THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4 ®
Quarterly Issue No. 4 | 2017
contents
Publisher Uptick Mail Inc. #317—1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.604.202.7841 Group Publisher Terry Tremaine terryttremaine@gmail.com
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Editor in Chief James Black Graphic Design Vanessa Fryer Free Digital Subscription Published by Uptick Mail Inc. on behalf of the Canadian Securities Exchange. To receive your complimentary subscription, please visit www.thecse.com and complete the contact form.
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Letter from the Editor
feature story
8 Canadian Securities Exchange Another banner year for the “Exchange for Entrepreneurs”
company profiles
12 CannTrust Holdings Rapid growth could vault licensed cannabis producer to top 3 in Canada
15 Ortho Regenerative Technologies Healing today beats surgery tomorrow
18 DOJA Cannabis Co. Branding, artisanal quality among differentiators driving value
21 Exro Technologies Applying a new twist to make electricity generation and consumption more efficient
www.thecse.com @CSE_News
24 Liberty Health Sciences Making high-quality medical cannabis available one state at a time
www.thecse.com | 5
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Letter from the Editor Greetings and welcome to the “final” issue of the CSE Quarterly! In place of our regular letter from the CEO, I have stepped-in, as Editor-in-Chief of this publication, to let you know about the future of this magazine. Launched over three years ago (!) The CSE Quarterly was an opportunity to present several features of companies listed on the CSE that showcased the ingenuity, intrepidness, and excellence of our listed companies on the Canadian Securities Exchange. Over the years we have worked hard to improve the layout, variety, and breadth of content. For us, the publication has been the ultimate opportunity to illustrate our slogan “the exchange for entrepreneurs.” We truly believe that it is the entrepreneurs on the CSE that make the exchange what IT is (and not the other way around). With that in mind, we have decided to embark on a new journey, with a brand-new publication and to put to rest The CSE Quarterly for the simple fact that we think our voice and platform now speaks to a wider stakeholder base than we originally envisioned with this corporate publication.
JAMES BLACK
VP, Listings Development Canadian Securities Exchange (CSE)
Internally we went back to the drawing board and re-imagined what a magazine for and about publicly listed companies should achieve, especially if it falls in the hands of an entrepreneur or investor. The magazine should inspire, inform, and engage those who follow business, entrepreneurship, and capital markets. We have set out to make this happen with a refreshed publication, launching in 2018. Readers might note that I am avoiding the term “early-stage.” I do so purposely as the ethic of entrepreneurship extends well into many company’s lifecycles. Moving forward, we will feature companies both big and small, young and mature—as that better reflects the complexion of listings on the CSE. We will continue to work hard to touch on themes that were, and will, be at the forefront of everyone’s minds, including blockchain, cannabis legalization (and US considerations) and AI, as well as where innovation is taking place in well-established sectors and industries. We at the CSE have also spent A LOT of time online building and sharing content through our website, blog, and social media. We have learned many things about the audience that interacts with us online and in-person at our many events. Our upcoming publication will also bring with it changes to some of our web properties including our YouTube and Instagram accounts. Finally, we do have a name for the new publication, but will opt to keep it a surprise until our roll out. When you see it, however, we hope you will know why we chose this new direction and I believe it will speak to you whether you are an entrepreneur yourself or carry that spirit in your work as an investor or elsewhere! With that in mind, please enjoy this last issue of the CSE Quarterly, which includes an update on the CSE and five profiles from a cross section of companies in tech and cannabis—two sectors you will see us continue to be loud advocates for in the coming years.
Thank you for reading and we will see you in 2018!
James Black VP CSE—Canadian Securities Exchange
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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feature story
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Inaugural recipients of the CSE25™ Index Award
Canadian Securities Exchange Another banner year for the “Exchange for Entrepreneurs”
Originally published on Proactive Investors December 14, 2017.
By Peter Murray
O
bservers might be surprised to learn that it has been four years since the Canadian Securities Exchange adopted its current brand, the name change undertaken because the organization felt it was ready to challenge for a greater share of the activity generated by Canada’s small-cap public companies. One wonders how many of its executives realized what a turning point they were at in the exchange’s fortunes at the time. The achievements in the intervening years have been truly outstanding: a 90% increase in listings, transaction volume up by over 2,000%, trading value up by over 3,000%, and similarly exponential growth in the amount of capital raised by CSE issuers. To top it all off, the CSE Composite Index is sitting at an all-time high. CSE Chief Executive Officer Richard Carleton is quick to give
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credit for the exchange’s growth to the broader financial community, of which the CSE and its team are but one member. “The growth of the CSE over the last few years is a model of how the Canadian public equity markets can provide the capital entrepreneurs and innovative companies need to expand their business. Exempt market advisors and private investors have teamed with the Canadian broker-dealer community and public market investors to finance exceptional growth,” remarks Carleton. “The CSE simply tries to provide the best listing environment possible from the standpoints of cost, compliance and a variety of ongoing support so that our issuers can deploy more resources to building their business. Our goal is to facilitate the lowest cost of capital in the country for these types of companies.”
