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InThisIssue

July2017

ReturnsYTD 1YR 3YR* 5YR*+2.7% +9.8% +1.9% +11.8%

*Annualized

Top5HoldingsCompany %of

Portfolio7.66.46.46.04.9

Company Sym ChangeBNNPickDate

RecentBNNTopPicks

Watergatewasinfullbloom.Iwasaglobalveteranpreoccupiedelsewherewithotheradventuresand stayed quite apolitical until gripped by the campaigning and thebullying as the gate startedopening for Trump. Watergate came to me by way of a TV documentary this July and it wasBREAKINGNEWS!NoonewarnedmethatTrumpgatehas thesameoldbuzzwordsandscenes–leaks,Russia,tapes,lies,impeachmentwithvariations thereof. InTrumpgatetheyhavedresseditup–or down– and Imustsay it suffers by losingaquitecivilisedor at least agentlerbanterofWatergatetime.However,itwasnosurprisewhentheword“impeachment”firstslippedintothepoliticalvocabulary.Abigdifferencebetweenthenandnowisthattheeconomyandunemploymentareinbettershapetodaysowemightdowithoutanotherpresidentforawhile.Onthemarket,itlookslikeamid-yearstandstillwithsomeexceptionalmovesinindividualstocksthough not to be found generally in financials and resources. But do not rule out big surprises.Perhaps the Canadian dollar will continue to do surprisingly well even without its customarysupportive performance from oil and gas. Perhaps being the nice country with the nice primeministerinthesetimesisallittakesforCanadatoruletheworld!u

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…Infactithasarrivedwhilemassperceptionofhydrogen cell power is numbed by the biggerpictureoflithiumionbatteries.Justthreesmallcompaniesinmyviewdominateinhydrogen.TheyareBallardPowerSystems(BLDP-TSX & NASDAQ), Hydrogenics Corp.(HYG-TSX,HYGS-NASDAQ)andITMPowerPlc(ITM-LSE). They updated investors at a RothCapital Cleantech and IndustrialsConference inLondoninJune.Believers inhydrogen fuellinghavebeenscarcesince Ballard, which was once a two hundreddollar stock, burned investors like no other –exceptforNortel,Blackberryandmorerecently,HomeCapitalintheCanadianmarket.The three hydrogen players are already linkedwith thousands of endpoints in transportationor stationary storage equipment – cars, buses,

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forklifts, trucks, as well as other substitutionsfor internal combustion engines and asalternatives to electric batteries. They haverecognition and support from many keyprofessionalbodiesandmajorcorporations. Allthreeappeartobeclosinginonbreakeven.Hereisaverybrieflookatthethreecompanies.Least known toCanadian investors, ITMPowerPlc has about 70 employees and is based inSheffield, England. It is at the forefront in thebuildingofhydrogenbusfuellingstationsintheU.K. where 65 across London and beyond areplannedunder oneofmanyprojects inEurope.ITM is also in California, France, Germany andother European countries. Several cities arereplacing diesel buses. London, which isintroducing “toxicity charges” this year for carsina“mostpolluting”categoryhascommitted tophasing out the ordering of pure diesel buses.

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TMX Group – Beloved of the Banks

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London’s Mayor launched the firsthydrogen-powered double-decker in theworld in November last year. Fleets ofhydrogen buses are being orderedelsewhereinEurope.ForITM,thepasttwoyearshavebroughtonnumerousgrantsformingarevenuebacklogof about £27.5 million and the companylooks for profitability within 18 months.The company has about 250million issuedshares and the largest shareholder isAllianzSE(ALV-GR)with22.15%followedby about50other institutional holders andjustbelow10%heldbyinsiders.IthasbeenAIMlistedsince2006andisdown6.6%YTDaftercorrectingfromaJunehighof25p.TheCanadianPioneersBallard, the only name in the SmedleySpecial Opportunities Fund was priced at$3.74attheendofJune,up68.5%YTDanddownfromahighof$4.47inMay.Thestockonce traded above $200! Also awaitingprofitability, it has been operating for 38years,20as a listedcompany. Ithas3,600employeestodayandrevenueisatthe$85.5

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million level, forecastedover $100million.After its initial unimpressive rush intohydrogencellbatteriesforcarssolongagoit is in multi-year bus testing programsacrossEurope,withLondonTransportandin Orange County, California. Its choiceactivity is in China with Broad Ocean, its8.5%strategicshareholder,abig industrialenterprise.Ballard’s Chinesepartner ismanufacturingbuses for the domestic market andcurrentlyhasa16,000vehicleprogram,thepropulsion part licensed out by Ballardwhichwill also take royalties. The capitalcostofafuelcellbusappears tobeUS$9mandvolume is needed todrive costs downtoward the $600,000 level of electricbattery vehicles or $250,000 for a dieselbus.Thethirdcompany,Hydrogenicsstartedupin Canada in 1995. It has achieved arevenue level of $33.5 million and risingand has a backlog of more than $110million. Thereareonly13.5millionsharesfullydilutedwhich inpartaccounts for thestockpricerisingthisyear127%to$13.05at the endof June. Differing fromBallard,this company is at the front end of theprocesses – in electrolysis, that separateswater intohydrogenandoxygen. It isalsobringing on power modules of the scaleneeded for zero-emission passenger trainsnow under advanced testing in the CzechRepublic and in sales engagement throughmarketleaderAlstomTransport.u

