MQPXF: Matica Enterprises (CNSX:MMJ) Analysis and Research Report

2018-03-19 - by Asif , Contributing Analyst - 183 views

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Overview

The Company was incorporated pursuant to the Business Corporation Act (British Columbia) in November 2007 under the name of Cadman Resources Inc. The Company was initially listed in July 2008 as a capital pool company ("CPC"), as defined in the policies of the TSX Venture Exchange (the “Exchange”). In December 2010, the listing of the Company’s shares was transferred to the NEX Board. In July 2012, the Company began trading on the Canadian National Stock Exchange (“CNSX”) under the symbol “CUZ” and voluntarily delisted from the NEX board.

In April 2014, the Company changed its name to Matica Graphite Inc. and began trading under the new symbol “GRF”. In July 2014, the Company changed its name to Matica Enterprises Inc. In July 2014, the Company’s shares were accepted for trading on the Frankfurt Stock Exchange.

In 2014, the Company completed a change of business with a primary focus in the medical marijuana industry. As a result of the change in business focus, trading of Matica shares was halted in August 2014 and resumed trading in November 2014 as “MMJ”. The Company had retained an exploration property portfolio.

The Company has continued to acquire, evaluate and dispose of exploration properties and also to evaluate opportunities to invest in parties that are applicants under the Health Canada Access to Cannabis for Medical Purposes Regulation (“ACMPR”)

Exploration Activities:

Nevada, U.S.A.

In September 2014, the Company entered into a property option and royalty agreement to acquire a 100% interest in the Grumpy Lizard Project. As consideration, the Company paid $57,291 and issued 3,400,000 shares to three individuals at a fair value of $272,000 as well as incurring $23,403 in staking costs. This agreement was subject to a 2.5% NSR on any materials sold from the project. The original claims were abandoned in 2015 and the exploration and evaluation balance for this project of $352,694 as at December 31, 2014 was recorded in 2015 as an impairment expense.

During 2015, the Company staked additional claims to the Grumpy Lizard Project. The company incurred 2015 staking costs of $10,057 (US$8,298.20), 2015 exploration and evaluation expenses of $26,676, and 2016 renewal costs of $2,225 (US$1,550). The balance of exploration costs of $38,958 were recorded as impairment at December 31, 2016.

In October 2015, the Company signed a property agreement to acquire 100% interest in the Clayton Valley Lithium Project located in Esmeralda County, Nevada. The Company issued 6,000,000 common shares to two companies at fair value of $240,000 and paid $15,000 in acquisition costs. The $255,000 was charged as an impairment expense in 2015 as the Company had no future exploration plans for this property.

In February 2016, the Company signed an agreement to acquire additional lithium claims in the Clayton Valley, Nevada. The Company signed an agreement to acquire a 100% interest in the McGee claims located in the south-eastern Clayton Valley. The payments required for a 100% interest were $23,244 (US$17,500) due at signing (paid) and a further US$30,000 due within 12 months of signing (the property was sold prior to the US$30,000 becoming due) and 8,500,000 common shares issued in February 2016 at a fair value of $255,000. These were issued 6,500,000 common shares to four companies and 2,000,000 common shares to two individuals jointly as spouses. There was a 3.75% NSR associated with the property. In March 2016 the Company entered into a letter to intent with Cache Exploration Inc. to option the McGee Lithium Project in Nevada. In May 2016, the letter of intent was terminated by mutual consent.

In July 2016, the Company agreed to sell the two Clayton Valley lithium properties to Spearmint Resources Inc. (“Spearmint”) for 4,700,000 common shares of Spearmint (received at a value of $188,000). The Company continues to hold a 2% NSR on one of the two properties. Spearmint may purchase half of the 2% NSR for US$500,000. These shares had been pledged as security for the $30,000 loan received by the ompany in October 2016 which has since been repaid in full.

