Tags Posts tagged with "Canada"

Canada

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Canada is set to make history this week by tabling legislation that would make the nation the first G-7 country to legalize recreational cannabis.

This development has captured the attention of the market and many investors are focusing on companies levered to this opportunity. We want to highlight two Canadian companies that investors should be monitoring closely.

OrganiGram Announces LOI with Trauma Healing Centers

Organigram Holdings (OGI.V) (OGRMF), a licensed medical cannabis producer in Canada announced that it entered a letter of intent to acquire all the issued and outstanding shares of Trauma Healing Centers Incorporated. Under the terms of the LOI, Organigram will issue 719,425 common shares at $2.78 per share to the company.

Trauma Healing Centers currently services over 3,500 patients across 7 Canadian locations and it has plans to open 7 more locations. The company specializes in medical cannabis assessment and prescribing. Trauma sees patients on a referral basis and offers a multi-disciplinary approach to healing chronic conditions.

Trauma Healing Centers will continue to operate independently by providing referrals based on client need to any licensed producer in Canada. The company is the only organization to have a multi-disciplinary designation with Blue Cross for military and RCMP veteran clients.

We favorable on this development due to the potential synergies between the two companies. Also, the $2 million purchase price is attractive when compared to similar transactions. OrganiGram has rallied off its recent lows and this is a company that should be on every investor’s radar.

Canabo Announces Groundbreaking Results

On Friday, Canabo Medical (CMM.V: TSX Venture) (CAMDF: OTCQB) released the results of an observational study that connected doctor-supervised medical cannabis treatments to a decrease in benzodiazepine reliance among Canadian patients.

Research conducted over the past year revealed that 40% of patients who were prescribed medical cannabis to treat pain and anxiety eliminated the use of benzodiazepines within 90 days. The number of patients that stopped using benzodiazepines increased to 45% within a year of cannabis treatment.

 

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With one of the biggest cannabis IPO’s out of the way for the venture market, it’s important to reassess where Emblem Cannabis stands today, and where its headed in the future, in light of all the interim short-term movement. It is often the case, that we find ourselves with too narrow a horizon, and often overlook key fundamentals with all the hearsay of the stock market. I first spoke to Maxim Zavet, President of Emblem, to see where the company stands. I then did a bit of digging on my own. To the goodies!

A Talk With Maxim Zavet, President of Emblem

1. Demand is high, while supply is low, for the medicinal cannabis market (currently). I have heard of stocking problems from other Licensed Producers’ clients. What are you doing to make sure this isn’t the case for Emblem?

Maxim: “We will stop taking registrations to manage supply for our existing customers and only take new registrations when we can supply new customers.”

2. What do you consider your unique value proposition, and how do you intend on translating it into growth?

Maxim: “We have three very distinct verticals 1) High Grade or Premium indoor grown dried flower; 2) Pharmaceutical product development; and 3) Patient education clinics. All of these verticals will create revenue streams and more shareholder value.”

3. John Stewart, and the pharma division of Emblem, have a lot of keen eyes closely watching. When do they begin operations and what will be their primary focus?
Maxim: “We’ve begun our extraction activities under his leadership and hope to be ready to sell Cannabis Oils very soon as the first step, he is also working to create novel formulations and delivery mechanisms from those extractions that we are already producing.”

4. Where do you, as Emblem, expect to be in this space, by the time legalization in Canada is enacted as the law? 2019 likely seems to be the case, where do you expect to be by then as as far as expansion is concerned?

Maxim: “You can expect us to be very competitive in the legalized market with a high quality product at a competitive price. We’ve begun expanding our current facility and will continue expansion as we move closer to legalization. We are getting really good feed back with respect to our branding and we believe that Emblem is going to be a very strong mainstream premium brand.”

5. When supply eventually starts meeting demand, and within the mid-term (let’s say 5 years approx.), if the price of cannabis falls per gram due to that, what safeguards do you have in place to ensure your profit margins aren’t overwhelmingly impacted?

Maxim: “Within the next five years, we feel that if there is downward pressure on the price of cannabis it would be with lower quality greenhouse produced cannabis. This is the case in California where greenhouse product is half the price of indoor premium quality dried flower. Also pharmaceutical like products would not be subject to the same price pressures as dried cannabis would be.”

