CEO - Laguna Blends

Transcription

CEO - Laguna Blends

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
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Quarterly Issue No. 2 | 2016
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CEO’s Message
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feature story
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7 Difference Makers
CSE’s top performers share more in common than you might think
company profiles
16 Urbana
Mix of private and public holdings beats street, appeals to deep value investors
18 Laguna Blends
Combining unique product, technology edge to put own spin on network marketing
20 Captiva Verde
Building serious revenue momentum as its organic farms hit their stride
22 Supreme Pharmaceuticals
Shaping medical marijuana strategy around Canada, with potential for overseas
markets down the line
www.thecse.com
@CSE_News
24 Beleave
Advancing smooth through Medical Marijuana approvals with eye on
big sales, margins
www.thecse.com | 5
CEO’s Message
Welcome to the CSE Quarterly, the Canadian Securities Exchange’s
publication that profiles the stories of entrepreneurial companies listed
on the exchange.
Now in its third year of publication, the CSE Quarterly has witnessed
the CSE’s listed issues count grow from 220 to just shy of 330. Trading volume is continuing to set new highs and we have seen a greater
diversification of our listings that reflects the spectrum of innovation
in Canada.
These developments are the result of the efforts, ingenuity and persistence of the entrepreneurs who have chosen to list with the CSE.
In this edition we profile the stories of 9 of these firms. The recurring
theme throughout all of these stories is that these companies are
difference makers in their respective fields.
RICHARD CARLETON, CEO
Canadian Securities Exchange (CSE)
I also want to take a moment to highlight some of the investments we’ve recently made at the CSE that showcase
our ongoing commitment to better serve issuers and investors. The numbers also show that we’re headed in the
right direction.
Our new and fully rebuilt website (thecse.com) officially launched in April. Designed around the evolving needs
of our stakeholders, the website is optimized for mobile users, is easier to navigate, and offers a deeper suite of
information and tools with which to research our market and individual issuers.
I invite readers to visit the new website to experience some of the highlighted features including:
• Enhanced listed issuer pages which feature price quotes, market depth (by price and order), interactive charts,
news releases, documents filed with the exchange, and searchable SEDAR filings;
• A Market Activity page with broader exchange data, expanded charting and information tools for the CSE Composite Index, as well as regulatory materials;
• A regularly updated blog featuring exchange news, regulatory initiatives, event coverage and added content on
companies featured in this magazine, including video content.
Another important milestone I am happy to report is that trading volume recently reached the highest level in the
CSE’s history for a four-month period. Volume surged 34.7% year on year from January through April 2016 to 1.15
billion shares. This outpaced the previous four-month record (September through December 2015) by 22.7% and
is an encouraging sign that investors are increasingly seeking out our market to trade securities.
In reading about the journeys of the difference makers profiled in this edition of the CSE Quarterly, I trust readers
will understand why I am looking forward to what’s coming next at the Exchange for Entrepreneurs.
Please enjoy the issue.
Sincerely,
Richard Carleton
6 | www.thecse.com
feature story
Difference Makers
CSE’s top performers share more in common than you might think
E
very investor in microcap stocks is in it for the big win,
targeting double-digit or larger gains virtually every time
they make a purchase. Alas, if only it were that easy…most
microcaps don’t turn in market-beating performance, and far
too many end up costing investors all of their money.
Professional money managers typically follow a strict set
of rules for choosing the stocks to include in their portfolio—a
formula, if you will, to help make the right choices. Stellar returns remain far from assured, but winning companies seem
to share particular traits that are easily identifiable.
By the same token, public company managers can take certain
steps to give their companies the best chance for success, both
in attaining corporate goals and in achieving full valuation in
the market—objectives that are not exactly mutually exclusive.
The CSE has been home to more than a few prolific performers over the years and we profile four recent success stories in
this article. What makes these companies tick, why are their
shares investor favourites, and what exactly do they do that
enables their respective stock prices to perform so well? Is
there a magic formula? Let’s find out.
www.thecse.com | 7
Originally published on Proactive Investors May 25, 2016.
By Peter Murray
Manhole slack
A clean cut
Lite Access uses specially designed proprietary
equipment to create “micro-trenches” into which it
places exclusive crush-proof microduct (micro-conduit)
designed for all types of telecom applications, both for
today’s needs and those of the future. The microduct
serves as a medium through which optical fibre is blown
using compressed air to create high-speed broadband
connectivity in a matter of minutes and at a cost far
less than with traditional cable installation methods.
