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CSE Issuer Stories, CSE Quarterly

Hello Pal harnesses language learning to connect people in a new way

This story was originally published at www.proactiveinvestors.com on Sep 7, 2016 and featured in The CSE Quarterly.

Learning languages isn’t fun, even though it should be. You take classes, study grammar from textbooks and painstakingly memorize vocabulary.

Finally, the big day comes. Your plane lands in an exotic capital. Maybe you manage to make yourself understood with the first people you meet. But maybe you embarrass yourself.

Maybe you never take the trip in the first place, because you don’t have the confidence. You give up. You might sulk and regret wasting your time – and now your world has become a smaller place.

Or, you could try Hello Pal.

Hello Pal international Inc. (CSE:HP) has a social language learning network that flips the language learning process on its head. You start connecting with real people right from the start, while learning and having fun.

With nearly 1 million members in a user base that’s still growing fast, the company has captured the imagination of investors. Starting with a share price of $0.12 in May of this year, the stock was sitting at $0.43 by mid-August.

To use Hello Pal, users download the app to their smartphone. Next, they connect with a pal on the network (Think ‘pen pal’ – since that’s what the Pal in Hello Pal comes from).

Choosing a language comes next. With the help of phrasebooks integrated into Hello Pal’s chat system, users click on a phrase and then click the audio button to hear a native speaker say it.

After that, they record themselves saying the phrase. They send it to their pal. When the pal responds, the chat system helps the listener understand. Now they’re both having a conversation in a foreign language, instantly.

The user-friendly app has a big idea behind it. “We want to bring the world closer by eliminating the language barrier and letting people communicate in a joyful way,” says KL Wong, the CEO and founder of the company.

Wong, who was born in Malaysia and now lives in Hangzhou, China, speaks several languages. Fluent in English, Mandarin and Cantonese, Wong also has a working knowledge of Malay and French. He is learning Japanese and Korean.

The hard experience of learning languages the traditional way partly influenced the development of Hello Pal, but this entrepreneurial journey was anything but a straight path.

Following successful careers in law and investment banking, Wong made the switch to entrepreneur shortly after the birth of his daughter, Felicity.

With her education in mind, Wong created a team in Hong Kong and built a company, BrillKids. The company sold software to parents to help them teach their young children to read.

Wong recognized early on that it was tough to keep parents motivated to teach if they were using the software in isolation. To make BrillKids more engaging, they attached a social network and forums into the BrillKids online store, where the parents would interact.

The company gained traction and international recognition. With the support of an early investor, Wong tried to bring the solution to China.

Then he ran into a cultural barrier to entry. Parents there didn’t want their preschool kids staring at computer screens. To adapt, Wong decided to use his existing language curricula and content and target Chinese children of an older age group where the computer screen issue was less acute, and to offer the content through apps.

The vision continued to evolve. One key factor to getting children’s engagement would be to connect them with kids from other countries. He was excited about the idea at first, but he soon realized having to get parental permission would be a huge barrier.

Then came the final pivot: instead of catering to kids, they would target adults.

Hello Pal incorporated the best ideas from his earlier experiments.

“Why do we learn languages?” Wong asks.  “Ultimately, to use it with real people. I started to see that beyond just helping people learn languages, I could actually play a role, however small, in helping people meet each other, communicate better and promote greater understanding around the world.”

He had a lofty goal, but at first not much of a business model for Hello Pal. “I just needed to get this product done, for the sake of many people to come,” Wong says. He put his team to work, to make this vision a reality.

When they launched in the spring of 2015, Wong had a last-minute case of nervousness, half-expecting Hello Pal to be a desert. Instead, the team’s efforts at leveraging the now-popular BrillKids community paid off with 1,000 signups on the first day alone.

They’ve seen a steady torrent of new users ever since. Today, the user base is over 1 million.

Wong still conveys that same boundless idealism of the original mission when he speaks. Still, it didn’t take long for the serial entrepreneur inside him to realize the value of what they had. He wasn’t alone.

Hello Pal’s early investor started talking with some other investors from Vancouver who were looking for their next big opportunity. They looked at the app, saw that Hello Pal was already at about 350,000 users and they were hooked.

A reverse merger and listing as Neoteck Solutions Inc. came next, before Hello Pal listed under its own name on the CSE in May 2016.

Growth followed. The company now has 18 employees in Hangzhou, consisting of a programming team that complements another team in Ukraine. International marketers and administrators work in Hong Kong. Three advisers operate out of Vancouver.

“We’re truly a global company because we have to be to do what we’re doing,” Wong says. “Particularly when it comes to operating in China, you need people on your team who are international.”

“It’s very difficult, for example, for a US company to do something like this and do it well in China,” Wong adds. “Even when I was in Hong Kong, I didn’t feel prepared to tackle China. That’s why I moved here. You’ve got to have a real presence there to have a chance.”

Today, Hello Pal is free to download and the company is pre-revenue. “Right now, we’re focused on user growth and acquisition,” Wong explains. But that will change.

“We feel we’re actually spoiled for choice in terms of revenue models,” Wong says. The company aims to target three silos of customers: social people who just want to meet people from other countries, language learners who want to talk to native speakers and travelers who want to meet people from other countries before they go there.

These groups have some common interests, but Hello Pal ultimately aims to cater to them in different ways, leveraging the huge user base when they’re ready to go after revenue.

“Just looking at the social marketplace, there are a lot of tried-and-tested revenue models that have been highly successful,” Wong says. He points to the Chinese social network Momo, which was valued at $3 billion not long after it had its IPO on the NASDAQ.

He points out that in China, social networks become very profitable by charging for VIP systems, small gifts, digital stickers (like emoticons on steroids, Wong explains) and many other offerings. “These are things that are not necessarily popular in the West, but hugely popular in the East,” he adds.

Beyond that, there’s advertising, sponsorship, and more. “When it comes time, we’ll have lots of options.”

Learn more about Hello Pal International Inc. at http://www.hellopal.com/ and on the CSE website at http://thecse.com/en/listings/technology/hello-pal-international-inc

CSE Issuer Stories, CSE Quarterly

Peak Positioning builds bridge to success in Chinese marketplace

This story was originally published at www.proactiveinvestors.com on September 1, 2016 and featured in The CSE Quarterly.

For technology companies based in North America, the Chinese market is an enticing yet perplexing marketplace.

China’s vast population and the increasing wealth of its industrious citizens make it attractive to outside entrepreneurs and investors.

At the same time, there are unique challenges for foreign companies wanting to do business there: a relatively arcane regulatory regime, an uncertain commitment to intellectual property rights and a business culture very different from in the USA or Canada. Google, Apple, Uber and other tech titans have each stumbled on these various hurdles.

Peak Positioning Technologies Inc. (CSE:PKK), based in Montreal, has a straightforward strategy for avoiding these barriers to entry: buying innovative companies and finding strategic local partners.

Peak is an IT portfolio management company. Its mission is to deliver value to its shareholders by assembling a portfolio of high-growth-potential projects and companies in the e-commerce and fintech sectors in North America and China.

The company closed a major deal this year as it finalized a partnership with the owner of the Zhonghai Wanyue Group Enterprises conglomerate of 29 companies, Jiang Wang, who is based out of Shanghai.