Favourite Topic: Pesticides

It’s been the concern and cause of a lot of speculation in the industry, as of late. I asked Emblem’s front desk, what they are doing, to protect their product from such pesticides.
The answer: “Hello Hamzah, in regards to the question about pest control, We use organic mites to maintain a healthy plant dynamic so we don’t have to spray our cannabis with chemical pesticides. While Health Canada approves some chemical sprays, we avoid that as they can leave residue on the plant which we do not want to promote.”

Senior Management

Emblem is headed by one of the best senior managements’ in the industry. Gordon Fox, the CEO of Emblem, has practical experience running a successful pharmacy, and handling patients is something he has great familiarity with. Maxim Zavet, the President of Emblem, has traveled the world, studying phenotypes and strains for a living. He is in possession of in-depth knowledge of medicinal marijuana with a long list of contacts around the world. John Stewart, President of Emblem Pharmaceuticals, needs little introduction. He was the man responsible for bringing OxyContin to market during his reign with Purdue Pharma, a drug that rakes in multi-billion dollars annually. Finally, Harvey Sharpio, President of GrowWise Health, served as the CEO for TSX listed Dynacare Inc., a company which was eventually acquired by Laboratory Corp. of America Holdings. This top of the line senior management has invested $6 million of their own, indicating the sort of confidence they have in their operations.

Emblem’s ‘Hybrid’ Double-Edged Sword!

Emblem boasts a model and the experience to back it up, in a way, not many others can. The company has a full-scale grow operation, along with a full-fledged pharma production under way, led by John H. Stewart. The aim is to develop new dosage forms of cannabinoid medication. Gel caps, sprays, trans-dermal patches and pills. Push even a single drug through the market, and this company can fly to new heights. This is the very reason I have been so bullish on Emblem. They also have ‘the’ person to back up their aims in this division.

Production & Expansion

Emblem has invested $11 million in its state-of-the-art facility 60 miles southwest of Toronto, located in Paris, Ontario. The location consists of two buildings, spread across 4.3 acres of land, with a cultivation capacity of 14,500 sqft. Phase 2, subject to and based on initial expentancy, has been completed as of February, 2017, adding 1400kg to their existing 700kg production capacity for a total of 2100kg, for a total of $17.85 million in potential annual revenue, excluding oil sales. Capacity will remain that way until phase 3, which is expected to be complete sometime this year. The scaling out expansion is expected under phase 4, which is expected to be complete by 2018. Emblem plans on having a 12,000kg production capacity by then, with annual potential revenues soaring to $102 million. Emblem, at full production can produce 16,000kg of cannabis, with $136 million in annual revenue.

Greater Profit Margins

Based on phase 2 production, cash cost per gram is set at $1.52, with all-in cost per gram at $2.08 (includes ammortization and packaging). Average sale price is $8.50 per gram, translating into 71% profit margins. Projected operating margin for oil sales is set at a staggering 90%.

Oil Sales

All of this, already, without taking into account oil sales. I expect Emblem to be an industry-leader in this division, fully utilizing their pharma capacities to produce quality product. Within the first 12 months of operations and sales, Emblem expects to rake in $2.9 million in oil sales. The real revelation is in future numbers. For every 100kg of dried flower produced, 20% weight of the remaining plant can be used to produce 10,000 bottles of THC/CBD based oil bottles, translating into $8.1m in potential revenue (harvested 6 times). Simply put, $23.6 million is the potential annual revenue from a single grow room dedicated to oils!

Patient Acquisition

Emblem has out-done it’s own expectations. The company projected an estimate 1,000 patients to have been acquired by March, but that number currently stands just north of 2,000, with 8 days still left in the month. The company has seen a massive growth of 4167% in patient acquisition since operations kicked off. The company has a third prong, apart from cultivation and pharma, which is playing a pivotal role in expediting patient acquisition. GrowWise Health aims to educate the masses about cannabinoid based-treatments, and while doing that, has strategically been positioned to expand the bottom line: growth of the company.

Legal disclaimer: The writer holds a long position in Emblem Corp. (TSXV: ‘EMC.VN’)

And an affiliate of MAPH Enterprises LLC has a share position via private placement of 43,500 shares and 21,750 warrants of Emblem Corp Stock.

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The Canadian cannabis industry may have received the catalyst it needed…

Yesterday, CBC News reported that the Liberal government will announce legislation next month that will legalize marijuana in Canada by July 1, 2018.

This is a huge announcement as it was one of the main reasons why Justin Trudeau and the Liberal Party won the Canadian general election in 2015.

