CSE Issuer Stories, CSE Quarterly

Torino Power Solutions nears turning point with unique approach for better power grid efficiency

There are more than a few companies worldwide selling equipment to monitor the transmission lines that deliver power to our offices and homes, but none has products like Torino Power Solutions (CNSX:TPS). It should come as little surprise, then, that Torino CEO Rav Mlait speaks excitedly about the company’s outlook, fully understanding, as he does, the clever technology that makes its products so unique.

Before getting to that technology, however, a revealing story about the electricity we use every day is in order.

Power transmission is not nearly as efficient as the general public might think. From the time electricity leaves a power plant to the time it reaches its end user, it is common for somewhere between 6% and 15% of the power to be lost, and many estimates reach even higher. The losses occur for a variety of reasons.

One of these is that the company managing the transmission system needs to make sure its power lines don’t run too hot. Not only can excessive heat damage equipment along the transmission pathway, but when lines get too hot they can damage power lines that are very expensive to install and maintain.

So, how do many electrical utilities gauge the temperature of their lines to optimize the amount of power flowing through at any given time? Would you believe by referring to historical weather pattern charts and ambient temperature readings?

Despite the imprecision inherent in such an approach, Mlait confirms that the practice is common. Now, what if the utility were able to know what the temperature actually was along different sections of a long transmission system such that it did not have to underutilize its infrastructure?

That’s the issue that Torino addresses. And with over $10 million spent on R&D, plus patents in place, the time to push for widespread adoption of the company’s solution is at hand.

Torino’s “Powerline Monitoring System” is a combination of a hollow aluminum sensor placed on a power line, combined with a nearby “interrogator” that reads microwaves bouncing back from the sensor. The sensor expands and contracts according to the heat of the line, and an algorithm in the interrogator converts the signal to a temperature reading that is then relayed to the utility in real time.

“As populations grow and distributed connection resources such as wind and solar gain prominence, it is putting the existing electrical infrastructure under more strain and causing wear and tear,” Mlait explains. “Part of the solution is better data, and it all ties into the industrial Internet of Things concept whereby real-time information enables system administrators to make better decisions.”

Torino is not the only company to conclude that there must be a better solution for monitoring line temperatures, but it is the only one with a passive sensor. Mlait says that all competing line sensors require power sources, in the form either of batteries or the power lines themselves. “So, if a power line goes down, their sensors can go down with it. Ours won’t, and that is part of our competitive advantage.”

Another advantage comes in the form of economics. Torino will deploy a system, which is comprised of three sensors and one interrogator, for between US$40,000 and US$50,000, or approximately half the cost of its rivals’ installations.

“Having more data from more lines, and thus a richer data set, is a better way for utilities to manage their assets and conduct dynamic line ratings,” explains Mlait. “That is one of the reasons we priced our technology where we did, so that utilities can deploy more sensors for the same cost.”

Mlait claims that utilities can quite easily recover up-front costs within 12 months, enabling the return on investment to stack up quickly.

Consistent with the early stage of the product roll-out, Torino’s solution is being used by a single utility at present. Tri-State Generation and Distribution Association installed the system on a trial basis last year in eastern Colorado. In what can only be taken as a good sign, it added to the trial in June of 2017 by moving a second system to a more critical location in western Colorado.

“Utilities are conservative when it comes to adopting new technologies, and understandably so,” says Mlait. “They want to really examine new equipment before deploying it extensively throughout their expensive infrastructure.”

Mlait says that he and his team are in discussions with a number of utilities both in North America and overseas, and while nothing has been finalized, observers shouldn’t be too surprised if additional installations make news before long.

Another component of the marketing strategy is to potentially ally with distribution partners with reach into markets that Torino has yet to develop. “We are a relatively small company, so the idea of partnering with a large distributor is pretty significant,” Mlait says.

Word is definitely getting out because Torino has started developing new products based on feedback from potential users. The company recently initiated development of a system for distribution lines, which are the smaller power lines operating inside urban areas. Urban power lines often heat up and sag, causing a host of challenges such as power outages and clearance issues, so a robust solution in this environment would be most welcome.

The other development program announced recently involves underground sensors. Mlait says that potential clients have asked if products are possible for applications such as subways and other underground infrastructure.

“People in cities such as New York, London and Toronto know that there are significant down times associated with underground systems, largely owing to deterioration of aging lines,” says Mlait. “We have heard about the need to better monitor these cables as they continue to deteriorate and are looking to provide a solution down the road.”

With a cost/benefit ratio that makes sense and a need within a crucial industry that cannot be denied, the potential clearly exists for Torino’s sensors to gain broad acceptance. Installation of a mere 100 systems could bring in over C$5 million on the top line, and there is the possibility for ongoing revenue streams from installations as well.

“It is not too often that you see new technology in this industry. We have something that is unique and some highly respected companies have suggested to us that we might have a game-changer on our hands,” according to Mlait. “From an investment standpoint, we have an advanced product starting to make headway, but a pretty small market cap. Throw in our ability to develop new products as well and we feel very positive about our future.”

This story was originally published at www.proactiveinvestors.com on August 29, 2017 and featured in The CSE Quarterly.

Learn more about Torino Power Solutions Inc. at http://www.torinopower.com/ and on the CSE website at http://thecse.com/en/listings/technology/torino-power-solutions-inc.

CSE Issuer Stories, Listed Issuers

Deveron UAS’s drones helping agricultural efficiency to reach new heights

Deveron UAS helps agricultural efficiency reach new heights with a data-gathering drone fleet.

