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The CSE Quarterly | Issue #2

New exciting stories are coming to market on the CSE.

Read more about how innovations in sectors including mobile technology, medical devices, shipping, and agriculture are changing the face of the Canadian public markets. thecse.com | @CSE_News


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Contents

CSE | Quarterly Issue No. 2 www.thecse.com Publisher Fusion Publishing Media Inc. #317 – 1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.888.925.0313 (Toll Free) www.FusionPublishingMedia.com info@FusionPublishingMedia.com Group Publisher Terry Tremaine Group Editor Connie Ekelund Production Manager Christie Smith Free Digital Subscription Published by Fusion Publishing Media Inc. on behalf of Canadian Securities Exchange. To receive your complimentary subscription, please visit www.thecse.com and complete the contact form.

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CEO’s Message

Feature Story 6 Big Rock Labs readies to wow mobile users with two disruptive apps by Proactive Investors Company Profile 10 Helius Medical Technologies feels solution to neurological puzzle within reach by Peter Murray 13

Cielo Waste Solutions proves one man’s trash really can be another’s treasure by Peter Murray

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Newnote Financial: pioneering cryptocurrency transactions as online currencies set to change the face of money by Fiona MacDonald

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Axios Mobile promises more efficient transportation of goods with one-stop shop pallet solution by Deborah Bacal

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Massive license puts Supreme Pharmaceuticals in medical marijuana driver’s seat by Peter Murray

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Chlormet Technologies gets best of both worlds in North American marijuana market by Deborah Bacal

www.thecse.com | @CSE_News

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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

CEO’s Message As Canada’s “Exchange for Entrepreneurs”, one of the key goals for the Canadian Securities Exchange (CSE) is to create a favourable capital formation environment for early stage companies. The numbers to date this year demonstrate that we are making excellent progress towards this goal: 82 companies have completed 135 financings raising a total of $104 million. Leaving aside one monster deal done some years back by one of our companies, this is the first time that CSE-listed companies have collectively raised more than $100 million in a single calendar year. It’s particularly gratifying that we reached this milestone with more than a quarter to go in the year. Combined with record trading numbers, and over 50 new securities listed this year, it is clear that the exchange’s message is resonating with businesses looking to the public capital markets for investment. Among the names of companies that successfully raised additional financing this year were Pivotal Therapeutics (PVO), Helius Medical Technologies (HSM), Novo Resources Corp. (NVO), VoodooVox Inc (now UpSnap – UP) and RESAAS Services Inc (RSS). The companies raising money on the CSE come from a broad cross-section of industries. There are signs of life in the beaten down mining sector, with 31% of the funding for transactions having been completed in the space. In addition, the technology sector has accounted for almost half of the activity. With trading activity and financings pushing record levels, the CSE is hitting its stride as an exchange that more and more public companies are turning to as the best option to access capital. Underpinning the shift is a combination of factors that include pricing, simplicity and service. Going into the final stretch of 2014, the momentum for the CSE looks strong in all corners of the business. Best of all, entrepreneurs are gaining access to cost effective capital that drives business growth and innovation. We could not be more proud to be a part of their success.

...this is the first time that CSE-listed companies have collectively raised more than $100 million in a single calendar year.

Richard Carleton CEO The CSE - Canadian Securities Exchange

www.thecse.com | 5


feature story

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Big Rock Labs readies to wow mobile users with two disruptive apps by Proactive Investors

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ig Rock Labs (CSE:BLA) (FSE:BR1) Big Rock Labs (CSE:BLA) (FSE:BR1) has already launched one app and is preparing to launch another in 2015, both of which the company says will capitalize on the “fast-growing sharing economy”, with the first, known as Reach, designed to pick up where LinkedIn has left off. With the iOS launch completed in September, the iPhone/iPad/Android-compatible app uses location-based technology to connect professionals face-to-face in their respective areas. It allows users — both with and without a LinkedIn account — to connect with local professionals on the go, in seconds, generating local career opportunities and helping neighbourhoods and communities collaborate more efficiently.

6 | www.thecse.com

The concept for the app, according to board director and advisor Matthew Kaine, is to provide a platform for professionals inclusive of all industries and backgrounds, and assist them in becoming aware of new connections and potential opportunities while carrying out daily routines. While LinkedIn has built a user base of over 300 million professionals since launching in May 2003, the bulk of the connections made through the professional social network fail to ever develop into business or face-to-face encounters. Reach also offers users over 30 million Foursquare venues to check into, as well as detailed venue information such as Location, Hours of Operation, Menu Information, Outdoor Seating, Prices, Credit Card Acceptance and WiFi Availability. This information will be useful to organize meetings or explore new places. Reach is a powerful tool for sales people, marketers, HR professionals, freelancers, recruiters, entrepreneurs and those generally interested to network.


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Big Rock says that especially the human resources sector will stand to benefit from the app because it facilitates the search process for people with a specific skillset. Indeed, a potential end goal is to offer Reach as a validated job posting and referral platform built on the recommendations of other verified Reach users. The app also offers small business owners the ability to connect with top talent without having to pay a traditional placement fee for both full-time and contract employees. “The goal of Reach is to reinvent networking in common areas such as cafes, airport lounges and conferences.” said CFO Harald Seemann in an interview with Proactive Investors in July discussing Reach’s planned launch. The business model is that the company offers a free version of Reach with basic fundamental features to onboard users and develops premium features in the future. Big Rock’s marketing strategy for the app includes event sponsorship and hosting at airports and coffee shops, as well as a product website, partner channels and aggressive social media campaigns.