CBC said it learned that the legislation will be announced during the week of April 10th and will broadly follow the recommendation of a federally appointed task force that was chaired by former liberal Justice Minister Anne McLellan.

A Change of Words

According to the CBC, Parliamentary Secretary to the Minister of Justice Bill Blair briefed the Liberal caucus on the roll-out plan and the legislation during caucus meetings this weekend.

This is a big change from early March when Blair said the Canadian government will take as much time as it needs to correctly implement a legal recreational cannabis program. Blair previously did not suggest a specific time frame because he said it could vary from province-to-province and territory-to-territory

An Industry to Watch

The Canadian medical cannabis industry continues to record double-digit percentage growth on a month-over-month basis and has more than 100,000 patients. There are currently 38 federally licensed medical cannabis producers in Canada and we are favorable on the opportunity that these companies have on hand.

We are favorable on this update and expect to see the market rally higher off this news. Some companies investors should watch include: Cronos Group (MJN.V) (PRMCF), Emblem Corp (EMC.V) (EMMBF), OrganiGram (OGI.V) (OGRMF), Canopy Growth (WEED.TO) (TWMJF), Aphria (APH.V) (APHQF), Aurora Cannabis (ACB.V) (ACBFF), and VinergyRes (VIN.CN) (VNNYF).

Authored by: Michael Berger

 

Pursuant to an agreement between MAPH and Vinergy Resources, we were hired for a period of 2 months to publicly disseminate information about (VNNYF) including on the Website and other media including Facebook and Twitter. We are being paid $120,000 (CASH) for or “ZERO” shares of restricted or unrestricted common shares. We own zero shares of (VNNYF) which we purchased in the open market. We may buy or sell additional shares of (VNNYF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. An affiliate of MAPH Enterprises LLC owns 43,500 shares of EMBLEM as well as 21,750 Warrants

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Canadian licensed medical cannabis producers built off the momentum from Wednesday and benefited from this as it carried into Thursday’s trading session.

These movements are significant because several of these stocks were under pressure on Tuesday and early Wednesday (post-Canopy Growth earnings).

Investors should keep an eye on how this sub-sector continues to trade as we believe it is comprised of some of the highest quality opportunities for investors.

We recapped some of these recent price movements and provided our updated thesis below:

Canopy Growth Corp (WEED.TO: TSX) (TWMJF: OTC) recaptured most of its losses from Tuesday after the shares rallied 3.7% on above-average trading volume. We continue to view Canopy Growth as one of the top long-term cannabis investments due to its leading position in the Canadian medical cannabis market. Canopy Growth recently broke below the $10 level and investor should keep an eye on shares as we continue to see long-term upside to current levels.

OrganiGram Holdings (OGI.V: TSX Venture) (OGRMF: OTC) saw a nice rally yesterday and we will monitor how this continues today. OGI and OGRMF rallied more than 5% and this was a nice change from the recent trend. We will provide updates on any significant price movements today. Stay tuned as we continue to hold cautiously.

Emblem Corp. (EMC.V: TSX Venture) (EMMBF: OTC) continued to rally yesterday and the shares were one of the top performers as they also rallied more than 5%. EMC is trading at $4.17 while EMMBF trades near $3.20. We continue to hold as we are favorable on the long-term outlook. Emblem has a lock up coming up in March and we have started to receive questions about this. Although we expect this to cause a short-term dip, we do not expect it to last long and will keep an eye on any significant price movements leading up to this.

Aurora Cannabis (ACB.V: TSX Venture) (ACBFF: OTC) ended the day up less than 2% and we continue to hold onto the shares. We have contemplated exiting this position and re-entering on weakness, however, we have not decided yet. The reason why we are questioning this holding is due to valuation. When you look at Aurora’s fully-diluted market cap, it is over $1 billion which is significant. We view the risk-reward scenario as balanced here and will keep you updated on how the shares move from here.

Aphria (APH.V: TSX Venture) (APHQF: OTC) edged lower yesterday and this move followed an 18% rally over the last week. APHQF traded as high as $5.15 before ending the day at $4.97 and We continue to see upside to current levels but we may trim the size of our position because of the strength of the recent rally.

CanniMed Therapeutics (CMED.TO: TSX) is trading at $11.95 after the shares edged slightly higher yesterday and we are on the sidelines at current levels. Although we are favorable on the company’s recent execution, the exchange it trades on, and its business model; we are cautious at these levels. We will keep you updated on how the shares trade from here

Cronos Group (MJN.V) recaptured all its losses from Wednesday as the shares rallied approx. 8% yesterday. MJN.V is trading at $2.59 and we are on the sidelines at current levels. We were favorable on MJN after Wednesday’s dip and will monitor how the shares respond today. The company announced a bought deal this week at $2.25 a share and this has caused the shares to trade a little more volatile over the last two trading sessions.