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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There are some smart people building these companies, and some smart investors backing them, and the dynamic remains fascinating to watch.
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—RICHARD CARLETON
Richard Carleton, CEO
That ethos is reflected in simple listing policies catering to early-stage companies, a streamlined regulatory process, an affordable and fixed fee structure ($7,800 per year once listed), and an ongoing effort by staff to organize engaging events, publish rich content and reach out in any way they can to spread the word about the exchange’s issuers and their respective industry sectors. And trust that the as-yet-unreformed lawyer Carleton is hard at work as the face of the exchange, but also in the background influencing regulations to ensure small-cap public companies are treated fairly. “We refer to ourselves as the Exchange for Entrepreneurs, and that’s in part because
most of our team are from entrepreneurial backgrounds,” says Carleton. “If you’ve grown a business before, you understand how challenging it is and remember times when you wish something worked better or you had a certain type of support network to turn to. Our senior team all know what it is like to build a business from scratch. We are always mindful of that and do what we can to create that environment.” Stocks in several industry sectors are firing on all cylinders right now, but none has been as important to the CSE’s success over the last couple of years as cannabis. Visit the CSE’s homepage and on many days, most, if not all, of the five most heavily traded
issues operate in the cannabis space. “The first cannabis-related companies on the CSE focused on cultivation opportunities for the medical use market in Canada,” says Carleton. “We then saw companies with business in the cannabis ‘ancillaries’ space (delivery systems, extraction technologies, etc.), and finally a group of companies dedicated to large-scale growing and retailing networks in the United States. “More recently, some of the momentum seems to have swung back to the Canada-focused issuers, what with legalization in this country expected halfway through next year. There are some smart people building these companies, and some smart www.thecse.com | 9
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
CSE VP James Black presents 5 reasons to list on the CSE.
The CSE team welcomes DOJA Cannabis Co. to the Exchange in Kelowna
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investors backing them, and the dynamic remains fascinating to watch.” Carleton explains that the CSE is also interested in the potential of blockchain technology and cryptocurrencies as an asset class, with a handful of issuers recently enjoying major success by focusing on the space. The exchange is working to formulate its own approach to integrating blockchain into its business model. “But we are not rushing to throw the word into a press release,” Carleton notes. “There are some very real applications for blockchain technology that could change the way certain things are done in our business for the better, but we definitely want to have a sound strategy before pursuing them.” With an eye to the future both near and long term, the CSE has been strengthening its domestic standing and working to establish a meaningful presence in markets outside Canada. Now that all discount brokers in Canada facilitate trading access to the CSE for their clients, retail investing on the exchange has taken off, as can be seen in the trading volume and value growth. And a growing comfort with the CSE at the institutional investor level is evident in large financings supporting some of the exchange’s best-performing stocks. On the international front, Carleton, along with James Black, Vice President of Listings Development, spent a productive November week in Israel where “there are perfect alignments with our marketplace.” Israel, Carleton adds, “has a vibrant startup ecosystem much like Canada’s, but their public capital markets are reserved for larger companies. We see a clear opportunity there, whereby the CSE can supplement the traditional venture capital path and provide the many advantages of a public listing for growing Israeli companies.”
canntrust holdings
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
CannTrust Holdings Originally published on Proactive Investors December 5, 2017.
Rapid growth could vault licensed cannabis producer to top 3 in Canada By Giles Gwinnett
C
annTrust Holdings’ (CSE:TRST) emergence as a leading player in Canada’s medical cannabis market has enabled it to achieve a market capitalization north of $600 million since debuting on the Canadian Securities Exchange on August 21 of this year. As impressive as that is, Canada’s plan to legalize recreational use of the drug, widely expected in July 2018, clearly has the potential to take the company to even greater heights.