Peak received a $4 million strategic investment from Wang this spring. The company used approximately $3 million of the investment proceeds to pay for the development of a fintech platform called Gold River, and to establish an operating subsidiary called Asia Synergy Technologies (AST) in Shanghai.

Gold River is a web-based platform operated by AST that digitizes the distribution process of petrochemical raw materials and certain other commodities in China. The platform allows AST to receive and process orders from its clients and offer value-added services associated with the orders, such as purchase order financing, loans and logistics.

Gold River is set to process $575 million in transactions over the next 18 months, including $100 million by the end of 2016, with an average profit margin of 5%, explains Peak’s CEO Johnson Joseph. “Those orders are legally binding commitments from clients that AST simply now has to fulfill by the end of 2017.”

In return for Wang’s investment, the conglomerate owner received a 51% ownership stake in Peak.

The companies in Zhonghai Wanyue, together worth an estimated $10 billion, offer financing and supply chain solutions for a wide range of industries, from plastics distribution, manufacturing and clean tech to metals trading, auto parts distribution and financial services.

AST and Gold River will also help companies in the Zhonghai Wanyue group to transition from traditional offline paper-based operations to connected, digitally driven businesses.

The company didn’t start out by acquiring and managing ventures, though. Back in 2010, Peak was a security software development company.

Peak’s leadership team took their first trip to China, prompted by an entrepreneurial colleague who played up all the success he was having in the country’s tech sector.

“We knew that as a publicly traded company, if we could give our shareholders access to this market, it would be a big value-add,” Joseph says.

Peak learned the hard way about the challenges of running a new venture in China as they tried to develop security applications, a complicated business even under ideal conditions.

Differences in language, time zones and business culture played havoc with development timelines.

The company’s leadership team understood that there was still a huge opportunity in China’s tech sector, but after months of hitting a wall they had to change their strategy.

Around 2014, the company made a hard pivot. “We completely abandoned app development to become an asset management company, acquiring applications in China and Canada and delivering value to shareholders that way,” Joseph says.

While Peak is scaling the heights of success today, their leadership team is still realistic about the challenges of doing business in China. They have a healthy sense of caution and a desire to learn how to operate effectively in this environment.

“The biggest challenge is just learning about Chinese business practices in general, because there are a number of things we take for granted in how business is done,” Joseph says. “Just getting this transaction done with Zhonghai Wanyue was a challenge. In a situation like that, you usually just write a cheque.” The process took much longer than anticipated.

The Chinese government’s control of the Internet is another very direct challenge for technology companies. “Here, we take it for granted that if you want to put up a website, you just do it,” Joseph explains.

“In China, you need to have a license. Just look at Google, which is blocked and not allowed to operate in China. There are a number of things like this that we’ve learned and are still learning.” AST received its license to operate Gold River in mid-August, clearing the way to begin processing payments on their tested platform.

Aside from government bureaucracy, it is also common for business contracts in China to include verbal agreements on the side, in contrast to simply spelling all essential obligations out in writing.

To deal with these culture gaps, Peak has agreements in place between all of the parties it does business with to ensure that its subsidiaries and partners operate according to international business norms.

“We’re training them to be part of a public company that has the highest reporting standards and they are cooperating 100%,” Joseph says. “At the same time, we have to respect how our partners in China do business as well. If something doesn’t affect us negatively, we may be willing to accept it, but they also do what we need them to do to protect all of our interests.”

Being willing to adapt to unforeseen circumstances has helped the company get to where it is today. “Peak started out as something different, but we adjusted to be a portfolio management company. Then our first transaction didn’t work out because of circumstances beyond our control, but we did manage to get it done and that has turned into the best thing for our shareholders.”

With the revenue stream coming online from the partnership, Peak will continue seeking out new opportunities in China’s dynamic marketplace, Joseph adds. “We’re now in the process of building a solid foundation, which hopefully will allow us to build on a track record of success.”

Learn more about Peak Positioning Technologies Inc. at http://www.peakpositioning.com/ and on the CSE website at http://thecse.com/en/listings/technology/peak-positioning-technologies-inc

CSE Issuer Stories, CSE Quarterly

Carl Data Solutions is shaping its own niche in the Internet of Things revolution

It is a big statement to make that one’s company is working on an important part of a fourth Industrial Revolution. But listening to Greg Johnston, and the particular analogy he uses to put Carl Data Solutions Inc.’s (CSE: CRL, FSE:7C5) achievements into context, it is a statement that actually makes quite a lot of sense.

Those of us old enough to remember the pre-Internet days can probably recall when we first heard about the World Wide Web and thought “What would I need that for?” Fast-forward to today and the question has become “How would I live without it?”

Such is the dynamic that Johnston, who is Carl’s President and Chief Executive Officer, believes will take place over coming years with the so-called Internet of Things, which at its core involves appliances, automobiles and other everyday devices communicating with one another to make our lives safer, easier and more efficient.

“When the Internet came into play people did not know what it was and some perhaps dismissed it as just another trend that was going to be out of style in a couple of years,” Johnston explains. “Of course, the Internet changed distribution, it changed businesses, and continues to do so every single day. New devices, smart meters, data loggers and the products we are building do just that. It’s the Internet of Things and they are calling it the fourth Industrial Revolution.”

Carl got its start in 2014, analyzing bulk data from social media and other public sources for consumer marketing purposes. “When we started, we worked with unstructured information such as text from social media posts, media shares, photos, videos and the like,” Johnston says. “It was looking at social media and making this mass of information into something orderly and more useful, mainly for the purposes of social referral marketing, which has grown to become a more effective form of marketing than traditional strategies.”

Drawing on two decades of experience in e-commerce and database management, Johnston sensed that applying his team’s skills to increase the efficiency of industries lacking advanced analytical tools would be what ultimately separated his company from the pack. “It was always our intention to get into another vertical we thought had great promise but was underserved by technology and current marketing offerings, and the area we decided to focus on was the utilities sector,” he says.

In the fourth quarter of 2015 Carl acquired FlowWorks Inc., and with it an array of capabilities perfectly suited to utilities and municipal waterworks. Put simply, FlowWorks collects data from sensors within a city’s physical network and then applies layers of analytics to determine everything from how its systems can operate more effectively to the potential for a flood or failure in the city’s water or sewer network.

“Most cities have sensors throughout their storm water and sewage systems,” Johnston offers by way of example. “Every few minutes data loggers transmit information that can be collected, stored and funneled into the FlowWorks application that city employees can use on desktops or mobile phones to see what’s going on. This level of analysis used to take days and now we can deliver it in near real time.”

In addition to contracts with a number of cities in British Columbia, Carl works with a long list of large cities in other parts of Canada and the United States. In July, the company announced a contract to provide its services to the City of Toronto in a collaborative effort with a major engineering consulting firm it has worked closely with over the years on other projects.

Carl reported sales of just over C$227,000 in the first quarter of 2016 ended March, and since revenue is primarily recurring in nature, recent contract wins, plus more anticipated before the end of the year, have the potential to push the top line for full-year 2016 quite comfortably into the seven-figure range.

“Our revenue is based on three areas: setup fees, recurring licensing fees and customization fees,” says Johnston. “Out of those three, recurring licensing is the one growing the fastest. The other two really are enablers for the licensing revenues. I would say that right now about 90% of revenue, of which roughly 60% is in US dollars, comes from FlowWorks business. Growing those revenues is going to remain our main focus for the remainder of 2016 in conjunction with some possible utility-related acquisitions.”