The beauty of the system, and a main factor driving
demand, is the lack of interference with the local
environment and archaeologically sensitive areas both
during initial installation and any subsequent upgrade
cycle. As the micro-trenches are narrow, Lite Access
installation teams can be in and out of a site quickly
(micro-trenching and installing up to 1 metre per minute
of microduct) and at a cost much lower than more
disruptive conventional methods.
Later, when fibre needs to be replaced due to technological obsolescence or upgraded in support of future
growth requirements, there is no need to dig up the
roadway again. Lite Access simply blows new fibre from
the starting point through to its destination at the other
end and, voila, there is your upgrade. Nobody outside
of the companies involved even knows it took place.
As Plotnikoff explains, Lite Access is a pioneer in the
micro-trenching and air-blown fibre business, and as
the industry shifts into high gear he has a proven team
behind him that has successfully completed dozens
of projects globally, some quite challenging from an
engineering perspective and at times not possible
using traditional installation methods. Well-rounded
project and management experience is serving Lite
Access well from both an operations standpoint and in
the market with investors. It is one of several important
boxes it has ticked.
Good people? Check. And that includes over a dozen
partners around the world certified to install microduct
and handle air-blown optical fibre installation. These
partners will contribute to a re-balancing of the revenue
stream in future years as they collectively come to install
more of Lite Access’s patented equipment and supplies
than the company does itself.
Good financial management? Check that box, too.
Lite Access has just 30.6 million shares outstanding and
no financing has been conducted since the initial $0.25
round. A corporate update released February 1 explained
that milestone payments had been received on a $7
million project for BC’s Haida Gwaii community, plus
there was over $1 million in receivables and inventory
on the most recent balance sheet.
Another key point to note is that with the types of
customers Lite Access has—which include cities and
municipalities, First Nations and Native Americans, as
Microtrench finished product
well as private enterprise and local governments—odds
are the company rarely, if ever, finds itself chasing
anyone for payment.
Plotnikoff speaks warmly about shareholders he has
interacted with over the past year, saying some have
essentially become advocates for the brand, helping build
awareness and even calling in with business opportunities. Shareholders are welcome to visit the company’s
headquarters and main warehouse in Richmond, British
Columbia, if that level of contact is important to them.
“Our shareholders are comfortable because they have
an open line of communication and clear, transparent
access to information,” explains Plotnikoff. “I like to
think that if we preserve that approach as a principal
component of our corporate culture and continue to
deliver growth, we will always have a strong degree of
support in the market.”
www.thecse.com | 11
urbana
Urbana
Mix of private and public
holdings beats street, appeals
to deep value investors
By Peter Murray
O
ne would think that with a track record like Urbana
Corporation’s (CSE:URB; TSE:URB) the chance to buy
its shares at a discount would be almost non-existent. At an
annual return based on net asset value exceeding 14% since
it was launched in 2002, Urbana easily ranks as one of the
better performing investment companies on the block.
Puzzling then that its stock is priced around $1.97, while its
per-share net asset value is closer to $3.50. “Since October
2002 the rate of growth has been just under 14.54% but the
share price is at a significant discount to the asset value, to
an extent due to lack of coverage,” explains Thomas Caldwell,
Urbana’s President and CEO.
Caldwell, of course, is also Chairman of investment dealer
Caldwell Securities Ltd. He is well known on Bay Street and Wall
Street for making big returns from investing in stock exchanges. “At one point we owned 37 exchanges,” Caldwell notes.
That legacy remains a major part of the Urbana investment
approach, reflected these days more so in the heavy portfolio
weighting in companies involved with the financial industry,
be they major banks or service providers to the mortgage
business. “That is where I spent most of my career and is an
area we like to think we understand,” Caldwell says.
In many ways, Urbana is structured to offer investors the
best of all worlds. It has just shy of $200 million under management, about 55% in public investments, plus 45% in private
investments that its shareholders would almost certainly be
otherwise unable to access.
Another benefit is that the closed-end nature of the fund is
a perfect fit for Caldwell’s investment strategy. “A closed-end
investment corporation like Urbana is a great way to manage
16 | www.thecse.com
Jason Smith, CEO
Real Matters
money because the capital we have is permanent,” he explains.
