Endexx Corporation

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September 23, 2013 Issue

The Most Powerful Name In Corporate News and Information


Using an Old-Fashioned Investment Banking Philosophy, Endexx Corporation is focused on Creating New Businesses with Recurring Revenue Streams and High Potential for Growth in Key Sectors

Interview with:
Todd Davis


About Endexx Corporation


Endexx is the "Collaboration Corporation". Our mission is to harness the power of talented people through technology, the science of management and the spirit of capitalism to create new businesses and foster the growth of the entrepreneurial spirit. Building businesses with recurring revenue streams and high potential for growth in key sectors is our primary objective. Through the collaboration of highly skilled professionals and its subsidiaries, we will build our shareholders significant value.

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Endexx Corporation



Endexx Corporation

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Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published –  September 23, 2013


CEOCFO: Mr. Davis, what do you do at Endexx?

Mr. Davis: Being a small cap company is very difficult in today’s market with over regulation and very challenging circumstances to raise capital. Instead of trying to be a one-stop shop or one-type company where we are only selling one service, we are trying to diversify amongst five different technologies and services, taking individuals that are very talented at what they do and letting them be a part of something bigger and spreading out the risk. Currently, we have three operating divisions. One is a renewable energies consulting and contracting company that does mostly solar projects at this time. We are currently evaluating a couple of recycling energy technologies and that division is called Global Solaris Group. Another division we have is an app enterprise and software solutions division. We have not made a public announcement of exactly what they are up to but it has been under development for about ten months now and we are getting ready to launch before the end of the year. The third division is our M3 Hub division. This is what is getting a lot of the excitement today, mostly because the atmosphere of the market. The M3 stands for Medical Marijuana Management and what we are providing is both software and hardware solutions for inventory tracking, accountability, transparency, traceability and auditability for state governments and independent licensees that are legalized to sell either medical or recreational marijuana. We are in negotiations with a couple international countries that are going down that same path. That is the general gist of where we are right now and we will be looking for other acquisition opportunities going forward.


CEOCFO: What is the philosophy at Endexx?

Mr. Davis: It is kind of an old-fashioned investment banking philosophy. We have to look at a lot of deals and in order for the deal to pass the Endexx opportunity test. It cannot just be a one-time sale. There has to be attached recurring revenue streams and it has to be in a business that can grow 20% a year for the first five years. With that in mind, we are also looking for low cost entry points with existing markets that need the services and do not have a lot of competition in it. It is the path of least resistance, the lowest cost and the highest margins that we can enter in and those first three companies meet all of the criteria.


CEOCFO: What is the key to funding those opportunities?

Mr. Davis: It is 24 years of being in the business in the small cap arena. I have seen companies that have fantastic products and vision but no execution and they fail. I have also seen companies that have no idea what they are doing succeed. After you have seen several hundreds of these deals, you kind of get a feel for a blend- which ones will work, which ones will not and more importantly what not to do once you engage in a company. Just avoiding some of the losses and the bad decision-making, you can convert any entrepreneurial enterprise into a profit-making entity. The question is how scalable is it? and how big can you grow a company? Is it a 10 million dollar company or is it a 100 million dollar company? That is still part of the magic of the market. Right now, we are in three different divisions that can achieve between 10 million dollars in revenue and over 200 million in revenue. We are trying to get into that sweet spot for a five-year target revenue goal for each one of our companies.


CEOCFO: Would you take on more than one company in an industry or are you looking to diversify industry-wide as well?

Mr. Davis: It does not matter. With the M3 Hub concept, we know we are not going to be the only company in the business. We know that there are a lot of companies trying to make a run at this medical marijuana and recreational market, so instead of trying to be the dominant player and steal the business from everybody, we are trying through a collaborative effort to align ourselves with the right types of companies. If it is not a business space we want to be in, do we have complimentary services that can enhance their business? We are looking to create a Hub concept, harnessing 20-50 companies doing well that are all trying to standardize and create a sustainable industry. That is the trick, it is not a magic trick, but it is a trick to get all of those people thinking the same way instead of trying to cut each other’s throat. In the early stages, everybody is trying to figure out what the market needs and be compliant with the laws that they are working within. We are working on the collaboration side as much as we are on the acquisition front. If it is something that enhances our current services, we are going to acquire it. If not, we can do a licensing agreement, but that still keeps us in alliance with that partner.


CEOCFO: Would you tell us a little bit about the medical marijuana industry?

Mr. Davis: The voters clearly have spoken in 20 states. The federal government through the DEA and the laws they have written are the big hurdle. As each state is coming online, each state is going through the process of saying, “What are we going to do to run this business in a compliant fashion?” It is a very steep learning curve. We have met with several state entities and they do not all know what they are doing. They know partially what they are doing, but they are always wondering if they are doing something illegal in the eyes of the federal government. There is a balance right now and for us, we are not in the business of selling marijuana. We are in the business of providing technology solutions that allow purveyors of the product to be in compliance with the state and local governments and eventually in compliance with any changes that the federal government makes in their policies toward medical marijuana. In a hands off world where everyone is trying to say they are in the business but not in the business, we are providing the technology solutions that help operate these products like pain medications and chronic illness medications in the pharmacy world. We are building those types of solutions for medical marijuana. It is a tough balance and you really do have to be careful treading water in this space.


CEOCFO: As you are building the solutions, how do you keep up with changing regulations and the grey areas where people do not what is required?