Being an early mover in any business segment brings the opportunity to help shape that market and Carl looks set to benefit from being a standard-bearer in advanced analytics for the utilities sector.

Johnston explains that most of the company’s contracts are obtained by partnering with hardware vendors. When a city issues a Request for Proposals (the contract award process commonly referred to as an ‘RFP’), more often than not they want not only pumps, regulators and other infrastructure equipment but access to the detailed information that these devices generate.

“What seems to be happening more and more is that the hardware vendors can’t provide a software application with the tools and functions that a city is looking for, so they partner with us to complete the RFP and stand out from other firms who are also bidding for the job. The majority of our contracts are like that now and we are starting to see cities include compatibility with FlowWorks as a requirement in their RFPs. In other words, the analytics solution must have the certain feature set that our FlowWorks application has. This is great because it means word is getting out and cities are recognizing how valuable the platform and its capabilities are.”

It is worth noting that Carl’s analytics platform is “hardware agnostic” and thus not limited to interfacing with certain brands or models of equipment like some of the software solutions FlowWorks’ competitors provide. All Carl needs is the raw data, sent from a physical data logger, through its cloud service, and into its application.

At the end of the day, making systems run better means they cost less, perform more effectively and operate more safely. And given the scale of infrastructure that a platform such as Carl’s can improve almost immediately, the potential to directly influence the lives of large numbers of people is clear.

Taking things a step further, Carl’s platform will soon go beyond historical analysis and near real-time monitoring into the realm of predictive modeling. Here, machine learning and other processes will be used for comparing layers of data to pinpoint anomalies that could herald problems with the potential to result in floods or infrastructure failure. Identifying weak spots within gas pipelines is a good example of the capabilities of machine learning.

“Think sensors on cars: 12 records per minute times 12 sensors per car times 3 million cars operating almost 365 days a year – that is a lot of information going back to a manufacturer,” says Johnston offering one last illustration. “It is going to be the same for the utilities sector. They need a way to understand information at a glance and use analytics to figure out how they can make more intelligent decisions managing their infrastructure and resources. That is how we are going to help them – by providing innovative solutions and offering advanced analytics that make better sense of their data in less time and at lower cost than has ever been possible.”

CSE Issuer Stories, CSE Quarterly

BitRush blockchain-based payment platform shows users how to get paid

This story was originally published at www.proactiveinvestors.com on Sep 02, 2016 and featured in The CSE Quarterly.

“Nothing makes money like money.” It’s a mantra from the world of finance. In today’s frenzied fintech sector, we might soon say that nothing makes money like companies that move value, in any form it takes.

Funders poured nearly $5 billion into American fintech companies in the first quarter of 2016. It’s why VC funding for bitcoin and blockchain (the technology that bitcoin and other cryptocurrencies are based around) companies topped $474 million in 2015. Companies in this sector are fired up to put out the payment solutions that can be the currencies of the future.

You might think humans already solved the problem of how to pay for stuff. But cash gets stolen. Credit card fees are punitive. Fraud associated with the plastic in your wallet costs American merchants alone $35 billion a year. The currency exchange fee at the airport and with credit cards will put you off travel for good.

That’s why fintech upstarts are getting so much attention. Enter BitRush Corp. (CSE:BRH), with its patent pending blockchain-based universal payment system ANOON (www.anoon.co). It integrates cryptocurrency systems and fiat currency money systems into an easy to use digital means of payment. The company aims to help everyone tap into a mobile peer-to-peer economy that solves some of our biggest pain points around payment.

Launching in 2014, the Toronto-based company invested in a portfolio of promising cryptographic solutions from North America and Europe.

The platform relaunched in June, incorporating features requested by customers. BitRush partnered with Wave Crest, another payments solution company, in the first half of 2016, which gave them access to the Visa and MasterCard networks.

A zero-balance ANOON Visa debit card usable anywhere Visa is accepted from point of sale to ATMs worldwide came out this summer as well.

The company keeps adding new functionality, such as its recent integration with PayPal. The debit cards are directly connected with the user’s ANOON wallets and don’t need to be preloaded. As long as the user has funds in his wallets (in whatever currency) he can spend them using his debit card.

As ANOON is a multi-currency system users can hold funds in many currencies at the same time and easily transfer funds between different currency wallets. The currency conversion is done in real time deploying a smart conversion algorithm and bitcoin as a clearing currency. Users can fund their wallets using bitcoins (and other cryptocurrencies in the near future), PayPal, credit cards and bank accounts.

When BitRush’s founders started out, they asked one key question: where could blockchain have an advantage over the legacy payment systems in place today?

“We designed ANOON to match, or in some cases, go beyond the core capabilities of the biggest payment systems out there, combined,” says BitRush President Karsten Arend.

The platform offers instant and secure transactions, ease of access to funds, intuitive controls and privacy. Arend says that as far as they know, BitRush is further along with their offering than any of their competitors, including some who have raised tens of millions and in a few cases, more than $100 million.

“The system has been running just fine,” Arend says. “It’s robust. It’s tested. We’ve created a system that people can use how they want to use it. They never have to deal with cryptocurrencies if they don’t want to. They can just use fiat currencies. It’s universal.”

How does he know the system is so robust? BitRush is already processing up to 50 million micro and nano transactions per month. The company tested their proposition the hard way, by reaching out to their target markets at the same time that they built ecosystems in which ANOON could flourish.

Those transactions add up to a highly scalable business with attractive margins. Using its private blockchain, payment transactions between ANOON wallets can be cleared on a real-time basis with nearly zero costs.

ANOON has implemented free basic wallets as well as premium wallets available for a fixed monthly fee. Recurring revenues from the fixed fees constitute a main source of revenue.

They also created viable businesses that have a competitive advantage by using ANOON, just to show other companies what they could do with it.

BitRush runs the AdBit advertising network (www.adbit.co), a platform with more than 10 million unique visitors and 1.8 billion delivered ad impressions per month. It lets website publishers auction ad space to advertisers via a smart-bid system. AdBit is deploying BitRush’s ANOON to process payment transactions.

The hyper-efficient ad broker uses bitcoins as a clearing currency that pays website owners in real time. That means no more waiting weeks or up to a month for cheques from Google or other ad networks. The system also provides more useful data for advertisers and publishers, letting them target ads better.

Meanwhile, BitRush also owns Start-It, a publisher of cryptographic games, along with a Player vs Player gaming portal, WaggaWagga. Start-It’s cryptocurrency-based gaming sites already have 7 million unique users per month from more than 180 countries.

The need for some kind of cryptographic payments solution in gaming is intuitive: people often don’t feel comfortable giving their private information or depositing funds with a gambling site. That leads to a huge drop-off in potential users and a commensurate reduction in potential revenue.

From the gambling site operator’s perspective, trust is also a problem: it’s not uncommon for online gamblers who lose to claim their information was stolen and then demand a refund. That’s just not good for business.

By simply integrating ANOON with the gaming site, a player will be able to start gambling instantly, without giving away private information to a stranger or depositing funds on a site they just discovered a few minutes before.

AdBit and gaming are essentially proofs of concept, since BitRush’s business model, at the core, isn’t about dominating advertising or gaming.

“We only built those businesses to show other companies that they would have a competitive advantage by using our ANOON payment system,” Arend says. “Instead of telling them how they might use it, we show them the advantages it has with our functional growing businesses.” Gaming companies and website publishers aren’t BitRush’s competition: they’re the customers.