“The problem with mutual funds is that you get your money
at the worst time—at the top of markets—and you lose it at
the best time—at the bottom of markets. But that is when
you should be doing the opposite—you should be selling at
the top and buying at the bottom. If a market is going down
I am not worried about a run-off of assets and that’s where I
make our money. I’m a bargain hunter.”
Well-represented sectors these days include US financials,
which Caldwell says make up 32% of the portfolio, while a
recent move into a set of holdings he calls “Canada Inc.” saw
Urbana take meaningful positions in Barrick Gold (TSX:ABX),
Suncor Energy (TSE:SU) and Teck Resources (TSE:TCK.A). “Our
Canadian banks are up 10%, Suncor is up a few percent, and
Teck is up 100%,” Caldwell explains.
One of the CEO’s favourite holdings is a private company
called Real Matters. Real Matters runs a technology platform
and network of more than 100,000 independent field agents
that help financial institutions and other entities in the real
estate business perform appraisals, insurance inspections,
title searches and mortgage closings. Its customers include
60 of the top 100 mortgage lenders in the US and a number
of large insurance companies.
“Real Matters is run by an extremely bright executive
named Jason Smith,” says Caldwell, noting that he invited
the Real Matters President and CEO to speak at Urbana’s
annual general meeting this year. “I say now that I am not
interested in ideas anymore. I am only interested in people
who can execute on ideas. He can do that.”
Caldwell sees Real Matters eventually listing in the public
realm via an IPO, a path that Urbana
likes its private investments to move
along as they grow and mature.
Another successful holding on the
private side that anyone who follows
Urbana will be aware of is the Canadian
Securities Exchange, in which the investment company holds a major stake.
Caldwell also serves as the exchange’s
Chairman.
“The CSE fills a role that I believe, and
my directors and partners believe, is
important to Canada,” explains Caldwell.
“Canada is an entrepreneurial country
but it is very hard to build a company
here because we are losing a lot of
independent dealers and don’t have
the big venture pools like they have in
Silicon Valley. So what the CSE can do
as an exchange is to simplify the role of
accessing capital.
“Ned Goodman (Deputy Chairman of
the CSE and founder of Dundee Corporation—a significant shareholder in the
CSE) and I both say the same thing—we
feel the CSE is an extremely important
link in Canada’s prosperity going forward.
We pursue this with almost religious
fervor because both Ned and I feel so
strongly in terms of helping Canadians.
Remember, the large financial institutions
and many of the resource companies are
going to be generators of unemployment
in the years to come. New jobs and head
offices are only going to come from new
enterprise. That’s where the CSE lives
and that’s what we try to nurture.”
Fervour certainly is an apt word to
describe the way Caldwell feels about
the industry he has built his life around,
and it troubles him to see certain pillars
of the financial community struggling so
mightily. “Independent brokerage firms
are being massacred and that is going
to impact Canada’s standard of living,
the number of head offices and new
companies,” he explains. “It is a difficult
environment right now for new companies
trying to raise money. Regulators don’t
see that they are addicted to evermore
regulation and the damage they are
doing to the economy.”
Asked about the possibility of Urbana
seeing this as an opportunity, Caldwell
suggests he needs to know more. “I’d
love to sit down with regulators at some
point and find out what their intention
is. If they are planning to wipe out an
industry, which it appears they are, then
naturally I would not be doing bargain
hunting in it.”
In the end, he suspects the over-regulation he witnesses does not even
achieve its intended objective. “Quite
often in an onerous environment the
people who will work hard to jump through
the hoops are the ones with the more
speculative deals. So it does not even
mean that you are thinning the ranks of
the villains because those are the ones
that will bend the rules.”
Regulation run rampant is an issue
Caldwell sees as a threat to the Canadian
economy but, paradoxically perhaps, he
sees strict regulation of the financial industry in the US creating an investment
opportunity. “There has been tremendous
regulatory pressure on US banks and it
is the shareholders who suffer,” says
Caldwell. “Our feeling is that they will have
to ease up, which would be good for the
Tom Caldwell, CEO
Urbana Corporation
banks. If they don’t then US banks may
unilaterally break themselves back up
into commercial and investment banks,
which I think would also be good for the
stocks. If history has shown us anything
it is that when you break up a company,
the parts are usually worth more than
the whole.”
With the discount to net asset value at
Urbana so significant, it makes sense to
use a portion of the corporation’s capital
to buy back its own shares. “We have been
very aggressive buying back stock and
cancelling it,” says Caldwell. “We have
bought back about 37 million shares at
a discount, and this has benefited the
remaining shareholders.”