New trends in technology are penetrating every conceivable part of our daily lives, and the food on our table is no exception.  What many shoppers might not know, however, is that technology is now making a difference right at the very source of our food – the farmer’s field.

The agricultural sector is experiencing a rapid digital revolution, with some farms these days run more like high-tech outdoor factories.

Right place, right time…

Deveron UAS Corp (CSE:DVR), an enterprise drone data provider targeting agriculture, would thus seem to be at the right place at the right time.

This use of drones, or for the uninitiated, unmanned aerial vehicles, is a nascent industry, yet one where the potential rewards are enormous, explains Deveron’s co-founder and Chief Executive Officer David MacMillan.  Put simply, the company’s pilots ‘fly’ farmers’ fields, mainly over mass crops like corn and soybeans, and provide follow-up analysis to help increase yields and reduce costs.

Services include thermal imaging, data analysis and drainage identification – in other words, Deveron’s technology is able to tell a farmer what is going on in his field, something that is oftentimes difficult to determine by working strictly at ground level.

Macmillan says that in discussing Deveron with potential users, the emphasis must be on explaining the advantages of this new type of analysis, rather than trying to tell people that they’ve been farming the wrong way their whole lives.

“Essentially, we’re trying to enable decision makers in agriculture to make more efficient choices,” he says.

For farmers eager to embrace the concept, Deveron is one of just a handful of entities with a permit to fly drones across Canada.  There are 15 pilots available as and when needed in eight of the country’s 10 provinces (having started in Ontario with just two).

MacMillan explains that it makes more sense for farmers to hire Deveron than to buy their own drones at great expense, particularly if field analysis is needed only a couple of times each year (as is often the case).  The fact that farmers need to make key decisions on a variety of crop planning issues every year is a strong selling point, both for farmers who might use the service, as well as to investors considering whether to back Deveron with an equity purchase.

A strong recurring revenue model…

“Our hope is to continue to show the investing public that there is a strong recurring revenue model here,” MacMillan says.  “Corn grows every year and the farmers need the data every year to make informed decisions.”

Currently, the group is targeting large agricultural operations as customers – those which might manage a million acres or more –  as well as smaller outfits.  At this point, it is all about encouraging a network to develop.

While it is still early days, Deveron is already seeing engagement expand as bigger players increasingly sell its services ‘downstream’ to their customers.  At present, there are around 30 such partnerships with big farm managers.

Recent collaborations include the retail division of GROWMARK Inc., vegetable producer Bonduelle North America and major farming services and grain retailer Thompsons Ltd.  Everyone gains in the network, explains MacMillan, as the large entities get Deveron’s services at a discount, and then in turn make some money when they sell it down the line.

“There are 400mln acres of farmland in North America so it’s a huge addressable market,” adds MacMillan.  Some 88mln of those are in Deveron’s home Canadian market.

What could that translate into in dollars and cents? At Deveron’s standard $3 an acre charge, 2-3 flights a year over 400mln acres, and an assumed adoption rate of 20-30%, that’s a potential annual market of $700mln, reckons MacMillan, and likely to increase in the future.

First mover advantage…

For now, though, revenue and earnings are less important to the group than consolidating its first mover advantage by investing and scaling up the business.

MacMillan’s background is in public venture capital and he came to research drones three or four years ago after looking to invest in new technology which could be supported by Canadian companies.  Rather than obsessing over the ‘flying robot’ concept, he was interested in how data collected by the vehicles could be used intelligently, and agriculture was a good place to start.

“Historically, network plays end up having very high IRRs (internal rates of return) for the first people in the space,” he explains.  Behind all that, the idea that by 2050, with a global population of 10bln people, the earth’s food security may be an issue if agricultural yields don’t increase only added to the drive to establish the company, he says.

Business partner and co-founder Norm Lamothe is himself a farmer and manages 500 acres of land, so is ideally placed to know what famers need and want.

If valuation is any guide, it would seem this combination has the company heading in the right direction.  From around $2mln in 2016, Deveron is now worth nearer to $8mln, and recently raised $2mln, says MacMillan.  The idea now is to continue to grow organically, scale up the business and gain credibility via more collaborations and partnerships.

Canada is the focus for the time being, but to increase the amount of drone flights possible (they can’t fly fields in the snow) developing more of a presence south of the border is appealing, says MacMillan.

There is also the possibility of news flow over the next year around further partnerships, new revenue streams, and intellectual property value related to the company’s analytics technologies.

The seeds now planted, careful nurturing of Deveron’s business has the potential to yield robust returns for shareholders in the years ahead.

This story was originally published at www.proactiveinvestors.com on August 15, 2017 and featured in The CSE Quarterly.

Learn more about Deveron UAS at http://www.deveronuas.com/ and on the CSE website at http://thecse.com/en/listings/cleantech/deveron-uas-corp.

CSE Issuer Stories, CSE Quarterly

Tower One Wireless the one North American microcap tapping int’l cellular tower build-out

Often in the investment world, a long-term business trend is easy to identify, but finding the right stock to buy to take advantage of that trend is anything but.  Fortunately, the choice is simple for microcap investors looking to hitch a ride on the rapidly expanding need for cellular network capacity by owning shares in a cellular tower company, as there is only one such stock in North America: Tower One Wireless (CNSX:TO).

Fortunately, too, the basics of the business are easy to understand.  In many regions, mobile network operators don’t own the towers to which their antennas are fixed, but rather lease space on them.  This approach essentially enables a carrier to share tower costs with other carriers serving the same area.

For a tower company, then, owing the structure that wireless carriers need today, next year and into the foreseeable future can be a stable, and lucrative, proposition.