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”Lovingustilldeathdouspart”theTMX,inmy view, might say about the majorCanadian banks, its key shareholders. Amore than40%growth in its stockprice inthe past year, good dividends and futurepromisemakesitunlikely–alsoinmyview– that they will do much selling down aspermitted in September. Itwillbe recalledthat theybattled andwon against a plan toslide the exchange across the Atlantic andintothearmsoftheLondonStockExchange.Thebanks arenot likely togo through thatkindoftrialagain.I know a thing or two about investing instock trading platforms. The Smedley

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Special Opportunities Fund is doing ratherwell in the OTC Markets Group (OTCM-US), which trades in about 10,000securities. It has replaced the old pinksheets and has taken over the juniorelectronic platforms. Wall Street andAmerican entrepreneurshipbenefit from itbecause of its own performance and thenurturing of new public companies thataspire to be on the main board. It wasestablishedquiterecently,thebrainchildofCromwell Coulson, formerly a brokerspecializing in distressed and value-addedcompanies. Weirdly, the company seemsunknown tomost stock exchange analystsbut that could be because there are only

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11.4millionissuedsharesandcloseto40%are owned by the founder. As well asgrowth it has established a reputation forregular and special dividends. I expect tolikeittilldeathdouspart.BacktoCanada.IfasellingdownoftheTSXdoes take place in September, a limitedbenefit would be some improvement inshareliquidity. Thathasalreadyhappened;thebanks’ co-investors, fourmajorpensionfunds who joined the banks in what wascalled the Maple project, took out someprofit inashare issue inAugust2016. Thefunds now own about 25% of the TSX andthebanks–TD,Scotia,CIBC andNational–

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Patriot One – Deter, Detect, Defend

(FLT-CNSX)

(YFI-TSXV)

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So goes the motto of Patriot OneTechnologies (PAT-TSXV), a Canadiancompanyengagedinwhatlooksincreasinglyimportant – weapons detection that isdeeper, more covert and in much broadersettings than in scanning processes as atairports, building entrances and at othercheckpoints. Sadly, there appears to be noretreat.PatriotOnebelievesitisinthefrontlineofattack.The purpose and the future business ofPatriot One is to provide enhanced metalrecognition capabilities for clients throughnew skills to detect suspicious objects.Perhaps passing by, perhaps knives, orassault rifles. The service might beprogrammed to be smart about what itdetects so that the user might decidewhether to take action or not. Considerselectivity in an extreme situation: thesystem might show an observer with anormal percentage of small handguns,lawfully held, passing through an area, asmightbecommonin theUnitedStates. Theequipmentdiffersfromfixedvisualscanningin that it is intended for covert non-visualuse,perhapsconcealedbehindadrywallinan office or a hotel, for example. Its usecould be synchronised with cameras andothertypesofsurveillance.The only comparable capability known toPatriotOneisofferedbyaU.K.companybutinthatcaseapparentlytheequipmentistoo

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bulky for covert operation. The firm isQinetiq Group Plc. (QQ-LN), which has anumberofdefenserelatedservices.Patriot One was established about a yearago as a public company. It is thecommercial outcome of many years ofresearch at McMaster University inHamilton,ledbyDr.NataliaK.Nikolovawhocontinues on atMcMaster and now acts asChief Science Advisor to Patriot One. Shedid not know initially that her academicwork could lead to this. Thecompanyalsohas an expert board, linkswith one of thebiggest security consultancies in theworldand big corporations like Tyco andHoneywell. It has been busy buildingdistributor representation and has startedtotakedepositsinahealthyorderpipeline.The company sees its initial targetmarketsasCanada,theU.K.andtheU.S.Patriot One’s technology centre is inBurlington,Ontario. Itassemblesantennaethere and orders other components fromelsewhere. Patenting processes andworldwidelicensinghavebeentakingplaceand management is building variousinternational collaborations. For example,the project work at McMaster has NATOfunding. PatriotOne sees itself as the firstcost-effective solution for “active shooter”prevention.RunningthefirmisMartinCronin,CEO,who

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hadalongcareerinsecurity-relatedworkwiththeBritishgovernmentintheMiddleEast and Asia. He was approached byfounders for advisory contribution andjoined the company full time. The totalstaff is about 25. There are 59 millionissued shares ofwhich 25% arewith thefounders and around 20% are withmanagement members and a few in thehands of McMaster connections. Thepresent cash burn rate is about $40,000permonth, thelatestreportedcashfigureisapproximately$350,000andMr.Croninis confident of the support that willcome from clients when firstinstallations of equipmentare inplaceina fewmonths. Investmentanalystsarejust starting to become aware of thecompanyanditswork.u