Mr. Davis: We are treating the process as if marijuana is reclassified as a schedule II narcotic. We are wrapping our compliance metrics and are functioning metrics around that classification. If, and when, the federal government changes the classification of the drug, the product is already in compliance with the federal standard. At the state level, they are not even looking at it in those terms. They do not care if it is schedule I, or schedule II because it is a new business enterprise and they cannot stop the flow of that business. They are embracing it and they are trying to convert it into something that can be a respectable, sustainable business. At the same time that the state and local governments are trying to stay hands off, they also want to be able to at least monitor it without actually endorsing it. We are creating the tools necessary for them to monitor it and administer the law that exists on the books today. Once the federal government comes around, this industry is going to explode and we feel that we are way ahead of the curve and will be one of the frontrunners in that space.


CEOCFO: Would you tell us a little bit about the other two projects?

Mr. Davis: We have been pursuing renewable energy for two and a half years now. We bid on multiple contracts in the Arizona market for example. Arizona is a prime market for solar installations. The challenge there is that the utility companies here do not want to lose the business that they are currently generating. You have to work in coordination with the utility companies and when you bid on a contract ultimately they have to approve that contract and allow that customer to move from the grid on to a solar platform. We went after all of the schools, municipalities and commercial operations such as non-profit hospitals and churches that fell under the non-profit category. All of those deals that were out there and up for bid we bid on, we were competitive and we won four or five bids statewide. It became very apparent that nobody would finance these deals under the criteria that exist in the market today. Any deal less than five million dollars, there simply is no financing available. The challenge is that if we really want the masses to convert to solar in a state like Arizona, you have to make some type of financing tools available to those markets; that is one of the areas we are going to concentrate on. We are not in a position to self-finance yet, but we are working on tools that will allow these deals less than five million dollars in total costs of installing to be completed. There are many contracts out there with schools, churches and municipalities that have not been fulfilled, and they have been sitting dormant for the last two years. That is the problem- how do you get there? We do not know.  We have talked to everybody in the solar financing community but they do not know either. Until something changes and allows for the financing while getting rid of some of the legal expense of putting these platforms together, we are going to be stuck. Eventually, we are going to be in a position to provide that finance platform because they really do pay for themselves in about five to seven years now. It is the regulatory requirements and the RECs that are creating the challenge and the utility companies just do not want to sign off. They delay even after construction is done, they will sit on a project for three to five months without letting the customers switch over. Right now in Arizona, it is the peak of the cycle for electricity production and cost. They will probably wait until the cycle is over to approve the contracts that we have sitting out there right now.


CEOCFO: In a company like Endexx, the background of management and the CEO is key. You mentioned your long background previously; what have you learned over the years?

Mr. Davis: For the first eleven years in the business from 1990 through 2000, I was a stockbroker and investment banker specifically concentrating on small growth companies. Back in an era when we would raise three to five million dollars and sometimes ten million dollars- which was a huge money raise for a small company- we would plug it in to an inventor, engineer, or doctor that figured out something that no one else figured out. There were standardized success rates and out of ten companies that you would underwrite, three of them would go out of business within a couple years. Three to five of them would do absolutely nothing and one to three of them would just kill it. From the IPO price to ultimately getting bought out or being the dominant player, these companies would go up several thousand percent. In that cycle and that professional side of my career, that is where I learned which ones were better than others and it all came down to the recurring revenue stream. The ones with recurring revenue and a product that people needed and wanted were in the only place they needed to be to have long-term success.That is the primary background for how to be successful in the small cap arena. In 2000, I went independent and I was consulting for and participating in multiple public companies. I was either sitting on their board, operating as an intern CEO or CFO, raising money, executing business plans and trying to make a difference in the small cap arena. What I learned there is that individual companies that have a single technology have a very difficult time making it. They may make an initial run, but then they fail because they fail to diversify and expand. Through Endexx, we are trying to avoid those problems. We are trying to diversify our risk through multiple platforms, raise money when it is appropriate and employ that money only on investments that can generate a rate of return and growth cycle. In essence, we are trying to be a good old-fashioned, diversified holding company, that takes an active role in management and the growth cycle. If you look at Illinois Tool Works for example, there are 2,000 plus companies operating independently under their platform. One company does not necessarily know what the other one is doing, but they do fantastic as a company. 3M is not a good example because they buy, cannibalize the market and ultimately many of their acquisitions die out and they end up with technologies. We are more on the Illinois Tool Works side of the equation. Ultimately, if we could have 12, 20, or 50 companies over a multi-year platform, diversify it out and spread that risk, that is what is going to give the long-term rate of return for our investors.


CEOCFO: What else should investors and people in the business community know about Endexx?

Mr. Davis: As far as a team goes, I am just one player and I cannot do everything alone. I have a fantastic support network and none of my consultants or partners has less than ten years of experience in their respective business. Some of them have as many as 50 years in the pharmacy space. Together, we all recognize, and we have all been part of public companies, we know what it takes to stick around for a long time and we are putting those skills together to generate a unique investment opportunity both for our shareholders and future shareholders.  More importantly for the companies that we are growing, to go out and create jobs, grow their businesses and have a successful enterprise. Hopefully, four out of five of those companies will do well. We are seeking to create a new chapter in small cap investing.


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“We are seeking to create a new chapter in small cap investing.”- Todd Davis


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