For a company that’s developed a universal payment platform, it seems to fit that BitRush has a very international profile. BitRush is listed on the CSE as well as the Frankfurt Stock Exchange.

They also have stakeholders and executive board members who hail from eight cities on three continents, including Toronto, London, Vienna, Hong Kong, Singapore and other centers of commerce and innovation. “We’re Canadian, but we’re also global,” Arend says.

The success they’ve had so far has come from listening to their customers. “I know that’s nothing new, but we started out by speaking with our customers about what they didn’t like and built a solution to solve for that.”

“When we showed it to them, they started jumping up and down,” he adds. “It was a good thing. Sometimes you can solve the problem with greater ease than expected.”

Founders in any sector also need to follow success, Arend says. “What I mean by that is if you design your business to do one thing and find you’re getting great traction in a slightly different direction, find out why that’s happening. That might be the direction you need to go in. Don’t ignore it.”

Learn more about BitRush Corp. at http://bitrush.co/ and on the CSE website at http://thecse.com/en/listings/technology/bitrush-corp. Watch Karsten Arend’s presentation from the recent CSE Day in Toronto below:

CSE Issuer Stories, CSE Quarterly

IGEN Networks takes relationship between car and driver to a whole new level

This story was originally published at www.proactiveinvestors.com on Sep 03, 2015 and featured in The CSE Quarterly.

Have you ever wished you knew how fast your teenage son was driving your car when he borrows it? Or exactly where dear old dad is when he is 40 minutes late for a family dinner?

Or that your car battery is about to conk out before it does so and leaves you stranded in the middle of a downpour?

If so, then you’ll want to know about IGEN Networks Corp. (CSE:IGN; OTCQB:IGEN), as the company is beginning to commercialise a system that sends all this information and more straight to your mobile phone in real time.

From monitoring the location and driving behavior of family members to tracking a fleet of drivers to ensure they are doing what you pay them to, the enhancements to safety and efficiency are far-reaching.

IGEN President and CEO Neil Chan and his team have really thought this through, to the point that not only does their solution address safety problems for drivers but also marketing problems for car dealers.

The chain of use begins when a new car arrives on a dealer lot and is installed with the IGEN hardware, a box about half the size of a computer mouse. Dealers are able to track cars if they are stolen, and the companies that finance the cars know how many cars are on each dealer lot. They will know which ones too, as the system provides the Vehicle Identification Number unique to each automobile as part of its data feed.

When a customer purchases a new car they have the opportunity to subscribe to the IGEN service and have a full array of real-time data available to them to monitor the conditions and use of their car.

The dealer benefits as well, not only from having sold the system but also because it creates an ongoing connection with the car purchaser. One of the biggest challenges for car dealers is customer retention. In other words, once a customer purchases a car, how do you get them to come back to you for their next purchase, and in the interim how do you keep them loyal to your dealership for oil changes and other service?

Because the IGEN system is monitoring the vehicle, it can automatically inform the owner when it is time for an oil change. But this can be programmed as a dealer function as well. That way, the dealer can e-mail the owner to let them know that their automobile needs servicing, and perhaps send a coupon or some other type of enticement along with the message to encourage the owner to use the dealership.

“Less than 10% of customers come back to the dealer after the warranty period expires,” Chan points out.

It is the classic win-win situation, where the customer and the business both derive clearly identifiable benefits from use of the system.

Another benefit to consumers is the potential for lower insurance rates. In this scenario, the driver chooses an insurance company that agrees to a discounted premium in exchange for the ability to monitor driving habits so the insurer knows if the driver is operating the vehicle safely and adhering to limitations within the terms of the policy. The owner saves money and the insurance company knows it is underwriting someone who realizes they are being monitored and therefore had better drive responsibly.

Chan explains that the insurance industry in the United States suffers some $15 billion each year in what is known as “rating errors,” essentially money left on the table by insurance companies because they are incorrectly assessing the behavior of the drivers they insure. “The fact is they are guessing and don’t really know how you drive,” says Chan.

“The premium discounts come from the ability of the insurance company to have better visibility on your driving patterns. We have the capability within our platform to know whether you are a good driver or a bad driver. We have developed algorithms along with insurance companies to determine that as it relates to premium discounts.”

Chan names some of the biggest insurers in the United States and says “this is where they are heading – if you want a discount on your insurance you will have to have one of these in your car.”

The driving force behind the idea and creation of the technology to support it is Chan himself, whose background fits the IGEN vision perfectly. As Senior Vice President for Sales and Marketing at Webtech Wireless, a leader in GPS-based fleet management, Chan was essentially responsible for executing the company’s strategic plan. Under his watch, Webtech grew to have 800 customers and some 240,000 location devices in over 40 countries.

Earlier in his career, Chan founded and built Motorola’s broadband access business in the Asia Pacific region, establishing 12 regional offices along the way, and was involved in the actual creation of wireless broadband through a company he helped put together called Airvana.

Thanks to these and other Senior roles at successful technology companies, Chan also understands a relatively new, but very important, market that depends on our use of mobile phones, computers and other connected devices – big data.

Once IGEN has enough vehicles equipped with its monitoring hardware, it will be able to profile drivers in different jurisdictions and pool data that can be analyzed to show how people live their lives, via their cars. Marketers, government, infrastructure planners and many others should be willing to pay a pretty penny for IGEN data and related analytics.

“I can be specific regarding the various services we offer but at the end of the day this is our business,” says Chan of analytics. “We know the lifestyle of a family based on the time they are spending in the car. Who is driving and how much time are you spending in various locations throughout the day? There is a lot of information there and our model is targeted at the consumer segment, where we are going to get the biggest sample.”

Almost sure to make that sample larger over time is a relationship with Verizon Wireless in the United States announced on May 21 of this year. Under the agreement, Verizon sales representatives will sell IGEN’s system to automobile dealers in addition to the telephones and other products they are already marketing.

“One of the first things I always used to do was go find the gorilla to hold its hand, and that was usually the carrier. I get inside the carrier to develop a relationship and that is how you expand your channels,” says Chan.

“With the Verizon partnership, we are preparing the Verizon sales force to sell our products and services into dealer channels across the United States. We do business with 500 dealerships now but there are 25,000 new car dealerships in the country, so we have barely scratched the surface.” Chan goes on to explain that a large dealership sees about 500 vehicles pass through its lot every month.

When asked to boil the appeal for drivers down to a single concept, Chan is quick to choose “consumer empowerment.” He explains this using transportation trailblazer Uber as an analogy. “What the difference is between before Uber and the present is now the consumer interacts directly with the driver. It is simple but it has created a billion dollar industry. We’ve bypassed competitors who require you to talk to someone to get information. With IGEN the information goes directly to you.”

And taking that concept one step further, could the benefits extend beyond paying customers by serving one day as a solution to the plague of bad driving? “I believe family behavior changes,” says Chan. “I have never been alerted on speeding with any of my kids when they have taken the car. It does change everyone’s behavior for the better.”

Revenue in the quarter through June 30 was US$289,065, some 90% of it from hardware sales. The first year of service is baked into the initial sale, and profit margins are good, but it is in the second year — the renewals — when the margins get really juicy.