“What makes this business interesting is that a tower costs between $50,000 and $70,000 to erect, but the monthly lease payments come in at $1,000 to $1,500, and that is just for one mobile network operator,” explains Alejandro Ochoa, Tower One Wireless Chief Executive Officer.  “We sign 10-year lease contracts, with a 10-year option, but companies in the tower sector are valued highly because in essence use of the towers is perpetual.  And if we add a second or third carrier to use the tower, there is no marginal cost to us.”

Reflecting the Colombian-born Ochoa’s 18 years of investment banking experience in Latin America, Tower One Wireless is focusing its early building efforts in Argentina and Colombia, with Argentina expected to account for about 80% of activity.

“Argentina went through some challenging times, but now the country has elected a new president and is back in business,” Ochoa says.  “There will be demand for 10,000 new towers in Argentina.”

Ochoa tells an impressive story of competing with a large pool of rivals for the Argentine business before winning a spot on a shortlist of 15 companies, and finally being among the four companies awarded the right to build towers.  “We all got awarded the same number of towers, which is 100 to begin with,” he says.

So far, the company has 20 towers up, and anticipates having the first 100 hundred built sometime around the end of 2017.  The early exercise of warrants combined with a $5mln credit line will see the company through that planned construction.

Key to understanding the risk side of the equation is that Tower One Wireless never builds a tower hoping that a carrier will need it.  “We don’t build towers on a spec basis, but rather on a build-to-suit basis,” Ochoa emphasizes.  “Every tower I build has a guaranteed tenant.  My relationship with other carriers is my chance to add a second or third carrier to that tower.”

Once a site is agreed and permitted, construction takes 60-120 days, and some 30 days later payments begin to come in from the first carrier on the tower.  It is thus an easy business to model, and Ochoa’s model suggests very good returns indeed.

“With 100 towers we should have an EBITDA margin around 72%,” Ochoa says, adding that the company won’t see everyday expenses increase as it expands its tower pool further.  “The majority of the work is outsourced, so I can move from 100 towers to 500 towers and manage it with the same 15-person team I have today.”

Ochoa describes his team of accountants and other professionals as hailing from major wireless companies and tower builders, including a legal unit entirely from telecommunications giant Telefonica.

Ochoa has some interesting comments when asked why he chose to list the company on the public markets.  “When you sit across from the wireless carriers and they ask what makes you better than your 15 competitors with many times the capital you have, it is that I am not structured to sell my towers back to American Tower (NYSE:AMT).  Every other company out there is modeled to build their towers and sell them as their natural exit.  By being public, my investors have the embedded option of getting in and out of the company as they please.”

He also talks about the dynamics of capital in South America, where among his banking achievements is leading the team that listed Facebook (NASDAQ:FB) on Colombia’s stock exchange.  Institutional investors in Colombia and other Latin American countries must observe foreign investment limits dictating that a substantial portion of any equity allocation ends up in domestic stocks.  In some cases, this means a fund has fewer than 100 issuers to choose from.

Ochoa would one day like to provide them an additional choice.

“Canada has been very proactive in Latin America and is a market where investors understand the region through mining and oil and gas involvement,” Ochoa states.  “The potential to access capital by listing in another market is also a reason we decided to go public.”

The company Ochoa mentions absorbing other networks, American Tower, is listed on the New York Stock Exchange and sports a market capitalization of some US$60bln.  In 2017, it has outperformed the S&P 500 average at a triple-digit pace.

Putting Tower One Wireless and its C$13mln market cap next to American Tower makes for a lopsided comparison to be sure, but it illustrates the potential for value expansion as the former’s tower network builds out.  It also shows that demand for towers is nothing if not healthy.

“I think looking at our company today makes sense because with the 100 towers we should finish over the next six months we’ll have positive operating cash flow,” Ochoa concludes.  “On a discounted cash flow basis, every dollar you invest in a tower is worth three dollars the day you finish building.  Our company is well-managed and the business is simple.  And we are the only publicly listed entry point into the tower market at the microcap level.”

This story was originally published at www.proactiveinvestors.com on August 31, 2017 and featured in The CSE Quarterly.

Learn more about Tower One Wireless at http://www.toweronewireless.com// and on the CSE website at http://thecse.com/en/listings/technology/tower-one-wireless-corp.

Listed Issuers

CSE Stockpools Cannabis Investment Challenge Successfully Concludes

This past summer, the Canadian Securities Exchange, in partnership with Stockpools, Lift Cannabis Expo, and Abattis Bioceuticals Corp. (CSE:ATT), successfully ran the first-ever CSE Stockpools Cannabis Investment Challenge.

This 11-week fantasy stock trading competition attracted over 1,000 participants from across North America and beyond who were each vying for the chance to win weekly cash prizes as well as the chance to win the grand prize, valued at $3,000.

The challenge helped investors understand more about the pool of companies in the competition; specifically, all of the companies that investors could choose from are CSE-listed companies involved in the cannabis sector. In total, there were 45 companies that investors could choose from in order to put together their fantasy portfolio.

In addition to some colourful usernames, weekly winners of the competition (listed below) posted some impressive gains, with the range of returns spanning from 0.28% in week 6 to 15.12% in week 4. The grand prize winner, John Terry from Rhode Island (USA), won the final three-week stretch with a gain of 13.21%.

