Analysts' Ideas of the Week Is the Spike in Inflation Transitory?

October 25, 2021

www.researchfrc.com

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Reddit Discussed Stocks

Our pick last week, Facebook (NASDAQ: FB), went from US$335.34 on Monday, to a high of US$343.98 on Friday (up 3%). The Electric Vehicle sector remains the most actively discussed among retail investors, followed by cryptos, cannabis, and betting. This week, we are observing strong retail sentiment around Revolve Group (NYSE: RVLV). Key parameters used may include – a) total number of mentions, b) percentage change in the number of mentions, c) stock sentiment, and d) market capitalization.

Oct 25, 2021

Company Ticker Sector

Revolve Group Inc. RVLV Internet Retail Source: FRC

Historic Weekly Returns (Mar 1, 2021 – Present)

29 out of 34 picks have generated positive returns Average return = 21.91%

*Returns were calculated based on the assumption that picks were sold at their peak the same week. *Past performance is not indicative of future performance.

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FRC Top Picks The following table shows last week’s top five performers among our Top Picks, including EV-metals juniors, and two silver juniors. The top performer, FPX Nickel (TSXV: FPX), was up 30%, on positive drill results (see page 11). Our prior reports can be viewed here.

Top Five Performers Last Week

Source: FRC

Companies in our Top Picks list were up 45.0% YoY (on average) vs 39.2% for the benchmark (TSXV).

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Performance by Sector

Source: FRC

Our complete list of top picks (updated weekly) can be viewed here.

Weekly Mining Commentary

Global equity markets were up 2.5% last week (2.1% in the previous week) amid a dip in U.S. treasury yields. The U.S. Fed’s latest comments indicate that they are in no hurry to raise rates, as they believe that inflation is transitory. As mentioned last week, considering the weakness in key economic indicators, we believe rate hikes will be slower than market expectations. The Bank of Canada is expected to start raising rates in H2-2022.

Source: FRC / Various

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We believe that inflation is unlikely to be transitory as U.S. M2 money supply is up 35% since the beginning of the pandemic. Prior to the pandemic, M2 had increased at just 6% p.a. in the last two decades. Note that rate hikes were unable to curb inflation during 2016-2019 (see charts below). Gold was up 16% during this period.

U.S Fed Funds Rate

U.S. Inflation

Source: Trading Economics

Copper and zinc prices retreated after reporting strong gains in the prior week. We believe that supply chain disruptions will support commodity prices in the near-term.

Source: FRC / Various

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Valuations of gold producers were up 3% WoW; base metals producers were down 2%.

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Last week, two (previously three) out of the 15 hardest hit nations experienced higher daily new COVID-19 cases. Two countries (previously one) experienced WoW increases in deaths. Globally, 48.66% have received at least one dose, up 1.05 ppt WoW vs 0.02 ppt the same time last week. 73.56% of Canadians are fully vaccinated (0.8 ppt vs 0.7 ppt) vs 66.77% in the U.K. (1.0 ppt vs 0.5 ppt), and 56.67% in the U.S. (0.4 ppt vs 0.6 ppt).

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Source: Our World in Data / FRC

We believe vaccine hesitancy remains a major challenge for developed economies, even though vaccinated people account for a small share of new cases and deaths.

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Distribution of confirmed COVID-19 cases reported to PHAC (Dec 2020 – Oct 2021)

Source: Government of Canada

We believe inflation, supply chain disruptions, and slow rate hikes will provide

near-term support to commodity prices. We are maintaining our price forecasts.

Updates from Resource Companies Under Coverage

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Aurcana Silver Corporation

TSXV: AUN $0.64 $1.14

PR Title Announced C$15M in private placements

FRC Opinion Positive - Proceeds will be used as contingency funding for restarting the Revenue Virginius mine, as well as for resource expansion. Mill construction is complete, and shipment of concentrates will commence imminently.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

FPX Nickel Corp.