“We are bringing the control back to the consumer,” says Chan in summary. “Providing that direct information to the consumer is really the essence. Being able to collect and use that data, being in the analytics business, is where we think the future is. And we understand technically how all this needs to come together, and what metrics you need to focus on to make sure you have a profitable and ongoing business for the long term.”

Learn more about IGEN Networks Corp. at http://www.igen-networks.com/ and on the CSE website at http://thecse.com/en/listings/technology/igen-networks-corp

CSE Issuer Stories, CSE Quarterly

Robix’s one-of-a-kind oil spill clean-up vessel ready to make a splash

This story was originally published at www.proactiveinvestors.com on March 31, 2016 and featured in The CSE Quarterly.

Robix Fuels (CSE:RZX) has under its sleeve what it says is a revolutionary oil spill clean-up technology, with a patent for a vessel that recovers oil off the surface of water mechanically. Known as the “COV”, or Clean Ocean Vessel, the apparatus promises a higher rate of recovery as well as a lower environmental footprint for oil spills in open waters, harbors and near shorelines.

After signing its first preliminary agreement to market the device last week, Robix is ready to build on its foundation and establish a portfolio of customers, taking the company to a new stage of growth.

The Alberta-based company’s CEO, Nathan Hansen, said the technology is based on simple “oleophilic” (oil friendly) principles of physics, as the ocean vessel contains two metal contra-rotating drums to which the oil clings, allowing for the material to be picked up off the surface of water. Scavenger blades then work to scrape the oil/water fluid off the drums into storage tanks so that the oil is safely contained in the vessel.

The contra rotating drums also cause a pumping action, which helps the oil to collect more effectively than by one rotating drum, explains Hansen.

The advantage of the stable, Catamaran-style barge vessel is that it can be used in virtually any rough sea conditions with waves as high as 8 feet, and that the recovery efficiency of the COV is in the 90 to 97 percent range, outperforming its competitors that cannot operate when waves exceed 18 inches. The special design of the company’s vessel gives the ability for the two drums to fit into the surface of the oil slick, says Robix.

The technology is also highly scalable, as it can be used in any size, from mini to large, depending on the size of the oil spill.

The company has already built its first COV, which is 40 feet long, 26 feet wide, and 12 feet deep from the surface of the deck to the bottom of the tanks.

Robix’s idea is to license its technology to either a potential customer such as an offshore oil producer, or a service contractor, to use the vessel “in case” with a quickly deployable plan in place. The license would provide the same comfort as insurance, in the sense that if an oil spill tragedy occurred, the COV would be on stand-by and ready to help.

“If there is a leak on a drilling platform in the open ocean, that’s where we come in,” says Hansen.

“A small spill at a gasoline station — that’s not really our strength. Ours is a big oil spill. It doesn’t happen that often, but when they do, it’s catastrophic,” he adds, referring to the $40 billion clean-up cost of the infamous BP oil spill in the Gulf of Mexico in 2010, which put oil companies under intense scrutiny, and on governments’ radar screens everywhere.

A market for the technology certainly exists. Some 2 billion metric tons of oil is shipped in oil tankers every year, and in U.S. waters alone, 1.3 million gallons have been spilled from vessels and pipelines.

Robix’s idea is taking off, with the company already in discussions with several potential customers.

The company just signed a letter of intent with a Mexico consortium to jointly market the vessel in Mexico, to be used for oil spill recovery and remediation in the country. Robix said efforts are now underway to ship the recently manufactured first COV to Mexico for reassembly and testing upon the execution of a definitive agreement.

The deal was signed with Grupo Macomax, a Mexican holding company that offers services to environmental emergencies in the country.

“Our vessel works to reduce the cost [of clean-up] so dramatically, and appeals to any entity operating in a region with ample shipping traffic and with production platforms with a higher risk,” the chief executive affirms.

Hansen is confident that the technology has widespread appeal nowadays, citing the example of a mandate implemented in the Mediterranean to have all risk mitigated through stand-by equipment, a result of the BP oil spill that occurred almost five years ago.

The typical method used to clean up oil spills now consists of surfactants and dispersants, which drive the oil directly to the bottom of the ocean, and only defer the problem, whereas oil is contained in the COV safely.

Indeed, Hansen says that environmentalists have put pressure on governments to supply “best-in-class, mechanical solutions” for protocol measures, which he anticipates will be a huge benefit in terms of attaining customers. Specifically, Robix has advanced, developing economies high on its radar screen as opposed to already developed markets.

Currently, the company is in the early stages of crafting its business plan and working out its guidance, which it expects it will be able to release after it completes its first deal. Its lucrative business model is such that as soon as it has a licensee with a revenue stream, it will immediately begin generating positive cash flow.

For example, a customer would pay an upfront license fee, which would be quite similar to the capex required to build the unit, as well as monthly stand-by fees based on how many units the client would like to place.

“The margins on profit are very high. Aside from building the unit, the only costs would be training on how to use the apparatus,” says Hansen.

Marketing plans are being implemented now, with Robix recently raising $1.1 million in an equity round, with the intent of going back to markets to raise more funds soon. Any funds raised so far have gone directly toward the cost of building the first unit, which was approximately $2 million.

“We are required to design another size unit, probably a 10 footer, [which will likely be] in conjunction with the first license,” the CEO explains, adding that this new unit could well be funded by a provincial grant from the Canadian government.

The COV, the patent for which forms the basis on which the company was founded, is just the beginning for Robix, as it looks for more intellectual property acquisitions, all focused on oil-water separation technology.

The chief executive says such technology would be in demand in the Western Canadian Sedimentary Basin, where many oil fields in the northern parts of B.C. and Alberta have severe water issues when drawing the oil up.

“[These companies are] basically producing water with oil that comes with it. There is a need for new technology for the industry to continue to have economic viability.”

He adds that there is also an acute need worldwide for purifying water, another possible use for its oil water separation IP. Whatever the scenario, the COV patent is the first in a series of patents, with Robix currently in various negotiations to tack on more to its portfolio.

In the meantime, Robix is working on further applications for its Clean Ocean Vessel, opening up its existing technology to new markets and buyers.

The basic parts of the COV can also be used for oil sands tailings ponds, another big environmental concern for both governments and the oil and gas industry as a steady stream of oil slick is created by the tailings process. The device would turn the otherwise toxic oil sands waste into more oil to sell, which otherwise would be lost revenue.

“Our R&D team is working on this right now,” says Hansen, referring to the combination of other technologies with Robix’s two contra-rotating drums to make the idea more economically efficient.

Learn more about Robix Fuels at http://www.robixfuels.com/ and on the CSE website at http://thecse.com/en/listings/cleantech/robix-environmental-technologies-inc

CSE Issuer Stories, CSE Quarterly

Global Gardens’ Veggemo beverage targets fast-growing dairy alternative space with fresh approach

This story was originally published at www.proactiveinvestors.com on December 8, 2015 and featured in The CSE Quarterly.

With typical acerbic wit, the late columnist Mike Royko once offered his readers a simple rule for eating healthily: “If you enjoy it, you can’t have it; if you don’t like it, you can eat all you want.”

That was a little over three decades ago, when there was probably some element of truth to Royko’s tongue-in-cheek guideline. Today, however, the list of products that not only are tasty but also good for you is long and growing.

Global Gardens Group (CSE:VGM) made that list a little longer on November 5 when it released a product line aimed squarely at the highly popular almond and soy milks that many health-conscious adults view as a refrigerator staple.