As part of the competition, select CSE-listed companies also shared their unique insights and experiences on the shifting landscape facing public cannabis companies. Included below is a list of companies that shared their perspectives on the cannabis markets:

Rob Abanante, CEO of Abattis Bioceuticals Corp. (CSE:ATT), a lead sponsor of the challenge, shared his thoughts on challenge’s performance and had a few kind words to say about working with the CSE and Stockpools:

“We at Abattis Bioceuticals Inc. would like to first thank all of the participants in the CSE Cannabis Investment Challenge, as well as Lift Cannabis Expo, the Canadian Securities Exchange, and of course the other featured companies; I hope you all enjoyed participating as much as we did. After this success, we are looking forward to working with Stockpools and the CSE again on future contests. There is so much to learn about this diverse and volatile industry that is changing rapidly.  We wish to continue educating new investors through Stockpools’ unique platform and invite them to our website for more information. Thanks again everyone!”

This competition not only helped to highlight the cannabis sector, it also provided investors with a risk-free opportunity to learn more about investing online as well as about the diversity of companies in the cannabis space and the Canadian Securities Exchange. “Our partnership brought together a select group of CSE-listed companies in the Cannabis space,” explains Anil Mall, CEO of Stockpools, “and gave our global audience a unique opportunity to hone their trading skills on Stockpools’ risk-free educational platform.”

The focus of the CSE Stockpools Investment Challenge was to provide an educational opportunity as well as engage retail investors in the cannabis space, an objective the CSE is confident was met. “The initiative ended as a huge success in August with more participants than expected across the globe,” said Anna Serin, Director of Listings Development and challenge organizer. “The Canadian Securities exchange continues to work to engage the investment community in the small cap space, always striving to build more engaged and liquid markets for the benefit of its issuers.”

Thank you to our sponsors and to everyone who participated in the CSE Stockpools Investment Challenge. Congratulations to the following weekly winners:

Week 1 – michelrbrunet (1.58%) – Quebec, Canada

Week 2 – Krab – (4.26%) – Delta, BC

Week 3 – dancep (6.02%) – Ontario, Canada

Week 4 – arod (15.12%) – Ontario, Canada

Week 5 – Beausoleil (5.64%) – Quebec, Canada

Week 6 – Excelsior (0.28%) – Tennessee, US

Week 7 – chriscam (9.01%) – Has not sent in claim form yet

Week 8 – Tiekam (11.71%) – Kitchner, ON

Week 9-11 (Grand Finale) – Jt420money (13.21%) – Rhode Island, USA

Industry Insights

How to Improve Your Recruiting Through Analytics

We are living in an age of big data and analytics.  It has never been easier to collect and analyze information to optimize your organization’s business processes.  Recruiting is no exception.  Doing this will not only offer you fresh insights into how successful your existing recruitment efforts are but also provide clarity on how to make them more efficient to achieve better results.

Establishing and using analytics is a great way to figure out how to make your recruitment efforts as effective as possible. You can uncover that you’re spending hundreds or even thousands on resources that are not leading to the desired candidate pools where you wind up hiring from. Smart organizations leverage HR technology to gather the proper data points required for c-suite decisions for funds allocation and business process effectiveness.

There are lots of ways to capture data about your recruiting process. One of the easiest is to use an applicant tracking system that will automatically collect that data for you and display it back in an easy-to-understand dashboard. But, no matter how you collect your recruiting data, make sure that you focus in on a few key metrics:

Time to hire – is the amount of time to it takes from when a job is posted until a candidate accepts your job offer.  While time to hire can vary dramatically depending on the industry you are in and the role you’re recruiting for, the longer the procedure takes, the more expensive it becomes.

Cost to hire – is how much it costs to fill a position, to calculate this you factor in advertising the position on paid job boards, paying for various other tools, and time spent on recruiting, vetting, and onboarding candidates.

Source quality – is the cost-effectiveness of the different sources you’re using to attract candidates. An easy way to calculate this is to divide the cost of each source (job boards, ads, etc.) by the number of successful hires for the desired time frame in question (quarterly, annually).

Together, these metrics will give you a fantastic initial understanding of how efficient and cost-effective your recruiting is.  Once you’ve established some benchmarks for yourself or your recruiting partner like TPD, (i.e., how long it typically takes you to fulfill a job, how much doing so typically costs on average, and how cost-effective your distinct sources are), you can then get to work to optimize your recruiting efforts to get better results.  When you have clarity through attribution analytics on your top candidate sources by job type, you can effectively build a case to increase ad budget for that job board platform and reduce spending on underperforming job boards.

There are many ways to leverage applicant tracking systems during the recruiting and onboarding. When done right this pivotal step in candidate experience becomes the stepping stone for your employer brand and the start of your new hire’s journey with you. TPD provides end to end solutions for organizations looking to improve their recruiting process internally or take over the entire function with total transparency into all of the analytics mentioned.

Anytime that you have data-driven analytics and metrics, you can use them to gain insights into everything you’re doing.  If your time to employ is long and your cost per hire is low, then you should make some tweaks to your procedure, such as spending a bit more on advertising.  A small investment can easily pay for itself if you are getting to better candidates faster, but you need to know your numbers to justify the action.

It may not be easy, but using analytics is a great way to figure out how to make your recruiting efforts as efficient as possible. For that reason alone, it’s worth taking a closer look at them.

About TPD

TPD® is an international Workforce and HR Solutions company that partners with our clients and talent pool to help people succeed and help organizations perform. Founded in 1980, TPD works with people, for people, and about people; providing scalable HR solutions that are backed by the best-proven practices in the industry.

Industry Insights

Are You Protected Against Cyber Security Attacks?

No one thinks it’s going to be them. Until it is.

According to the movies, cybercriminals operate out of abandoned warehouses, target carefully selected conglomerates and use things like “worms” and “keys” to gain access. The reality, however, is that cybercriminals, using scattergun techniques like phishing, are not out for world domination but rather a more familiar motive: money.