TSXV: FPX $0.56 $1.34

PR Title Confirms significant new discovery in maiden drilling at Van target

FRC Opinion Positive – The first two holes of a nine-hole maiden program at Van (located 6 km north of the Baptiste deposit) returned promising values of nickel over long intercepts, including 101 m of 0.15%, and 103 m of 0.14%. This compares to an average grade of 0.12% for Baptiste.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Blue Sky Uranium Corp.

TSXV: BSK $0.30 $0.47

PR Title Provides drilling activity update for the Amarillo Grande uranium project, Argentina

FRC Opinion Positive - Results were generally encouraging. Although grades were low, we were pleased to see that multiple holes intercepted shallow mineralization. We continue to believe that the project has potential to host multiple deposits.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Cora Gold Limited

AIM: CORA £0.135 £0.18

PR Title Final drill results from its Sanankoro gold project

FRC Opinion Positive – Continues to report multiple long intercepts of high-grade gold values, including 17 m @ 17.13g/t, 19 m @ 6.14 g/t, and 22 m @ 3.28 g/t. An updated JORC compliant resource estimate, and DFS are expected in the coming months. We are expecting the new resource to be at least 2x of the existing estimate.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Cornerstone Capital Resources Inc.

TSXV: CGP $4.30 $7.44

PR Title Maiden resource at Tandayama-America (TAM) porphyry copper-gold deposit, Cascabel project, Ecuador

FRC Opinion Positive - TAM is 3km north of Cascabel’s main deposit (Alpala). The new resource expands the project’s resource by 10%, to 3.4 Blbs CuEq. As 60% of the resource has open-pit potential, the resource has lower grades than Alpala (0.36% vs 0.52% CuEq). We were very pleased with the resource as TAM can be a good satellite deposit. We continue to believe that Cascabel is a strong acquisition target. We will be publishing an update shortly.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

East Africa Metals Inc.

TSXV: EAM $0.28 $0.68

PR Title Updated Magambazi mineral resource estimate

FRC Opinion Positive – Total contained ounces remained flat, but grades improved 34%. In addition, the bulk of the inferred resource was upgraded to measured and indicated categories. EAM has a 30% streaming interest in the project, and can purchase 30% of produced gold for 115% of production cost. As higher grades will result in lower production costs, we believe EAM’s purchase price will be lower. EAM’s partner is planning to produce at least 10 Koz in year one of production. We will update our valuation when we have a better understanding of the project’s production costs.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Monarch Mining Corporation

TSX: GBAR $0.82 $1.44

PR Title Intersects significant gold mineralization one km south of the McKenzie Break deposit

FRC Opinion Positive – Indicates potential for resource expansion. The company plans to test the discovery at depth.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Quaterra Resources Inc.

TSXV: QTA $0.14 $0.42

PR Title Option to acquire B.C. mining properties

FRC Opinion Positive – We believe this deal diversifies the company’s portfolio. The option agreement relates to two properties in B.C. – one located east of the Golden Triangle, and one near Lytton. Option payments are mostly in shares. As they are in early stages, it is too early to comment on the potential of both projects. We believe management will commence exploration quickly. A recent US$4.13M financing puts the company in a strong financial position.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

South Star Battery Metals

TSXV: STS $0.18 $0.52

PR Title Closes non-brokered private placement ($2.4M)

FRC Opinion Positive - STS is aiming to commence production next year (subject to project financing), and has all the required permits

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Enertopia Corporation

OTCQB: ENRT

US$0.06 US$0.16

PR Title Receives positive third-party engineering study

FRC Opinion Positive – Results indicate potential for higher energy output relative to existing technologies. The company is advancing to fabrication and beta phase. We note that ENRT’s technology can be retrofitted onto existing PV (solar) panels, and potentially increase energy output and extend life of panels (by lowering heat stress).

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Golden Minerals Corp.

