|Period Ending:||Oct 31, 2016||Jul 31, 2016||Apr 30, 2016||Jan 31, 2016|
|Income Statement||Oct 31, 2016||Jul 31, 2016||Apr 30, 2016||Jan 31, 2016|
|Cash Flow||Oct 31, 2016||Jul 31, 2016||Apr 30, 2016||Jan 31, 2016|
|Period Length:||9 Months||6 Months||3 Months||12 Months|
|Cash From Operating Activities||-0.13||-0.07||-0.02||-0.03|
|Cash From Investing Activities|
|Cash From Financing Activities||0|
|Net Change in Cash||-0.13||-0.07||-0.02||-0.03|
Price Target 2017 : $5.25 Analyst Consensus : BUY Market Sentiment : Bullish
About Emblem Corporation
Emblem Corp. is a licensed producer (LP) and distributor of medical marijuana. The Company is working to develop three verticals, including marijuana production, healthcare services (through GrowWise), and pharmaceuticals. It is currently producing at an annualized rate of approximately 660 kg. The Company was originally incorporated as KindCann Holdings Limited in October 2014, changed its name to Emblem in September 2016, and completed its qualifying transaction in December 2016.
Strong Balance Sheet Supports Expansion to 11,600 kg Annual Capacity :
Including the recently completed special warrant financing, we estimate that EMC has approximately $40M in cash available to fund expansion. Its facility in Paris, Ontario, is currently producing at an annualized rate of almost 700 kg. The Phase 2 expansion should triple capacity with commissioning expected in April, and the Phase 3 expansion should take total capacity to 11,600 kg (almost 16x current levels). The Company also has in-themoney warrants/options outstanding that could generate an additional $36.5M in proceeds, which could be used to fund a Phase 4 expansion to 21,100 kg. That capacity could bring run-rate revenue to approximately $180M.
Vertically Integrated Model with Strong Management Depth :
Emblem owns a 50% stake in GrowWise, which operates education centres where patients receive personalized advice on product selection, including varieties offered by other LPs. Mr. Harvey Shapiro, the CEO of GrowWise, was the Co-founder and CEO of Dynacare, the third largest provider of clinical laboratory services in North America, which was acquired in 2002 for almost US$500M. Emblem is also developing a Pharmaceuticals division headed by Mr. John Stewart. He is the former President and CEO of Purdue Pharma Canada and Purdue Pharma USA, one of the largest privately held pharmaceutical companies in the world. We estimate that management and the board own a combined 14% of the basic shares outstanding, having invested $6M out-of-pocket to date.
The Cannabis Market is set to Rapidly Expand with Recreational and Pharmaceutical Opportunities :
Recent Financing’s Support Growth: Following financing’s in December 2016 and January 2017, we estimate that Emblem has approximately $40M available to fund capacity expansion. Our estimates assume that Phase 3 takes capacity annual capacity to 11,600 kg, with commissioning expected in Q218. We do not yet include the Phase 4 expansion in our formal estimates as it is not yet fully funded, although it is expected to add another 9,500 kg in annual capacity, bringing total company capability to 21,100 kg. We note that Emblem has in-the-money options and warrants outstanding that would generate gross proceeds of $36.5M if fully converted, which should be sufficient to fund Phase 4.
Source : Echelon wealth partners report