The buyback has doubtlessly contributed to share price stability, but there still
remains a gap wide enough to present
opportunity for new investors. “The great
bargain right now with Urbana is that for
$2.00 you get $3.50 working for you,
and that $3.50 has been growing at over
14% per annum for the last 14 years.
The stock price will eventually catch up
with it but I think in the meantime you
can get pretty good management and
assets at a discount.”
www.thecse.com | 17
laguna blends
Laguna Blends
Combining unique product,
technology edge to put own spin
on network marketing
By Peter Murray
T
echnology companies are renowned for their rapid
growth rates, but apparently even they can’t keep up to
successful groups in a tried-and-true business that many of
us are in contact with all the time.
Network marketing, also known as multi-level-marketing
(MLM), is the practice of individual direct sales coupled with
recruitment of new direct sellers by existing salespeople. If
you are thinking Amway, you’re on the right track. With some
3 million salespeople worldwide, Amway is the MLM king,
recording US $9.5 billion in sales in 2015. Avon (NYSE:AVP)
and Herbalife (NYSE:HLF) are among other big MLM names.
Laguna Blends (CSE:LAG) is the latest entry onto the MLM
scene and the potential to go from zero to 100 overnight was
one of the key factors that convinced its founder to go all in. “I
have put over $1 million of my own capital into the company,”
says Stuart Gray, Laguna’s CEO. “Successful MLM groups
grow faster than tech companies so one of
the nice things about Laguna is that we have
the ability to get bigger really quickly.”
Laguna began its sales quest in March
focused on the nutritional and health benefits
of products containing hemp. Hemp is known
for being rich in protein, as well as omega fatty
acids 3, 6 and 9, plus magnesium and other
nutrients important to a balanced diet. Gray
summarizes the product category as “functional beverages” given that a hemp-infused
instant coffee and four flavours of a sports
drink mix called Pro 369 (after the omegas)
18 | www.thecse.com
comprise the initial product line.
Gray originally learned about the benefits of hemp as a
consultant to several companies in the medical marijuana
industry. But while the health benefits of hemp strains used for
food, as opposed to intoxication, were obvious, he felt that the
approach to selling these products could be improved upon.
“We see hemp-based products on the shelves at many of the
biggest food retailing names in the world, but in some cases
the product has not sold through as well as the producers
thought it would,” says Gray. “There remains a lot of education
that needs to take place as to the true value of hemp, so we
chose direct marketing because it enables potential customers
to really learn about what they are buying.”
Gray understands that MLM is an ultra-competitive universe
and as such is relying on more than just unique products to set
Laguna apart. “We are definitely differentiating ourselves by
pioneering hemp-based products that nobody
else has,” explains Gray. “But really, how we
separate ourselves is through technology. We
have virtual 3D technology that replaces the
need to go to hotel meetings to learn how
to recruit. Everything you need to build your
business is on there.”
The objective of a company such as Laguna
is to provide products, infrastructure, support and training for independent affiliates,
he explains, whose role it is to then go out
and build the business through sales and
Stuart Gray, CEO
Laguna Blends
recruitment.
captiva verde
Captiva Verde
Building serious revenue momentum as its organic farms hit their stride
By Josh Allsopp
A
neat carpet of green can be seen
stretching as far as the eye can
see, like a well-tended lawn of some
grand country manor. But this is right
in the middle of the California desert. It’s just one of Captiva Verde’s (CSE:VEG)
many organic vegetable farms in isolated
patches across the California and Arizona
desert.
Being organic, the farms deploy no
chemical pesticides or synthetic fertilizers.
There is a big cultural shift as organic
becomes the mainstream, with 78%
of US families buying organic produce,
which means it’s big business… if you
can get it right.
Organic farms are 35% more profitable
than the average farm and in retail stores
organic prices are typically double conventional prices. Yet currently only 0.5%
of US farmland is suitable for organics.
According to the Research Institute
of Organic Agriculture and International
20 | www.thecse.com
Federation of Organic Agriculture Movements, global retail sales of organic food
are estimated at US $72 billion. North
America represents 48% of this global
demand.
Captiva Verde is taking a run at this giant
market. Worth just CDN $20.5 million, it is
fair to say the company is a comparative
minnow in the field of agriculture. But founder Jeff Ciachurski is ambitious:
“You’ve got to have a lot of guts,” he says.