In 2016, 24% of breaches targeted financial organizations, 15% healthcare, 12% public sector entities and 15% targeted retail and accommodations*. Whether it’s design plans, medical records or good, old-fashioned payment card details—someone, somewhere will see it as their meal ticket.

Organizations need to build a strong security posture by implementing strategies that address internal and external threats across the entire chain. It is critical to start from the premise that systems will be breached. This perspective enhances the effectiveness of decision making related to preventing, mitigating and recovering from a breach.

Another recent development makes this a pressing imperative. Canada’s new Digital Privacy Act has introduced mandatory breach notification.  In 2017 organizations will be required to notify the Office of the Privacy Commissioner, as well as the individuals affected, if the organization experiences the loss or theft of personal identifiable information that puts these people at “real risk of significant harm.” Failing to do so could result in fines of up to $100,000 per offence. This comes as part The Digital Privacy Act (formerly referred to as Bill S-4) that was put into effect in June 2015.

On January 19, 2017, the Canadian Securities Administrators (CSA) published Multilateral Staff Notice 11-332, stating that they expect issuers to provide risk disclosure that is as detailed and entity specific as possible, should they determine that a cyber security risk is a material risk. In order to determine materiality, the cyber security incident requires analyzing and the probability of a breach occurring and the anticipated magnitude of its effect needs to be determined. The CSA expects issuers to disclose specific risks, rather than generic risks common to all issuers, and they expect issuers to tailor their disclosure of cyber security risks to the particular circumstance. Underestimating risks leaves enterprises highly vulnerable. Poor security can lead to painful, even catastrophic, financial and reputational losses. Moreover, data breaches and other security incidents put not just individual companies, but entire supply chains, at risk. The following are three steps to build a robust security posture that will support the goals and resilience of your organization, and assist you in determining your cyber security risk.

  1. Conduct a health check of your organization’s cyber security maturity.

A health check is an assessment of an organization’s controls, security risks and threats, to define its current security posture and highlight gaps.

The health check assesses current risks to your industry and business and evaluates the strengths and weaknesses of your organization’s existing security controls.

The health check determines the impact a breach could have on your organization: operations, productivity, information assets, infrastructure, reputation, materiality of the cyber security risks and brand.

  1. Develop a clear security roadmap.

The health check will guide an organization by providing a clear map of priority risks and practical direction regarding where to most effectively focus cyber security budget and resources.

  1. Test your organization’s vulnerability to cyber-attack.

It’s essential to supplement planning with robust testing to determine your organization’s vulnerability to cyber breaches. Intellectual property, personal information, plant systems, computer servers, and mobile devices, could all be targets for attacks.

Seek objective, trusted third party cyber security expertise to assess potential weaknesses through vulnerability assessments and penetration testing of your internal and external networks and applications.

Without adequate protection, cyber security threats can put your organizations’ operations, reputation – even its existence – at risk. Vigilant assessment, planning and testing are critical to protect the bottom line.

For more information on how you can better protect your business from cyber-attacks, contact: Danny Timmins, CISSP, National Cyber Security Leader T: 905.607.9777 E: [email protected]

About MNP

MNP is a leading national accounting, tax and business consulting firm in Canada. We proudly serve and respond to the needs of our clients in the public, private and not-for-profit sectors. Through partner-led engagements, we provide a collaborative, cost-effective approach to doing business and personalized strategies to help organizations succeed across the country and around the world.

*Sources:

  • 2017 Verizon Data Breach Investigations Report
  • Canadian Securities Administrators Multilateral Staff Notice 51-347 – Disclosure of cyber security risks and incidents
  • Canadian Parliament: Digital Privacy Act (Bill S-4)
  • Government of Canada: For Discussion — Data Breach Notification and Reporting Regulations
CSE Quarterly

CSE Quarterly – Technology and Innovation Issue 2017

The pace of change in technology is extraordinarily fast and, it seems, only getting faster. Ideas and technology that seemed to belong to the realm of science fiction are now very much on the cusp of becoming commercial realities. It is against this exciting backdrop that the latest edition of the CSE Quarterly is launching.

The growing constituency of tech issuers on the CSE, including those profiled in this edition of the CSE Quarterly, provide great examples of innovators leveraging technology to solve real-world problems and have global impact.

Featured in this special technology and innovation edition of the CSE Quarterly are:

  • Tower One Wireless Corp. (CSE:TO)
  • Deveron UAS Corp. (CSE:DVR)
  • Torino Power Solutions Inc. (CSE:TPS)
  • Subscribe Technologies Inc. (CSE:SAAS)
  • Victory Square Technologies Inc. (CSE:VST)
  • Enviroleach Technologies Inc. (CSE:ETI)
  • RESAAS Services Inc. (CSE:RSS)

Read the latest issue of the CSE Quarterly below.

Missed a previous edition of the CSE Quarterly? Click here to access previous issues.

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Events

Peering into the next big thing in tech: Preview of the Extraordinary Future Conference

It’s one thing to talk about ‘the next big thing’ but it’s another to actually meet the entrepreneurs and thought leaders making it happen.

This month, investors and technology enthusiasts will have the opportunity to attend the first-ever Extraordinary Future conference in Vancouver. Attendees will be able to meet and engage directly with companies working on a number of cutting edge technologies, including blockchain and cryptocurrency, artificial intelligence, virtual and augmented reality and more.

Produced by Cambridge House International and sponsored by the Canadian Securities Exchange, the Extraordinary Future conference aims to connect the vibrant entrepreneurial community of the West Coast with investors who are both curious and keen to stay on top of the latest developments in these fast-moving spaces.

