The CSE Quarterly | Issue #1
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
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Contents 7
CEO’s Message
Feature Story 8 Gener8, RESAAS put West Coast on CSE’s tech map with big 2013 gains by Peter Murray Sector Profile 12 Medical marijuana stocks take off as investors key in on first-mover advantage by Fiona MacDonald Company Profile 16 Urbana Corp sees potential big win from CSE investment amid challenging regulatory landscape by Deborah Bacal 20
Brisio Innovations to capitalize on explosive mobile app growth with multi-dimensional platform by Deborah Bacal
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Traders Corner
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
CEO’s Message Welcome to the inaugural issue of the Canadian Securities Exchange Quarterly! What does it take to succeed as a publicly listed company in today’s market? As Canada’s fastest growing stock exchange, we are privileged to see many examples of companies demonstrating the answer every day. Despite the diversity of approaches we see to achieving success, a common thread amongst our listed issuers is a resilient and vibrant entrepreneurial spirit. The purpose of this new publication is to showcase the entrepreneurial spirit of our listed companies in action. Given our role as “the Exchange for Entrepreneurs”, we take great pride in supporting the ingenuity and dedication demonstrated by the many talented individuals who build and run companies listed on the exchange. We feel that much of this great work translates to the stories offered in the following pages. As you will see, the companies highlighted in this issue come from diverse sectors including technology, venture finance, and emerging bio-pharma. These companies all share a driving passion to build great enterprises focused on growing shareholder value. In addition to company stories, we also have perspectives on issues that matter to investors. More and more companies are taking advantage of our exchange model that reduces the cost of capital during the initial raise, and provides efficient and accessible secondary market trading services once the company is listed. Access to CSE trading and market data is now available on 10 online discount brokerages in Canada, with recent additions like Scotia iTrade, QTrade, and Questrade. Among the many great reasons to do business with us, we believe the most important for investors to know is that companies listed on the CSE operate within an efficient regulatory model that saves them time and lowers the cost of listing vis-a-vis other Canadian exchanges. Ultimately, listing on the CSE enables entrepreneurs to spend more time and resources building shareholder value rather than pushing paper back and forth with the exchange. Please take note that none of the information provided is intended to be construed as investment advice. We strongly encourage all of our readers to conduct their due diligence, including talking to their financial advisor, before making any investment decisions. On our own website – www.thecse.com – we provide individual profile pages for each listed company offering up-to-date disclosure including SEDAR filings and, uniquely in Canada, monthly updates from listed companies. We hope you enjoy the issue and we look forward to any feedback you have about the publication. All inquiries can be directed to CSE’s head of Business Development, James Black by email at james.black@thecse.com. Thank you and we look forward to catching up and sharing even more stories in our next issue!
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...listing on the CSE enables entrepeneurs to spend more time and resources building shareholder value rather than pushing paper back and
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forth with the exchange.
Richard Carleton CEO Canadian Securities Exchange
www.thecse.com | 7
feature story
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Gener8, RESAAS put West Coast on CSE’s tech map with big 2013 gains By Peter Murray
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orth American technology stocks delivered excellent returns to investors in 2013, and in Canada some of the sector’s top performers were CSE-listed companies making their homes in Vancouver, where tech names large and small are quietly establishing a major presence. 3D movie technology leader Gener8 Media Corp (CSE:GNR) made its trading debut in April 2013 and after some early turbulence climbed steadily to close 2013 up 110% at $1.27. CSE veteran RESAAS Services (CSE:RSS) did even better, finishing at an all-time high of $4.00, up 344% on the year. Below we present some of the business highlights and concepts behind these two big winners and also provide some thoughts on what lies in store for the newly branded CSE (formerly CNSX) in 2014.
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When competitors first saw what Gener8 was doing, all claimed there was no way it would ever work, and particularly not from a commercial standpoint. “As they were telling me this, I was finishing a full movie using the method,” Bennison says. Companies post-processing 2D film to convert scenes into 3D typically use a technique called Displacement Mapping that delivers what Bennison refers to as “2.5D.” Gener8 developed its own method called Virtual Native 3D, where filming takes place in 2D and software re-creates the image by re-filming with a two-lens virtual camera inside the computer. The result is indistinguishable from filming with a native 3D camera. And since filming with 3D cameras is both slow and expensive, that solves two very important problems facing 3D filmmakers. “We are being asked to bid on every 3D project in Hollywood. I would not have been able to say that two years ago because half of the producers didn’t even know we existed,” Bennison explains. With studios such as Sony Pictures, Warner Bros and Twentieth Century Fox on its client list, it is clear that the industry knows who Gener8 is now. And in the final quarter of 2013, its superior industry position finally started to be reflected in the share price. Founder and CEO Rory Armes says the company had to learn about the capital markets following its listing in April 2013, “and the good news is we learn fast around here,” he adds with a smile, describing the listing as “both exciting and scary.”