NYSE: AUMN US$0.51 US$1.03

PR Title Drills 18 m grading 2.9 g/t gold at Rodeo gold-silver mine

FRC Opinion Positive - These results reflect potential for resource expansion, and extension of Rodeo’s mine life. We were also pleased with 8 m grading 3.9 g/t, and 24 m grading 2.2 g/t gold. Q3 financials will be out shortly, and we are expecting record revenue.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Falcon Gold Corp

TSXV: FG $0.10 $0.29

PR Title Received high grade gold results, sampling program at the Central Canada project, Ontario

FRC Opinion Positive – High-grade grab samples (11.2 to 79.7 g/t Au) were encouraging. In addition, assay results indicated several gold-bearing zones. Property-wide mapping is underway to delineate drill targets. We expect a maiden resource estimate next year.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Latin Metals Inc. TSXV: LMS $0.12 $0.37

PR Title Receives ground magnetic survey results, Lachsa project, Peru

FRC Opinion Positive – Survey results confirmed the anomalous surface geochemistry of Lachsa North and Lacsha South targets. The program also delineated two new targets.

Financials, Technology, Energy, and Special Situations

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

TAAT Global Alternatives Inc.

CSE: TAAT $3.32 $5.92

PR Title Secures first store placement on the Las Vegas strip, across from the Bellagio

FRC Opinion Positive – TAAT’s products are now sold in eight states. Nevada sees roughly 42M tourists each year, more than the entire population of Canada (38M). Our FY2021 (12 months ending October 2021) revenue forecast is $4.26M (unchanged).

Weekly Cryptocurrency Commentary

The Global MCAP of cryptos is US$2.61T (all time-high), up 6% WoW, and 562% YoY.

Source: Coinmarketcap

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Performance of Select Cryptos Cryptos were up 1% on average last week.

October 25, 2021

Cryptocurrencies YTD 1-Week 1-Year

Bitcoin 60% -5% 383%

Ethereum 243% 1% 934%

Binance Coin 1059% -3% 1654%

Cardano 546% -2% 2094%

XRP 269% -4% 356%

Solana 8859% 22% 11762%

Polkadot 358% -1% 943%

AVERAGE 1628% 1% 2589%

MIN 60% -5% 356%

MAX 8859% 22% 11762%

Canadian YTD 1-Week 1-Year

EBIT 9% 1% 9%

BTCC 10% 1% 10%

BTCX 10% 1% 10%

U.S. YTD 1-Week 1-Year

BITO n/a -5% n/a

BTF* n/a n/a n/a

Indices

Source: FRC / Yahoo Finance

Companies operating in the crypto space are trading at an average EV/R of 18.3x (previously 18.1x).

October 25, 2021

Crypto Companies Ticker TEV/Revenue

Marathon Technologies NASDAQ: MARA 109.4

Riot Blockchain NASDAQ: RIOT 39.0

BIGG Digital CSE: BIGG 23.8

Voyager Digital TSX: VOYG 22.6

CME Group NASDAQ: CME 17.6

PayPal Holdings NASDAQ: PYPL 11.7

Hive Blockchain Technologies NASDAQ: HIVE 14.2

Coinbase Global NASDAQ: COIN 12.4

Banxa Holdings TSXV: BNXA 5.4

Galaxy Digital Holdings TSX: GLXY n/a

18.3

15.9

5.4

39.0

AVERAGE

MEDIAN

MINIMUM

MAXIMUM Source: S&P Capital IQ/FRC

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The first Bitcoin futures ETF (BITO) in the U.S. started trading last week. Another ETF, the Valkyrie Bitcoin Strategy (BTF), was launched on the NASDAQ last Friday. Two other ETFs are expected to obtain approvals in the coming weeks. We believe these new vehicles will drive more investors to the sector.

Updates from Crypto Companies Under Coverage

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Voyager Digital Ltd.