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The licensed producer acquired a 430,000 sq. ft. greenhouse in Niagara, Ontario and has completed a first phase, state-of-the-art renovation of 250,000 sq. ft. that is now in production. The second phase of 180,000 sq. ft. will be finished by March 2018, and with 430,000 sq. ft. in production the conservative estimate for annual output is 40,000 kg of cannabis. Late 2018 should see an additional ex-
pansion of 600,000 sq. ft. on the 46-acre site to meet anticipated growth in demand from medical and recreational users. Chief Executive Officer Eric Paul explains this will cement CannTrust’s position as one of the larger “longer term players” in the Canadian cannabis market. As it is, the company is already firmly in the top 10. Canada is one of a handful of countries where medical cannabis is legal, and permitting recreational use will not only fulfill
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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I think cannabis will take a seat at the table along with all the other drugs that are out there and be prescribed routinely and used on a regular basis. — E R I C PA U L
”
an election promise by Prime Minister Justin Trudeau, but also means it will become the first major industrialized nation with a system permitting both uses. Paul is bullish on the potential for the recreational market, pointing to projected numbers from groups, including Health Canada, which put its size above $5 billion annually. In terms of users, the medical market is estimated to reach 450,000 to 500,000 people, and the recreational market is projected to be three to five times the size of the medical market, Paul notes. “I think cannabis will take a seat at the table along with all the other drugs that are out there and be prescribed routinely and used on a regular basis.” CannTrust was founded in 2013 with a view to getting a license under the Access to Cannabis for Medical Purposes Regulations (ACMPR) framework, which it accomplished early in 2014. It started selling product in 2015 via mail based on physician’s prescriptions and now boasts a “menu” for customers of around 12 high quality products, including oils. These can be used for symptoms ranging from pain to stress to sleeplessness and auto-immune conditions. The company went public in August of this year, when it was producing from an indoor hydroponic facility with annual capacity for 2,500kg of cannabis. The shift to a large new greenhouse taking advantage of natural light allows CannTrust to increase output and reduce operating costs, explains Paul. www.thecse.com | 13
ompany snapshot
CannTrust Holdings Inc.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
(CSE:TRST)
• CannTrust was founded in 2013 and obtained a license under the ACMPR framework in 2014. It started selling product in 2015 via mail based on physicians’ prescriptions. • The company expects a new expansion phase to be finished in March 2018 that could take annual output to 40,000kg of cannabis. Yet another expansion stage is planned for completion by the end of 2018. • Utilizing a greenhouse approach allows CannTrust to produce cannabis for approximately 50% less than facilities completely dependent on artificial light. This reduces per-gram production costs to around $0.75. • Since debuting on the CSE on August 21, CannTrust has achieved market capitalization of over $600 million. HEADQUARTERS
Vaughn, Ontario, Canada
CEO
Eric Paul
WEBSITE www.canntrust.ca
financial snapshot TRADING (as of 12/15/2017) Price $8.10 52 Week High $8.84 52 Week Low $2.01 Shares Outstanding 90,906,131 Market Cap $736,339,661 ADTV (3 months, September – November) 434,272 FINANCIAL (as of 9/30/2017) Cash $7,701,838 Current Assets $23,255,555 Total Assets $51,464,104 Current Liabilities $5,802,657 Working Capital $17,452,898 All figures in CAD unless otherwise stated.
Full company profiles at www.thecse.com
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Taking production to 1 million sq. ft. once the full expansion plan has been implemented should make CannTrust one of the top three Canadian producers. Paul says the CannTrust customer base has expanded 117% since May to 32,500 active patients, positioning it among the fastest growing players in the industry. In addition, its greenhouse approach allows CannTrust to produce cannabis for some 50% less than facilities completely dependent on artificial light. The reduction in costs from around $1.50 per gram to $0.75 can be expected to have a positive influence on margins. The first phase greenhouse expansion has already been funded and a recent $20 million placement will pay for the second phase, as well as some ancillary improvements to supply channels. Interestingly, Paul thinks the market that observers refer to as “recreational” is actually being mislabeled. “We don’t believe that everyone out there is just the sort of person who wants to get high at the weekend. We’re postulating that two thirds of the recreational market is a person over 30 who’s chronically ill and self-medicating,” he says. With revenue rising quickly, Paul expects the company to be profitable in the 2017 financial year. Analysts see the potential as well. Haywood Securities recently began covering the stock with a ‘Buy’ rating and target price of $8.00. “CannTrust reported Q3/17 growth of 35%, resulting in revenues of $6.1 million. Importantly, the company also announced that 61% of its sales were from oil products that drive higher margin sales,” said Haywood. “We believe that CannTrust’s % of sales of oil/extract products will continue to increase, particularly as it releases new products, such as capsules it is currently working on, but other novel products that are likely to be developed through its partnership with Apotex (private).” The broker predicts EBITDA of $5 million on revenues of $20.7 million for 2017. Canaccord initiated coverage in October with a ‘Speculative Buy’. “Based on the company’s low-cost production, leading growth profile, and forecast superior margins (driven by its medical strategy), we believe that CannTrust deserves to trade at a premium multiple to peers,” Canaccord stated. The company’s performance on the CSE has proven the analysts right, with its share price recently cresting $7.50, up some 200% from its August debut. It is quite a story, but with regulatory change on the horizon and production set to rise several fold, CannTrust looks to just be getting started.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
or tho regenerative technologies
Ortho Regenerative Technologies
Healing today beats surgery tomorrow By Peter Murray
I
Ortho’s technology is all about leaving these soft tissues in place and treating them so they repair themselves. “Long term, if we can treat injury versus treating the complications of the injury, that’s the better way,” says Norton. “The opportunity is to heal the soft tissues, and the result is that we no longer treat complications such as pain and arthritis, have people miss work and be inactive, nor have to bear the expense of introducing an artificial joint.” Tendons, cartilage and meniscus are close to the last in line to receive blood supply in our bodies and are relatively avascular, meaning they have few blood vessels. The bottom line is that because blood gets little chance to bring revitalization to these body parts, they do not heal well and thus need assistance. There are medicines that promote healing
in tendons and meniscus but they have to remain in contact with them for a meaningful period of time. Not only do joints naturally involve internal motion, they also contain lubricants, which usher medicines away from the locations that need them. Ortho’s solution is to apply what in industry parlance is called a scaffold to hold the medicine in place long enough for it to work. Essentially, it is a special compound made from a naturally occurring protein that a surgical team mixes with a patient’s blood to ensure efficient delivery. The scaffold will remain in place for several weeks before naturally dissolving, but in the meantime it ensures the medicine is hard at work on the body part that needs to heal. “Years ago, when we took pills we took them several times a day,” says Norton in drawing an analogy. “Then someone www.thecse.com | 15
Originally published on Proactive Investors December 7, 2017.