The company’s technological approach is different than that taken by competitors...
Gener8 – If You Don’t Know You Can’t do It, Maybe You Can
Gener8 proved in 2013 that if you focus on your core business and deliver great performance, the proverbial light bulb will eventually go on and investors will take note. Gener8 is the only company in the world that can deliver 3D stereo conversion for an entire featurelength film that matches or exceeds the quality of native 3D filming. The company’s technological approach is different than that taken by competitors, a destination arrived at through a process Chief Operating Officer Tim Bennison laughingly describes as “disruption through ignorance.” 8 | www.thecse.com
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
3D movie technology leader Gener8 Media Corp (CSE:GNR) made its trading debut in April 2013 and after some early turbulence climbed steadily to close 2013 up 110% at $1.27. CSE veteran RESAAS Services (CSE:RSS) did even better, finishing at an all-time high of $4.00, up 344% on the year.
As the story got out more broadly through creative means, and the financial statements started to evidence business model success, investors began to respond. From a financial perspective, Gener8 began 2013 a private company and wanted to obtain more working capital, for use both from a G&A standpoint and to fuel its research and development efforts. The CSE listing and concurrent financing facilitated this, and the wisdom of this move is evident in the company’s near 250% year-on-year revenue growth in the nine months through September 30 to $8.4 million. As strong as the company’s 3D business is, investors are also excited about another product that Gener8 created for its own use but soon realized that the film industry and others could benefit from. This product is Cumul8, which in a nutshell takes complex processes involving numerous teams and individuals and organizes the work process in such a way as to save immense amounts of time and money. Or as both Armes and Bennison explain, it takes the overwhelming volume of data facing the modern executive and organizes it in such a way that it can be used for decision-making and other purposes in real time.
“We built this technology internally for our own film production purposes,” says Armes, “then we realized this is a much bigger play.” That same description applies to Gener8 as a whole, as one considers how this young company could leverage its growing resources to tackle these and other challenges. “As technology companies go, you don’t actually just create one technology,” says Armes. “What a technology company does is invest and create ideas that will enhance their vision. A true form technology company will realize you probably have two or three or four brands within your technology. “So our story for Gener8 is not so much that we are a 3D movie house, as that we are a technology company that will look at a problem and help to create a solution for that problem.” This is product diversification at its finest – multiple products that stand on their own merits, yet at the same time are inextricably linked and combine to benefit the company’s client list better than the individual products could alone. The way Armes and Bennison make it sound, Gener8 is just getting started.
RESAAS CEO Cory Brandolini
Photos by: Noravera Visuals (www.noravera.com)
RESAAS President Tom Rossiter
Gener8 CEO Rory Armes
Gener8 CTO Tim Bennison
RESAAS CFO Cam Shippit
www.thecse.com | 9
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RESAAS – Being Your Customer’s Best Friend Works
CSE stalwart RESAAS had a truly outstanding 2013 on many fronts, enjoying a successful commercial launch of its online social network platform for real estate agents, and seeing its share price end 2013 at an all-time high of $4.00. RESAAS provides a social media platform for real estate agents to showcase their listings, answer questions from potential homebuyers, and communicate ideas on their market and profession to followers online. “We are helping a professional to bring their model into the new generation,” explains RESAAS CEO Cory Brandolini. The results speak for themselves, as reading the message streams of some of the agents, one follows along as they answer questions and offer ideas, build credibility and finally see listings and sales begin to ramp up. The bottom line is that RESAAS works. While the user base may be growing quickly, this is hardly an overnight success story. The RESAAS team spent the rest of the year following platform launch in February visiting offices, attending trade shows and making connections with agents and teams of agents. “Our sales team made a conscious decision that our approach was going to be boots on the ground, arm around the customer, and what can we do for you?” says Brandolini. “It was almost a year before we started to do any digital media buying.” Although the company will not disclose specific numbers, they will say that the user base is growing at something starting to resemble the much coveted hockey stick profile. “We have a platform that is first and foremost for the real estate agent and they power the industry, so we were not surprised to see the growth we experienced early on,” says RESAAS President Tom Rossiter. Rossiter explains that “2013 was about launching the social network, which is an ecosystem for real estate agents to promote their knowledge, their brand and their content. And the response was through the roof.” A glance at RESAAS’s list of news releases leaves no doubt that the company is adding new users at a torrid pace.