“You need to go in with a big operation
and take the chance.” Ciachurski made his fortune in sustainable power after he founded Western
Wind in 2002 with an initial investment
of CDN $250,000. Just over ten years later he sold the
company to Brookfield Renewable Energy
Partners for $420 million.
As important as the project is the person behind it; the man or woman with the
relentless drive and will to win.
“I made a very big success for my
shareholders; in fact I was one of the few
guys in the entire worldwide market place
that made a whole lot of money in the
wind and solar space,” says Ciachurski.
“So I’ve got a knack for finding high
quality deals and ones that really take
a lot of perseverance, a lot of emotional
energy and challenges.”
And he thinks there are lessons he
learned from his former employment
that are directly applicable to the world
of organics.
“There is a huge regulatory landscape
you need to navigate. But we successful
entrepreneurs take on the big challenges,”
Ciachurski says.
Captiva Verde was founded in 2014
and is certified by the United States Department of Agriculture (USDA).
Ciachurski’s team now farms 3,700
acres, the majority of which is leased, and
the group is looking to add another 2,270
“
We are fast making money in a dynamically growing
sector, and that’s what investors want to see.
—JEFF CIACHURSKI
”
acres in the southwest US for organic cultivation. fluctuate minute to minute, while it proved its
The farmland is managed by a team with exoutput was reliable.
tensive experience in organic vegetable farming,
“The risk is no one will buy from you until you
food processing, clean energy and land develcan prove to them you can grow big quantities.
opment in California and Arizona. At one time US $9 million worth of supply had
The isolated fields in Arizona, Imperial Valley
to be re-ploughed back into the ground,” Ciaand Tehachapi are all at different elevations
churski laments.
for production synched to optimal climate conIt’s only really in the last month Captiva has
ditions, allowing for 365 day a year harvesting
found itself in the happy position of selling all
Jeff Ciachurski, Founder
Captiva Verde
and crop rotation. its production on contract.
If the vision above is one of man in harmony
“That means that everything we grew already
with his environment, the state of California,
had a buyer by the time it goes in the ground,”
with some 20,000 organic farms, reveals what happens when adds Ciachurski.
agriculture of this sort is done on an industrial scale. So what does the future hold?
It has been a challenge for Captiva Verde, not just meeting
“Tremendous growth,” Ciachurski says.
the exacting farming standards, but winning over retailers.
The organic vegetable market is worth around US $35 billion
“The certification program in California is so tough. The reality a year and is expanding at some 12-15% annually. That rate is
of organics is that the standards are way beyond what you’d forecast for the next 10 years.
call sustainable,” said Ciachurski.
Captiva, meanwhile, is making remarkable financial headway.
“The US is a very litigious place, California especially so. There
In 2015 it reported US $9 million of losses. By November it
is a very large and robust food safety program. You want to make was producing US $500,000 a week worth of vegetables but
sure the buyers know you have a top rated food certification.” selling it at only $200,000.
Scrutiny was intense to gain National Organic Program cerAs of 8 May, Captiva has 455,000 pounds of produce a week
tification. And meeting the food standards and safety criteria fully contracted, which brings in US $570,000 a week in sales
can be very costly, which is often a deterrent or inhibitor to (the equivalent of almost CDN $30 million of annual sales).
smaller, less well-funded groups.
“We are the only company that even has those kinds of revHow many small businesses could fund a four-mile fence to enues on the CSE and the only publicly traded 100% organic
avoid cross-contamination from animals? Captiva was forced farming company,” he points out.
to bear these costs to gain USDA certification for just one
Further expansion is on the books as Captiva looks to some
600-acre farm.
strategic acquisitions.
“We take 300 tissue samples per acre to test for bacteria,”
The company announced last month that it was considering
states Ciachurski.
buying two companies—a large food broker and a substantial
“All this can be a big setback for the smaller guys, who salad making operation - to expand right through the organic
often have to sell at the farmers market because the big end produce supply chain.
retailers would not find their standards remotely adequate to
The acquisitions will add a further US $13 million of sales
get onto their shelves.
a year for the group. “That’s why you have to raise the capital; it’s a big risk with
“We’re a growing company in a growing market. Since Ocbig money at the start.”
tober 2015 we started from zero sales to now US $1 million
Captiva also had to convince potential buyers of produce a month. Now, as of May, we are moving to US $2.5 million a
that its farms were capable of producing enough to meet the month,” explains Ciachurski.
demand from retailers such as Whole Foods and Trader Joe’s.