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Although the Canadian cannabis market has seen incredible growth over the last year, we believe there is a lot of room to run as the legislation to create a recreational cannabis program is scheduled to be introduced this spring.

When looking at growth catalysts for companies levered to the Canadian medical cannabis market, none is more significant than the legalization of recreational cannabis at the federal level. At the United Nations meeting earlier this year, Health Minister Jane Philpott said Canada’s Liberal Party government will introduce a law in the spring to legalize recreational cannabis.

Some Producers to Benefit More than Others

Although recreational cannabis will benefit all licensed producers that are approved to distribute cannabis, some will benefit more than others.

Many licensed producers have been expanding and constructing new facilities to prepare for the increased demand. Investors should focus on companies that are well capitalized, well positioned and well managed.

Private opportunities like The Green Organic Dutchman have generated great interest from investors as the company possesses one of the largest licensed land lots in Canada as well as one of the most attractive valuations when compared to its peers.

This is different than the approach taken by Aphria (APHQF), a licensed producer that recently acquired 200 acres in a separate location in Canada. This acquisition though, is not as attractive as that of The Green Organic Dutchman since Aphria’s property will require its own license from Health Canada.

Companies are Positioning Themselves for Growth

According to Health Canada, if a licensed medical cannabis producer acquires a property that is adjacent to its licensed facility, it does not need to receive a new license.

If the property in not attached or adjacent to the cannabis producer’s licensed property, it will need to apply for and receive a new license from Health Canada.

Although legal recreational cannabis represents a huge market in Canada, these companies must scale the size of their operations to fully capitalize on this opportunity.

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VIA CDNMJStocks.com Twitter @CDN_mj

It’s no secret the industry has come under some pressure lately with frequent product recalls. Growing to Health Canada standards, as we’ve mentioned many times before, is not easy by any means. The 7 limited pesticides LP’s are allowed to use while growing cannabis are essentially soap based products, so you’re able to give the plants a quick bath and whatever mold, powdery mildew or pests you were trying to get rid of, are back within a few days.
We wanted to learn more about this ourselves and truly understand the depth of the problem and how much it impacts the consumers, shareholders and the future expansion plans of the LP’s. Is this actually a real problem? Is this truly a cause of concern for consumers? Should we be worried? Well, we hope this article sheds some light on these issues for all.
First of all, we wanted to bring the attention to the dispensaries and mention how there is zero testing here, you can use any chemicals or pesticides you’d like. So the second we get a legalized system for recreational marijuana in Canada, this is going to change drastically.
Secondly, having product recalled is a good thing, the system is working. After years of Health Canada working towards a system where both medical marijuana and cannabis oil are available and safe for consumption, they have figured out a viable system, implemented it, and now proving that it actually works with recalls.
Third, companies like Organigram have been completely transparent with both the consumers and investment community about the issues. Which is also a check. The goal here isn’t to jam contaminated products through the system. It’s to protect consumers and make sure patients are always safe. In our view these systems are put in place and are now proving to work, and secondly we value the transparency of the LP’s with all issues.
Fourth, we haven’t spoken to Mettrum, but chatting with Organigram, they’re committed to providing health care with high standards, hence the recall. Nothing has changed with the long term vision of the company. You can’t sell the product that’s anything less. LP’s will likely start moving towards the standards that CanniMed adopted many years ago with “GMP” rooms (Good Manufacturing Practices) which are already standard in the pharmaceutical industry.
Now that we know the system is safe, and LP’s are honest with their shareholders and patients, let’s move into the actual pesticide’s and insecticides used and determine how and why they end up in the product.
First of all, this is an agricultural environment, if one thing is for certain there will be pests, there will be insects, contaminants, mildew, and the rest of issues that have been dealt with for centuries with all agricultural undertakings.
The two main ones found are:
1) Pyrethrin – A highly effective organic insecticide, this “chemical” is completely natural and actually comes from a plant. Its effect is instant paralysis of an insect. Pyrethrin breaks down rapidly so it does not exist in the environment very long. Organic gardeners have been using this for years to get rid of insects, pests, ants, mosquitoes, moths, flies, fleas etc., it’s effectively a harmless insecticide used in organic grows and marijuana growers for ages; but, unfortunately not approved by Health due to toxicity issues. Most problems in humans stem from the allergenic properties of Pyrethrum.