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The RESAAS executive team speaks carefully about its plans for 2014 and clearly has some strategic ideas in the works that will only be offered for public consumption when the time is right. “We are adding a whole new realm to RESAAS, which is a platform for the industry,” Rossiter volunteers, happily pointing out, “We have had massive demand from overseas.” One thing RESAAS does not hesitate to do is give the CSE credit for helping it to get the resources it needed to grow early on. “It has been a great platform for raising money,” says CFO Cam Shippit, pointing out that the company has raised approximately $12 million since its February 2011 debut. “We feel like we are not just a number,” says Shippit. “Extremely proactive,” Brandolini says in describing the exchange. Same goes for RESAAS itself. From organizing numerous focus groups in formulating its product, to being a presence at every industry gathering it could possibly reach, the RESAAS team has earned its success through a commitment to working harder, smarter and better than the competition. The mood in RESAAS’ Vancouver headquarters is upbeat with a comfortable, low-burn intensity – the team knows it is onto something and is eager to leverage its early success to the utmost. Its stock price performance and the loyalty of its shareholder base suggest it is doing a fine job. Could 2014 be an even better year for technology stocks on the CSE? It will be challenging to best the one just finished, as Toronto-based Micromem (CSE:MRM) and its 775% gain in 2013 also helped skew CSE tech issuer performance stats to the upside. Needless to say, the answer lies in continuing strong performance by existing issuers and good showings by new names debuting in 2014. And while the exchange itself reserved comment, word has it that more than one listing application from a young, promising Vancouver-based technology company is either before the exchange or heading its way soon. n
The bottom line is that RESAAS works.
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Originally published on Proactiveinvestors.com on January 15, 2014.
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sector profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Medical marijuana stocks take off as investors key in on first-mover advantage By Fiona MacDonald
T
he legal cultivation of medical and adult use marijuana is a field set to bring prosperity to a great many people due to changes at the regulatory level combined with a groundswell of acceptance for the idea of use itself. In the U.S., 17 states have legalized medical marijuana, two states have legalized adult use marijuana, and many more states have ballot measures in place for the November 2014 elections, while on this side of the 49th parallel, the newly established Marijuana for Medical Purposes Regulations (MMPR) have both cut down on the red tape and plethora of forms that characterized prescriptions for medical marijuana heretofore and opened up the market to commercial– scale production. According to some estimates, the current market of 40,000 patients in Canada could grow at the rate of 35 per cent or more per year, such that the industry’s value, at $1.5 billion today, is projected to outstrip the North American wine industry, which stands at $35 billion. “So it’s going to see growth of several thousands of percent over the next decade or more,” says president of Enertopia Corp. (CSE:TOP) (OTCBB:ENRT), Robert McAllister. The Vancouver-based company is bracing for a surge in demand, of which it aims to snag a national market share of 5 to 10 per cent.
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McAllister, who cites numbers in the order of 25 to 35 per cent profitability, sees the market expanding markedly in years to come. “I believe we are in a new industry being transformed with the legalization in multiple states in the U.S., and federal government support for the new system here in Canada.” McAllister’s expectations for the next two to three years involve a rapid increase in political acceptance: “Already, the approval for medical use of marijuana is running from 70-85 per cent and even on the adult use side, it’s at a 45 to 60 per cent approval rating. “Thirty years ago, the approval was under 10 per cent, so we›ve seen acceptance by the general public and once something is accepted by the general public, politicians will always fall in line.” While the old system provided for the cultivation of enough plants for four patients, the new system points towards scaling up to commercial quantities, a change likely to have major repercussions for growers. Crucially, under the old system, capital costs for the average grower ran from $10,000 to $50,000; while the new system demands more of growers security systems, qualified scientists, shipping and labeling departments – all of which have added greatly to the cost. McAllister estimates start-up costs under the new system to range from $250,000 to $500,000 at the entry level.
