper transaction structuring.

(PM) You opted for the Initial Public Offering route to go public.  What business objectives did you hope to achieve by listing on a securities exchange?

(JB) We debated internally whether to stay private or look to access the capital markets through a public transaction.  We decided at the end of the day that the needs of the shareholders are paramount.  We were able to structure a transaction that would be beneficial and minimize equity dilution in the company.  That would add value for shareholders, and from a business perspective that is the primary concern.

We chose the go-public route to capitalize the company with a minimum of dilution, and we were fortunate to open our IPO at an ideal time.  We opened it days after the World Anti-Doping Agency (WADA) removed CBD from schedule, allowing it to be used by athletes for the first time in the history of competitive sports.  And shortly after, the World Health Organization (WHO) released a report that said CBDs were not only safe and nontoxic and non-psychoactive, but in fact medicinal.

We received so much interest from the institutional investment community that we had 300% to 400% more demand than we were able to take.  We closed the IPO in a matter of days with gross proceeds of $5.75 million.

(PM) In selecting a marketplace to list the company, what stood out about the CSE? What was your experience during the application process, and how have your first few weeks on the exchange been?

(JB) There was only one option for us to list, and that was the CSE.  The Canadian Securities Exchange really caters to the entrepreneur, and that is the spirit of what Phivida is.  The CSE values innovation.  We are a biotech/food and drug company that is about nurturing new ideas and developing new markets based on innovation and product development and concept development, so the CSE was the perfect platform for us.

Our experience listing on the CSE was seamless.  From the service level through the application process through assisting in understanding filing and regulatory requirements.  And immediate response.  When we began trading it was, I understand, the highest volume trading day in the history of the exchange.  Even so, their service was uninterrupted – it was the utmost professionalism and we were extremely impressed and satisfied with the experience and highly recommend it to other private companies.

(PM) The stock market has been reacting well to hemp stories for a couple of years now, but you took your time and built the company privately before making the move to go public.  Talk to us about that strategy.  What advice would you have for companies considering a public listing?

(JB) I believe the timing we chose to launch our IPO was ideal.  Had we considered opening our IPO this time last year I don’t think the markets were as strong.  As we enter 2018 you see major market catalysts.  We saw the WADA announcement.  We saw the WHO put out their positive report.  We also saw Constellation Brands purchase 9.9% of Canopy Growth, the largest cannabis company in the world, to get into the cannabinoid-infused functional beverage market, which we’d been operating in and developing for several years.  So that validated our business model.

And I feel the timing was ideal in terms of how we launched and stewarded and properly educated the marketplace on the offering.

(PM) Talk about the team you assembled around the company to prepare for going public.

(JB) That was plenty of discussion as to whether we wanted to take on a public listing or keep the company private.  But we were fortunate in the sense that we were able to build a public company support team we felt comfortable could navigate the requirements and do a public offering.

First and foremost, our back office and bringing on Carmelo Marelli and DSA who were our corporate secretary.  Our legal counsel, by adding Peter Simeon, a partner at law firm Gowlings WLG, to the board gave us strong legal counsel and a national presence at one of the largest law firms in the country, specialized in publicly traded companies.  And on business advisory, adding Bill Ciprick, Senior Vice President of Business Development at the Business Development Bank of Canada.  He is another component of good corporate governance, which is critical to the development of a young public company.  Good governance, we think, is lacking in the Canadian capital marketplace and we really encourage that approach.

And in terms of having leadership on consumer packaged goods, adding Jim Bailey, former President of Red Bull Canada, to our board gave us strength and vision on how to develop a functional beverage product.  He understands that we are not an adrenaline-based function but a health and wellness function, yet the same model fits.

And on top of this, we have a tremendously strong clinical scientific team plus, again, a team of directors who have done it before in terms of building both natural health product-based consumer packaged goods offerings as well as food and beverage.

(PM) Looking at the industry landscape, how big can your sector get and where are the best opportunities?  What must participants be aware of from a legal perspective?  Are there challenges to selling product in the United States?