“We are fast making money in a dynamically growing sector,
It was stuck for five months in the spot market, where prices and that’s what investors want to see.”
www.thecse.com | 21
supreme pharmaceuticals
Supreme Pharmaceuticals
Shaping medical marijuana strategy around Canada, with potential for overseas
markets down the line
By Philip Waller
L
egalising marijuana for medical use can still be a thorny
topic in some countries.
But Supreme Pharmaceuticals Inc. (CSE:SL) is hoping to lead
the way in harnessing its acceptance and benefits in Canada.
Supreme obtained regulatory approval to grow medical
marijuana at its site in Kincardine, Ontario, in March.
The company is on track to harvest its first crop in the summer
and hopes to get final approval to sell it in September or October.
In the US, four states have legalised the plant for recreational
use and 12 others allow its consumption for medical purposes, although that remains a relatively small proportion of the
country as a whole.
But in Canada, the medical marijuana business has legalised
progressively in the last 15 years.
A key milestone came in 2014 when the government’s
Health Canada arm introduced the Marijuana for Medical
Purposes Regulations.
The government also said last month it will press ahead in
2017 with plans to legalise marijuana for adult recreational use.
That market is expected to be worth $5 billion a year by
2020 according to leading industry analysts.
Supreme is targeting a domestic medical market, which it
expects to be worth about $100 million by the end of this year
22 | www.thecse.com
and $1.2 billion by 2020.
Supreme’s President and Chief Executive, John Fowler, said
he believed Canada was doing better than other countries in
overcoming concerns about using the plant for clinical purposes.
“I wouldn’t say the stigma has gone but we’re moving in the
right direction,” he said.
Fowler began working in the medical marijuana sector
more than 10 years ago.
He pursued a legal career to help medical marijuana patients
with legal challenges relating to access, jobs and tenancies,
working on major cases.
He now sees his mission as being not only to provide Canadians with access to high-quality, low-cost medical marijuana,
but to work with physicians to improve their awareness and
support for it.
“The hope is that the doctor will be more educated and
more willing to subscribe to the company’s products,” he said.
Supreme and its wholly owned subsidiary, AMMCan, have
set up a federally-licensed, seven-acre greenhouse in Kincardine on the shores of Lake Huron. When fully operational, the
Company expects to be able to produce in excess of 50,000
KG per year.
Supreme has obtained exclusive rights to work with inter-
Exterior of Greenhouse
Grow Room
national seed supplier Dinafem. The
arrangement will provide Supreme with
access to over 100 unique cannabis strains
to put into production in the Kincardine
greenhouse.
“Choosing the right genetics is one of
the most important aspects of producing
high quality cannabis for both medical and
recreational markets. It was important
we seek out a partner like Dinafem to
ensure we grow only the best genetics
in our greenhouse which will maximize
output, increase quality and have a direct
impact on our bottom line,” Fowler said.
Supreme has raised more than $10
million, three quarters of which it has
spent on fitting out the greenhouse and
the rest of which it still has in the bank.
It expects those reserves to sustain
it until it starts earning revenue from
marijuana sales later this year.
Supreme is among about 25 companies holding 31 licences to produce
medical marijuana.
The current market of about 45,000
patients is increasing at a rate of about
5,000 per month and is on track to more
than double in this calendar year.
Supreme’s primary aim was to supply
the consumer market direct by mail order.
But it is exploring the possibility of
becoming more of a business-to-business
supplier of licensed marijuana to other
companies that would retail it.
Fowler said: “The benefits of that
are long-term, stable revenue based on
supply agreements, rather than volatile
revenues from retail.”
Supreme has had to take extensive
security precautions at Kincardine to
prevent theft, such as high fencing and
cameras, and the end product is stored
in a vault.
“We like to joke that our marijuana
in the vault will be more secure than our
money in the bank,” Fowler said.
Fowler also acknowledges the general
risk of abuse of the product. However it is
worth pointing out marijuana consumption is seen to be less dangerous than
tobacco or alcohol with few reported side
effects, he said.
Nursery
Strict regulation compels the company
to ensure its products are not contaminated by pesticides or other substances
that may be in marijuana bought from
street dealers.
Supreme has international ambitions
and is eyeing opportunities in countries
such as Australia, Germany and Austria.