...it’s going to be a growth of several thousands of percent over the next decade...
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Thus, chief among the changes the new regulations are set to bring about in Canada is a move from “up to 24,000 people licensed to grow on their own” to a system where “only several dozen new producers are likely” to qualify under the new, more stringent guidelines, says McAllister. The question, as McAllister puts it, is “how many of those growers are astute business people as well?” Enertopia’s near term focus is on taking significant positions in producers that produced under the old system, with an eye towards “helping them get approved under the new system.” “Our platform is to help producers get licenced under the new system. We have a direct equity ownership interest in their company, so as they build up their production facilities and grow, the revenue will increase over time as well and that will benefit Enertopia and our shareholders.”
To that end, the company looks for existing growers which had operations “larger than 15-25 plants in someone’s garage,” those who were, for example, growing for co-ops, and thus had more licenses and could raise more plants. “We’ll support them on the capital side, using Enertopia to raise funds and invest those funds immediately into those operations to build them up and get to Canada Health standards.” Enertopia’s plan is to look towards locations that have municipal support for production facilities and at existing facilities that can be upgraded and retrofitted, as opposed to building new structures. From there, McAllister plans to expand Enertopia’s hold on the market by finding patient groups through the network that it’s building, which includes doctor›s networks. “At the end of the day, we’re going to need patients.”
Next Gen Metals looks to keep momentum going for medical marijuana, industrial hemp Next Gen Metals (CVE:N) is hard at work on its plans to provide financing for medical marijuana and industrial hemp companies, moving fast to make its first investment mere weeks after announcing its intention to diversify into these industries. At the end of February, after only beginning to research these “explosive new industries” last August, the company announced its new vision of becoming a leading provider of venture capital, management expertise and education, becoming a facilitator of the medical marijuana, industrial hemp and alternative medicine sectors. Its strategy involves looking for companies which require capital, in exchange for taking an equity stake in the business or a royalty on sales. Next Gen’s intent is to leverage its own capital markets fundraising experience to help incubate “technically savvy” companies that aren’t quite as financially savvy. Several junior public companies listed on the TSX Venture and Canadian Securities Exchange have been rushing into the medical marijuana industry after new regulations in Canada allowed licensed producers to grow the controversial drug on a commercial scale, but many of these businesses require assistance in starting up. In late March, Next Gen made its first investment with Green Rush Financial Conferences, which aims to become the premier purveyor of investment/financial conferences for medical marijuana, industrial hemp and alternative medicine. The goal is to provide a platform/hub to facilitate investment, education and business-to-business opportunities, says Next Gen’s president and CEO Harry Barr, also the founder and chairman of the International Metals Group who has more than 30 years of public and private company experience, with a focus on acquisitions, financing and development. Green Rush’s first conference, which is nearly sold out, is taking place on May 7 in Vancouver, with the next event set for June in Toronto. Afterward, the plan is to host conferences throughout Canada, moving on to major centres in the U.S. and Europe, where Barr plans on leveraging his existing network of mining contacts. “Our first deal is creating income as we speak, generating revenue every day,” says Barr. The chief executive is planning to invest in 10 or more such companies in the next couple of years, helping them grow into “much bigger enterprises.” “Before deciding to enter these industries, I asked myself: ‘what do I do best?’ The answer was to raise venture capital and manage public companies.” Indeed, investors are encouraged by the company, the third in Canada to announce its entry into the medical pot sector. Originally published on Proactiveinvestors.com on April 17, 2014.
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Enertopia’s stock has had quite a wild ride this year, driven McAllister thinks, by investors’ realization of a new industry being created, which they are willing to dip their toes into with the knowledge that some companies are set to emerge as billion dollar entities. For now, investors tend to be “small guys”. However, “as more and more barriers are removed, more capital will come into the sector at higher levels,” he says. “People are really excited about what’s going on and how it’s transitioning.” Mike Withrow, president CEO and director of Abattis Bioceuticals Corporation (CSE:ATT) (OTC:ATTBF) too sees a world of opportunity opening up, but the company takes a different, more diversified, approach. With an eye on capitalizing on the move toward marijuana legalization south of the border and towards wider-spread medicinal use in Canada and internationally, the Vancouver-based specialty biotechnology company has plans for the development, manufacturing, licensing and marketing of natural health and wellness solutions addressing chronic illnesses. It recently negotiated a deal with two top researchers to set up an analytics lab in Washington State. “We have the ability to manufacture and market the most scientifically advanced natural therapeutic formulas based on proprietary technologies through multiple distribution channels,” Withrow says. The company licenses and markets proprietary ingredients, bio-similar compounds, and patented equipment. It also provides consulting services to North America›s medicinal and adult marijuana markets via its wholly owned subsidiaries and seeks to utilize its Grow, Dry, Extract, Refine, and Sell model (known as GDERS) to produce pharmaceutical-grade phyto compounds with its ultimate goal of taking the lead in the emergent botanical drug market. Its strategy involves growing cannabis with its proprietary indoor mass farming systems, drying it with unique low temperature drying systems to enhance quality, extracting the active ingredients, refining the product, and selling it around the world. The company has two Marijuana for Medical Purposes Regulations (MMPR) applications in, and is looking to becoming one of the few licensed producers of cannabis in Canada that is publicly traded.