Partnerships have been formed throughout 2014 with global innovation groups, conferences, incubators, local meet-ups and events. They will be kicking off in November this year reaching an audience of over 50,000 software developers, designers, entrepreneurs and investors by year’s end. Big Rock Labs has been positioned as a strategic tech partner by a number of organizations and companies that foresee Reach as a tool that will transform their culture allowing members and attendees to connect and collaborate in a precise and rapid way not previously possible. In terms of internal innovation, the company is armed with a strong software development background, having acquired two additional iOS engineers for its Reach development team in Toronto. Kashif Shaikh was a key member of the BlackBerry Software Infrastructure development team, where he was responsible for developing scalable, high performance and mission critical software for BlackBerry’s massive message routing network. Uzair Khan, who holds a Bachelor of software engineering from the University of Waterloo - a city known for its entrepreneurial savvy - has past clients including Rogers, Deloitte Consulting, Bell Canada and IBM Canada. Director Kaine is also an advisor at the Digital Media Zone at Ryerson University and the MaRS Discovery District in Toronto, while CFO Seemann has years of financial experience working at firms such as Deutsche Bank, Societe Generale and Thomas Weisel Partners. Chief Executive Officer Karl Pawlowicz was the CEO of Motion Season Studios, a digital production company, and has consulted and developed mobile solutions for major brands, agencies and start-ups. The team’s experience will definitely come in handy, as Big Rock ramps up development to launch its second app, Hostello, in 2015. Hostello, which is inspired by the Airbnb and Hotel Tonight mobile apps, will be a free mobile and web travel app for iPhone, iPad and Android devices that allows users to find discounted “high value budget accommodations” by curating results. Big Rock says it saw an opportunity in the online bookings space, as many existing sites offer no last minute bookings or booking processes that are not mobile-friendly, as well as generate too many search results with no quality control. The company is targeting users seeking lower budget accommodations at below $100 per night, an area in which bigger competitors are not quite as interested. www.thecse.com | 7


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

With Hostello, users...book a night upon arrival...

With Hostello, users will gain access to curated lists, with the best hostels in a central location, and they will be able to book a night upon arrival to a new city, even late in the evening. Credit card data will also be stored for easy booking, and the app’s geolocation technology will show hostels within a 10km range of where users are located. “The key word is curation,” says Seemann. “What many of these travel booking apps don’t tell you well or at all is the location of the hostel. That’s where we come in. We will filter results through an algorithm that generates properties with high ratings over multiple trusted review websites.” The market potential is certainly there, with online travel sales in 2012 rising 8.4 percent globally to $524 billion, or 25 percent of global sales. By 2017, mobile is expected to account for over 30 percent of online travel sales, according to data from the World Travel Market. Indeed, Big Rock’s apps are designed to appeal to the fast-growing, so-called “sharing economy”, which eliminates the middle men and democratizes the global economy. Jeremy Rifkin, author of “The Zero Marginal Cost Society”, says the success of businesses such as Airbnb --- the online marketplace where people can book or list a room, house or even a castle --- is about the emergence of a new economic system alongside the traditional capitalist market, potentially leading to what he calls a “paradigm shift in the economy.” “Salaries are not rising and people are looking for ways to save money. We think this will be a trend for decades to come, and we want to capitalize on that,” says Seemann. With its apps, the company will first focus on conquering the Canadian market in terms of user growth, with plans to expand to the U.S. and Europe soon afterward.

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Though Big Rock hasn’t raised funds from external investors yet, the company is fully financed to launch Reach and plans to raise additional funds by the end of the year and at some point next year to boost its marketing and CEO Karl Pawlowicz development budget and hire more developers to expand its business. Ideas are also being discussed among its team members for an accelerator with other start-ups and an Apple Watch app with Apple’s announcement earlier in September. “The Apple Watch will create CFO Harald Seemann an entirely new app market with tremendous potential. This is very exciting,” says CEO Karl Pawlowicz. “Our apps come from the necessity to make life easier through technology, and they offer clear, immediate value to the consumer.” Big Rock Labs, which Matt Kaine, Advisor listed on the Frankfurt Stock Exchange (FSE) in July, has 18.3 million shares issued and outstanding, with 13.4 million of those under escrow agreements. Management and insiders currently hold 80 percent of the shares, which is nothing if not a sure sign of their belief in the company’s future prospects. Free Reach iTunes Download here: https://itunes.apple.com/us/app/reach-realcareer-opportunities/id915364904?ls=1&mt=8 Company Website: http://www.bigrocklabs.com n

Originally published on Proactiveinvestors.com originally published on July 24, 2014, and updated on September 29, 2014.


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company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Helius Medical Technologies Feels Solution to Neurological Puzzle Within Reach by Peter Murray

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edical breakthroughs are extremely difficult to realize, and like a hockey pro chasing a Stanley Cup, it is the dream of everyone on the research side of the industry to be involved with one during the course of their career. The team at Helius Medical Technologies (CSE:HSM) believes it is on the verge of just such an accomplishment, one that would provide a chance of recovery to millions of people whose dream is merely to re-establish control of their everyday lives.

Helius...is moving it’s unique... medical device... through clinical trials and regulatory approval...

“I always find it fascinating how companies start,” says the company’s president and chief executive officer, Phil Deschamps. Helius, in a joint effort with the United States Army, is moving it’s unique, potentially groundbreaking medical device called PONS through clinical trials and regulatory approval, with commercialization targeted for the second half of 2016. 10 | www.thecse.com

“Groundbreaking” is a pretty big word, but when one considers anecdotal success to date, plus the set of indications PONS is positioned to address, it seems wholly appropriate. Try multiple sclerosis, traumatic brain injury, stroke and Alzheimer’s disease…for starters. Three years ago, Deschamps was introduced to well-known talk show host Montel Williams and asked to help develop a business plan for a project completely unrelated to PONS. Early in the relationship, Williams, who suffers from multiple sclerosis, arrived for a meeting with a device in his mouth. Deschamps naturally asked him what it was. “This device saved my life. It’s gotten rid of my neuropathic pain, it restored my sense of balance, and it enabled me to walk further than I ever have since my diagnosis,” says Deschamps, paraphrasing the moving response of a man who has since become a close friend. Williams went on to explain that the PONS device was made by a small lab in Wisconsin and that he was trying to get the group to commercialize the technology in some way, “but I don’t know how to do that.”


