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EMBLEM CORP (OTCMKTS:EMMBF) Is One Of The Cheapest Canadian Cannabis Plays

EMBLEM CORP (OTCMKTS:EMMBF) Is One Of The Cheapest Canadian Cannabis Plays
Written by
Jim Bloom
Published on
November 21, 2017
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EMBLEM CORP (OTCMKTS:EMMBF) is sitting at the bottom of this year's trading range.While competitors like Canopy Growth Corp (OTCMKTS:TWMJF) have made new highs, Emblem has hardly moved.Does this market imbalance create an opportunity?Take a look at the stock’s price action: EMMBF Daily ChartBrief HistoryEmblem Corp. engages in the provision of pharmaceutical development related to cannabis products. Its activities include cultivation and sale of medical marijuana. The company was founded in 2014 and is headquartered in Toronto, CanadaEmblem is licensed under the Access to Cannabis for Medical Purposes Regulations (ACMPR) to cultivate and sell medical cannabis. Emblem carries out its principal activities producing cannabis from its facilities in Paris, Ontario pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.Emblem Corp. is a fully integrated licensed producer of medical marijuana in Canada. The Company focuses its strategy across three verticals of marijuana production, patient education and a range of pharmaceutical formulations. Emblem serves the healthcare sector in Canada.Recent DevelopmentsEmblem Corp very recently reported that it had closed its previously announced bought deal short form prospectus offering, including the exercise in full of the underwriters’ over-allotment option. In connection with the offering, the company issued 7.8 million units of the company and 15,000 8.0% convertible unsecured debentures of the Company due in 2020. The units were sold at a price per unit of $1.75 for gross proceeds of $13.8 million and the convertible debentures were sold at a price per convertible debenture of $1,000 which amassed proceeds of $15milion leading to aggregate proceeds of $28.8 million from issuing of securities. The offering was underwritten by a syndicate of underwriters led by Eight Capital and included Canaccord Genuity Corp., Echelon Wealth Partners Inc. and GMP Securities L.P.Each unit consisted of one common share in the capital of the Company and one common share purchase warrant. Each Warrant will entitle the holder thereof to acquire, subject to adjustment in certain circumstances, one additional common share in the capital of the company at an exercise price of $2.15 per share until November 2020.The convertible debentures will bear interest at an annual rate of 8.00% payable in arrears in equal installments semi-annually. Most of the proceeds from the offering are expected to be allocated toward the currently unfunded portion of the planning, design, development, construction and implementation (including the purchase of certain designated capital equipment) of the Company's new facility which is expected to be comprised of up to approximately 120,000 square feet of greenhouse space and 50,000 square feet of infrastructure space. Although no specific investments are currently contemplated by Emblem, it is expected that the remainder of the net proceeds will be invested in, among other things, medical marijuana related technologies, seeds, clinical trials, genetics and research and development initiatives or other infrastructure, all within the industry.Emblem Corp. had announced in October 2017, announced today that it has entered into a Collaboration and Licensing Agreement with Canntab Therapeutics Limited of Toronto. Canntab has developed a patent-pending oral sustained release formulation for cannabinoids. Under the agreement, Emblem and Canntab will collaborate on the preclinical formulation, clinical development, regulatory approval, manufacturing and commercialization of the sustained release product.The agreement grants to Emblem the exclusive right in Canada to Canntab’s patents and know-how for the purpose of developing, commercializing, using, selling, and offering the sustained release Product for sale under the Emblem brand. The license does not include the right to import or export the product.The sustained release product will be manufactured by Emblem or by Canntab, after Canntab receives appropriate licensing allowing such manufacture.The agreement requires that Emblem makes payments to Canntab upon achievement of certain milestones involving stability studies, bio-availability studies and regulatory approval of the sustained release product. The agreement also calls for Emblem to make royalty payments to Canntab based upon gross sales of the product.Emblem and Canntab also intend to collaborate on the preclinical formulation, clinical development, regulatory approval and commercialization of a range of additional cannabinoid containing pharmaceutical formulations.Financial InformationFor 2Q2017, revenue amounted to $0.53 million, compared to nil in the second quarter of 2016. This was because Emblem received its License from Health Canada to sell medical cannabis in July 2016 and completed its first product sale in August 2016.During the second quarter of 2017, sales to registered patients generated revenues of $0.4 million with 53.9 kilograms sold at an average selling price of $7.39 per gram. Strains sold during the quarter were priced between $7.00 and $12.00 per gram before discounts.Gross margin for the second quarter was $146 which was impacted by the net change in fair value of biological assets, inventory expensed and production costs. Biological assets consist of cannabis plants at various pre-harvest stages of growth which are recorded at fair value less costs to sell at the point of harvest.The net loss from operations, net loss and loss per share amounted to $2.92 million, $2.95 million and $0.03 per share, respectively for the quarter.ConclusionConsidering that recreational marijuana will be legalised in Canada next year, EMMBF looks to be a discount entry opportunity for investors compared to its high flying peers.We will be updating our subscribers as soon as we know more. For the latest updates on EMMBF, sign up below!Disclosure: We have no position in EMMBF and have not been compensated for this article.

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