Meanwhile, in the U.S., the company’s subsidiary, Biocube Systems, provide growers with an energyand space-efficient cultivation system that generates high yields, enabling them to produce low-cost pharmaceutical-grade product. The subsidiary has just closed on acquiring the proprietary formulas from Green Gro Garden Supplies Ltd. and will build its customer base by marketing. But Abattis sees beyond the emergent medical and adult use marijuana industry, with Withrow noting that the company is looking to parlay its existing expertise into plants beyond marijuana. “Ultimately, we will be looking to what other medicinal plants we can fit into the model,” Withrow says. But for now, marijuana cultivation provides a ripe opportunity, and one Withrow sees as the highest growth opportunity out of any sector in North America. “The referendum in Colorado [which passed Amendment 64 legalizing personal use of marijuana for those over 21] changed everything. “Marijuana was already being accepted for medical purposes more and more, then when Colorado changed the law for recreational use – that woke everyone up.” The law kicked in January 1st of this year, and in the days that followed, Abattis’ phone “started ringing like crazy”. On March 7th Washington issued its first licenses for cultivating marijuana for recreational purposes. “We’re positioned perfectly to capitalize on this rare opportunity. We›ve assembled everything needed to be at the forefront of the industry.” Indeed, among Abattis’ impressive roster of assets are 15 proprietary formulas, proprietary Flash Freeze Extraction equipment, two patent applications and one provisional application, as well as a five-year contract with a Canadian distributor, and exclusive worldwide rights to Mass Growing Systems used to construct controlled indoor pharma grade growing environments. It also has a lease on a $13 million dollar Botanical Drug Facility in Quebec, fully equipped to cut costs by using the only LED made in the US that it is currently testing with the manufacturer. 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. 1
Urbana Corp sees potential big win from CSE investment amid challenging regulatory landscape By Deborah Bacal
U
rbana Corp (TSE:URB) (CSE:URB), an investment holding company run by Tom Caldwell, is attempting to do its part to help assuage the regulatory burden on companies looking to list on Canadian markets by investing its cash into the recently rebranded Canadian Securities Exchange (CSE), culminating in a listing on the trading platform in January 2014. The closed-end investment firm with interests across a variety of financial services businesses from exchanges to broker dealers previously owned 49% of the CSE until Ned Goodman, chief executive of Dundee Corp, gave the Canadian exchange a boost last September by acquiring a third of the company. Urbana, which is also listed on the TSX, now holds a third of the CSE itself, with the remainder held by a mix of individual shareholders, dealers and institutions.
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“If we’re telling other people to get listed on this dynamic, customer-friendly exchange, the least we can do is have our company there as well,” says the chairman of Urbana Corp and Caldwell Securities in a recent phone interview with Proactiveinvestors. “We put our mouth where our money is, so to speak.” Indeed, Caldwell’s mouth has been quite vocal lately on the difficult regulatory environment in Canada, with his opinions on the cost of compliance made evident in an editorial piece written in The Financial Post titled “Nanny-state regulators and lobby groups are sidelining investment experts”. The article highlights the expansion of the provincial securities commissions’ reach far beyond “investor protection into procedural audits”, which has led to the decimation of independent brokerage firms and deprived investors of choices beyond bank-controlled mutual funds. “Regulations are too hard at the moment. It’s incumbent on us to make it easier to raise capital to fund innovation, and give people an opportunity,” says Caldwell.
If we’re telling other people to get listed on this dynamic, customerfriendly exchange, the least we can do is have our company there as well.