Medical Marijuana Activities:

In October 2014, the Company entered into an investment agreement (the “THCD Agreement”) to acquire a 50% ownership interest in THCD. THCD was a private company incorporated under the laws of Nova Scotia. THCD was in the process of applying to become a licensed producer under the Health Canada marijuana for medical purposes regulation program (“MMPR”).

To obtain an initial 50% ownership interest, the Company had agreed to fund THCD by $325,000 (provided) and to issue 1,000,000 common shares (624,000 issued to one company and 376,000 issued to one individual as directed by THCD at a combined value of $130,000). Upon THCD becoming a licensed producer, the Company would have been required to fund THCD for a further $1,175,000 ($240,000 of which was advanced in 2015) and delivering an additional 4,000,000 common shares to THCD nominees.

The Company provided THCD with an additional $240,000 in 2015 in anticipation of THCD becoming a licensed producer. The additional $240,000 paid to THCD was intended to be used for the purchase of HVAC equipment required in preparation for the pre-licensing inspection by Health Canada. These additional advances reduced the balance of the amount outstanding that the Company would have been required to fund upon THCD becoming a licensed producer.

In November 2015, the Company filed a notice of civil claim in the Vancouver registry of the supreme court of British Columbia naming THCD, Francis MacMaster, CEO of THCD, and other related parties as defendants in an attempt to recover funds and other damages suffered by the Company. The Agreement provided that, should a license not be granted by Health Canada by October 31, 2015, then the Agreement would terminate and Matica would return its 50% shareholding in THCD. The Company contends that Mr. Francis MacMaster, the CEO of THCD, failed to complete the facility and created conditions under which the October 31, 2015 deadline could not be met.

In May 2017, the Company reached a third party settlement in regards to its legal action against THCD and other related parties. Matica is to receive shares of the third party at a deemed value of $700,000. in two tranches of $350,000 each. The first tranche of 350,000 shares at a deemed value of $350,000 has been received. The second tranche of shares at a deemed value of $350,000 is to be issued on the date of issuance by Health Canada of an ACMPR cultivation license to THCD.

OUTLOOK

Matica is currently completing the build out of a 10,000 square foot medical marijuana growing facility in Dorval, Quebec. The Company has recently raised over $2.5 million to complete the build out and anticipates that the facility build out will be completed by end of November 2017. Matica further anticipates becoming a revenue generating medical marijuana company in 2018.

The marijuana market is evolving rapidly with the anticipation of the legalization of recreational marijuana announced to take place on July 1, 2018. The estimated base retail market value of recreational marijuana is projected to be in the billions. The Company continues to evaluate projects in the medical marijuana sector, including, but not limited to, the agricultural, medical, technological, and property development sectors of the industry.

Recent developments

February 8, 2018 – Matica Enterprises Inc. announced that the Company signed a non-binding letter of intent (“LOI”) for Matica to purchase a controlling interest in a Quebec based health and personal care research and innovation technology company. Matica Enterprises is pleased to have come to an agreement on terms and will quickly proceed to a definitive agreement (the “Agreement”).

As Matica nears the completion of its cannabis growing facility in Dorval, management recognizes the acute need for alternative cannabis delivery systems, including pain relief topicals. With this acquisition Matica can direct research to produce new topical products such as balms, creams and salves. The target company is based just outside of Montreal and is a leader in sustainable, clean, health and personal care products. Using proprietary mineral and plant based suspension technologies which can create unique alternative clean ingredients, Matica intends to develop revolutionary topical products within the cannabis space.

After successful due diligence and signing of the definitive agreement, Matica will invest $2,000,000 to acquire a 25 per cent interest.

February 21, 2018 – Matica Enterprises Inc. announced that further to its January 26, 2018 News Release, the company has completed all adjustments necessary to ensure that the facility in Dorval Quebec should meet Health Canada's stated revised requirements as per Health Canada's January 25, 2018 announcement.

Management is pleased to announce that RoyalMax Biotechnology Canada Inc. (“RoyalMax”) has submitted the Confirmation of Readiness for a License under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) to Health Canada for the production facility in Dorval, including the Photographic-Evidence video to Health Canada to request a cultivation license.


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