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“These are worth nothing from a science standpoint because they are simply anecdotes, but it gives you faith that ultimately we will be able to prove through science that those effects are not chance effects.” Another plus for patients is that the treatment is completely non-invasive. “We are not performing surgery, we are not putting drugs in the system,” explains Deschamps. “We are tapping into the brain’s ability to, or amplifying the brain’s ability to, heal itself.” Serendipity was in the air that day, as Deschamps’ entire career had focused on commercialization of medical devices and pharmaceutical products. He quickly asked if he could be part of the PONS team and run with the idea. “I reached out to the lab and six months later we had agreed to form Neurorehabilitation Corporation,” explains Deschamps. Neurorehabilitation Corporation was reversed into the vehicle that now trades as Helius Medical Technologies on the Canadian Securities Exchange. Helius has 100% ownership of the technology through an exclusive license from the inventors. So, what exactly does the PONS device do? Essentially, PONS stimulates nerves in the human tongue that follow a unique pathway to the brain stem, and through this stimulation, it is thought to induce brain plasticity, thus allowing the brain to reorganize its neuronal connections where trauma or disease have caused cell death or chronic degradation. The objective is to address debilitating brain and nervous system disorders. While still to face the rigor of clinical trials, anecdotal evidence that PONS works is encouraging. Be it a recent heli-skiing trip with Williams, who when Deschamps first met him could barely walk 30 feet, or meeting a stroke patient who had lost use of her right arm but was lifting a 1-pound weight after just five treatments with PONS, Deschamps has witnessed multiple dramatic recoveries in person. “Those are things that mark you, especially after spending 30 years in neurological development for drugs and never, ever seeing anything remotely close to what this looks like,” says Deschamps with a gentle laugh, suggesting he remains in awe of the apparent healing power of the PONS device. “It affects you when you see patients respond with complete disbelief at what they are able to do.

The strongest teammate in the world

Few companies can say they have the United States Army as a partner, but given that the United States Department of Veterans Affairs system has, according to Deschamps, some 600,000 soldiers on disability with traumatic head injuries, the Army’s interest in the PONS device is easy to understand. According to Deschamps, support from the military has been nothing short of remarkable. The Army is spending north of an estimated USD$30 million on both clinical development and regulatory approval work. While Helius is contributing on both of these fronts as well, not having to shoulder the full burden alone means the company has the necessary freedom to also concentrate on medical infrastructure and commercialization planning. The Army’s requirements of the partnership are quite reasonable. Simply work together to advance development of the technology and product as quickly as possible, so as to benefit soldiers in need sooner rather than later, and for Helius to provide the Army with best pricing once PONS has been commercialized. Clinical trials and the core of the regulatory approval process are around the corner, with confidence bolstered by the outcomes of three trials that Deschamps refers to as “pilot clinical trials,” two in multiple sclerosis and one in traumatic brain injury. Each trial observed 10-20 patients and was designed as proof of principle. All three were positive in their outcomes, though they were not powered to be registration-level trials. In addition to these, some 200 patients in the United States with various neurological disorders have been treated. www.thecse.com | 11


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

And although the observation of these treatments was less formal, the individual case studies demonstrate that the device has been effective in reducing some symptoms. A traumatic brain injury pre-clinical trial is being conducted by the University of Wisconsin, sponsored by the United States Army and Helius. It began in May and is scheduled to provide results in the first quarter of 2015. Once those results are understood, a registrational trial will be launched. The schedule calls for this trial to be completed by the first quarter of 2016. Submission to the U.S. Food and Drug Administration (FDA) would take place at the end of that quarter, at which point the FDA would initiate a 90-day review. Commercialization is thus possible by the second half of 2016.

...some 200 patients...with neurological disorders have been treated.

A second set of trials is underway at the Montreal Neurological Institute and Hospital. Pilot studies there should last through January 2015, with clinical trials to last another year after that — very similar in timeline to the work at the University of Wisconsin. The clinical test results will be submitted to both Health Canada and the FDA. The University of Wisconsin studies will also be submitted for Health Canada approval.

A funded path to commercialization

Investors in medical device companies typically bear the costs of clinical development, regulatory development, marketing and all the other work that goes with turning an idea into a revenuegenerating business. “In our case, through a collaborative research and development agreement with the United States Army, they are sponsoring the clinical development of the device and also sponsoring the

regulatory pathway to the FDA,” explains Deschamps. “So, while the clinical and regulatory risk exists, it is not tied, as it usually is, to $30-100 million of initial investment.” The market for the product could easily stretch into the billions of dollars over time. “Just in President / CEO Phil Deschamps North America, over 100 million people in the span of their lifetimes would be able to make use of this technology, and that is the initial medical use for the device,” says Deschamps. “There is no reason to think that five to 10 years from now this device could not be used for cognitive enhancement, sports performance enhancement and other types of things.” Helius is well positioned financially to support the Wisconsin and Montreal trials, having closed a private placement of C$7.62 million in May of this year. The exercise of warrants already deep in the money would bolster the treasury with an amount equivalent to the gross proceeds of the financing, paving the way to finish the trials, the approval process, and begin initial commercialization. Considered in the broader context of medical treatment approvals, a two-year timeline to commercialization is nothing, and this reflects in large part the non-invasive nature of PONS. “Using that pathway to be able get to the brain stem to enervate the rest of the brain is something that is unique to the PONS technology and to Helius and nobody else is working on any technology of this kind,” says Deschamps. “It is really a binary opportunity. We have anecdotal evidence from over 200 patients in the U.S. who were treated under IRB (Institutional Review Board) clinical conditions, and now we are going to prove scientifically that it does work. We have to prove what we already know through the science.” Helius Medical Technologies began trading on the Canadian Securities Exchange on June 23 of this year. n Originally published on Proactiveinvestors.com on September 8, 2014.