16 | www.thecse.com
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“Stock markets are the ultimate democratic tool in the capital world and it is important to preserve this environment where everyone can buy a little bit of someone else’s dream.” The idea behind the CSE is quite simple. As a way to encourage this environment, and “ease the burden a bit from [the exchange] side”, the trading platform operates on continuous disclosure requirements, rather than a heavy upfront burden at the exchange level, believing that the broader investment community is better suited to value a given company. The CSE requires a monthly update from each issuer, which is not required on other exchanges, making up for the fact that upfront business diligence is not conducted by the CSE, dramatically reducing the time frame from application to listing as well as advisory and legal fees. “If [the company] is a reporting issuer of good standing, then there’s no reason to have to do it all over again at the exchange level and delay the process by six months. [The CSE] accepts the government filings and works with that.” The effects are already noticeable. The exchange estimates that it accounted for 17% of the new issuers entering the Canadian public markets last year, up from 11% in 2012. The CSE is just one of Urbana’s investments, with the firm also having interests in large U.S. banks like Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C), as well as in exchanges around the world from Bombay to the Chicago Board Options Exchange and the NYSE Euronext. The investment firm has a broad mandate, allowing it to put its money in a myriad of both public and private companies as well as sectors. Caldwell reckons that about 80% of Urbana’s holdings are publicly-listed securities, with the remainder being private companies. The company, which focuses on long-term growth, has seen its asset value increase from $112 million in December 2012 to $178 million at the end of January 2013, while its share price has risen more than 90% over the same time frame. “Our investor group has changed over the last five or six years. It was originally shareholders that owned penny stocks, but now it’s generally more sophisticated investors, such as high net worth individuals and investment management firms across Canada, the U.S. and Europe.”
Photo by: Marypics (www.marypics.com)
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Tom Caldwell, CEO Urbana Corp.
Caldwell also highlights that Urbana has a 1.5% overall management fee, compared to 2% for most money managers, and allots no performance bonus for management, resulting in a “very efficient mechanism for managing money.” Efficient indeed. The company’s performance metric, based on net asset value per share, at year-end 2013 came in at 56.45% for the year, with an annual compounded return of 15.96% since inception in October 2002, compared with an annualized return of 5.6% for the S&P/TSX Composite over the same period. He says Urbana’s closed-end model will be seen increasingly over the next few years, as mutual funds lose their investment appeal. “Mutual funds lose at market bottoms and gain at the top. We have money always. If you want to get out, you sell the stock.”
www.thecse.com | 17
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Caldwell, who owns about 6 million shares of Urbana on his own, calls himself a “garbage man” in that he looks for investments that have “just been massacred”. “We’re long only—there’s no real leverage, no shorting or anything else. “We pick strategically. That’s the advantage of being a closed end vehicle as we have the freedom of time horizon and don’t have to worry about redemptions.” He gives the example of Barrick Gold (TSE:ABX), the world’s largest producer of the metal, whose shares took a serious tumble last year. That doesn’t faze Caldwell, however, who picked up 675,000 Barrick shares through Urbana, equating to some 8% of the firm’s portfolio market value. Despite the gold company being “massacred pretty badly”, he says he is leaning toward resources, especially given the current U.S./Canadian dollar exchange rate. This view is also reflected in Urbana’s investments in major U.S. banks like Citigroup, Bank of America (NYSE:BAC) and Morgan Stanley, which were all trading at discounts from net tangible asset value per share and had all passed stress tests. “We don’t have to worry about quarterly performance to the same degree. The time horizon allows us to be a little bit more aggressive,” says the chairman, explaining that one of the most important questions he asks before making a distressed investment is whether the company is suffering from a “fatal wound” or if the problem is fixable. Depending on the sector, Urbana typically invests half of a million for a start-up, and anywhere up to $50 million for an intermediate company.