Extraordinary Future: Highlights

One of the biggest attractions for this year’s conference is the opportunity to hear from the innovators defining the commercial landscape for some of the most talked-about ideas making headlines today.

Among the highlights of the show for the Canadian Securities Exchange will be the Technology & Finance panel discussion (taking place at 4:50pm). The CSE’s VP of Listings Development, James Black, will be moderating a group discussion between technology entrepreneurs and investment professionals including Jamie Brown – Vice Chairman, Managing Director Investment Banking at Canaccord Genuity; Tom Rossiter – CEO at RESAAS Services (CSE:RSS); Bill McGraw – Executive in Residence at Wavefront and Aimee Gagnon – VP Marketing & Co-Founder at Dojo Card.

With a mixture of panel discussions as well as company presentations, attendees will have the chance to discover what the entrepreneurs working in this space see as challenges and opportunities on the path to growth.

Another unique and highly-prized feature of the Extraordinary Future conference is the ability to meet directly with company management and executives. Going beyond being able to meet on the show floor, this conference enables individuals to schedule personal meetings with companies to ask in-depth questions of the company. In fact, via the conference registration software, companies and investors can coordinate meeting with one another.

According to Jay Martin, president of Cambridge House International, there is a palpable appetite in Vancouver for a technology show of this nature. One of the most compelling reasons is because growth stage companies are looking to raise capital. The launch of the Extraordinary Future conference offers entrepreneurs convenient access to a critical mass of well-establish brokerage firms and experienced deal-makers who can consult on options available to raising capital – including on how to do so by being public.

Building bridges for innovation

As the Exchange for Entrepreneurs, the CSE recognizes that accessing public capital is one strategy that has proven effective for companies looking to scale their growth. In addition to representatives from the CSE being present, there will also be a number of CSE-listed firms in attendance demonstrating that with the right exchange, the cost of raising capital can actually be competitive with other methods while providing the advantages associated with being public.

For growth stage companies working in such frontier opportunities, the path to going public requires working with partners with an expertise and appreciation for innovation. The CSE is no stranger to bold ideas, a fact borne out by their own revolutionary approach to the Canadian publicly listed marketplace.

In a recent interview, director of the Canadian Securities Exchange and renowned investor Thomas Caldwell stated:

“We felt access to public capital markets for up and coming Canadian entrepreneurs must be made simpler and less onerous. That does not mean less safeguards. The CSE’s collective mission is embodied in our byline “The Exchange for Entrepreneurs”. Our concern is exemplified in the fact that only a single digit number of new companies became public (IPOs) in Canada in 2016. Most were CSE listings.”

By focusing on what would enable entrepreneurs to succeed, including streamlining the listing process, the CSE is arguably the most entrepreneur friendly exchange in Canada. Their leadership and subsequent success in the commercial cannabis sector, is clear evidence of that.

James Black, VP of listings development at the CSE, also shared his thoughts on the upcoming conference stating: “the CSE is thrilled to be a founding sponsor of the Extraordinary Future Conference. We are excited at the prospect of growing this event into Vancouver’s premier technology investment show by focusing on the topics and themes that are going to dictate the future of our markets for years to come. Vancouver is building a reputation as a world-class tech centre.”

To that end, in addition to being a title sponsor of the event, the Canadian Securities Exchange is offering an exclusive discount code for the Extraordinary Future conference of 25% off the ticket price. Attendees can use code CSE25 during the ticket registration (available here) to receive the discount.

Looking forward to the future

Without question, technology will reshape the world in which we live. To realize its promise, however, ideas need to make the leap into products and services. For that to happen, there needs to be a well-functioning innovation ecosystem, one that brings together companies working on ‘the next big thing’ with those who wish to invest capital and resources to make it happen.

As the Exchange for Entrepreneurs, the CSE is actively working alongside great partners, investors and entrepreneurs at this conference to help ensure the future looks extraordinary.

For more information on the Extraordinary Future Conference, visit the conference website here. To follow the conference activities on Twitter, use the hashtag #XF2017.

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 Performance

Mid-year Update: An Interview with Richard Carleton

Richard Carleton, CEO of the CSE
CEO of the CSE, Richard Carleton, providing an update at the CSE’s annual pre-Stampede breakfast in Calgary (July 2017)

Earlier this month, CEO of the Canadian Securities Exchange, Richard Carleton, sat down with Peter Murray of Kiyoi Communications, to discuss the performance of the CSE in the first half of 2017 as well as to get the CSE’s perspective on a number of issues related to Canadian public markets, the evolving cannabis sector and innovation at the CSE.

Scroll down to read the full transcript of this interview. For ease of navigation, a list of hyperlinked topics is included.

  1. State of the Canadian microcap sector
  2. US companies choosing to list on the CSE
  3. Migration from the CSE
  4. Performance of the 1st half of 2017 at the CSE
  5. Reducing regulatory burden on small-cap issuers
  6. Simplifying access to marketplace data
  7. CSE marketing efforts
  8. Overview of cannabis sector
  9. Growing sectors
  10. Digital innovation at the CSE

State of the Canadian microcap sector

PM: Media outlets have published several articles recently on the demise of the microcap issuer, pointing to reductions in IPO activity, capital raised and issuer numbers.  The CSE is doing quite well servicing this segment of the market these companies.  What are your opinions on the state of the microcap sector?

RC: There are different ways to assess the health of the sector, some of which are pretty encouraging.  One of the concerns expressed in an article published by the Globe and Mail recently was that the number of companies listed on Canadian exchanges has declined quite considerably.  What they did not refer to was that there are some 320 companies listed on the Canadian Securities Exchange, and this was not the case eight or nine years ago.