nnovation is oftentimes the result of people approaching a problem from an angle that others haven’t considered. That’s precisely what the team at Ortho Regenerative Technologies (CSE:ORTH) is doing as it tackles some of the world’s most common surgeries—tendon, meniscus and cartilage repairs in shoulders, knees and other joints. Chief Executive Officer Brent Norton explains that the long-term result of removing damaged cartilage or meniscus is about the same as not having any procedure performed at all. Similarly, studies show that shoulder tendon repairs fail at an alarming rate. Missing its natural elasticity and shock absorber, a joint can deteriorate to the point that arthritis sets in, and if things get bad enough movement is very limited and full joint replacement often becomes necessary.
Brent Norton, CEO
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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Long term, if we can treat injury versus treating the complications of the injury, that’s the better way. —BRENT NORTON
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invented the sustained release formulation, which allowed you to take a pill only once or twice a day because it was sustained release. It is a similar principle.” The technology was borne of studies conducted by two of the world’s most prominent researchers in soft tissue repair: PhDs Michael Buschmann and Caroline Hoeman. Their initial scaffold for joints had promise, but it took 30 or more minutes to prepare for use when the patient was in the operating room, a factor reducing efficiency and contributing to it being cost-prohibitive. Norton is a medical doctor himself who practiced largely in the field of sports medicine. Early on, though, he knew that he wanted to mix actual practice with directing innovation to have the greatest impact. “I decided to do an MBA at Western University because I wanted to be a driver of technology rather than a clinician seeing one patient at a time,” he says. Norton’s career path would lead him to
be that driver in several corporate settings, including with Novadaq Technologies, a medical imaging solutions company acquired in 2017 by Stryker Corp. “With Novadaq, at times I felt like I was the coach, and was a founding director,” says Norton. “I helped with strategy, building the shareholder base, the board, hiring a professional CEO, recruiting the investment banks to take it public, and ultimately helping to lay down the strategy to get third-party validation and revenues. We created multiple partnerships, got FDA approval and a TSX listing and then it went on to have a Nasdaq listing and was sold to Stryker for C$900 million.” All of which, including the chance to return to his career starting point in Montreal, would seem to make Norton a good fit at Ortho. “When I took this role, I got messages from friends and colleagues saying ‘right back to your roots’. It is more than coincidental, it’s optimal,” he observes. Ortho’s product performed well in
company snapshot
Ortho Regenerative Technologies Inc.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
(CSE:ORTH) pre-clinical studies and is now in the final stages of animal studies, with expectations that it will move to human trials in 2018. Given that Ortho’s product is in the biologic category, the first step with human studies requires the company to prove that it is safe to use, something Norton expects the product to achieve with ease. The second study in a biologic is the main study, or pivotal trial, which regulatory bodies use as the basis for their effectiveness assessment. The pivotal trial would likely begin within two years from now. After that the company would apply for FDA (US Federal Drug Administration) approval. But that timeline hardly means investors will be left without milestones to cheer on in the near future. When asked, Norton lays out a pretty full slate. “This is the first fully patented product of its type in the world and we have an evolving patent family for it,” Norton explains. “Over the next year we expect to see patents issued around much of the world for this product.” “Key studies have also been accepted for publication in multiple scientific peer reviewed journals.” Norton says this means that some of the images and information on the product will take center stage in the related scientific community. “In my experience, having five papers in the queue to be published is something I have never heard of,” he says. “In the next short while we will have multiple papers and studies published, and we can anticipate our approval to begin human studies, which typically drives a lot of corporate value.” Norton emphasizes that it is up to the researchers to assess whether a product works, whereas management’s role at a biotech company is to minimize other risks and drive the strategy. He points to responsibilities such as making use of capable intellectual property firms, bringing in skilled accountants and hiring an experienced management team. “In Ortho’s case, the risk profile of getting through to a pivotal trial is nominal,” Norton concludes. “You can never guarantee biology or the ultimate results, but our goal is to optimize the process in the most cost-effective manner to get through to an FDA approval in the next three to four years. We are managing the company to reduce the risk of everything else, so that the only thing we are betting on is the results.”