(JB) Phivida has the opportunity to expand globally, and we anticipate being a globally recognized brand and setting the gold standard in CBD hemp oil-infused products in coming years.  We’ve already signed agreements into Asia, expanding our reach into the Japanese market, which is one of the largest nutraceutical-buying markets in the world.  We will continue to pursue new opportunities and markets in North America, Europe, South America, and Asia.

In fact, in the first two weeks of 2018 we have announced a licensing deal in Oregon that opens access to an additional 500 locations for us, and a Global Digital Reseller-Supply Agreement that expands our online reach into Germany and Australia.  And those come on top of the Japan agreement I just mentioned, which we announced January 5.

In the United States, we are excited to be covered by section 7606 of the Federal Farm Bill.  We source our product through farms that receive permits from the state-level departments of agriculture.  We are a federally compliant product which gives us an advantage to be sold as a functional food.  This is unique in the cannabis/hemp space and should be recognized and celebrated.

We recognize and support medical cannabis companies, but we are THC-free – all the medicine, none of the side effects.  And because we focused on hemp-derived full-spectrum oils, it gives us the opportunity to penetrate mainstream markets such as grocery stores and naturopathic clinics.

(PM) What makes Phivida attractive for investors at its current market value and stage of corporate development?

(JB) Phivida is in a rapid growth phase in its corporate development life cycle.  This is a very interesting time for investors to hear the story.  Our comparables in the marketplace have huge valuation multiples compared to where we are.  When we were at a pre-money valuation we were around $10 million market capitalization at the IPO level, and our closest comparable, Isodiol, was at $450 or $500 million market capitalization.  So, we were very undervalued compared to our closest comparable.

We are a growing company with huge potential for acquisitions of new technologies as well as capturing leading share in new markets.  California, Washington, Oregon, Colorado – across the western United States is our foothold, but we have new partnerships globally and we continue to pursue development of globally distributed brands.  As a result, this is a great time for investors to look at a rapid growth company which is well managed with premium quality products that is extremely well structured – fewer than 45 million shares outstanding with almost $8 million cash and no debt.  Management, offering, structure and financial health – we stack up well.

CSE Issuer Stories, Magazine

MGX Minerals acquires zinc air battery developer ZincNyx Energy Solutions Inc.

Jared Lazerson, chief executive of MGX Minerals Inc (CSE:XMG, OTCQB:MGXMF), tells Proactive they’ve furthered their reach into the emerging energy space with the acquisition of ZincNyx Energy Solutions Inc.

Canadian group ZincNyx Energy Solutions has developed a modular energy storage system (ESS) designed for energy storage in the 5 kW to 1 MW range for extended periods..

Its technology consists of three main systems each using zinc and air to store energy in the form of zinc particles.

This story was originally published at www.proactiveinvestors.com on December 15, 2017 authored by Andrew Scott and featured in The Public Entrepreneur.

Learn more about MGX Minerals Inc. at https://www.mgxminerals.com/ and on the CSE website at http://thecse.com/en/listings/mining/mgx-minerals-inc.

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

Global UAV Technologies: Pure play drone sector exposure with earnings just starting to take off

The main revenue-producing component of Global UAV is its services division, consisting mainly of photogrammetry and geophysical surveying, but it offers a full-service package in the field of unmanned aerial vehicles (UAVs)

Global UAV Technologies (CSE:UAV) is one of the few listed operators in the fast-growing field of unmanned aerial vehicles (UAVs).

Formed just more than a year ago, Global UAV has quickly merged complementary businesses, allowing it to be a “one-stop shop” for those requiring UAV – or “drone”, if you prefer – services and for those who want to offer their own drone services.

The group has been assembled quickly through acquisition. The focus has been on buying companies with proven technologies that provide cash flow. As a result, unlike many nascent technology companies, it is already earning revenues, including a modest profit in the third quarter of 2017.

Admittedly, those revenue and profit numbers are small at the moment, as might be expected of a company capitalised at less than C$20mln. With revenues rising rapidly and a high-margin business model, however, there is every reason to believe the stock is readying for take-off.

