Shell Sum­mary for Oct. 11, 2018

Stockwatch Daily - - SHELLS - by Stock­watch Busi­ness Re­porter

THE TSX Ven­ture Ex­change lost 1.10 points to 691.46 Thurs­day. There are three new qual­i­fy­ing trans­ac­tions to dis­cuss. Two of them are straight­for­ward: a Mex­i­can min­ing deal and a Chi­nese oil and gas ser­vices deal. The third is a fin­tech deal.

For the first QT, Ar­turo Bonil­las’s first cap­i­tal pool shell, Magna Gold Corp. (MGR: halted), plans to ac­quire the 345-hectare Mer­cedes prop­erty in Sonora, Mex­ico, from a grandly named Sonora res­i­dent, Beatriz Delia Yepiz Fong. The shell, which has 27,075,000 shares is­sued, will is­sue 2,442,105 shares and pay $1.34-mil­lion (U.S.) to Ms. Yepiz Fong over four years. As of June 30, 2018, the shell had $2.17-mil­lion cash. Pre­vi­ous ex­plor­ers at Mer­cedes per­formed drilling in 2008 and sam­pling in 2010. Sam­ples re­turned gold, sil­ver, cop­per and lead.

On clos­ing of the QT, all three shell di­rec­tors will re­main on the board. Mr. Bonil­las will con­tinue as the chief ex­ec­u­tive of­fi­cer. He is an en­gi­neer in Sonora and was the pres­i­dent of Timmins Gold Corp. from 2004 to 2017. Un­der his watch, Timmins brought its Mex­i­can gold project to pro­duc­tion in 2010. The stock peaked at $3.48 in 2012. He left Timmins Gold last year, when the com­pany re­made it­self into Alio Gold Inc. (ALO: $1.09). In Au­gust, 2018, Mr. Bonil­las listed Magna Gold with a $200,000 ini­tial pub­lic of­fer­ing at 10 cents.

Magna’s two other di­rec­tors are Laura Diaz and Alex Tsaku­mis. Ms. Diaz is a lawyer in Mex­ico City and a di­rec­tor of Gold­play Ex­plo­ration Ltd. (GPLY: $0.20), a Mex­i­can min­ing ju­nior. Mr. Tsaku­mis lives in Rich­mond, B.C., and was the vice-pres­i­dent of cor­po­rate de­vel­op­ment at Timmins Gold from 2007 to 2017.

For the sec­ond QT, Peter Chen’s first cap­i­tal pool shell, In­cep­tus Cap­i­tal Ltd. (ICI: halted), plans to ac­quire Rimpac Ad­vanced Tech­nol­ogy De­vel­op­ment Ltd., an as­pir­ing oil and gas ser­vices provider. The shell, which has 4,747,500 shares is­sued, will is­sue 20,274,370 shares to its tar­get’s share­hold­ers. To fi­nance Rimpac’s busi­ness, the

shell plans to sell a $2-mil­lion pri­vate place­ment at 20 cents. Rimpac is work­ing on tech­nol­ogy for find­ing and eval­u­at­ing oil and gas reser­voirs. Its pri­mary mar­ket is China. It has tested its tech­nol­ogy at state-owned oil fields, specif­i­cally the Shengli, Changqing and Yan­chang oil fields. Not much else is known about Rimpac, but we should find out who its in­sid­ers are when In­cep­tus Cap­i­tal sub­mits its QT fil­ing state­ment.

In­cep­tus listed in Novem­ber, 2017, with a $214,750 IPO at 10 cents. Its founder, Mr. Chen, is a man­age­ment con­sul­tant and ac­coun­tant in Rich­mond. He of­fers his ser­vices through Proterra Man­age­ment Group Inc. He is also a di­rec­tor and the chief fi­nan­cial of­fi­cer of East­wood Bio-Med­i­cal Canada Inc. (EBM: $6.40), a dis­trib­u­tor of nat­u­ral health sup­ple­ments. Three months ago, East­wood was trad­ing firmly un­der 30 cents on typ­i­cal daily vol­umes be­low 100,000 shares. It has since been asked three times by the In­vest­ment In­dus­try Reg­u­la­tory Or­ga­ni­za­tion of Canada (imag­ine squeez­ing that let­ter­head onto a piece of pa­per) to ex­plain the in­crease in its share price and trad­ing ac­tiv­ity (daily vol­umes above 600,000 shares). Each time, East­wood replied that it had noth­ing to ex­plain. East­wood’s pres­i­dent and CEO, Yunji Kim of Van­cou­ver, holds 47,855,000 (or 69.47 per cent) of the com­pany’s shares.