• Ortho Regenerative Technologies has developed a tool that surgeons insert into joints to help meniscus and tendons repair themselves. • Soft tissues in joints tend to heal poorly because they do not receive optimal blood flow. Ortho Regenerative Technologies is working to solve this by using a “scaffold” to hold medicine at the damaged site and encourage the tissue to heal. • The technology got its start with studies conducted by two of the world’s most prominent researchers in soft tissue repair: PhDs Michael Buschmann and Caroline Hoeman. • Ortho’s product performed well in pre-clinical studies and is now in the final stages of animal studies, with expectations that it will move to human trials in 2018.
HEADQUARTERS
Kirkland, Quebec, Canada
CEO
Dr. Brent Norton
WEBSITE www.orthorti.com
financial snapshot TRADING (as of 12/15/2017) Price $0.54 52 Week High $1.00 52 Week Low $0.37 Shares Outstanding 20,271,500 Market Cap $10,946,610 ADTV (November) 19,999 FINANCIAL (as of 7/30/2017) Cash $415,459 Current Assets $674,388 Total Assets $1,405,621 Current Liabilities $321,883 Working Capital $352,505 All figures in CAD unless otherwise stated.
Full company profiles at www.thecse.com
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doja cannabis co.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Trent Kitsch, CEO
DOJA Cannabis Co.
Branding, artisanal quality among differentiators driving value Originally published on Proactive Investors December 6, 2017.
By Peter Murray
I
f there is one thing that Trent Kitsch ingrained in himself while building SAXX Underwear into a multi-million-dollar company, it was the value of a brand. SAXX entered the men’s underwear market with an innovative line of undergarments sold online at higher than average prices and margins. The premium quality appealed to plenty of men that were willing to pay a little extra to take care of their bodies, with clothing they felt was made with more care and attention than they could find elsewhere. It is precisely this approach that Kitsch and his team at DOJA Cannabis Co. (CSE:DOJA) intend to follow in building their newest venture: a collection of cannabis and lifestyle products created with meticulous care.
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“Our background is building brands in the fashion and wine worlds,” says the DOJA CEO, who founded not only SAXX Underwear but also award-winning Kitsch Wines. “DOJA is a brand built around the uncompromising quality of its product. We do things differently than most of our peers in how we cultivate, hand-trim and cure the cannabis we grow.” Kitsch explains that hand-trimming retains the look of the flower better than the more popular approach of machine-trimming, while keeping more of the terpenoids and other desirable components machines tend to rustle off. Rather than removing buds from plants the moment harvesting begins, DOJA hang-dries and cures its product on the stalk. “You get a better finish that way,” says Kitsch. “It brings out superior flavors, trichomes and aromas.”
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
DOJA is headquartered in British Columbia’s picturesque Okanagan Valley. With 2 million visitors that come to the region each year, the company plans on leveraging the vibrant tourism market to build a far-reaching brand. The company also believes it will soon have the opportunity to show the rest of Canada the difference its artisanal approach makes. DOJA received its license to cultivate under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations) framework on June 16 of this year. Soon after the first harvests, a request to Health Canada for a Pre-Sales License Inspection was submitted. The inspection is the final step ahead of the government issuing DOJA a Sales License under the ACMPR. With license in hand, DOJA’s primary distribution channel would be online sales direct to the customer. “Channel two will depend on how the provincial governments announce their planned sales structures,” says Kitsch, alluding to the expected legalization of cannabis in 2018. “We are hoping some of the provinces see opportunities similar to those in the wine industry or agriculture tourism and that some of those channels open up to us.” DOJA is planning for its products to be very popular, having already invested in a second growing facility that will expand its overall production capacity by more than 700% to just over 5,000kg of dried cannabis per year. The new 22,580 sq. ft. Future Lab facility, located close to the Kelowna International Airport and the University of British Columbia’s Okanagan Campus, will be home to DOJA’s research into new and unique cannabis strains, processing, as well as exploration of the edible and oil extract markets. The proximity of the Future Lab to the airport will not only reduce both cost and time required for delivery but the 60,000
“
Our brands and unique advantages will differentiate us from the pack, and in one to three years I could see us being acquired by a larger company who wants to have a B.C. footprint and a premium lifestyle brand in their portfolio. —TRENT KITSCH
”
www.thecse.com | 19
ompany snapshot
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
DOJA Cannabis Company Ltd. (CSE:DOJA)
• DOJA Cannabis has been cultivating medical cannabis under Canada’s ACMPR framework since summer 2017. • The company has applied to Health Canada for a license to sell its cannabis products; upon receipt it is ready for direct sales to patients. • DOJA produces an artisanal cannabis, handtrimming plants post-harvest and using other approaches to craft an end-product of the highest quality. • The Future Lab, a new facility expected to be ready in summer 2018, will drive a 700% increase in production capacity, plus allow for processing and research to take place. HEADQUARTERS
West Kelowna, British Columbia, Canada
CEO
Trent Kitsch
WEBSITE www.doja.life
financial snapshot TRADING (as of 15/12/2017) Price $1.30 52 Week High $1.50 52 Week Low $0.44 Shares Outstanding 60,907,737 Market Cap $79,180,058 ADTV (3 months, September – November) 211,131 FINANCIAL (as of 9/30/2017) Cash $4,034,437 Current Assets $4,410,625 Total Assets $7,124,430 Current Liabilities $362,250 Working Capital $4,048,375 All figures in CAD unless otherwise stated.