Veggemo is a vegetable based dairy alternative that tastes delicious and feels so much like milk, according to the company, that even devoted milk drinkers will be hard-pressed not to give it serious consideration. Factor in the absence of bad stuff like trans fats and cholesterol and one begins to understand why the Global Gardens management team so deeply believes it has a winning combination on its hands.

That combination might never have come together were it not for a fateful meeting four years ago between now president and chief executive officer (CEO) Rob Harrison and vice president (VP) of  Marketing, Wade Bayne.

Harrison had traveled to Vancouver from Ontario to see an early version of the product at an incubator group founded by executives from Lululemon. Bayne had been invited to the office that day as well, and the two experienced consumer goods executives quickly found themselves on the same page. “We both perceived a huge opportunity,” says Harrison.

Bayne, whose background includes executive positions at names like Molson Coors and Procter & Gamble, explains that being in the right business at the right time is everything. “In an industry that is enjoying great growth, even an average company can do well, whereas in an industry that is flat or declining, a strong company will struggle,” he says.

“So, before you choose where you want to be, find an industry that has strong growth driven by factors that are sustainable.”

Harrison, who has advised the likes of Heinz, Nabisco and Nestle, claims that the dairy alternative beverage category is growing at double-digits per quarter, which compares to 1-2% growth for consumer goods overall in Canada.

And then there is dairy itself.

“You see dairy milk declining on a per capita basis for the last 25 years and people migrating to our category,” explains Harrison. “As marketers, you see exponential growth, a new category, great margins and strong demand from consumers, and we believe this shift is going to continue.”

Harrison says the alternative dairy industry is now valued at over $2 billion in North America.

In the four years since Harrison and Bayne met at the incubator, countless versions of the beverage have been created, a number of which were taken out for testing with large groups of consumers. The main tests took place in two waves: the first led to the conclusion that protein was breaking too strongly through the flavor matrix, thus causing consumers in the trials to report a slightly bitter taste.

“Protein doesn’t taste good,” says Bayne, “so you have to mask it and we spent three months getting that right.”

The next wave of testers liked the taste but said they would prefer the product to possess a little more body, “so we dialed up the texture to replicate a 1% or 2% milk,” says Bayne.

One might wonder how a vegetable-based drink manages its slightly off-white color. Bayne credits ingredients such as potatoes, organic potato starch, tapioca and a white-yellow pea sourced from Belgium for the milk-like hue. “It is not an artificial colour,” he points out emphatically, adding that genetically modified, or GMO, ingredients are similarly banned from the Veggemo recipe.

With the product perfected, the fourth quarter of 2015 was chosen for the start of an aggressive yet prudent roll-out.

“There are two things you measure in this business, and the first is distribution,” explains Harrison.

“We had set out to be in 450 stores at the end of the first quarter of 2016 and it appears the number is going to be closer to 800.”

Six months from the beginning of product roll-out the goal is to be in approximately 1,800 stores across Canada, including those run by several of the leading chains.

The roll-out continues in further stages to include chilled Veggemo (the first phase involves shelf-stable product, which is packaged in an environment such that the beverage remains fresh on the shelf for up to 14 months) and the addition of stores in the United States.

Looking a bit further out, Harrison says the company has its eye on the global marketplace, as North America accounts for only 18% of dairy alternative beverage sales volume worldwide. There are many attractive markets for Global Gardens to consider, he says, both for sheer size and, in some cases, high levels of lactose intolerance within the population.

A product can be fantastic, but if people don’t try it they will never know. Harrison and Bayne have already considered the appeal factor from multiple angles and have a game plan to ensure that consumers across the country find the product if not one way, then another. This, of course, drives the second metric Harrison was hinting at: sales per point of distribution, or how many units you are selling at each store.

Key to this is the brand and its character, which Bayne describes as “light-hearted, approachable and playful.”  A naturopath in Colorado that Harrison and Bayne refer to as a “guru” asserted that many healthy food choices brand in such a way as to appeal to hard-core health food consumers; because of this, however, they effectively alienate a large percentage of “average” consumers not drawn to a product branded in that fashion.

The packages for Veggemo’s three flavors – original, unsweetened and vanilla – are each different but share a common visual theme characterized by happy animals in fantasy-like nature settings. To say they stand out sitting amid rows of competitor’s containers, almost all featuring a white beverage splashing into a glass or cereal bowl, is an understatement.

Then there is in-store product demonstration, which begins this month.

“We will be doing product tastings at about 1,000 stores so that shoppers can come and try Veggemo before they make a purchasing decision,” says Bayne.

Prices for Veggemo, which at first will be offered only in the 946ml size, will differ from region to region and by retailer, but the company’s suggested retail price is $3.49. This is in the middle of the category and at a level that leaves a very nice margin both for the retailer and for Global Gardens, and the company’s margin can be expected to climb in later years as economies of scale and other efficiencies take root.

Research indicates that a consumer making a health and wellness purchase decision tends to be less price sensitive than an average consumer, and because Veggemo is so innovative it is essentially creating a new segment of non-dairy beverages. Indeed, at the recent Grocery Innovations Canada show, Veggemo was chosen as one of the 10 most innovative products, which is quite an accomplishment given that there were some 300 products at the show.

While one eye will always be on profit, Harrison understands that execution of the business plan is the most important thing as the company begins to establish the brand.

“The gross margin is great and the selling price is great, but it is really about the management team, the category growth and how we have positioned this product,” he explains. “We have a point of differentiation that is research-based and are selling an everyday consumer good resistant to recession.”

Investors seem to share Harrison’s belief. When the company went out to raise capital in the second quarter of this year, its target was $2.5 million. It ended up with $4.3 million.

A commitment to running lean and mean should help to make those funds stretch a long way. A team of just five people has brought the company to its current state, with an aversion to owning fixed assets serving to keep costs mostly on the variable side of the ledger. “We are a company that fits the times,” says Harrison. “Who wants to own fixed assets and a factory with lots of people when there are groups whose business it is to do that?”

Going onto shelves in the likes of Walmart, Save-On-Foods, IGA Market Place, Calgary Coop, Metro Quebec, Thrifty Foods and London Drugs there is bound to be at least one retailer close to most people in Canada carrying Veggemo no later than April. Try it. You might like it, and if you do…you can have as much as you want.

Learn more about Global Gardens Group Inc at http://globalgardensgroup.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/global-gardens-group-inc

CSE Issuer Stories, CSE Quarterly

Golden Leaf shows way for public marijuana companies with strategy timed to perfection

This story was originally published at www.proactiveinvestors.com on December 9, 2015 and featured in The CSE Quarterly.

The rush of junior public companies into the marijuana space over the past couple of years has been fast and furious as laws regulating the drug’s use changed in Canada and some US states.

Despite the best of intentions, many of these companies have not fared well, though in fairness regulatory hang-ups undermined momentum for those focused on operating in Canada.

Golden Leaf Holdings (CSE:GLH) chose a decidedly different path by positioning itself to take advantage of regulatory change in states on the US west coast. It turned out to be a shrewd move, as the company has gone from strength to strength literally since day one.

Golden Leaf was established in May 2014 and in the one-and-a-half years since has succeeded in growing sales to over US$1 million per month. Oregon has proven to be the perfect jurisdiction for its operations, with the company having been able to legally sell its refined marijuana oil products to medical marijuana users since inception.