2) Eagle 20 – A Myclobutanil-based fungicide – a highly effective fungicide used to combat powdery mildew and mold in a wide range of edible agricultural products including grapes, apples, spinach, marijuana etc. Typically used very early in a marijuana plants lifecycle (read: applied correctly) it is attractive because it prevents mildew throughout the whole lifecycle of the plant. It’s completely removed by consumption making it safe for consumers. The problem comes when Myclobutanil is combusted after it’s been applied later in a crops lifecycle, and not removed before consumption because it releases toxic gases. It’s stable at room temperature, but once heated past its boiling point of 205°C it becomes unstable. (For reference the average vaping temperature is 175°C). However, “The human health effects from the combustion and inhalation of myclobutanil have not been evaluated” as quoted by The Colorado Green Lab article here.
Another one that no LP’s have actually been reported to use, but is common in underground grows is:
1) Avid Miticide – With a main ingredient of Avermectin, Avid Miticide is a highly effective insecticide used to combat mites, whiteflies, aphids and thrips. Again, it runs into problems when applied late in the plants life cycle and combusted, but helps immensely in controlling mites for the duration of the plants lifecycle.
It wouldn’t be fair to talk only about non-approved pesticides, without mentioning the most commonly used approved one:
1) MilStop – MilStop is a contact fungicide that is designed to control and suppress powdery mildew on vegetables and marijuana plants. It’s effectively baking soda and acts as a bath for the plants. MilStop has to be reapplied every few days to be effective, unfortunately it turns the hairs on the cannabis plant dark red after its sprayed, and doesn’t look the best to consumers. A normal more naturally grown plant would stay whitish until harvest.
In talking to a few growers, it’s determined that most “street” marijuana contains much more dangerous versions than the above pesticides and insecticides. These chemicals have been used for years in street marijuana, decades before LP’s were around. Ironically, medicinal home growers and dispensaries can still use all these chemicals and more, with no restrictions. None of this is new or should be perceived as shocking.
If any companies use these products at the end of the day, the company can simply irradiate the product and clear it for sale. We’ve mentioned irradiating before which is perfectly safe. Most vegetables are irradiated, however it changes the look of the bud with a brownish tinge, and changes the flavor to enthusiasts, and removes any organic stamps.
We asked Jason Spatafora, better known as the Wolf of Weed Street (Twitter @Wolfofweedst) is thoughts to in order to ascertain an objective perspective. He stated “the reality is that we are observing what I would call an operational bump in the road. We saw a similar bump a few years ago with the Tweed operation and at the end of the day, management and the operators they employ adapted and evolved to the situation. Where some investors like myself see a bump, we also see an opportunity. Price pressure for LP’s usually comes from investors not understanding the news, financing or bumps in the road, but they also create opportunities to take advantage of misconceptions and lower price. I use tweed as an example because after their production hiccup the stock has rallied to multibagger status. This is cannabis people and money literally grows on trees, sometimes trees get sick, it doesn’t change the price per gram in the long run. These LP’s have massive investments and much longer time horizons than simple traders and yesterday’s news will be lining the floors of your grandma’s birdcage, come April & any legislative catalysts it won’t matter. Long term investment opportunity in LP’s remains consistent, and that’s why I believe the Canadian Market is the place to be heading into 2017, 2018, 2019 and beyond, as I believe there will be a major supply and demand issue on the horizon with a a recreational market.”

As a market in its infancy there will be mistakes, companies will learn from these mistakes and will ultimately be better because of it. Our concern is with so many reports of banned pesticides being used all across Canada and the states, have the regulators made it too difficult to actually grow without destroying crops? Are the rules so stringent that no one will be able to produce product without “GMP” compliant rooms? Time will tell, but it’s clear the system works from a Health Canada standpoint protecting the consumer, and we’re hopeful that as the industry grows there will be room for new pesticides and insecticides that are both approved for LP’s, and safe for the consumer.

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Planned vertical farm in East Baltimore aims to train ex-offenders.

 

A Canadian agriculture technology company is partnering with CBO Financial Inc. and Volunteers of America Chesapeake to develop a $6 million indoor urban farm in East Baltimore, part of a new program to give workforce training to ex-offenders.