Full company profiles at www.thecse.com
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travelers who traverse the road in front of the facility each day will be exposed to the DOJA brand on their commute. Estimates around permitting and construction time have DOJA intending to open the Future Lab in the summer of 2018. There is one other DOJA initiative helping to create awareness around the brand and the various aspects of cannabis. The DOJA Culture Café in downtown Kelowna will act as a hub for cannabis information within the community. Here, customers can have a coffee or a meal, while also learning how to access and use cannabis safely, depending on their particular needs. DOJA, whose shares began trading on the CSE on August 9 of this year, is well capitalized to execute on the first phase build-out of the Future Lab. Plans also call for borrowing against their newly acquired facility to further bolster the company’s working capital position. When asked about the outlook for DOJA, Kitsch responded, “The sky is the limit. Our brands and unique advantages will differentiate us from the pack, and in one to three years I could see us being acquired by a larger company who wants to have a B.C. footprint and a premium lifestyle brand in their portfolio.” Near term, though, Kitsch believes the investment community would do well to keep some potential share price catalysts in mind. “Once we receive our sales license I would say we’d be quite undervalued at our current share price and there would be a strong investment thesis for DOJA on a relative valuation basis,” says Kitsch. “Ahead of legalization, I think positive sentiment will continue to pick up and an increasing number of people will start to see cannabis as a viable investment opportunity.”
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
exro technologies
Exro Technologies
Applying a new twist to make electricity generation and consumption more efficient By John Harrington
xro Technologies Inc. (CSE:XRO) has developed a technology to enhance an invention that has served mankind remarkably for more than 150 years. Exro’s dynamic power management technology (“DPM”) enables electric generators and motors to work at peak efficiency, even at variable speeds. Why is that important? As Exro’s Chairman and Chief Executive Officer Mark Godsy explains, electric generators only work efficiently at a single speed, and “if they go too fast, it’s a challenge; if they go too slow, it’s also a challenge.” For scores of years this has not been a problem because generators have used an
energy source—coal, diesel, or gas—that allows the rotating part of the generator to remain at, and operate at a consistent and optimum speed and torque. But the increasing push toward renewable energy is changing the game. Mother Nature may be bountiful, but she is not constant, and if you don’t believe it, think of those seemingly paradoxical reports of wind turbine generators shutting down because it is too windy. “What we do at Exro is, very simply, bring intelligence to a generator and an electric motor,” Godsy says. So, what’s the big twist on the ancient technology?
The traditional generator works off a single configuration of coiled copper wires. “We isolate all of the coils. We then create circuits amongst them, driven by a computer that, depending on the speed and torque, will reconfigure the coils in the generator for exactly the right speed and torque, creating an efficient and “intelligent” generator,” Godsy explains. The technology was invented by Jonathan Ritchey, Exro’s founder and its chief scientist and designer. Optimizing power systems is becoming more important in the current economy. “The problem does not apply only for renewables,” Ritchey declares. www.thecse.com | 21
Originally published on Proactive Investors December 11, 2017.
