LiveWell Canada Inc becomes Eureka93

On December 3, LiveWell Canada issued a news release announcing a possible merger with Vitality CBD Health Products to create a world-class life sciences company specializing in CBD, one of the first fully integrated companies to address  the growing demand for CBD products from hemp and cannabis.

Vitality is a hemp CBD growing and production company while LiveWell is a CBD research, development, marketing and distribution company. Together, they would combine their Canadian and US operations to meet the growing demand for CBD in North America and international markets.

Under the terms of the agreement, Vitality’s shareholders would own 85% of the new business while LiveWell’s shareholders would own 15% of the company. The distribution could be 90% / 10% if Vitality were able to produce 3000kg / day of CBD by 30 June 2019.

On April the 10th. Vitality’s shareholders voted in favor of the merger, while the following day, April 11, 2019, 97% of LiveWell’s shareholders accepted the merger between the two companies, creating the new EUREKA93 company, which will trade under the symbol ERKA. Eureka93 comes from the fact that the facility in Montana is in the city of Eureka, accessible by road 93. With a bit of imagination, the leaders say Eureka, what a good idea …

The final proportion of the agreement ultimately allows LiveWell’s shareholders to own 15% of the shares of the new company. The rest will be held by the shareholders of Vitality (83%) and those of Mercal (2%).

To date, the acquisition of Acenzia (research and development, Windsor) has been completed. Eureka93 is in the process of finalizing the sale of CBD isolate in Tilray (Nasdaq: TLRY) at a rate of 300kg / month starting in the summer of 2019. Other agreements are being negotiated. The adoption of the Farm Act Bill in the United States last December has allowed companies to grow hemp legally. This created a craze for this product and for CBD (non-psychotropic part of Cannabis). In addition, the fact that these products were banned for several years implies that there has been almost no research and development. Eureka93 has a competitive advantage due to its progress in these areas.

The company currently produces about 50Kg / day of CBD at its Montana plant. It is the largest producer in North America for the moment. According to the forecasts of the managers, this production should increase gradually to 100kg / day in Q3 2019 then to 200kg / day towards the end of the year. The Las Cruces plant (New Mexico) is under renovation and is expected to be in operation in Q3 2019 with a potential production of 1000kg / day. It is expected that in 2020, the plant could produce up to 4000kg / day at its maximum operating level.

Eureka93 already has four high-potential customers who are willing to buy a good part, if not all, of the company’s CBD production (CEO’s statement at the April 11 meeting). The price of a wholesale kilogram of CBD ranges from $ 6500 to $ 10,000 per kilogram. Eureka93 will also enter the retail sector with refined products and isolates, profitability being significantly increased

Managers have announced that a request has been made to integrate the NASDAQ. For this reason, the new firm has consolidated the shares of LiveWell Canada at a ratio of 15: 1. In doing so, the company assumes that the share price will remain above US $ 4, the minimum amount required to enter the NASDAQ. It is mentioned that the registration for this stock market exchange could be done in the summer of 2019. In the meantime, it was mentioned during the meeting that, following the results of the votes of the shareholders, the firm had about two weeks of paperwork to be done before submitting it to the Canadian Stock Exchange. In the wording issued by the firm, the latter expects the stock to be listed at the end of April.

Obviously, it is not possible to determine the price of the stock at its next exit, it would be only speculation. However, the company’s management mentions that it would be normal to have downward pressure at the time of opening (statement of the CEO at the meeting of April 11) given the time elapsed since stopping transactions. At the time of the trading stop, LiveWell’s stock traded at $ 0.74 per share. As a result of the consolidation, this equates to $ 11.10 for the new Eureka93 stock (15 times 0.74 = 11.10). There will be approximately 74 million shares outstanding.

Finally, I would like to point out that the AGROTECH bond, a product we currently distribute at Cape Cove Financial Management, has an exposure in Eureka93 (originally LiveWell stock) and is available for some time as a new portion is added to the available capital. This bond will give you a 10% distribution per year for 3 years followed by a profit sharing afterwards where the investor will take 75% of this profit.