Arcturus Growthstar Technologies Inc. signed a letter of intent last month to lease 25,000 square feet from local nonprofit Volunteers of America Chesapeake at one of its centers at 5000 E. Monument St. Part of the building will be renovated to accommodate Arcturus’ “controlled environment agriculture” technology, which uses LED lights to grow plants indoors on vertically-stacked levels. The farm will vertically grow produce like lettuce, basil, cilantro and oregano.

And though the company is involved with marijuana growing efforts in other markets like Florida, Russell Snyder, CEO of Volunteers of America Chesapeake, said that will not be part of the Baltimore operation.

The renovation is expected to be finished in 2018.

@Read more about Arcturus $AGSTF “here

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Although the North American cannabis industry has remained under pressure this month we are keeping a close eye on trading activity after the industry bounced well off its lows yesterday.

According to The Marijuana Index, during the course of this month the Canadian cannabis sector has significantly underperformed the United States cannabis sector. This is a significant change from November and we continue to closely monitor this trend.

Since the beginning of the month, the Canadian index and United States index have fallen15.2% and 9.6%, respectively. In November, the Canadian index moved approximately 20% higher while the United States index plunged more than 25%.

Weakness Creates Opportunity

Although a Canadian federal task force issued favorable recreational cannabis recommendations last week, stocks levered to this development have continued to move lower after the market initially responded favorably.

The United States cannabis industry has been under pressure since early November and this weakness has come despite favorable state-wide election results. We believe that a lot of this pressure has been the result of President-elect Donald Trump’s cabinet nominations and that much of this weakness is overdone.

Investors looking for a new growth opportunity should take advantage of the recent weakness within the North American cannabis industry and focus on companies that will see remarkable growth for years to come.

We want to recap some of the significant price movements as well as some of the companies that after this recent weakness represent attractive investment opportunities.

Licensed Organic Cannabis Producer Trading at a Discount

The increased selling pressure within the Canadian cannabis industry has created several attractive investment opportunities for growth investors and this weakness has made us increasingly more favorable on one company in particular.

OrganiGram Holdings (OGI.V) (OGRMF) is undoubtedly one of the best licensed producers of medical cannabis. Organigram has been able to differentiate itself from the competition through the following:

1) It is the only fully licensed producer that is east of Quebec with bilingual branding and services, 2) The company has been selling a certified organic product since October 2014, 3) It entered into a production and distribution agreements with The Green Solution and NectarBee as well as a licensing agreement with the Trailer Park Boys , 4) The company recently completed the acquisition of a property adjacent to its existing facility and announced a fully funded expansion that will increase its annual production capacity to 26,000 kilograms.

The difference between organically grown cannabis and synthetically grown cannabis is not merely due to the use of particular fertilizers and nutrients. Organic cannabis sells for a premium more on account of the longer grow process and smaller-on-average plant yields.

In order to be considered an organic grower, you need to have a certified facility, a certified property, a certified standard operating procedure (SOP), and to be considered certified organic each ingredient (from soil to fertilizers) must meet certification standards. All nutrients and pesticides used must be of natural origin. Some of the benefits include:

The growing process does not include any synthetic nutrients, pesticides, herbicides or additives
It promotes healthy growing through the use of beneficial organisms
The growing process is biodegradable and has no negative impact on the environment
Results in the plants having higher terpene levels
Although it is harder to grow organic cannabis, there is a reason why it sells for a premium and is typically sold out. Companies like Organigram that sell organic cannabis are usually sold out of their product and cannot seem to grow enough product as demand remains at very elevated levels.

Organigram will soon be able to meet some of the increased demand. The company’s fully funded expansion will increase its annual production capacity to 26,000 kilograms.

We continue to remain favorable on OrganiGram as it possesses several traits that make it an attractive investment. The company sells a premium organic product that continues to see revenue growth and margin expansion, it has established products lines that have strong brand recognition and it has significant expansion opportunities that can be self-funded on account of the company’s solid balance sheet.

Medicine Man Signs 20+ New Clients in 2016

One company we continue to remain favorable on is Medicine Man Technologies (MDCL). The company released an update late last week and Medicine Man said it will end the year with at least 23 new clients in eight states including clients in California, Oregon, Maryland, Pennsylvania, Arkansas, Colorado, Florida, and Puerto Rico.

Of the 23 new clients, 12 were signed during the fourth quarter and the company continues to increase its market share, improve its geographic diversity and expand its relationships and influence in the industry.