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
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Take electric motors. These are Exro has already signed a develessentially the flip-side of electric opment agreement with a leading generators, and the same conunsupplier of propulsion systems for drum applies: getting the motor drones and is working towards to work at maximum efficiency validating the technology for at variable rotational speeds. this application. “These are the technical issues As for electric/hybrid vehicles, that Exro is addressing,” Ritchey reduced electricity consumption asserts. and greater power regeneration Ritchey sees a lot of applicawhen braking could significantly tions for Exro’s technology in the reduce the range anxiety for drivers. high-profile sector of electric and The name of the game for Exro is electric-hybrid vehicles. to prioritize near-term market oppor“Put in our technology and it will allow tunities with low execution risk. —MARK GODSY you to have a situation where we not only A key aspect of this strategy calls for securgather more electricity when you are braking but ing partnerships with leading companies who have that electricity does more for you when you are converting it their own design and manufacturing facilities and distribution back into mechanical energy,” Ritchey says. channels. The potential breadth of applications for the technology is Exro’s revenues will largely come from licensing fees and ongoing enormous, but initially Exro is targeting proof of concept in wind royalties, in return for allowing the utilization of its technology energy, unmanned aerial vehicles (drones) and electric/hybrid to be integrated into generators or electric motors. vehicles starting with electric bicycles. “The reason for a licensing/royalty model is to achieve scale The company has built three prototypes to prove its technol- and create concurrent value for our shareholders. Our proprietary ogy viability and is now focusing on early market opportunities. technology has the potential of creating intelligence in billions of In a capital intensive, low-margin business those sorts of ef- electric rotating machines—be it in generators or electric motors. ficiency improvements are sure to make wind farm operators sit If we were to do an elevator a day just for the approximate 17 up and take notice. Exro’s technology can also be used to retrofit Western European countries, it would take us over 1,000 years,” existing wind turbines. Godsy explains. As for drones, these will become more efficient, paving the “We need to work synergistically with parties in this space by way for smaller drones or bigger payloads, and potentially longer working with them, not competing against them. flying times. “We want to work with all companies that can benefit from
I was attracted to Exro as I am concerned as much now about the health of our planet as I am about the health of people.
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Exro Technologies Inc. (CSE:XRO) • Exro Technologies enables electric generators and motors to work at peak efficiency, even at variable speeds. This is important because, “if they go too fast, it’s a challenge; if they go too slow, it’s also a challenge.”
Mark Godsy, CEO
our technology—not unlike Intel wants to provide processors to all computers versus creating its own computer brand and competing with them—working with companies is a much better long-term strategy since our technology is easily integrated into generators and motors,” he adds. If that sounds like the semi-fabled “win-win” scenario, there’s actually a third “win” to be taken into consideration and that’s the environmental aspect. It was one of the things that drew serial entrepreneur Godsy to Exro in the first place. “I was attracted to Exro as I am concerned as much now about the health of our planet as I am about the health of people. Exro has an opportunity to change the way we create and use energy, which can help our planet and reduce the other related issues connected to energy. The win-win here also includes the opportunity to build value for our shareholders,” Godsy says. Company founder Ritchey believes the drive to a clean power world will eventually come down to economics. In other words, the bottom line will be the bottom line or, if you prefer, it will happen because “torque is cheap”. “So, if we’re able to make that economically viable now, it’s not a carrot and the whip; it’s not the subsidies, the tax credits; it’s because it is also the best financial decision.”
• Exro isolates a generator’s coils then builds circuits among them which respond to a computer’s controls to operate at exactly the right speed and torque. • Practical applications exist in a variety of sectors, including electric and electric-hybrid vehicles. • Exro has signed a development agreement with a leading supplier of propulsion systems for drones and is working towards validating its technology for this application.
HEADQUARTERS
Vancouver, British Columbia, Canada
CEO
Mark Godsy
WEBSITE www.exro.com
financial snapshot TRADING (as of 12/15/2017) Price $0.50 52 Week High $0.68 52 Week Low $0.20 Shares Outstanding 46,090,844 Market Cap $23,045,422 ADTV (3 months, September – November) 128,808 FINANCIAL (as of 9/30/2017) Cash $2,036,403 Total Assets $2,389,545 Total Liabilities $232,261 Working Capital $2,104,891 All figures in CAD unless otherwise stated.
company snapshot
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Full company profiles at www.thecse.com
www.thecse.com | 23
liber ty health sciences
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Liberty Health Sciences Originally published on Proactive Investors December 19, 2017.