I remain available for any questions you may have.

 

Luc Chartrand

514-995-4584

 

A decade with no probable returns

All the following information is taken from Steve Blumenthal’s newsletter, “On My Radar: Balancing Offense and Defense, Equity Market Valuations and What They Tell Us About Coming Returns,” dated March 8, 2019.

According to Blumenthal, the goal of any investment portfolio is to capture growth while preserving capital, although these two may conflict with each other. Taking more risk can suggest better returns with the risk of losses in the event of a market downturn, while being more conservative in order to preserve capital could mean missing out on growth opportunities, no matter if in mutual funds, ETF (Exchange Traded Funds) or other investment tools.

Markets have periods of Bullish growth and Bearish decline. Depending on where we are in time, considering inflation, interest rates and other factors, experts give opinions on the development of the future trend of the stock market.

Mr. Blumenthal suggests a dozen graphs and charts highlighting the fact that according to experts consulted, the returns we should get from traditional markets over the next TEN YEARS should be minimal or even nil. In this document, we will focus on two of those charts, because a picture is worth a thousand words

The first chart shows: “The Household Equities Percentage vs Subsequent Rolling 10-Year of the S & P 500 Index Total Return” (SP500 is widely regarded as the best single gauge of large-cap U.S. equities).

This chart looks at equity ownership percentage. It has a high correlation (0.9, or 90%) to what future annualized returns turned out to be.

-The solid line represents the household exposure to equities, as a percentage, including mutual funds and pension funds. We are around 52.5%.

-The dotted line represents the average subsequent return that happened for the subsequent 10 years and is plotted on a rolling basis.

Here’s an example: In 2000, household exposure to equities was around 62% (scale on the left side of the chart). Referring to the right side of the graph, if it is true, the average return for the next 10 years could have been be expected to be about -3% per year on average. This prediction proved more or less accurate, the reality giving -2% on average between the years 2000 and 2010. So, today, we could foresee that the return on US equities for the next 10 years would be on average 3% per year before inflation, including dividends.

In summary, the more households are exposed to equity ownership, the lower will be the return of the next ten years.

The second chart deals with:Jeremy Grantham-GMO’S & Year Asset Class Real Return”.

Each month since the early 90’s, the Global Investment Financial firm – GMO publishes their forward return forecasts. This firm has a high correlation over time, 0.97 (1.0 being a perfect correlation).

For the next 7 years, GMO anticipates that US equity returns will average -3.7% and the US bonds expected return will be of -0.8%.

These forecasts issued by GMO are based on the reasonable beliefs of the firm and do not guarantee the future performance of the market

All those who have met me in the past 4 years know that I have integrated exempt market products into my service offering. I believe so much in this market because at the end of the day I can offer my clients an investment category that is not correlated with traditional markets, while suggesting quite respectable returns, considering the risk associated with this type of investment. What a nice tool to offer my clients to diversify their portfolio and reduce volatility. In addition, for the last year and a half, I have joined the firm Cape Cove Financial Management for the vision of the managers and for the opportunities that I could offer my clients so that they can enjoy the pleasant retirement they desire and deserve.

I am also, in addition to be a representative with an exempt market broker, a referral agent to our portfolio management department. Within the customer service offering, there are several investment opportunities that have no or little correlation with traditional markets (option portfolios, private real estate investment trusts, alternative or algorithmic products, tax efficient products, pre-IPO private equity shares). My objective is that, even if traditional markets do not provide the desired returns in the short term, I can offer you solutions that will help you achieve your goals.

 

Do not hesitate to contact me so that we discuss the present and your personal situation always in order to satisfy you fully

Luc Chartrand

lchartrand@capecove.ca

www.lucchartrand.ca

514-995-4584

 

WARNING. This announcement does not constitute an offer of securities on which you can rely to make your investment decision. The offer is qualified in its entirety by the offering memorandum of the issuer. Please read the Offering Memorandum before making any investment decision. The graphics and several comments are from Steve Blumenthal’s publication, On My Radar, March 8, 2019.