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Cielo Waste Solutions proves one man’s trash really can be another’s treasure By Peter Murray

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etween waste from manufacturing and other commercial activities and the garbage thrown out by the planet’s 7.2 billion people, society generates an unfathomable amount of refuse on a daily basis. It may end up out of sight, but it shouldn’t be out of mind. It all has to be stored somewhere, adding to the burden on our increasingly beleaguered environment. Cielo Waste Solutions Corp. (CSE:CMC) plans on being one of the entities that rides to our rescue, and sooner rather than later if chief executive officer Don Allan keeps the company on schedule to have its first commercial facility up and running. Cielo recently announced that it had secured the funding required to build the first commercial refinery in Red Deer, Alberta, which would sort garbage arriving at the local waste transfer site and remove 9095% of the garbage, basically eliminating the need of a landfill.

Typically, 75% of garbage will contain fiber suitable for feedstock for the plant, 20% will be recycled and sold and 5% will be dirt and rock. Once it is finished processing, the product is highgrade renewable diesel. The key to the process is cellulosic fiber. “We take garbage or anything cellulosic as a feedstock,” explains Allan. “We’re talking rubber tires, plastic, newspaper, cardboard, wet organics from your household waste, sawdust, trees, pallets — anything that has a fiber we can use, and our goal is to eliminate the landfill.” The refinery liquefies the waste and when a proprietary catalyst is introduced, a conversion to renewable diesel takes place. “When I say highgrade renewable diesel, we have actually managed to turn it into a military grade jet diesel, what they call a Number 1 diesel,” Allan says. “We’ve got the cloud points and the freezing points down to -120 C. Of course because we are using garbage we don’t have very much sulfur to remove, making it a low-sulfur diesel. We are changing the both the way you handle garbage and the renewable diesel industry.” If all goes according to plan, Cielo would be yet another overnight success story a decade in the making. The company has actually spent some 11 years getting to this point and considered 38 different technologies along the way. It eventually decided that none met its requirements and came up with its own. Plans call for filing related patents within the next few months.

company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

...our goal is to eliminate the landfill.

www.thecse.com | 13


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Keeping the focus close to home

While perhaps its highest profile news release of late was of a non-binding Letter of Intent (LOI) with a Swiss company involving waste management in Kazakhstan, Cielo intends to methodically establish a strong base in its home province before making a concerted push into overseas markets. “Our goal is to focus on Alberta development right now,” says Allan. “While we have our global team focusing on international sales, it is not our main goal. We want to build the corporation right here in Alberta.” 14 | www.thecse.com

Cielo announced April 17 an LOI with Alberta’s Red Deer County that would see the company construct a renewable diesel refinery in collaboration with the local Horn Hill waste transfer station. According to Allan, Cielo plans to install a sorting line “so that [it] can basically eliminate the landfill.” And Cielo’s CEO sees the company’s home base as suitable for much more than just that initial facility. “We hope to build in Red Deer up to six commercial refineries,” says Allan, with plans also calling for announcements regarding other cities and small municipalities.


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“We think we could easily be one of the largest producers of renewable diesel in North America right here in Alberta.” Logistically, this makes good sense as Cielo’s ongoing relationship with Calgary-based engineering group Falling Apple Solutions has been instrumental in bringing the technology to shovel-ready status. An upcoming collaboration with the University of Calgary on engineering and improvements to proprietary catalysts will help keep the research side of things at home, too. “In the next 12 months we hope to have engineering finished and be into construction,” says Allan, with the goal actually being to have the facility in operation toward the end of that timeframe. “We have the feedstock secured with Red Deer County and we have the offtake agreements in place to sell the renewable diesel.” Those agreements include a multi-year contract to supply its product to a US-based bio-diesel processor for a minimum price of $1.30 per litre. “They came to us and said they have the opportunity to sell a lot of our diesel for us by upgrading it,” explains Allan. “We put a ROFR (Right of First Refusal) in the contract, so if someone comes and offers a higher price they can match it or they can allow us to sell it. But it will not be sold for less than $1.30 per litre.” Allan says the company’s financial model shows the whole process being solidly profitable for Cielo, while also being a good deal for the purchaser. Combining the Cielo product with petroleum diesels and additives yields a premium jet fuel for which airlines and federal governments will pay top dollar.

The art of the deal

Aware that biting off more than one can chew has spelled the end for a multitude of small companies, Allan and the Cielo management team opted for a prudent approach to establishing their first commercial facility. On June 26, the company announced it had signed a Letter of Intent with a private investor that would see the new partner put up a maximum of $10 million to finance construction of a 700 litre per hour renewable diesel plant.

Cielo gives up 50% of its intellectual property rights and 90% of the net revenue until the investor is paid back, after which Cielo’s ownership jumps to 30%. There is also a $.04/litre royalty involved and a ROFR that enables the investor to fund another 100 plants in Canada. While that may seem a lot to concede, the deal structure essentially transfers the financial risk to the new investor, while keeping debt off Cielo’s balance sheet and preventing construction-related dilution to the share base. “When you are scaling up it is important not to scale up from a demonstration plant to a multihundred million dollar commercial plant,” says Allan. “We are moving from a 50 litre per hour demonstration plant, which is actually very large when you think of demonstration plants, and we are going to a smaller-scale commercial plant of 700 litres per hour. “We are talking about a $6.5 million dollar refinery, and then with the entire infrastructure it would be about $10 million. When we found the partner willing to put in $10 million, we didn’t mind giving up 70% of the ownership. It worked well for us. The risk scale is right.”

Fuel as the by-product of solutions

“We think that our company is a waste solutions company, so we don’t call it a renewable diesel company,” says Allan. “We want to be able to provide a creative and unique solution for everybody’s waste issues. “So if you have a problem where you can’t burn or use your sawdust we’ll come in and turn that into diesel. If you have a mountain of plastic you can’t sell, we will come in and make a solution for you. If you have a big pile of rubber tires, we will come in and deal with that.” But “landfill” is the word that trumps all for Allan. “Landfills are a big opportunity for us. We get to charge to take that landfill, a tipping fee if you will. We eliminate that landfill so we also get methane credits, and we get carbon credits from the refinery,” he explains. “Everything we do is about green.” n

Originally published on Proactiveinvestors.com on March 10, 2014.