For the third QT, John Travaglini’s sec­ond cap­i­tal pool shell, Plat­form 9 Cap­i­tal Corp. (PN: halted), plans to ac­quire Up­tempo Inc., a fi­nan­cial tech­nol­ogy com­pany with of­fices in New York and Flor­ida. The terms are not yet avail­able, but Up­tempo plans to raise $13-mil­lion. Up­tempo has a mo­bile app that en­ables U.S. bor­row­ers to man­age their bill payments. Its tar­get bor­row­ers are those who need help with or­ga­niz­ing their fi­nan­cial sched­ules, for in­stance, those who need to make car loan payments on a fixed date each month but who re­ceive their wages bi­weekly. Up­tempo ex­plains, “You pay us on your sched­ule; we fa­cil­i­tate pay­ment of your loans when they are due.” This way, Up­tempo adds, the bor­rower would not fall be­hind on his payments and ruin his credit his­tory.

There are many bill pay­ment man­age­ment apps that are avail able for free . Up­tempo’s app is not free. This is prob­a­bly why the com­pany is push­ing the app not pri­mar­ily to bor­row­ers but to lenders. Up­tempo says there are over 370 lenders, mostly car deal­er­ships, that are mak­ing their cus­tomers use Up­tempo’s app. The lenders re­ceive a fee for this sort of re­fer­ral. They also gain ac­cess to Up­tempo’s data­base of user in­for­ma­tion, specif­i­cally which users are good at keep­ing up with their payments. In other words, Up­tempo is of­fer­ing its users’ data to lenders, al­low­ing them to find po­ten­tial new cus­tomers from among the app users. Up­tempo counts “tens of thou­sands” of bor­row­ers who are us­ing its app. It is un­clear how many of these users un­der­stand that Up­tempo is mak­ing money off them in two ways. First, they pay to use the app. Then, their data are be­ing used by Up­tempo to at­tract more lender part­ners. Usu­ally, you are ei­ther a pay­ing user or a saleable data provider, not both. For ex­am­ple, peo­ple do not pay to use Face­book, but Face­book col­lects its users’ per­sonal data and uses those data to at­tract pay­ing ad­ver­tis­ers. Any­way, we should find out whether Up­tempo is prof­itable when Plat­form 9 Cap­i­tal sub­mits its QT fil­ing state­ment.

On clos­ing of the QT, the re­sult­ing is­suer will have five di­rec­tors: Mr. Travaglini, Michael Hilmer, Ja­son Ewart, Art Man­narn and Wil­liam Ross. Mr. Hilmer is the chair­man and CEO of Up­tempo. Long ago, from 1989 to 1996, he was a man­ager with CIBC Wood Gundy. Af­ter­ward, he moved on to the tech sec­tor. From 1998 to 2005, he ran an IT ser­vices firm in Toronto called Mil­len­nium Care Inc. Then from 2005 to 2012, he was the CEO of One Con­tact Inc., a cus­tomer ser­vice out­sourc­ing com­pany (a call cen­tre). From April, 2015, to Oc­to­ber, 2017, he was the CEO of DealNet Cap­i­tal Corp. (DLS: $0.08), which of­fers fi­nanc­ing for home im­prove­ment projects and equip­ment. DealNet peaked at $1.08 in late 2015. When Mr. Hilmer left, the stock was trad­ing around 15 cents.

The next di­rec­tor nom­i­nee, Mr. Ewart, is an an­a­lyst and the ex­ec­u­tive vice-pres­i­dent of cap­i­tal mar­kets for Up­tempo. For 14 years to Oc­to­ber, 2017, he was the CEO of Foun­tain As­set Corp. (FA: $0.60), for­merly called GC-Global Cap­i­tal Corp. Foun­tain is an in­vest­ment and fi­nan­cial ad­vi­sory firm in Toronto. Its stock peaked at $1.45 in 2006.

The next di­rec­tor nom­i­nee, Mr. Man­narn, worked for more than 20 years at Cana­dian Im­pe­rial Bank of Com­merce (CM: $115.70) in po­si­tions in­clud­ing manag­ing di­rec­tor of CIBC World Mar­kets and deputy head of CIBC Wood Gundy. The fi­nal di­rec­tor nom­i­nee, Mr. Ross, is se­nior coun­sel with WeirFoulds LLP in Toronto. He is also a di­rec­tor of the Royal Cana­dian Mint.

Plat­form 9 Cap­i­tal listed in June with a $335,300 IPO at 10 cents. It is Mr. Travaglini’s sec­ond shell. He runs an in­vest­ment firm in Toronto called 4Front Cap­i­tal Part­ners Inc. He is also a part­ner at Plat­form 8 Inc., which ad­vises first na­tions groups on casino de­vel­op­ment. Mr. Travaglini listed his first shell, Plat­form Eight Cap­i­tal Corp. (PEC: halted), in Fe­bru­ary with a $334,700 IPO at 10 cents. Plat­form Eight is work­ing on a po­ten­tial QT with GrowForce Hold­ings Inc., a li­censed mar­i­juana grower in Bramp­ton, Ont.


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