TMX Group – Beloved of the Banks

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could,underrules,selldownbutwouldstillholdaminimumof30%intotal.Anincreaseinthefreefloatwouldbehealthy. Sincethepension funds trimmed positions, thetradingintheshareshasincreasedbytwotothreetimes.AcurrentphaseofprogressisgenerallyseenasstartingwiththearrivalofLouEcclestoneas CEO after a prolonged search in 2014.NotbeingfamiliarinBayStreethenaturallygave the market cause for thought. Mr.Eccleston is a data-driven individual whowas S&P Capital IQ President and thenChairman of S&P Dow Jones Indices. The

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TMX set about building up in-housetechnologysolutions. TheheavydatahandofLouEcclestonewasbroughttobearbutitseems that other leadership requirementscame through. Benefits of the efforts havestarted but a building of the top-line willnowbeexpected.Thoughrevenueswereuponly 3.5% after much transformation,EBITDA last year expanded 13% andoperatingEPSby21%.Itseemslikelytherewill be big free cash flow ongoing,potentiallyraisingthedividend.LouEcclestonisagloballythinkingman.Hetold a small group of fund managers andanalysts invited by CIBC to an updatingsession that theTMX sees itself as a globalbusiness, but not necessarily into buyingforeignexchanges. Theglobal touchshows

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through inachieving veryhigh ranking inthe world in attracting internationallistings as well as being top dog in acombinationofmining,oilandgas,energyservices,cleantechnologyandrenewables.The TSX Venture Exchange has becomequite a strong feeder of companies ontothemainboard.Itisof courseownedby the TSX. I see the Venture assimilar in roles to the independent OTCGroup Inc. (OCMB-US) in the U.S.,mentionedearlier.Among attractions the TMX mighthave for investors, as Lou Ecclestonputs it, the exchange has a 66-67%share of “best market” pricing andtherefore it is not being overwhelmedbytradingcompetition.u

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Dr.NataliaK.Nikolova,source:www.patriot1tech.com

Smedley Special Opportunities Fund

MichaelSmedleyP:(416)366-2931TollFree:1(866)443-6097E:funds@mmainvestments.com

How To Invest With Michael

About Morgan Meighen & Associates

About Michael Smedley

MorganMeighen&AssociatesLimited10TorontoStreetToronto,ON,M5C2B7,Canadawww.mmainvestments.com

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After years of perfecting high-densitymulti-channel WiFi, Edgewater WirelessSystems (YFI-TSXV) appears close tosolving a bottleneck threateningcommunications. All traffic up to nowsurges along a single channel that is agrave problem for the big carriers and yetlargely thepublic awareness. It is going togetmightilyworseastrafficdensitysoarsastheageoftheinternet-of-thingsbringsonascoreormoreofWiFiactivepointsin just one household and the averagethree portable devices already on a singleperson.As Ihavewrittenbefore inconnectionwithEdgewater – I know the problem. I wastrapped in New York withoutcommunications during 9/11 and morerecentlystuckwithhundredsofothersallnight in Dallas/Fort Worth airport. Inscenes of more pleasant drama, likestadiums and other entertainmentvenues, devices can collide, go inoperative,orintoseriousdelaymode.Whileidentifiablecompetitorsaresaidtobe

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relyingonasingle channel, EdgewaterhasperfecteditsWiFi3™andaftermuchlabourhasreachedthepointatwhichasix-figurefee isbeingpaid fora trialatamajorNewYork venue and might lead to connectedinstallations around the world. A secondtrialshouldstartatamajorretailoperationforwhichEdgewaterwillcustomizeinstantcommunications services for staff,departments and customers. Mostimportantly there are discussions underway with cable industry leaders who aremoving toward massive disruption bytrafficoverload.I gather that scientists have been slow inengineering multi-channel capacity.Various capacity upgradeswere generatedinthepastfewyearsthattheindustrysaidwouldtakecareofusinthefuture.Notso.Edgewater believes its WiFi3™ multi-channel system is the answer. Thecompany has secured customers and isshipping product on a small scale butbelieves it is weeks away from a major

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business breakthrough. A multi-task testprogramisunderwaywithina largeretailoutletinNewYork.The company was originally a divisionalactivity of Edgewater Computer Systems,Inc. which is a private company servingmainlyaviationanddefenceindustryneedsintheU.S.Thatcompanystillowns7.6%ofEdgewater Wireless, which was untilrecentlyonthesamepremises.YFI has defended its technology withpatents, more than 20 so far, and hasestablishedregulatoryapprovals todate inCanada, the U.S., the EU and Brazil –approvalsnoteasilyobtained.I havebeen into the stockwithout successbut management has expertise, isconvincing and seeking more awareness.The stock should lift if a big contract winoccurs.u