Shell Summary for June 5, 2018

JUNE 5, 2018

THE TSX Venture Exchange gained 6.09 points to 767.85 Tuesday. Murray Moore’s first capital pool shell, Colson Capital Corp. (COLS: halted), plans to acquire Honest Inc., doing business as Province Brands of Canada, for the shell’s qualifying transaction. Province Brands is a company in Toronto that is working on marijuana beer that will get you high but not drunk. The terms of the QT are not yet available, but Province Brands must raise at least $5-million before the deal can close. It has thus arranged an $11.5-million private placement of unsecured convertible 8-percent notes. (It has not yet stated the issue price or conversion price.) Province Brands and Colson Capital are giving themselves until Aug. 31 to upgrade their letter of intent into a definitive agreement.

Province Brands’ competitors typically inf use marijuana extracts into beer. Province Brands, however, has come up with a patent-pending process for making so-called beer using marijuana instead of barley. Its products are therefore non-alcoholic but, because of the marijuana, still psychoactive. Province Brands says it has two prototypes, an imperial pilsner and a blonde ale. It is working with Loyalist College of Belleville, Ont., to develop the recipes. In February, Loyalist received a $300,000 grant from the Ontario government for this research and development project. Loyalist Prof. Kari Kramp says non-alcoholic marijuana-brewed beer could have a nutty taste, but it is still too early to say for sure. Province Brands aims to have saleable products in the second half of 2019, when marijuana edibles are expected to be legalized in Canada for recreational consumers.

Province Brands plans to build an 80,000-square-foot commercial brewery near Toronto before the second half of 2019. As part of its financing efforts, it raised $2.06-million in March, 2018, by selling preferred shares at $1 to Chuck Rifici’s Cannabis Wheaton Income Corp. (CBW: $1.29). The shares then represented a 10-per-cent equity interest. Under their deal, Province Brands also received 303,030 shares of Cannabis Wheaton. In a separate financing in March, Province Brands sold $4-million worth of preferred shares at 80.43 cents to 86 investors, mostly from Canada and the United States, but there were also six investors from Sweden, three from the United Kingdom, one from Japan and one from Turkey.

Province Brands’ cofounder and chief executive officer is Dooma Wendschuh. He repeatedly describes his company’s products as a safer and healthier alternative to alcoholic drinks. He notes that consumers of his company’s drinks will not be exposed to the risk of liver cancer or even hangovers. He decries alcohol as poison. Commenting on the $300,000 grant to Loyalist College, Mr. Wendschuh explains that the Ontario government approved the grant because Province Brands’ brewing process uses marijuana

stalks, stems and roots, all of which are waste materials for licensed marijuana growers. These waste materials cannot easily or cheaply be thrown away, because marijuana is a controlled substance. Province Brands thus offers a waste-reduction service, explains Mr. Wendschuh. Environmental and health benefits aside, Province Brands’ efforts might come down to one thing in the end, that is, whether its drinks taste good.

Before getting into the marijuana sector, Mr. Wendschuh was a co-founder and the CEO from 2001 to 2013 at Sekretagent Productions Inc., a video game production company and advertising agency in Los Angeles. Sekretagent’s projects have included writing for Assassin’s Creed, a popular video game developed by Ubisoft Entertainment SA. In 2014, Mr. Wendschuh co-founded a Colorado marijuana R&D company called Ebbu LLC. Apparently, he later had a falling out with his Ebbu co-founder, Jon Cooper, and so he moved on to Province Brands in 2016. These days, Ebbu is working with a Colorado company called Ceria Beverages Corp. to come up with non-alcoholic marijuana beer. Ceria’s founder, Keith Villa, created the Blue Moon beer for MillerCoors LLC. Aside from Ceria and Province Brands, there do not seem to be any other companies selling or working on non-alcoholic marijuana beer. In California, however, a company operating as Rebel Coast Winery is accepting preorders (from Californians only) for non-alcoholic marijuana wine, specifically white wine. The price is $59.99 (U.S.) a bottle.

According to documents filed by Province Brands with the B.C. Securities Commission, Mr. Wendschuh’s fellow directors are Jennifer Dianne Thomas and Ernesta Redi. Ms. Thomas is a lawyer in New York. She is the other co-founder of Province Brands. The third director, Ms. Redi, is an investor in Berlin. Province Brands also has a business development officer, Elad Barak, an engineer in Toronto. Previously, he was the vice-president of business development at eCamion Inc., a lithium-ion energy storage company in Toronto. From 2008 to 2013, he worked with Israel Aerospace Industries Ltd. Before that, he was a security officer at Israeli embassies in Ukraine and Mexico. He was also a lieutenant with the Israel Defence Forces.

Colson Cap ital list ed in September, 2017, with a $600,000 initial public offering at 10 cents. Mr. Moore, an accountant in Calgary, is the shell’s promoter, chief financial officer and secretary, but he is neither the CEO nor the largest escrow shareholder. The shell’s CEO and largest escrow shareholder is Michael Doyle, a geophysicist in Calgary. He holds 400,000 escrowed shares. He is also the CEO of a capital pool shell called Richmond Road Capital Corp. (RRD: halted), which listed 5-1/2 years ago and does not have a QT in progress. On May 18, 2018, Richmond Road requested a halt, pending news, presumably about a QT, but the news has not yet arrived.