Recreational use was legalized in Oregon on October 1 of this year, but the only products that can be purchased through approved dispensaries at the moment are dried leaves and buds. Golden Leaf chief executive officer (CEO) Don Robinson anticipates that the second half of 2016 will bring permission for dispensaries to sell oils and edibles to recreational users, a move that would expand the market for Golden Leaf’s products by leaps and bounds.

All Golden Leaf products are based on the extraction and refining of oil from marijuana plants. The oil is sold in a variety of delivery systems, including vaporizers and edible products, the latter slated for introduction late in the current quarter or early in 2016.

“Our business model is built around the lowest cost production of the highest quality oils, based on competitive advantage, economies of scale and intellectual property,” explains Robinson.

“We think we have a different approach to the industry than other companies.”

Well-funded (the company raised a total of US$17 million in two financing rounds prior to going public on October 14 of this year) and with a strong team, Golden Leaf has proven its ability to move quickly when opportunities present themselves.

“We believe we are the biggest extractor in all of North America – we don’t know anyone bigger,” says Robinson in describing the company’s market position.

“Our growth has been explosive, from $150,000 in revenue in September 2014 to over $1 million in April 2015. We have added equipment in the last month, and by the end of this year will have doubled our output capacity and be at a monthly run rate of $2.5 million.”

Robinson explains that the company has been able to sell all of the product it makes, and that further capacity will be needed once refined products become legal for sale to recreational users. So far, Golden Leaf’s sales have come entirely from the medical use market in Oregon.

Right next door to Oregon, of course, is Washington State, where the market is twice the size of Oregon’s.

“When you put Washington and Oregon together, you are looking at a combined market of US$2.5 billion, and almost 1.4 million consumers,” says Robinson.

Keeping up with demand will require significant capital spending. “Capex for us,” explains Robinson, “is all about acquiring more machines. Each machine is close to $300,000 dollars with a two-month payback. We had three machines and added two over the summer, and by the end of the year will have 11. With each extractor you need support and auxiliary equipment because you extract with one machine and refine with another. That is the bulk of our capital spending.”

Funds have also been used to enable production of marijuana itself. “We are attempting to grow all of the feedstock for our extraction process and the reason we want to be self-reliant on feedstock is we believe it is important to be organic. You also get a better quality of feedstock if you do it yourself as opposed to buying it on the open market, where it is inconsistent.”

That claim was borne out in a November 18 press release from the company giving quality control through in-house production part of the credit for extraction yields reaching 14%, up 50% from the year-to-date average to the highest level ever experienced by the company.

From a structural perspective, part of that credit belongs to a Golden Leaf subsidiary in Israel called Green Point Science, which conducts research and development work.

“Everything that happens in Israel with cannabis is best practice,” explains Robinson. ”They have been experimenting with cannabis since the early 1970s and we are adopting their best practice in growing, breeding and greenhouse operations. In a perfect world, we would have our own strain optimized for extraction that would grow faster, with less light, less water and more disease resistance, and therefore be organic.”

Golden Leaf has grown at breakneck speed so far and with recreational use of oils in Oregon seemingly on the horizon, demand looks like something the company may never have to worry about. Still, it is hardly a bad thing that ongoing regulatory change in other parts of the country, and even nationally, will likely to add to its demand prospects.

“Four states and Washington DC are legal medically and recreationally, the states being Alaska, Colorado, Washington, and Oregon,” says Robinson. “In addition, 23 states are in some form of decriminalization.”

Then there is the national front. “The Obama administration took a big step earlier this summer and now allows research into medical marijuana,” Robinson explains.

“Up to now it has been illegal so claims as to the efficacy of marijuana from a medical standpoint are all anecdotal. Once medical studies start coming in that prove efficacy in a formal way, you will see a sea change.”

Getting back to the principle of positioning for change before it happens, Robinson points to the strength of his team and says that when it comes to management, “we have invested ahead.”

It is all about striking the right balance, mixing team members with years of experience in various aspects of the marijuana industry with executives from outside the space who bring branding and other valuable skills.

“This is going to be a very big business and we believe it requires the best of big business practice applied to cannabis,” says Robinson. “It is that marriage of talent plus ready access to capital that will enable us to continue taking advantage of opportunities as they come our way.”

Learn more about Golden Leaf Holdings at http://goldenleafholdings.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/golden-leaf-holdings-ltd

CSE Issuer Stories, CSE Quarterly

DNI Metals sees vertical integration as key to success in tough market

This story was originally published at www.proactiveinvestors.com on February 23, 2016 and featured in The CSE Quarterly.

DNI Metals (CSE: DNI) is lining up all the pieces to become one of the world’s leading graphite producers, using a three pronged approach of exploration, distribution and refinement.

Exploration

Success begins with finding the goods, and this is a base DNI has covered, having purchased a high-quality graphite project with a mining license in Madagascar in 2014. Some of the best large flake discoveries are in Madagascar and Stratmin Global Resources PLC (LON:STGR) owns and produces there from one of the top graphite deposits in the world.

That deposit happens to be just down the road from DNI’s project, with both sitting along the same trend. DNI chief executive officer Dan Weir points out his site is also close to the main shipping port and has ready access to a paved highway.

“I believe that DNI sits on a world class graphite deposit,” said Weir, “as we are located on the same trend as Stratmin.”

Working in Madagascar has some important benefits as compared to other parts of the world, including Canada; while there is good graphite in Canada, Weir concedes, it is difficult to get at.

Currently, only one small mine in British Columbia is in production, and it can only operate for six months of the year. “Most other North American graphite deposits are hosted in hard rock. They have to drill it, blast it and grind it up really, really small, and process it – there’s a huge cost to do that,” Weir said.

Conversely, Madagascar has material which is “like going to a sandbox, where you go in with an excavator or a shovel and you dig it up and process it.”

Another benefit to being in Madagascar is that it has one of the best mining codes in the world.

“To get a permit in Canada probably takes around three to four years – it’s very difficult,” Weir said.

Weir joined DNI in November 2014, and since then the company has acquired a full mining permit in Madagascar. He would likely still be waiting for the go-ahead in Canada.

The combination of a good permitting environment and soft host rock that makes for easier processing culminates in a reasonable price tag to go into production. Weir expects to begin commissioning the facility in the first quarter of 2017, with the mine set to be operational midway through the same year.

Overall, the project is slated to cost $10 million to $15 million, which is a fraction of the spending proposed in North America by other graphite companies.

Moving toward production, DNI plans to complete a resource estimate, with drill results and a preliminary economic assessment expected by the end of this year.

In tandem, DNI is acquiring two copper-zinc exploration companies with $2.3 million in working capital that will be directed to development costs at Madagascar over the next year, as the project heads toward the construction phase.

Distribution

While the company takes the Madagascar project forward, Weir is also looking to add value in other ways.

This is where part two of the plan comes in – establishing a reputation in the graphite space.

Success in the industrial metals world begins pre-production with off-take agreements and relationships; with this in mind, Weir has established a distribution network buying graphite from Brazilian producers and selling into North America.

“I am making a little bit of money from that,” he said, “but not a lot. The whole point is to build off-take relationships with buyers of graphite, so that when we come to market for financing to build DNI’s mine in Madagascar the end users will know us, respect us, and DNI will have established a reputation of high-quality graphite and partnerships with buyers,” he said.