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company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Newnote Financial: pioneering crypto-currency transactions as online currencies set to change the face of money By Fiona MacDonald

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itcoin ‘mining’, the process that produces the decentralized digital currency that is set to transfigure monetary systems, shares at least one commonality with actual mining, in that it is a capital intensive activity. For Bitcoin miners, the stakes are high. It is into this brave new world of virtual currency that Vancouver-based software and service company Newnote Financial Corp. (CSE:NEU) steps. Specializing in the development and acquisition of products and services specific to Bitcoin and other crypto-currencies, Newnote aims for the creation of a self-contained ‘eco system’ of such services. “Everything we have ties in together in an integrated platform,” says president, CEO and director Paul Dickson. There’s no doubt that Bitcoin is slowly but surely gaining traction, an acceptance signaled recently by the currency’s use in the purchase of a $500,000 villa in Bali. 16 | www.thecse.com

Dickson, who allows that “most people just don’t understand [Bitcoin] yet,” says he commonly describes Bitcoin in terms of mobile devices and app stores. “Bitcoin protocol is like an app store and Bitcoin is an app. Right now developers like us are pioneering new financial tools and utilities that are going to be added to the ‘app store’ — financial services like escrow and contracts.” The company has already purchased its first Bitcoin ABM machine, a device that can convert fiat currency to Bitcoin in fifteen seconds and accepts notes from over 200 countries. The ABM — the first of many, according to Dickson — not only allows Newnote to make commission on withdrawals and trades, but the machine is also linked to the company’s exchange. “So someone who buys Bitcoin from the ABM purchases automatically from our own exchange, from a human on the sell side, creating more liquidity on the exchange.”

There’s no doubt that Bitcoin is slowly but surely gaining traction, an acceptance signaled recently by the currency’s use in the purchase of a $500,000 villa in Bali.


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The exchange Dickson refers to is another near-term development in Newnote’s rapidlydeveloping story, also known as the Puretrade Bitcoin exchange, due to be opened “any day now.” Of the planned exchange, Dickson says traders will find some familiar aspects. “It’s going to have a lot of familiar trading tools — it will be like trading a stock.” The company recently achieved a major milestone in its rapidly developing story, as Winrock Resources Inc. (CSE: WR), the company of which Newnote Networks Inc. is a wholly-owned subsidiary, changed its name to Newnote Financial Corp. and had its common shares approved for listing in early April. “We’re really excited about that,” says Dickson. “We did it without getting halted – we did it delicately with tons of disclosure and we’re quite pleased with the results.” “Everything’s coming to fruition at the same time. It’s going to be an exciting next couple of weeks.” Among the plans aborning is one that takes advantage of the capital intensive nature of the mining process for Bitcoin.

Newnote’s data centre, in full operation now, which has “six 10 tonne AC units and virtually unlimited power”, currently boasts capacity of “6 or 7 terahashes”, says Dickson – that is, a speed of production of a trillion hashes per second, a hash being the smallest unit of mining work. An order due in the next few weeks is set to bring the total to more than 10 terahashes, with further plans to get to 50 by December. These machines can be bought or rented such that individuals can buy gigahashes (which correspond to a million hashes per second) for a set amount of time, with the resultant Bitcoin going straight to their Bitcoin wallet. Once again, the practice has a tie-in to other Newnote products. “When [a client] creates an account on the cloud hashing service, they automatically get an account on the Bitcoin exchange and vice-versa. So if you’re trading on our exchange, you can go buy gigahashes; if you’re mining Bitcoin, you can trade on the exchange. “We’re creating an eco-system of Bitcoin services.”

Specializing in the development and acquisition of products and services specific to Bitcoin and other crypto-currencies, Newnote aims for the creation of a self-contained ‘eco system’ of such services.

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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The data centre is also a revenue stream in itself in that it currently hosts 12 of “other people’s machines that rent the space from [Newnote]. We charge per kilowatt hour.” Newnote has other ambitions beyond this, including its own crypto-currency currently under development for the explicit purpose of philanthropy. The currency, called CryptoAid, is produced by a customization of the Bitcoin software. But unlike Bitcoin, which goes exclusively to the miner, CryptoAid is mined with the intention that a portion be redistributed. While the miner gets the lion’s share of the currency, a random amount within a range is sent to a manifest list of beneficiaries of that coin. The list, developed through votes cast by the CryptoAid community, is broken down such that a different level of importance and thus a greater amount of currency is awarded to those closer to the top of the list. “Unlike other charities, it doesn’t end,” says Dickson. “With CryptoAid, we continue the charity until you say stop.” And unlike Bitcoin, it can be efficiently mined currently with consumer-grade hardware. It is a project close to Dickson’s heart, and in the same vein with the youth entrepreneur program he founded. CryptoAid, says Dickson, is important to him “because there’s no charity coin out there.” Ultimately, the chief executive is planning to form a CryptoAid foundation that will eventually be spun off from Newnote. With the launch forecast for later this month, CryptoAid will be tradable for Bitcoin on the Puretrade exchange to start. The process of inventing CryptoAid and the “technical knowhow” it conferred gave Newnote the inspiration for another revenue-stream based on the Bitcoin model, what Dickson calls “a vanity coin, or a marketing tool we offer other companies.” Under this scenario, Newnote would pre-mine the coin in the quantity stipulated, supply a QR code to put in or on the company’s product – under a bottle cap in the case of a beverage company for example – for the consumer to then scan with a mobile device in order to collect the coins, which could then be redeemed for products and prizes. Another application could be a vanity coin that takes the name of a pop star with a large youth following, which could then be redeemed at concerts. 18 | www.thecse.com

The marketing campaign “can last as long as you want,” says Dickson. “Crypto-currencies are neat because you can trade them. They’re unique, and you can create as many as you want. If it’s a five year campaign, we will have to run the data centre for five years for them. CEO Paul Dickson There’s the potential for it to be a long term source of revenue.” Certainly, Dickson sees the future as one in which acceptance of cryptocurrencies is commonplace, pointing to such tacit endorsements as eBay’s (NASDAQ:EBAY) recent launch of a crypto-currency section, Hani Rayess VP Marketing and the acceptance of Bitcoin in payment for subscription to old media stalwart The Chicago Sun-Times. “Acceptance and the valuation in the short-term are going to continue to grow. Crypto-currency is going to be accepted as all it takes is for merchants to accept it. There Brian Gusko, VP Retail are companies developing their POS [point of sale] services, and someone’s going to add that to their existing infrastructure. “Once that happens, we’re going to see Bitcoin acceptance will become just like using a debit card, but on your mobile device.” It is a future Dickson Brian Onn, Sr. Software sees as being wide open, Developer and constrained only by imagination. “There’s just so much you can do.. It’s going to change things just like email changed communication forever. This is going to change money forever.” n

Originally published on Proactiveinvestors.com on April 15, 2014.