Making high-quality medical cannabis available one state at a time By Jamie Ashcroft
A
round a third of all Florida residents, or some 6 million people, could qualify to use medical cannabis, so there’s good reason for the Sunshine State to be the initial focus for Liberty Health Sciences (CSE:LHS). “Florida is one of the most populated states in the U.S., but it also offers quite a diverse amount of chronic medical conditions that doctors can prescribe cannabis for,” says George Scorsis, Liberty’s Chief Executive Officer. At present, the state has just over 36,000 patients registered for medical cannabis, after a 300% rise in registrations in the past quarter. Liberty is one of only 13 companies licenced to cultivate, 24 | www.thecse.com
process and dispense it by the state government. Research suggests Florida could be a US$1.6 billion medical cannabis market by the end of the decade. In other words, it has the potential to eclipse Colorado, a pioneering state in legalizing cannabis, as the latter is forecast to be worth US$1.5 billion by then. As we reach the fourth quarter of 2017, 29 states and the District of Columbia have legalized the use of cannabis in some form. Last year provided something of a tipping point, with five additional states, including Florida, approving medical cannabis use, while states such as California and Nevada also approved the drug for recreational consumption.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
At a federal level the market is a greyer shade of green—the state by state legalization does not equate to national legalization, and businesses thus cannot operate across state lines. In other words, each state has its own regulations and within each state businesses must establish internal production and distribution channels. As a result, Liberty’s strategy is to enter specific state markets and embed their entire verticals within those states. Scorsis highlights the importance of Liberty’s approach to growing its business, where Florida is the initial focus, and new ventures in other states are in the pipeline. Discipline is a particularly important tenet of the strategy. “First and foremost, we will only enter into medical markets. There are now a tremendous number of markets that allow medical cannabis, such as Florida, Ohio, Pennsylvania, Maryland and Connecticut, with more on the horizon,” says Scorsis. “We plan to enter into all of those markets if they follow through with the second criteria in our business strategy, which is the number of chronic conditions that the states permit for medical cannabis treatment.” Scorsis points out that in Florida, for example, more than 30% of the population could qualify to become a medical cannabis patient. Meanwhile, in Ohio that figure is around 24%. Moreover, there are some 3 million potentially qualifying patients in Pennsylvania, equating to 24% of the state’s population, while in Maryland the figure is 1.8 million patients or 30% of the population. Connecticut is estimated at 20%, or 736,000 people. Conversely, Scorsis notes that in New York State the medical cannabis program is too “narrow” to meet the company’s investment criteria. Liberty is targeting states with both large populations and large numbers of qualifying patients not only with revenue in mind, but also cost—producing at a certain scale is a necessity to meet the business objectives in a given market. “We need to ensure that we can provide what truly differentiates us from all our
George Scorsis, CEO
www.thecse.com | 25
ompany snapshot
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 4
Liberty Health Sciences Inc. (CSE:LHS | OTCQX: LHSIF)
• The Liberty Health Sciences strategy is to enter specific US state markets and embed entire verticals within these states. • Florida is the initial focus, where a third of residents, or some 6 million people, could qualify to use medical cannabis. At present, the state has just over 36,000 patients registered for medical cannabis, after a 300% rise in registrations in the past quarter. • Canadian cannabis producer Aphria owns 36% of Liberty and helps with both licensed products and operational expertise. Since adopting Aphria’s production techniques, Liberty has increased output by about 15%. • By March 2018, Liberty aims to be growing 3,000kg per year as it ramps up to 56,000 sq. ft. of growing space. Subsequently, the company plans to step up to a 13,000kg annual production rate. HEADQUARTERS
Toronto, Ontario, Canada
CEO
George Scorsis
WEBSITE www.libertyhealthsciences.com
financial snapshot TRADING (as of 12/15/2017) Price $1.70 52 Week High $2.56 52 Week Low $0.75 Shares Outstanding 284,526,193 Market Cap $483,694,528 ADTV (3 months, September – November) 1,678,634 FINANCIAL (as of 6/30/2017) Cash $11,427,292 Total Assets $63,607,276 Total Liabilities $658,625 Working Capital $12,356,324 All figures in CAD unless otherwise stated.
Full company profiles at www.thecse.com
26 | www.thecse.com
competition,” Scorsis explains. “We are experienced commercial greenhouse growers and can produce the lowest cost, highest quality cannabis in the marketplace. That means we can supply it to the patient at a more accessible price than anybody else in the industry. We don’t enter into markets that have canopy restrictions because we would like to grow at scales in excess of 100,000 sq. ft.” With such major ambitions it is nice not to be going it alone, and in this respect, Liberty benefits from the support of successful licensed Canadian cannabis producer Aphria. That C$1.3 billion company owns 36% of Liberty and provides both licenced products and operational expertise. Notably, since adopting Aphria’s licensed production techniques, Liberty has increased output by about 15%. Liberty’s current footprint in Florida comprises a 14,000 sq. ft. growing operation on a 36-acre property in Alachua County. Production capacity is approximately 700kg of cannabis per year. By March 2018, Liberty aims to be growing 3,000kg per year as it ramps up to 56,000 sq. ft. of growing space. Over the following years, Liberty expects to be at 13,000kg and an intended 187,000 sq. ft. of room for growing. Retail outlets are also part of the plan, and before the end of 2017 the company anticipates having dispensaries open in Fort Lauderdale, Miami and Tampa. Locations are planned for Orlando, Tallahassee and Pensacola by June. With anticipated annual production of 13,000kg and an increased retail footprint, Liberty would be supplying the equivalent of 20,000 patients. The opening of mass market consumer states like California (where the new legal framework officially comes into effect in January) will hold strong appeal for cannabis companies and their investors. But Scorsis definitively sees Liberty as a medical cannabis company, with specific competitive advantages. “Medical cannabis is who we are. It’s the ethos of our organization,” Scorsis emphasizes. “We truly believe that cannabis is a product that should be used for medical purposes. Our intellectual property, our knowhow and the equipment that we have invested in are really designed to produce products for medical purposes.” “For instance, not only do we produce the highest quality cannabis at the lowest cost, we inspect our products over 500 times before they are released to any patient. Why? Because it is medicine.”