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“We have $175 million. It’s not a large pool of capital, but it’s the kind of fund that you can do unique things with,” says Caldwell, who is slowly handing the reigns over at his investment management firm Caldwell Securities to the “younger team”, giving him time to focus on building up Urbana. Back to his investment philosophies, Caldwell calls himself an “incurable optimist”, and says that the U.S. economy is slowly picking up, coming through the crisis in “ripple effects”, with optimism beginning to squeeze its way back into the picture. “The challenge to growth is regulating the economy to death, and unfortunately, the U.S. is leading the way there. It’s harder to fund businesses in America and we’re reaching a tipping point where innovation – America’s strong suit – is getting increasingly stifled.” He says that while not as bad as in the U.S., the regulatory environment in Canada is also under pressure, particularly in Ontario, where it is “becoming very difficult for companies to raise money at a reasonable cost.” That is why the CSE is Urbana’s most exciting investment, according to Caldwell, in light of weakening commodity prices and regulatory overkill causing huge headaches for junior companies in Canada. “[The CSE] is trying to make the net, net burden not as bad,” says Caldwell, referring to the total burden of exchange requirements, plus regulatory oversight. “There is massive upside potential if we do it right. It could be a very large win for us even though the investment itself is small,” he asserts, noting his past experience with exchanges, having at one point been the largest owner of the NYSE and the governor of the Toronto Stock Exchange.n
The challenge to growth is regulating the economy to death, and unfortunately, the U.S. is leading the way there.
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Originally published on Proactiveinvestors.com on February 5, 2014.
www.thecse.com | 19
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Brisio Innovations to capitalize on explosive mobile app growth with multi-dimensional platform By Deborah Bacal
B
risio Innovations (CSE:BZI) (OTCMKTS:NTCEF) has a game plan in place to reap the benefits of the mobile app space, which analysts worldwide are categorizing as one of the fastest-growing industries yet. The company’s strategy is to acquire, develop and market software applications for smart devices, which include phones, tablets, and wearable computers, among other items set to dominate the mobile device industry. Its goal is to become the destination site for users to discover the latest and best apps across multiple devices, as well as find related editorial content and reviews. The Vancouver, British Columbia-based company is certainly moving fast. In the last quarter, Brisio, which launched its business plan to aggregate mobile apps in December, managed to list on the Canadian Securities Exchange and complete 43 mobile app acquisitions. These apps, which are compatible with Android and iOS systems, increased the company’s overall installed base from zero to nearly 1.3 million, and hiked its combined daily downloads from zero to over 100,000 across its whole portfolio. Importantly, Brisio signed a game-changing preliminary deal to acquire an interest in the largest independent app store in Canada, known as OakBranch Media.
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If all goes according to plan, the platform, which currently attracts over 2.5 million users per month and is growing rapidly, will become the Brisio App Store. Right now, the curated app store has over 35,000 apps to its name. “We’re not focused on any specific area for the apps. We’re driven by certain financial metrics and strategic ideas,” says president and CEO Paul Andreola, noting that one of these metrics is rapid payback, with expectations for this on some of its apps in as little as four to five months. The OakBranch independent app store is just another mechanism that Brisio will have to market its own apps and those of other developers, in the process helping consumers find the right type of apps for themselves. “[OakBranch] has their own video studio as well as 13 journalists on staff and a YouTube channel, which will help build out the whole discovery process with our ability to market online,” adds Andreola. The YouTube channel attracts over 320,000 views per month, while the website draws in 230,000 unique visitors, in addition to the traffic the app store brings. Under the current terms of the deal, Brisio will pay C$130,000 for a 30% interest, with the option to boost its stake to almost 50% for an additional 250,000 shares and a cash payment of C$75,000.
In the last 90 days, Brisio...managed to list on the Canadian Securities Exchange...
20 | www.thecse.com
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
“Within the mobile app space, which is one of the fastest growing industries ever, the discovery space is growing even faster. The challenge is to be able to get in front of everyone else in such a rapidly expanding market.” Indeed, Andreola is speaking of the invariably high costs for developers to build and market an app, with many mid-size developers struggling because “big players are spending so much money”. “We have more than 1 million installed users that have proven they buy and use apps, giving us the ability to promote other products to these users.” Andreola says that according to recent stats, there are 2 billion smartphone users within the next three years that are looking to download 50 apps each on average. “This is a staggering number. The question is how do you get in front of that and help people find what they are looking for. We are looking to solve that.” Brisio’s value proposition is highlighted best by two recent transactions in the industry, the first of which is Baidu’s $1.9 billion acquisition of 91 Wireless, a Chinese Android app distributor. And recently, GetJar, the biggest open app store in the world with more than 3 million downloads per day, was bought out in what looks to be a $40 million transaction with China’s Sungy Mobile. The company’s chief executive says Brisio’s business is “relatively conservatively managed”, as it seeks to buy apps that already generate revenue and have “real solid business fundamentals”, including a growing user base and revenue. “We expect to close on one significant acquisition every two to three months,” he stresses. The last app Brisio purchased, called Spermy’s Journey, is the most significant to date, according to the company’s president. “It has given us a lot of mileage. It was among the top five most downloaded apps in 19 countries and ranked as high as second most downloaded app in all of England.”