Axios Mobile promises more efficient transportation of goods with onestop shop pallet solution

company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

by Deborah Bacal

A

xios Mobile Assets (CSE:AXA) has a product on its hands that it says makes the transportation of goods twice as efficient, with the potential to reinvent a market valued at up to $21 billion, according to company estimates.

Axios says the combination of technologies is truly disruptive to a 90-yearold commodity industry.

The junior CSE-listed company is targeting a growing market transitioning to alternative materials, with its shipping pallet made of a lightwieght composite material matrix fitting right in. A pallet is a platform used by vendors and retailers on a daily basis to move products from point A to point B, with every item sold at a retailer transported via this mechanism.

But 95% of pallets used in the world today — with 13 billion pallets in use globally — are made of wood, an inefficient, heavy material that requires repair and replacement and that has no way of being tracked, with no “chain of custody” metrics. Indeed, the pallet replacement market potential is estimated at $5 to $11 billion, with retailers driving the need for change. While the overall wood pallet industry is growing by just over 6% annually, the alternative material pallet industry is set to expand by about 30%, according to a study by Freedonia. In comes Axios. The company has a bio/polyester resin composite pallet — a more durable and lightweight material — as well as a complete vertically integrated software addressing supply chain management needs for tracking, monitoring, data collection, and measuring return on investment. Axios says the combination of technologies is truly disruptive to a 90-year-old commodity industry. “Each one of our pallets is individually serialized with its own barcode printed on all four sides plus embedded RFID (radio frequency identification), so we have a record of when it left, where it’s going and where we can pick it up after,” said CEO Richard MacDonald in a recent interview with Proactiveinvestors. www.thecse.com | 19


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“It allows you to expedite the retrieval of the asset, and therefore you don’t need twice the number of pallets to run the shipments or manage the client’s pool size.” The big benefit of its 100% recyclable, fire resistant product is also what it’s made of, with the composite material a hybrid of three major components — calcium carbonate, a small amount of a bonding agent and a combination of short and long fiber fillers to strengthen the pallet. While true plastic pallets are also a viable alternative to wood, MacDonald says plastic is not without its problems, despite the fact that the material is lighter in weight. “The asset itself is a valuable asset, meaning theft or loss of plastic pallets becomes a big issue. They also don’t perform very well in high heat temperatures, unless you reinforce them, either through alternate materials or structures, but then you add weight again,” he explains, adding that the production of plastic pallets are also far more expensive than the wooden version. Meanwhile, Axios’s version is “far more structurally rigid than plastic” as well as lighter, equating to savings on the transportation side as it takes less fuel to move less weight, says the chief executive. This could solve a big problem for vendors, manufacturers and retailers as the cost of getting a product on the shelf can be as much as 30% of the retail price, cutting into company profits.

“Because we were able to make it so light, but still able to carry the same loads as a wooden pallet, we were able to write a carbon protocol, meaning companies can earn a portion of a carbon credit. You can sell this on the spot market, get cash for it, or retire it against CEO Richard MacDonald your corporate carbon footprint.” “The majority of larger corporations are seeking to reduce their carbon footprint,” MacDonald emphasizes. He notes that the company’s pallet is the only one to have its own certified Carbon Methodology in the world. Under normal usage, the bio/polyester resin composite pallet has a “very long life” without any repair, and doesn’t warp or change its shape with any extreme temperatures. “A wooden pallet can last a number of years, but it absolutely has to be repaired multiple times, which means it has to come out of service and then go back in. All this requires fuel, which leaves a high carbon footprint. It’s not all that efficient on a total lifecycle (LCA) basis.” But Axios does not stop at just the manufacturing of its shipping pallet, with the company also providing pallet logistics and management services from regional hubs, becoming a one stop shop. The embedded RFID tracking, which works via a webbased information system, allows companies to track their goods if they’re making an additional, unplanned stop en route or if a pallet is left on the way. “You can immediately know there is an issue and begin to track and trace,” says the chief executive. “You would not be able to do this until much later with a non-trackable wooden pallet.”

...the Axios pallet system requires low capital to implement, and is rapidly scalable...

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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The software program also offers services such as carbon tracking, with plans also in the works for temperature tracking on products, which is useful in the foods and pharmaceutical industries for products that need to remain at a certain temperature during their journey. MacDonald also says the Axios pallet system requires low capital to implement, and is rapidly scalable, with “seamless cloud software adoption”. The business offers a solid value proposition for investors, with multiple and recurring revenue streams, including from pallet sales, lease revenue, royalty stream, carbon credit revenue, software and technology licensing as well as annual maintenance fees. Axios recently signed a five-year, long term contract with Trillium Farms, one of the largest egg producers in the U.S. today, supporting a phasedin deployment of rolling out the Axios pallet and technology platform to the egg industry. With full endorsement of CCF Brands, which provides sales and marketing of egg products to some of the largest U.S. grocery retailers, Axios has already begun the roll out, increasing its adoption among retailers on a regional and national scale.