TSX: VOYG $11.80 $32.08

PR Title Business update for the quarter ended September 30, 2021 Secures final approval to begin operations in Europe

FRC Opinion Neutral – FY2021 financials (12 months ended June 2021) are expected later this week, and we are expecting record Q4 results. However, management’s preliminary revenue guidance for Q1-2022 reflects a 40% QoQ decline. We were not expecting such a large drop, considering that global crypto trading volumes were only down 10% QoQ. On a positive note, funded accounts increased 29% QoQ, to 0.86M by the end of September. VOYG also started offering staking capabilities to its customers, which it believes will bring in another $40-$50M in revenue per quarter. The company’s expansion into Europe (the world’s largest crypto market) is very promising.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

BIGG Digital Assets Inc.

CSE: BIGG $1.16 $3.25

PR Title Treasury reaches 450 Bitcoins; Netcoins assets under custody exceeds $85M

FRC Opinion Positive – Assets under custody increased to $85M, up from $50M at the end of Q2. We believe this significant jump, and stronger crypto prices will enable the company to report record revenue in Q4.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Diginex Limited. NASDAQ: EQOS

US$4.32 US$18.41

PR Title Lists Polkadot (DOT) token

FRC Opinion Positive – As Polkadot is the eight largest crypto by market cap (US$43B), we believe its addition will result in increased trading volume. Prices of DOT are up 944% YoY. Our FY2022 (12 months ended March 2022) revenue estimate is $14M (unchanged).

Weekly Cannabis Commentary

Cannabis Industry Performance

October 25, 2021

U.S. Companies YTD 1-Week 1-Year

Curaleaf Holdings Inc. -25% 1% 9%

Trulieve Cannabis Corp. -32% 4% 15%

Green Thumb Industries Inc. -16% 2% 47%

Cresco Labs Inc. -29% 1% 14%

Canadian Companies YTD 1-Week 1-Year

Aurora Cannabis Inc. -30% 3% 65%

Canopy Growth Corp. -57% 2% -33%

Cronos Group Inc. -40% 4% -2%

Tilray Inc. -30% 9% -30%

HEXO Corp. -65% 1% -35%

Organigram Holdings Inc. 33% 4% 81%

Canadian Average -31% 4% 7%

U.S. Average -25% 2% 21%

Canadian YTD 1-Week 1-Year

HMMJ -18% 4% 29%

MCAN -8% 3% 23%

XCAN 14% 4% 13%

U.S. YTD 1-Week 1-Year

MSOS -31% 2% 13%

Indices

Source: FRC

Last week, Canadian cannabis stocks outperformed their U.S. peers. Key sector developments are listed below:

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➢ Statistics Canada reported that cannabis sales grew 67% YoY in August to $186M. This was the sixth consecutive month of record cannabis sales.

➢ South Dakota lawmakers introduced a bill to legalize recreational cannabis. ➢ The U.S. Senate released a draft spending bill, indicating a removal of the ban

on recreational cannabis sales in the District of Columbia. Valuation As of October 25, 2021, the Canadian big four LPs were trading at a 53% premium (up from 40% in the previous week) over their U.S. peers.