Indeed, the app, which was bought for US$130,000, was downloaded over four million times in the less than two months since its release. It also has potential franchise opportunities, as well as the possibility of multiple versions to accommodate for international languages and product placement. Currently, the company’s apps, which are downloaded through its own website, or more often from the Google Play and Apple stores, are acquired with all the IP and source code. Brisio’s business model works by taking undercapitalized assets from developers that have not had much experience in marketing, and leveraging its own platform and installed user base to quickly solve this problem. Brisio can convert apps from one platform and one language to many, and can also cross-market them to a global audience using its app store, giving developers access to “different marketing techniques” they otherwise wouldn’t benefit from to increase their app’s reach. “We maintain a relationship with the developer and can have them update the app on a contract basis if need be. With every acquisition, we also have a growing roster of app developers that we can use on an as-needed basis when we have our own ideas,” says Andreola. Indeed, the company’s contractor base extends as far as Croatia and India, with these developers just a phone call away when Brisio has its own ideas of what to develop. “We’re rapidly growing the business, and there’s no shortage of opportunities for what we’re doing. We surpassed all objectives with the first three months, and we will continue at this pace for the near future,” says Andreola, making the case that Brisio is undervalued given its current assets. Case in point: King Digital (NYSE:KING), the largest game developer on Facebook that is best known for its Candy Crush game saga, went public at $60 per user, and Facebook (NASDAQ:FB) bought out WhatsApp for $42 per user. Brisio’s market cap is $5.8 million, and with its latest acquisition, picked up over 1.2 million installed users. “Using these metrics, the value for those users is extremely discounted right now.” n
Originally published on Proactiveinvestors.com on April 9, 2014.
www.thecse.com | 21
tr co ad rn er er ’s
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 1
Staying in the Green: How Golfing Can Help Your Investing Performance
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ow that spring has sprung, if you’re thinking about teeing it up on the golf course, you (and most Canadian hockey team players) are not alone. For many investors, the pull of good weather is tugging at them to step away from behind their screens and head outside. Getting away from the markets, however, doesn’t mean you should let your trading skills get away from you. If you happen to find yourself on the fairways instead of behind a computer screen, there are still opportunities to sharpen and reinforce important trading fundamentals while also having fun. Here are three important investing lessons to chip away at while you’re out enjoying the greenery.
Mastery Takes Practice
The golf pros do a great job of making their game look easy. Getting to that point, however, takes ongoing obsessive and systematic practice. Interestingly, professionals in both golf and trading share a common focus when citing their success: a focus on process rather than outcome. For golfers, focusing on the right swing means the ball drops where it should. For traders, instead of focusing on how much money is to be made, focusing on which trades to take and which to avoid means that profits tend to follow.
Expect Rough Patches
One of the most important lessons about investing that golf offers up is that there will be bad shots. In spite of misdirected drives, inconveniently placed trees, and unlucky streaks, professional golfers make bad shots and recover from them constantly. 22 | www.thecse.com
For professional investors, trades also go off the rails constantly. The key, according to numerous professionals, is to know how to handle a bumpy situation calmly. One way to learn to react calmly is to practice getting into and out of those stressful situations.
Always Keep Score
The best golfers and investors judge themselves on performance. And, as the old adage goes, the key to improving performance by measuring it. Being honest about your performance on the course makes it possible to gauge progress over time (not to mention making your golf buddies want to keep playing alongside you). The more points about your game that you measure, however, the finer the improvements you can make. When trading, the same rules apply. It is important to look at the ‘winners’ vs. ‘losers’ as well as at the checklist of things that should be done on a trade. In doing so, you can separate those lucky breaks from those times where you intentionally did things according to plan.
The Takeaway
Of all the lessons it provides, golf can teach investors the following: that consistently being able to hit a target some distance away, in spite of changing landscapes and many known or unknown hazards requires skill. The challenge when it comes to investing is that often neither the hazards nor the target are that well defined. That said, by committing to dedicated practice, planning and performance measurement you’ll likely have a better chance of keeping your shot and portfolio in the green. n
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