Additional contracts are pending, says Axios, with a “vibrant sales pipeline in the USA” matched with pallet production facilities in Guelph and contract facilities in Buffalo that can scale up and “do very large volumes very quickly”, says the chief executive. Still in the early stages, Axios is looking to raise funds to fuel its expansion and fulfill its contracts, with a goal of up to $3.5 million this year via a subordinated debt financing, which MacDonald says would move the company to a cash flow positive position. “We’re very focused on product verticals that are fast-moving. We’re not looking for stuff that sits in the warehouse for six months. Our pallets like to move; when they move, it generates the greatest revenue opportunity for the client,” adds the CEO, pointing out that the grocery and pharma verticals are good examples, as are high value goods such as electronics that “need good track and trace” services. While prices for its platform vary based on the specifics of the contract, the services work for any product, providing a more competitive alternative to replace wood-based transportation of goods. The proof in the pudding is the company’s ISO 8611 accreditation, which refers to a three-part set of internationally recognized guidelines used to assess the overall quality of storage pallets after putting them through a lengthy series of tests. Properties such as durability, racking capability and even payload slip resistance are thoroughly tested. “For companies looking for a competitive alternative to the current monopolistic pallet pooling practices of today, and are looking to reduce their carbon footprint, we are a great option,” the CEO concludes. n

Originally published on Proactiveinvestors.com on June 4 2014.

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company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Massive license puts Supreme Pharmaceuticals in medical marijuana driver’s seat by Peter Murray

T

he rush into the growing medical marijuana business in reaction to new regulations adopted by the Canadian government in April 2014 has been nothing short of astounding. It goes to reason, of course, that the quality of participants is varied – some companies are quite advanced, some are still finding their feet, and many fall in between the two extremes.   Only one, however, lays claim to having the largest pre-approved Marijuana for Medical Purposes Regulations (MMPR) license yet awarded, and that is Supreme Pharmaceuticals (CSE:SL) (OTCBB:SPRWF). “The big competitive advantage we have is that we have been approved for our proposed MMPR license for 24,000 kg per year, and I know of no bigger license than that,” explains Supreme’s president and CEO David Stadnyk, referring to the company’s Southern Ontario facility acquired earlier this month.  “All we have to do is implement our security, which is already underway.” At present, Supreme has a “pre-approved” license, and to move to post-license production status, the company must adopt the high-level security measures required by Health Canada at the 342,000 square foot facility. “We are currently implementing all of the security Health Canada requires,” says Stadnyk.   “We are getting Level 9 security, which is the highest level.” If all goes according to plan,  Supreme Pharmaceuticals  will be in position to start cultivation, and thus to turn on some significant revenue taps.   “We are planning for the fourth quarter of this year,” says Stadnyk in discussing the company’s target date for initial production.   22 | www.thecse.com

“It could be the first quarter of next year if approvals run a bit longer, but we are targeting the fourth quarter.” Given the size of the facility, Supreme will bring on production gradually, tailoring output to meet the strain and volume demands of the market. “We will bring in the first phase of 60,000 square feet in the fourth quarter, with 6 to 10 strains of medicinal cannabis,” Stadnyk explains. The flexibility to compartmentalize the facility is important, as uncertainty surrounding Health Canada’s ultimate regulatory direction introduces a similar degree of uncertainty into sales forecasts for marijuana growers. The MMPR program was developed to replace the Medical Marijuana Access Regulations (MMAR) license regime, which had proven difficult to monitor owing to the many thousands of smallscale growers it covered.  The idea behind MMPR is to put licensed growing into the hands of a much smaller number of large commercial operations. With the changeover scheduled to take place April 1, Health Canada chose at the last minute to hold over the MMAR program for an indefinite period owing to what it called “ongoing litigation and uncertainty arising from court decisions.”


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“We believe the government will rule that the MMAR for individual-use licenses can’t happen anymore, and that next year there will be a huge spike in demand,” says Stadnyk. Either way, the economics Stadnyk lays out for the facility point to a healthy income statement once production reaches a certain level. “The costs are $1.50 to $2.00 per gram for us to produce, and we will have a range of sales prices of $2.00 to $12.00, with the average being in the $8.00 dollar range,” he explains. Stadnyk puts the Canadian medical marijuana market at 30,000 to 40,000 users, many of which are currently covered under the MMAR program.  He sees the value of the market growing to as much as $1.5 billion annually.  “That’s just if it stays medical marijuana,” he says.   “If it goes recreational, we are looking at a multi-billion dollar market.” Supreme’s CEO predicts a challenge under the North American Free Trade Treaty at some point to bring the potential for cross-border commerce in marijuana, perhaps not only on the medical side but also potentially in the recreational use segment.   And there is also the possibility of export sales to countries “such as Italy, Spain, and the Netherlands that have the regulatory process in place for selling marijuana.”

Supreme will need to find more cash at some point, but with approximately $1.2 million at its disposal, the company is comfortable in its ability to take the Ontario facility to the point at which Health Canada provides it with a stamp of approval to begin growing. The company has another facility as well in British Columbia’s South Okanagan, and an application for an MMPR license to cover this operation has been submitted. “We have received comments from Health Canada and are working on those comments.   Right now it is 3,000 sq feet.   The application looks good, the people are good, but we are still waiting.” Supreme now boasts strong personnel on both sides of the country, as each facility had experienced people in place when it was acquired.  “Our acquisition in Ontario comes with 10 years of growing experience in the MMAR market and two lawyers who know the industry really well,” Stadnyk says.   “Supreme has all the ingredients, including the right team in place.” “The reality is,” says Stadnyk, “that the company has one of the largest MMPRs to be awarded, and we intend on capitalizing on that and serving medicinal cannabis patients from coast-to-coast with high quality, low cost cannabis.” n Originally published on Proactiveinvestors.com on June 9, 2014.