Medicine Man is pursuing strategic acquisitions that will allow it to offer additional products and services to clients as it continues to work toward completion of the acquisitions of Pono Publications and Success Nutrients.

We remain favorable on MDCL and view the company as a long-term investment opportunity for the following reasons: 1) Medicine Man is led by a management team with a proven track record, 2) The company continues to execute on its business initiatives and secure new clients around the country, 3) It has a strong parent company, and 4) We expect to see significant growth over the next 12-24 months.

Social Media Cannabis Business Announces Major Acquisition

The market has responded favorably to MassRoots’ (MSRT) acquisition of Whaxy and Cannabuild and the shares have rallied more than 7% since then.

We continue to remain favorable on MassRoots and believe that this acquisition will enable the company to improve and enhance its social media platform. Once the acquisition is completed, MassRoots will be able to offer a full suite of dispensary software solutions (online ordering, marketing and real-time inventory management) to cannabis businesses.

Whaxy’s platform seamlessly integrates with nearly every major point-of-sale system used by dispensaries and will readily connect to the MassRoots network allowing for live pricing, online ordering and product feedback. Since launching in May 2016, Whaxy’s menu management and online ordering platform for licensed cannabis businesses has processed over $5 million worth of business through 40,000 unique transactions.

This announcement came shortly after MassRoots reported that MJ Freeway’s API will power live menu pricing for its dispensary clients. MJ Freeway is one of the leading point-of-sale and compliance management platforms focused on the cannabis industry. This partnership will enable seamless communications between MJ Freeway’s thousands of dispensary clients and MassRoots’ community of cannabis consumers.

MassRoots is one of the largest and most active technology platforms for cannabis consumers, businesses and activists. This social network formed in April of 2013 as an online community for people who smoke cannabis but has since evolved into much more. We continue to remain favorable on MassRoots and view the company as an attractive ancillary investment opportunity.

Kush Bottles Bounces Off its Lows and We Remain Favorable

One cannabis stock that has bounced well off its monthly lows is Kush Bottles (KSHB) and we continue to remain favorable on the shares after they moved 3% lower yesterday.

KSHB has rallied more than 18% off its lows on December 14th and the shares are trading right below the $3 level. Although we view the shares as fairly valued at current levels, we consider KSHB to be one of the highest quality OTC cannabis stocks and view the company as a long-term investment.

Kush Bottles is trading right below the $3 price target issued by Cowen and Company in mid-September. The analyst assigned the shares a Buy rating and a $3 price target because of its unique exposure to the high growth emerging cannabis industry.

The company offers several child resistant and non-child resistant exit bag solutions, all of which are fully customizable, allowing Kush Bottles’ customers the opportunity to creatively market and brand themselves. We find this aspect of its offering to be extremely important as companies compete to become a recognized brand amongst consumers.

We are favorable on Kush Bottles due to the product it provides, its geographic diversity, its growth potential following positive state-wide election results, and its continued execution.

Important Investor Disclosures

Disclosure. Compensated Affiliate. This report was authored by and is property of StoneBridge Partners LLC. All information and data relied upon in drafting this report is publicly available. The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report. Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice. Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment. This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation. The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals. It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction. Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks. The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission. Please contact a Financial Advisor for professional advice regarding any and all securities investments. This report is intended for informational purposes only. StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC. StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report

 

Authored by: Michael Berger

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Emblem Corp.’s chairman Gordon Fox has provided an update to shareholders, reviewing its accomplishments to date and its plans going forward in 2017.

Welcome to the Emblem story! We feel we have built an exceptional management team to implement our unique three pronged approach to the industry. Our production division is committed to cultivating the highest quality product possible. Our healthcare division, GrowWise Health, is designed to address the challenges that patients are confronting as they attempt to access the ACMPR system. Our pharmaceutical division is pioneering the next generation of Canadian medical cannabis: medication made available in standard pharmaceutical dosage formats.

We believe that the Emblem senior management team (myself, Gordon Fox, and my partners Harvey Shapiro, Maxim Zavet, and John Stewart) are uniquely qualified to carry out this demanding business plan. Our mission is to pursue a patient-centric model with a relentless commitment to quality and a dedication to innovation.

Today, Emblem is fully licensed and actively registering patients. Our facility in Paris, ON was designed and built to produce elite quality dried flower. From inception we have been successful in raising over $42 million dollars of capital and we currently enjoy a cash position of $27 million as we expand our production capacity for medical offerings and prepare for the onset of the recreational market.