In other words, some of those missing companies are not missing at all – they are listed on the Canadian Securities Exchange.

That said, we’ve obviously gone through a prolonged slump in the mining and oil and gas exploration sectors.  This has an impact on the overall health of the Canadian markets because Canada has been very good historically in terms of creating large numbers of these types of public companies.

The bottom line is that public capital is always there, but raising that capital is never going to be easy.  Quite frankly, it is not supposed to be easy.  But with price weakness in some of the commodities that underpin the value of Canadian resource companies, applying the model of raising public funds for pre-revenue companies has been a bit of a struggle.

Fortunately, the tremendous growth in the legal cannabis space since the spring of 2014 has served as a counterbalance.  We are increasingly seeing old fashioned IPO-type deals where companies are raising tens of millions of dollars, and even into nine figures, in ways that remind one of the good old days, with Canadian investment dealers conducting a wide distribution on behalf of the issuer.

So, what we really have is a kind of dichotomy where the traditional Canadian small-cap space continues to suffer a high degree of stress.  But the sunrise industry that is the legal cannabis space in Canada and the United States has attracted a lot of attention from investors and the investment dealer community.

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US companies choosing to list on the CSE

PM: The CSE has welcomed several issuers based in the United States over the past few years.  What is the attraction for US companies in listing on the CSE, and in general what do they tell you about their listing and post-listing experiences?

RC: The reason they come to Canada is that they can raise money here.  In the United States, deals in the $20 million to $40 million range are the realm of the venture capital and private equity investment communities.  Some companies don’t want to go down that route because there can be significant drawbacks when you accept money from these types of investors.

Specifically, entrepreneurs find that venture capital funds and private equity funds exert a tremendous level of control over investee companies, as you would expect when they are investing the amounts of money we are talking about.  An important advantage to raising funds publicly is that you often retain more control over the future direction of the enterprise.

Another issue is that the exit scenarios for private funds may be at odds with those of a company’s founders.  Funds may be more interested in an early trade sale, rather than continuing to finance the company to the point where it is one of the big and truly successful entities in its space.

The result is that we see companies looking to raise the smaller amounts available in Canada through the public markets.  And the cost of that capital tends to come in lower than if they were raising money privately in the United States.

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Migration from the CSE

PM: A number of companies have successfully grown their operations on the CSE but then left for other exchanges as they reached a point they felt warranted such a move.  Can you share your views on why this happens?

RC: There are two issues in play in my opinion. The first is something the team at the Canadian Securities Exchange is working to address, and that is a bias held by some members of the institutional investment community.

When companies are looking to raise large amounts of money – and again I am talking high tens of millions, or over $100 million – many institutional investors are more comfortable with the incumbent exchanges because they have worked with them before and they understand their standards and procedures.  It really is up to the CSE to better communicate our value proposition and our reliability as a partner to these institutions, because we have a lot to offer.  This is definitely something we are working diligently on.

The other issue is that if a company believes it will have sufficient market capitalization and trading turnover to qualify as an index component on the Toronto Stock Exchange, public company managers may see that as a powerful inducement to move.  Once you join the index it means the company is likely to be followed by several analysts and its shares will be included in a variety of portfolios held by investors both domestically and internationally.

Those two factors combined can create, under certain circumstances, an incentive for companies to move to another exchange.

I do believe, though, that some of this thinking is rooted in the past.

If one looks at the trading volumes and amounts of capital being raised on our exchange in the first half, a well-run company clearly can achieve its goals with a CSE listing.  Not to mention the advantages we offer from cost and other perspectives.

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Performance of the first half of 2017 at the CSE

PM: It has been a good first half for the CSE and the financial community is increasingly supportive of what the exchange and its issuers are working toward.  Can you briefly review the half for us and share some of the approaches that seem to be succeeding for issuers right now?

RC: We have a number of projects underway at the exchange and one I would highlight is the update to our listing standards.

We updated the initial listing standards last year and are now in the process of introducing continued listing standards.  Our intent is to ensure that companies listed on the exchange are active businesses, which means that the ones hanging on purely for shell value are not going to qualify for continued listing unless they can show that there is an imminent opportunity for a transaction.

We are receiving a lot of support from both the investor and issuer communities for this effort.  Last year, we delisted almost as many companies as we listed, which was almost 10% of the listed company register.  We want to assure investors that the companies that remain listed are active.

In the first six months of the year, CSE issuers raised a record amount of capital ($320 million).  I think observers would expect that it is flowing mostly into the legal cannabis space, but actually this sector accounted only for about half of the total.  We have seen a variety of companies in the financial technology space, clean technology and mining add significantly to their treasuries.

Again, although capital is scarce and companies are having to work hard to obtain it, they are certainly doing so at record levels on the Canadian Securities Exchange to this point in the year.

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Reducing regulatory burden on small-cap issuers

PM: The CSA (Canadian Securities Administrators) recently released for comment a list of proposals designed to reduce the regulatory burden on small-cap issuers.  Can you discuss the CSE’s positions on some of the key recommendations?

RC: Most of the recommendations are aimed at small- to mid-cap companies listed on the Toronto Stock Exchange.  So-called venture issuers, which covers companies on the CSE, are already afforded relief from some of the reporting requirements imposed on public companies.  Essentially, the CSA was looking to extend similar relief to some of the companies listed on the Toronto Stock Exchange.

The key measure in the discussion paper was a proposed reduction in the financial reporting cycle from quarterly to semi-annually.  Basically, only the audited annual financial statements and a half-year summary would be required from public companies.