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company profile

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Chlormet Technologies gets best of both worlds in North American marijuana market by Deborah Bacal

U

nlike other Canadian junior entrants in the marijuana space, Canada’s Chlormet Technologies (CSE:PUF) is looking to beef up its exposure to the burgeoning marijuana space on both sides of the border, with a producer license application pending for a medical marijuana facility in London, Ontario and an LOI with a license holder in the legal recreational marijuana industry in Washington State, U.S.A. While both markets share similarities, the difference in commercial potential is vast after Washington recently became the second U.S. state after Colorado to allow the sale of marijuana for recreational purposes. Canada’s new Marijuana for Medical Purposes Regulations (MMPR), while quite promising, has led to a surge of new entrants in the sector that has bogged Health Canada down. The Canadian health regulator has been inundated with MMPR application requests, as the department has predicted the explosive industry will be worth some $1.3 billion by 2024 and that the number of users could increase 10fold within five years. But the number of licenses granted so far by Health Canada, as of September 9, is just 13.

Hence Chlormet’s good idea to diversify its operations and bring itself exposure to a market that could bring in billions at a much quicker pace. The potential for the market in Washington State is evidenced by Seattle’s first recreational pot store having to close after running out of stock just three short days after opening. As of July, the state had issued its first 25 licenses to outlets under a heavily regulated and taxed system approved by voters in November 2012. The state of Washington has allotted a total of two million square feet of growing space for the licensed production of marijuana. Under the new initiative, a licensee can manufacture as much product as they are able, with no limits on the amount of plants that can be grown within a defined foot print. This backdrop compares to a federal court injunction in Canada in April that gave a coalition of people who use the drug for medicinal purposes an exemption from the new Health Canada rules, which were designed to eliminate 30,000 licenses for homegrown marijuana on April 1, and force patients to buy quality-grown pot from approved commercial producers.

...the commercial potential is vast after Washington recently became the second U.S. state after Colorado to allow the sale of marijuana...

24 | www.thecse.com


THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The simple idea behind MMPR was to put licensed growing into the hands of a much smaller number of large commercial operations, as the old regime proved difficult to monitor owing to the many thousands of small-scale growers it covered. “Our eyes are open because of the Canadian federal court granted injunction in April, and thought it would be best to start looking outside of Canada,” said interim chief executive of Chlormet, Yari Nieken in a recent interview with Proactiveinvestors. Nieken also indicated that the potential market size of the legal recreational marijuana space in Washington made it very attractive. While in Canada there are between 32,000 to 40,000 registered medical marijuana users, Washington State’s has roughly 350-400,000 regular marijuana users, who can now access their recreational marijuana legally. Adding to this, due to Canada’s uncertain regulatory footing, the licensing process has slowed since the winter/spring of 2014. But Chlormet’s chief executive says there have been encouraging signals, with Health Canada recently sending two companies notices that they will be receiving licenses in the next 30 days, after not having granted a license for the past two and a half months. In addition, the level of communication from Health Canada to Chlormet has dramatically improved as well, says Nieken, with the company receiving confirmation that it had reached the ‘enhanced screening stage’.

Chlormet earlier this year announced an exclusive option to acquire 100 percent of AAA Heidelberg, a private Ontario company that currently owns a secure 8,800 square foot commercial building and is located in London, Ontario. Since December last year, AAA Heidelberg has had an application pending with Health Canada for a new MMPR license for the production of up to 1,320 pounds of marijuana in the first year. The facility interior had been built out as per regulatory requirements, says the CEO, with Health Canada to be called on site to perform a final inspection of the building. As a result of the early application, the licensing process is well underway. The facility will include four grow rooms, labs, offices and secure storage for the product. AAA Heidelberg is also armed with an experienced grow professional, who is currently a designated grower under the MMAR licensing, or old regime. The current crops from the facility, which are thriving and being grown under the continued MMAR licensing owing to the injunction, include 10 different strains of marijuana that range from high cannabidiol (CBD) content to high THC content. The product is expected to fetch between $5 and $15 per gram, depending on the strain, according to Chlormet. Currently, Chlormet has a 16.5 percent equity stake in AAA Heidelberg, after having invested $120,000 in the business in March. It has an option to acquire the remaining 83.5 percent, subject to the grant of the MMPR license, by issuing up to 16 million common shares of Chlormet. In June, the company also signed a letter of intent with Babcock Bench Farms of Washington to lease property, building and equipment in support of its state-approved marijuana production and process license.

The product is expected to fetch between $5 and $15 per gram, depending on the strain, according to Chlormet.

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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Chlormet is not permitted to directly run a growing facility due to state restrictions and would therefore operate in the U.S. as a company that leases facilities, equipment, security and expertise to licensed growers. Indeed, the Babcock deal will be facilitated through a long-term facility and equipment lease agreement. Babcock has been approved for a Tier 3 (the biggest category of license based on square footage) marijuana license in Washington State, with anticipated production of between 1,350 and 2,150 pounds of dried marijuana per quarter from the approved 21,000 square foot indoor facility. This would generate revenue in excess of $6 million in the first year and revenue could start to be realized as early as May, 2015. To boot, the principals of the US-based company have already been growing for Washington State for the past two years, under a non-profit cooperative for approved medical marijuana patients. Chlormet is currently conducting due diligence on this deal, with a definitive agreement required for the transaction to close. “With AAA Heidelberg’s London, Ontario grow facility nearing completion and pending Health Canada’s final approval for a MMPR license, the company has been actively searching for real, attainable and diversified opportunities to continue to bring shareholder value,” says Nieken, indicating that there may be additional deals in the near future.

The chief executive is expecting to complete due diligence in Washington within the coming few weeks. Its treasury has also been filled with the exercise of warrants from a March financing which has brought in more than $700,000. “The exposure to the recreational space is a huge advantage to us given that Health Canada is currently inundated with applications and the injunction has, unquestionably, delayed the licensing process. “With the recent notice from Health Canada that we have passed through the enhanced screening process, we are convinced that we will receive a MMPR license. The addition of near term revenue generation in the US puts us in a more viable position than other companies with MMPR applications in Canada,” adds Nieken. “We have a number of other opportunities that we are looking at — it is a great time to be in the marijuana sector. It is going to be a fun ride over the coming years.” n

Originally published on Proactiveinvestors.com on September 10, 2014.

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