Using drones to provide information on the physical properties of a land mass
One of the group’s subsidiaries, Pioneer Aerial Surveys, is the industry leader in drone geophysics and field operations.

In simple English, the company’s drone service can provide information on the physical properties of a land area. This service is a more cost-effective operation than manned surveys and can reach places a manned aircraft or ground crews would find hard to access.

Pioneer Aerial’s UAV-MAG surveys are in high demand from mineral exploration and mining companies worldwide.

In a similar vein, Global UAV’s other services subsidiary, High-Eye Aerial Imaging, provides low altitude, high definition, LiDAR (light detection and ranging), aerial surveying, photography, videography and other aerial mapping services.

Again, mining companies are keen on this stuff, but so too are the construction, engineering and agriculture industries, to name a few.

The company manufactures its own drones
The company uses its own drones, designed and manufactured by its NOVAerial Robotics division.

Its flagship Procyon 800E helicopter is used by international customers and is considered one of the best UAVs in its class. The single-rotor helicopter style design of the Procyon provides higher payload capacities and longer flight times than a typical commercial-grade multi-rotor UAV.

As a small progressive company that keeps abreast of industry trends, Global UAV president James Rogers thinks their products and services will keep them “ahead of the pack.”

The company also has a division, UAV Regulatory Services, which provides an online service called Easy SFOC.

This service assists clients with the preparation of special flight operation certificates (SFOCs). These certificates are required for the operation of recreational and commercial drones in Canada.

“It can be a fairly complex process to apply for that [an SFOC], so UAV Regulatory essentially offers a consultancy service to consumers who are interested in starting their own business. We can guide them through the regulatory requirements to help them get their licenses,” explained Michael Burns, CEO of Global UAV.

Together, these four businesses within Global UAV provide a fully integrated profile of manufacturing, services and regulatory compliance unique to the UAV industry and its customers.

“Right now, the main revenue-producing component of Global UAV is our services division, consisting mainly of photogrammetry and geophysical surveying,” Burns explained.

“The geophysical surveying services have been very lucrative for us. We have been the leader in this commercially since 2014 when we really brought this technology to market. We set ourselves up as a commercial supplier of the UAV-MAG services through Pioneer Aerial,” Burns continued.

“We’re able to offer to our customers either a full-service package, where they can hire us to come and do the work, or we can also do a sale. If a customer would like to purchase the equipment and get set up as a user, we can sell them a drone, train the customer and set them up with all the regulatory framework.” Burns added that it is a very attractive model for small companies.

The top line is heading higher – rapidly
A chart of quarter-by-quarter sales for Global UAV shows the sort of vertical take-off one might expect from the company’s drones.

In the first quarter (the three months to January 31), sales were C$22,386; in the second quarter they soared to C$181,204, and in the third, they rose to C$333,529.

The third quarter – to the end of July – saw the company move into the black, with net income of C$154,956.

A NOVAerial drone typically sells for US$30,000 to US$40,000. Therefore, the company does not exactly need the manufacturing clout of General Motors to keep that top line moving north at a rate of knots, especially as a high-margin business that gets the bottom line heading in the right direction as well.

According to auditing and consulting services provider PwC, “the drone revolution is disrupting industries ranging from agriculture to film-making”.

PwC values the emerging global market for business services at US$127bn, with infrastructure (US$45.2bn) and agriculture (US$32.4bn) the two biggest markets, while mining, where Global UAV is already strong, is valued at US$4.3bn.

In conclusion, the market opportunity is enormous. As James Rogers observed, however, North America is not awash with listed pure-play UAV companies, with big names such as Facebook, Google, Amazon and Boeing certainly having their fingers in the pie.

“Global UAV offers a ground floor entry opportunity to get into the drone sector.”

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

Learn more about Global UAV Technologies at https://www.globaluavtech.com/ and on the CSE website at http://thecse.com/en/listings/technology/global-uav-technologies-ltd.

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.