Canadian Companies Ticker TEV/Revenue TEV/EBITDA TEV/Revenue TEV/EBITDA

Aurora Cannabis Inc. TSX: ACB 6.9 NM 7 NM

Canopy Growth Corp. TSX: WEED 10.9 NM 10.9 NM

Cronos Group Inc. TSX: CRON 16.8 NM 17.8 NM

Tilray Inc. NASDAQ: TLRY 9.4 NM 10.1 NM

HEXO Corp. NYSE: HEXO 5.3 NM 5.2 NM

Organigram Holdings Inc. TSX: OGI 8.6 NM 9 NM

AVERAGE 9.7 NM 10.0 NM

MEDIAN 10.9 NM 10.9 NM

MINIMUM 5.0 NM 5.0 NM

MAXIMUM 16.8 NM 17.8 NM

U.S. Companies Ticker TEV/Revenue TEV/EBITDA TEV/Revenue TEV/EBITDA

Curaleaf Holdings Inc. OTC: CURLF 7.9 29.5 7.6 28.4

Trulieve Cannabis Corp. OTC TCNNF 7.9 14.7 7.1 15.4

Green Thumb Industries Inc. OTC: GTBIF 7.3 19.8 7.1 19.3

Cresco Labs Inc. OTC: CRLBF 4.4 13.6 4.4 13.6

AVERAGE 6.9 19.4 6.6 19.2

MEDIAN 7.6 17.3 7.1 17.4

MINIMUM 4.4 13.6 4.4 13.6

MAXIMUM 7.9 29.5 7.6 28.4

Implied Premium (Canada vs U.S.) (Average) 40% 53%

October 25, 2021October 18, 2021

Source: S&P Capital IQ, FRC

The following chart shows the average EV/R of the companies we track in both countries:

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Average EV/R

Source: S&P Capital IQ, FRC

Canadian Retail Cannabis Pricing Province (As of 2021/10/25) Average Price per Gram Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price

B.C. 9.36$ 9.36$ 9.41$ 8.45$ 239 3.89$ 15.71$

Ontario 9.20$ 9.20$ 9.28$ 7.77$ 395 3.57$ 19.99$

Quebec 9.07$ 9.07$ 9.09$ 9.05$ 282 3.60$ 21.68$

Alberta 10.43$ 10.43$ 10.43$ 10.61$ 438 3.14$ 22.00$

N.B. 9.20$ 9.20$ 9.28$ 8.07$ 234 3.57$ 15.99$

P.E.I. 9.60$ 9.60$ 9.61$ 9.54$ 197 4.40$ 23.30$

Newfoundland 9.88$ 9.88$ 9.84$ 10.17$ 201 4.08$ 25.84$

Yukon 16.33$ 15.21$ 14.49$ 12.68$ 9 12.68$ 16.71$

N.S. 9.85$ 9.85$ 9.90$ 9.50$ 200 4.64$ 42.85$

Nunavut 13.15$ 13.15$ 13.35$ 19.41$ 32 9.43$ 17.91$

Northwest Territories 14.53$ 13.90$ 12.64$ 4 12.08$ 17.28$

Manitoba 11.30$ 11.27$ 11.22$ 11.46$ 370 3.93$ 23.57$

Saskatchewan 11.65$ 11.62$ 11.63$ 12.07$ 278 4.40$ 38.50$

CANADA 11.04$ 10.90$ 10.78$ Province (As of 2021/10/18) Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price Max. Price

B.C. 9.35$ 9.41$ 8.45$ 239 3.89$ 15.71$ 15.71$

Ontario 9.15$ 9.28$ 7.77$ 395 3.57$ 19.99$ 22.66$

Quebec 9.08$ 9.09$ 9.05$ 282 3.60$ 21.68$ 21.68$

Alberta 10.44$ 10.43$ 10.61$ 438 3.14$ 22.00$ 22.00$

N.B. 9.19$ 9.28$ 8.07$ 234 3.57$ 15.99$ 16.28$

P.E.I. 9.61$ 9.61$ 9.54$ 197 4.40$ 23.30$ 23.30$

Newfoundland 9.89$ 9.84$ 10.17$ 201 4.08$ 25.84$ 15.40$

Yukon 16.33$ 14.49$ 12.68$ 9 12.68$ 16.71$ 22.28$

N.S. 9.87$ 9.90$ 9.50$ 200 4.64$ 42.85$ 42.85$

Nunavut 13.15$ 13.35$ 19.41$ 32 9.43$ 17.91$ 17.91$

Northwest Territories 14.53$ 12.64$ 4 12.08$ 17.28$ 17.28$

Manitoba 11.30$ 11.22$ 11.46$ 370 3.93$ 23.57$ 23.57$

Saskatchewan 11.65$ 11.63$ 12.07$ 278 4.40$ 38.50$ 38.50$

CANADA 11.04$ 10.78$ Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram was flat week-over-week at $11.04. The chart below shows the Canadian retail dried cannabis flower pricing trend:

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Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC

Canadian Retail Cannabis Stores As of October 25, 2021, there are 2,685 retail cannabis stores in Canada, a WoW increase of 32 stores, including 20 in Ontario, five in Alberta, and seven in B.C.