Canberra recently legalised marijuana
for medical use and Berlin and Vienna
are considering doing the same.
The company believes it will be able to
generate $200 million in annual domestic
revenues within the next decade. This
keeps the company’s focus on executing
on its domestic business as a top priority.
Fowler said: “It’s very important to
me as the Chief Executive that we don’t
allow the prospect of new markets to in
any way negatively affect our primary
market, which is right here in Canada.”
www.thecse.com | 23
beleave
Justin Kosalka and Roger Ferreira
Beleave
Advancing smoothly through Medical Marijuana approvals with
eye on big sales, margins
By Jamie Ashcroft
A
s the social narrative and legal argument surrounding
marijuana continues to evolve, an intriguing dilemma
is posed for a typically conservative mainstream investment
community.
Investors looking at Beleave Inc. (CSE:BE) will likely have
polarised opinions depending upon their age, politics and life
experience. Indeed, the issue of marijuana’s decriminalisation
and commercialisation is very much loaded.
But, whatever an individual’s standpoint on the moral or
ethical merits of this emerging industry, one thing is quite clear;
a pragmatic look at the business case reveals a compelling
argument for the growing sector.
Marijuana sales reached nearly US $1 billion in 2015 for the
state of Colorado, where the drug was cleared for recreational
sale just over two years ago. According to the state’s authorities
some US $135 million was collected in taxes and fees related
to the pot business that year.
Colorado is one of four US states to legalise marijuana for
recreational use (the others are Alaska, Oregon and Washington). Twelve others, including big markets such as California
and Nevada, now allow consumption for medical purposes.
24 | www.thecse.com
In Canada, the medical marijuana business has legalised
progressively over the past 15 years.
But, the major turning point came in 2014 with the introduction of the Marijuana for Medical Purposes Regulations (or
MMPR) by the government’s Health Canada arm.
Newly-elected liberal Prime Minister Justin Trudeau in
November announced that marijuana would be legalised for
recreational use in Canada during 2017.
It represents a major opportunity, particularly for Beleave.
Although there’s a lot going on around the edges for Beleave—
with the company working on various research and development
projects—at the moment the story is quite a simple one.
BELEAVE IS THE NEXT MAN UP FOR
REGULATORY APPROVAL
Around 30 companies have been given the regulatory green
light for medical marijuana.
And as Beleave Chief Executive Roger Ferreira explains
it, his company is currently in the advanced stages of the
regulatory licensing process with Health
Canada. Being in the final stages of the
approval process, the regulatory decision
is expected soon.
With the help of chief operating officer
Bill Panagiotakopolous, and his construction industry ties, the company has now
built at low capital costs a 14,500 square
foot production facility designed to meet
Health Canada’s requirements.
The facility, in Hamilton, will be capable of producing some 550,000 grams
of marijuana each year and, crucially, it
is designed to be scalable so that the
production line can grow in lock step with
the commercial side of the business.
That scalability will be key. Ferreira says
initial market research to date indicates
Beleave could sell out its entire capacity
within a year from the start of production.
Prescribed patients on average con-
sume between one and three grams of
marijuana per day, he explains. As such
just 270 to 800 registered patients would
be needed to max out the group’s supply
in year-one, giving the company revenue
of $4.2 million with margins of 72%. As
demand for the product increases the
company has already laid the groundwork
for expansion of up to 270,000 square
feet with margins increasing to 83% and
revenue growing past $100 million.
At the same time the demand for licensed marijuana in Canada is forecast
to soar.
The number of registered patients
has grown at a rate of 20,000 patients
per year since the regulatory framework
was brought in during 2014, and the
introduction of a recreational use market
is expected to see customer numbers
swell further.
SO WHAT’S NEXT IN THE
MEDICAL MARIJUANA
LICENSING PROCESS?
To be green lit in Canada a grower has to
complete a three step permitting process.
First, the company needs Health Canada to approve the drug for cultivation
(i.e. growing). This is what Beleave is
currently waiting for.
Once licensed for cultivation the company will then be able to legally obtain
already sourced seeds and ‘clones’ for
planting and begin the process of growing
cannabis plants.
Health Canada assesses and reviews
the operation throughout as part of the
new regulation process.
A separate license is then required
for harvesting. Without a harvesting license the plants cannot be cut, dried or
www.thecse.com | 25

CEO - Laguna Blends

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