Refinement

The third and final stage to DNI’S vertical integration strategy is the acquisition of a laboratory 20 kilometres outside of Toronto.

DNI looks to establish this lab as a hub for innovation, not just in the mining sector, but in batteries, pilot plant development and clean tech. In the future, DNI will purify its graphite at the facility. The lab works with some of the largest companies in the world.

DNI is buying the laboratory for $4 million, and while this seems like quite a large chunk of change for a small company Weir points out that the assets and property value are around $3.6 million, making it a low-risk proposition.

The transaction is expected to be completed over the next few months, Weir said, giving the business some cash flow to help toward building the mine in Madagascar. “The shining star in this whole transaction is, what other junior mining company is cash flow positive?” said Weir.

While the company builds relationships with buyers, builds its project in Madagascar, and acquires the laboratory, there is one overhanging issue that Weir is also quick to address – the graphite price.

The graphite graph

“Graphite prices in 2012 were twice what they are today,” he said, though he is not concerned, and his reasoning is two-fold.

Firstly, new supply is unlikely to come to market in the near term, particularly in North America, where he believes that economically, the more expensive hard rock projects will be difficult to commission and put into production at current graphite prices.

“We see a lot of growth around the world,” Weir said, noting that demand from new sectors such as lithium batteries was beginning to pick up.

With a potentially world class project in Madagascar, relationships with most of the major graphite buyers in North America, its own laboratory, and a positive outlook on the price of graphite, it is no wonder that the chief executive is “extremely excited” about his company’s future.

Learn more about DNI Metals Inc. at http://dnimetals.com/ and on the CSE website at http://thecse.com/en/listings/mining/dni-metals-inc

CSE Issuer Stories, CSE Quarterly

Captiva Verde: growing greens and making money

This story was originally published at www.proactiveinvestors.com on May 17, 2016 and featured in The CSE Quarterly.

A neat carpet of green can be seen stretching as far as the eye can see, like a well-tended lawn of some grand country manor. But this is right in the middle of the California desert.

It’s just one of Captiva Verde’s (CSE:VEG) many organic vegetable farms in isolated patches across the California and Arizona desert.

Being organic, the farms deploy no chemical pesticides or synthetic fertilizers.

There is a big cultural shift as organic becomes the mainstream, with 78% of US families buying organic produce, which means it’s big business… if you can get it right.

Organic farms are 35% more profitable than the average farm and in retail stores organic prices are typically double conventional prices. Yet currently only 0.5% of US farmland is suitable for organics.

According to the Research Institute of Organic Agriculture and International Federation of Organic Agriculture Movements, global retail sales of organic food are estimated at US $72 billion. North America represents 48% of this global demand.

From renewable energy to organic farming

Captiva Verde is taking a run at this giant market. Worth just CDN $20.5 million, it is fair to say the company is a comparative minnow in the field of agriculture.

But founder Jeff Ciachurski is ambitious: “You’ve got to have a lot of guts,” he says. “You need to go in with a big operation and take the chance.”

Ciachurski made his fortune in sustainable power after he founded Western Wind in 2002 with an initial investment of CDN $250,000.

Just over ten years later he sold the company to Brookfield Renewable Energy Partners for $420 million.

As important as the project is the person behind it; the man or woman with the relentless drive and will to win.

“I made a very big success for my shareholders; in fact I was one of the few guys in the entire worldwide market place that made a whole lot of money in the wind and solar space,” says Ciachurski.

“So I’ve got a knack for finding high quality deals and ones that really take a lot of perseverance, a lot of emotional energy and challenges.”

And he thinks there are lessons he learned from his former employment that are directly applicable to the world of organics.

“There is a huge regulatory landscape you need to navigate. But we successful entrepreneurs take on the big challenges,” Ciachurski says.

Captiva Verde was founded in 2014 and is certified by the United States Department of Agriculture (USDA).

Ciachurski’s team now farms 3,700 acres, the majority of which is leased, and the group is looking to add another 2,270 acres in the southwest US for organic cultivation.

The farmland is managed by a team with extensive experience in organic vegetable farming, food processing, clean energy and land development in California and Arizona.

The isolated fields in Arizona, Imperial Valley and Tehachapi are all at different elevations for production synched to optimal climate conditions, allowing for 365 day a year harvesting and crop rotation.

If the vision above is one of man in harmony with his environment, then the state of California, with some 20,000 organic farms, reveals what happens when agriculture of this sort is done on an industrial scale.

A big risk with big money

It has been a challenge for Captiva Verde, not just meeting the exacting farming standards, but winning over retailers.

“The certification program in California is so tough. The reality of organics is that the standards are way beyond what you’d call sustainable,” said Ciachurski.

“The US is a very litigious place, California especially so. There is a very large and robust food safety program. You want to make sure the buyers know you have a top rated food certification.”

Scrutiny was intense to gain National Organic Program certification. And meeting the food standards and safety criteria can be very costly, which is often a deterrent or inhibitor to smaller, less well-funded groups.

How many small businesses could fund a four-mile fence to avoid cross-contamination from animals? Captiva was forced to bear these costs to gain USDA certification for just one 600-acre farm.

“We take 300 tissue samples per acre to test for bacteria,” states Ciachurski.

“All this can be a big setback for the smaller guys, who often have to sell at the farmers market because the big end retailers would not find their standards remotely adequate to get onto their shelves.

“That’s why you have to raise the capital; it’s a big risk with big money at the start.”

Captiva also had to convince potential buyers of produce that its farms were capable of producing enough to meet the demand from retailers such as Whole Foods and Trader Joe’s.

It was stuck for five months in the spot market, where prices fluctuate minute to minute, while it proved its output was reliable.

“The risk is no one will buy from you until you can prove to them you can grow big quantities. At one time US $9 million worth of supply had to be re-ploughed back into the ground,” Ciachurski laments.

It’s only really in the last month Captiva has found itself in the happy position of selling all its production on contract.

“That means that everything we grew already had a buyer by the time it goes in the ground,” adds Ciachurski.

So what does the future hold?

“Tremendous growth,” Ciachurski says.

The organic vegetable market is worth around US $35 billion a year and is expanding at some 12-15% annually. That rate is forecast for the next 10 years.

Captiva, meanwhile, is making remarkable financial headway.

In 2015 it reported US $9 million of losses. By November it was producing US $500,000 a week worth of vegetables but selling it at only $200,000.

As of 8 May, Captiva has 455,000 pounds of produce a week fully contracted, which brings in US $570,000 a week in sales (the equivalent of almost CDN $30 million of annual sales).

“We are the only company that even has those kinds of revenues on the CSE and the only publicly traded 100% organic farming company,” he points out.

Further expansion is on the books as Captiva looks to some strategic acquisitions.

The company announced last month that it was considering buying two companies – a large food broker and a substantial salad making operation – to expand right through the organic produce supply chain.

The acquisitions will add a further US $13 million of sales a year for the group.

“We’re a growing company in a growing market. Since October 2015 we started from zero sales to now US $1 million a month. Now, as of May, we are moving to US $2.5 million a month,” explains Ciachurski.

“We are fast making money in a dynamically growing sector, and that’s what investors want to see.”

Learn more about Captiva Verde Industries Ltd. at http://www.veg.net/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/captiva-verde-industries-ltd