Our facility currently operates with two flowering rooms, one vegetation room, one mothering room and one propagation room, supported by trimming and drying facilities, fulfillment, administration and a 625kg vault. We will commission three new growing rooms in March and a 4th in June. We’re currently growing a total of 12 strains, with a variety of CBD and THC strains, (indica, sativa & hybrids). We have an excellent cultivation plan and a superb growing team to carry it out. Our growers are passionate and experienced. Management’s mission is to provide our growers with the ideal growing environment to produce the highest quality offerings for both the medical and anticipated recreational market.

Recent trends in the medical cannabis market are encouraging. The registered patient base for the industry appears to be growing at the extraordinary rate of about 10% per month. However, the number of physicians prescribing medical cannabis still appears to be below 5% of the total. While patient numbers may be increasing, they continue to confront difficulty accessing the system.

GrowWise is committed to meeting this challenge. GrowWise continues to expand its clinic network and we expect it to be serving a significant patient base by the end of 2017.

We continue to believe that medical cannabis in Canada will experience fundamental change in the coming years. We expect the number of authorizations filled in dried flower format to reduce materially over time and be replaced by authorizations for cannabis medication in standard pharmaceutical dosage formats. We are committed to be in the vanguard of this developing pharmaceutical field. We expect that the market for cannabinoid based pharmaceutical formulations to be significant. Emblem is committed to deploying the laboratory facilities and building the scientific team capable of developing a range of formulations to reach these markets.

We were gratified by a number of elements of the recent report of the Canadian Taskforce on Cannabis Legislation. The report confirms the strong recommendation that the current licensing and regulatory regime continue for recreational marihuana. A recommendation that attracted less attention but that is extremely important is the recommendation that the current e-commerce model be allowed to continue into the recreational regime. This will allow high quality producers such as Emblem maximum flexibility in reaching a Canada-wide market and optimizing margins.

We continue to perceive that the recreational market will evolve into a distinct “table wine” market and “fine wine” market. Emblem will be focusing on the upper echelon of the recreational market where we perceive that margins will be the most attractive. To pursue this objective Emblem will be deploying significant capital for the construction of the highest possible “closed box” horticultural environment capable of producing the highest quality product, at scale. We have plans and funding in place to build and commission capacity to 12,000 kgs annually for the arrival of recreational cannabis. We have additional longer-term plans to expand production to over 21,000 kgs annually.

We believe that we have a unique and well considered business plan. More important, we believe that we have the senior management team to drive it home.

We have enjoyed unwavering support from our shareholders for which we are eternally grateful. We thank you for being a part of our journey into the public markets, and look forward to delivering on our business plan.

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Forensic labs throughout Canada will most likely be overwhelmed with samples of blood, urine, saliva and hair as soon as recreational marijuana becomes legal. This is what Public Safety Canada is concerned about as the government moves forward towards legalization of marijuana. Prime Minister Justin Trudeau promised legislation will be finalized by spring and a distribution system should be in place by the beginning of 2018.

Ottawa said that it expected an increase in the amount of people using marijuana as it becomes legal; therefore, meaning more people abusing marijuana. Public Safety Canada published documents Monday morning stating that as usage increases, police may be doing more testing for the presence of weed.

“It should be expected that the number of samples requiring lab analysis will increase dramatically once cannabis is legalized, simply because the police will be reacting to the new regime with a similar approach as they do for driving under the influence of alcohol,” the documents note.

“Roadside checks and random screening of drivers for drugs will likely occur more often, thus increasing the number of samples that will need to be tested for drugs.”

The government is looking to hire an outside contractor to find out if labs across Canada can handle the large amounts of samples anticipated. 80 labs to be surveyed’ As per the documents, the contractor will send out questionnaires to approximately eighty Canadian labs as well as some American labs. The final report should provide suggestions for avoiding backlogs.

Christine Nielsen, CEO of the Canadian Society for Medical Laboratory Science (CSMLS) says that the fact that American labs are being included in the study implies Canada may be looking for help to keep up with the increased workload. “They may already know there’s no capacity in Canada,” Nielsen said. “That would be what we call a ‘send out.’ That means it has to go somewhere for timely testing.”

She adds that different provinces will have different capacities of testing samples, depending highly on the form of test that will be utilized to measure the drugs in one’s system.

“Especially when you’re dealing with a justice case, (the tests) are life altering,” Nielsen said. “We just want to make sure that the facilities that are assigned this work have the proper standards in place.”

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