Nationwide Store Count

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Sept-20-2021 Sept-27-2021 Oct-4-2021 Oct-11-2021 Oct-18-2021 Oct-25-2021

Geographic Region Store Count Store Count Store Count Store Count Store Count Store Count Population Population / Store

Alberta 684 688 689 691 691 696 4,428,247 6,362

B.C. 374 373 369 374 373 380 5,120,184 13,474

Manitoba 108 108 108 118 118 118 1,379,121 11,687

N.B. 20 20 20 20 20 20 780,890 39,045

N.S. 25 25 25 25 25 25 978,274 39,131

Newfoundland 30 30 30 30 30 30 520,437 17,348

Northwest Territories 6 6 6 6 6 6 44,982 7,497

Nunavut 39,486

Ontario 1,112 1,130 1,154 1,173 1,183 1,203 14,745,040 12,257

P.E.I. 4 4 4 4 4 4 158,717 39,679

Quebec 77 77 77 77 78 78 8,552,362 109,646

Saskatchewan 112 112 112 120 120 120 1,181,987 9,850

Yukon 5 5 5 5 5 5 41,293 8,259

CANADA 2,557 2,578 2,599 2,643 2,653 2,685 37,971,020 14,142 Source: Provincial Websites, FRC

Updates from Cannabis Companies Under Coverage

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Halo Collective Inc.

NEO: HALO $2.02 $12.00

PR Titles Announces changes to executive compensation program Enters into third amended and restated convertible promissory note for aggregate principal amount of up to $15M

FRC Opinion Positive – Senior officers and directors have elected to receive 100% of pay for the remainder of 2021 in common shares instead of cash. We believe this decision shows management’s confidence in the business. The company’s balance sheet remains strong. Extension of the credit facility (unused) reflects the lender’s conviction.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Pure Extracts Technologies Corp.

CSE: PULL $0.23 $0.90

PR Titles Ships repeat orders of edible gummies and vapes

FRC Opinion Positive – The company has announced multiple orders in recent weeks. We look forward to seeing actual sales figures.

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Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Ayurcann Holdings Corp.

CSE: AYUR $0.19 $0.71

PR Titles Continues its medical cannabis strategy with the Herb Clinic

FRC Opinion Positive – Pleased to see another patient referral agreement. We believe such partnerships will allow AYUR to quickly get exposure to a large user-base.

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Blueberries Medical Corp.

CSE: BBM $0.07 N/A

PR Titles Announces that its subsidiary, Blueberries SAS, has obtained qualification for a plant breeding unit and exporter of selected seeds

FRC Opinion Positive – This qualification allows the company to export seeds, in addition to flower.

Weekly Psychedelic Commentary

Psychedelic Industry Performance

October 25, 2021

Company YTD 1-Week 1-Year

COMPASS Pathways plc -14% 21% 22%

Atai Life Sciences N.V. -27% 3% -27%

Numinus Wellness Inc. -43% 0% 67%

Mind Medicine Inc. -24% 5% 147%

Braxia Scientific Corp. -80% 0% -80%

Cybin Inc. 25% 4% 183%

Levitee Labs Inc. -36% -15% -36%

Seelos Therapeutics Inc. 63% 8% 165%

AVERAGE -17% 3% 55%

MIN -80% -15% -80%

MAX 63% 21% 183%

Indices YTD 1-Week 1-Year

PSYK -26% 2% -26%

PSIL -9% 1% n/a Source: TMX Money, FRC

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