The CSE does not support this proposal, and neither do the vast majority of companies, financial advisors and accounting firms we have spoken with.

Quarterly reporting is not burdensome, and in fact the decrease in transparency resulting from a move to semi-annual reporting would increase the cost of capital for small companies.  So, while the idea is well-intentioned, we think it would bring about the opposite of its intended goal.

What we would like to see is significant change in how the exempt markets in Canada are managed and regulated.  For example, we would like to see regulation similar in nature to Regulation A+ in the United States, which gives individual investors an opportunity to invest in exempt market companies up to individual deal limits and annual limits.

What this means is that smaller retail investors would be able to participate in opportunities that at this point are only available to accredited investors and institutions.

We think this is important to engaging the next generation of investors because the average accredited investor is getting on in years.  We are concerned that younger investors are not getting the opportunity to invest in the kinds of growth stories they should.

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Simplifying access to marketplace data

PM: I know you are working on a consortium of sorts to address data fee costs for investors.  What are the specific issues at play here and what do you hope to achieve?

RC: I have some good news to share on this topic.

First, though, the background is that any professional investor looking to get a full picture of what is going on in Canadian equity markets must sign contracts and pay fees to each of the individual exchanges if they want access to real-time data.  Not surprisingly, the fees add up pretty quickly.  Canadian data can thus be considerably more expensive than in other markets around the world.  It is another resistance point we just don’t need.

The Ontario Securities Commission was successful in late June in its long-term effort to gain jurisdiction over marketplace data.  It looks as if the commission will seek to exercise that jurisdiction to address the pain points that professional data users currently suffer.  It remains to be seen what specific approaches to the problems the regulators are going to take.

This is a positive development from our point of view because there is a large transparency deficit at present.

The CSE and some of the alternative exchanges do not reach the same scale of user population that the TMX exchanges do from a data-subscription perspective.  And that means a significant transparency deficit exists in the marketplace.

It looks as if we will be asked to take a leading role in helping to define what the data delivery model, fees and terms look like in coming years for marketplace operators in Canada.

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CSE marketing efforts

PM: The CSE team has been very active in the first half of the year hosting CSE-branded events and participating in investment conferences.  Can you share with us the goals and some of the achievements on the marketing side?

RC: Our team has been extraordinarily busy this year, literally traveling all over the Northern Hemisphere – Europe, Asia, and across North America.

We always pursue two goals: to explain to the international and domestic investing public what the value proposition of the Canadian Securities Exchange is, and to meet with issuers, investors and advisors so that we continue to build the list of companies we present through our facilities.

The favourable reception we receive at virtually every stop is extremely gratifying.

I am amazed when I sit back on a given day and try to figure out where the various members of the CSE team are, because we have literally crossed the northern half of the globe several times over the course of the first half of 2017.

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Overview of cannabis sector

PM: Cannabis companies have experienced some ups and downs since entering the public markets a few years ago but the sector in general seems to be getting itself on a steadier track now.  While most of the early movers focused on opportunities in Canada, many of what one might term the “second wave” of issuers seem set on operating in the US.  What is next for the cannabis sector in your opinion?

RC: I actually think of the US companies as the third wave.  The first wave was the licensed medical marijuana producers in Canada.  Next, we saw entities in ancillary industries – extractors and alternative delivery systems are good examples.  The third wave is clearly companies that have business interests in the United States and are ramping up to address the coming legalization for adult use in very large jurisdictions.

We speak to people in this industry on a regular basis and the numbers are mind-boggling.

California’s population is roughly that of Canada, and they are on a similar timeline as Canada to legalization.  Cultivators there are looking to raise billions of dollars to build the operations necessary to supply the state’s legal market.

Given that one of the objectives of government policy in every jurisdiction is to displace the black market, it is critically important to the success of those policy directions to enable the legal market to meet the demand from the adult-use side.

It is fair to say that we have not seen anything yet in terms of how big this is going to become.  There will be a steady stream of companies in this space with solid business plans looking to build out and meet the dawn of a significant new industry in North America.

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Growing sectors

PM: Are there any market sectors right now that remind you of what cannabis felt like in 2014?

RC: In the sense that the legal cannabis market is one of the most significant new business opportunities to hit public capital in a long time, I can’t really say I sense anything up and coming of the same magnitude.

As I mentioned before, we see a lot of different stories getting funded, but I think we are going to continue to see the legal cannabis space driving a substantial percentage of our growth as we make our way through the rest of 2017.

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Digital innovation at the CSE

PM: The infrastructure supporting securities trading and information exchange is predominantly digital these days.  How has the CSE navigated the rapidly evolving digital landscape?

RC: There are a variety of things I would like to see happen faster than they are today.

One of them relates to information released by issuers, where I would like a more aggressive implementation in Canada of a protocol called XBRL (eXtensible Business Reporting Language).  This basically refers to digitally tagging news and company filings with the regulator.  The practical impact is that an analyst can download a company’s financial history directly into spreadsheets.  At the present time, an analyst wanting to initiate coverage on a CSE company has to manually key its financial history into a spreadsheet.

To put it mildly, that is a massive time commitment, with significant potential for error involved.

I would really like to see the Canadian exchanges and regulators get together on a taxonomy of XBRL for reporting financial information for public companies in Canada.  It has already been mandated for use in the United States.

We have also implemented a new trading system and a variety of new technologies around that system.  Although it was a significant investment for us, the benefits have been immediate, including lower operating and data centre costs.

We don’t describe ourselves as a technology company but we do certainly avail ourselves of those tools in a significant way and they up our game from a customer service perspective while helping us to manage costs.

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