Post by
deminimis on Oct 20, 2017 6:43pm
Disclosure Bonanza!
Emblem's 2016 Annual Information Form was posted on Sedar and included a number of interesting tidbits which I will highlight here:
On February 27, 2017, the Corporation announced that it had entered into non-binding memorandum of understanding (the "MOU") with ICC International Cannabis Corporation ("ICC"), a licenced producer of Cannabidiol ("CBD") and other cannabis derivatives based out of Uruguay. The objective of the MOU was to import CBD produced by ICC into Canada primarily for extraction by Emblem and inclusion in CBDbased oils and advanced pharmaceutical formulations for the Canadian medical cannabis market. Management has concluded that the ICC arrangements cannot be advanced at this time under Emblem’s current licensing.
Disappointing but not surprising. I mentioned in a post the other day that I did not think this would ever happen.
Management of the Corporation currently expects that the Corporation will begin selling cannabis oils to qualified patients in November or December 2017 after it receives approval for such sales from Health Canada. Health Canada inspected the Corporation’s extraction facility on June 28, 2017 and its review is ongoing. Accordingly, while the Corporation believes it will receive the approval shortly, it can give no assurance that it will be obtained shortly, that it will not be delayed beyond the timeframe specified above or that it will be obtained at al
Certainly sounds like this is completely in HC's hands so while it is frustrating, it doesn't seem like anything we can blame on Emblem.
The production building also has an additional four (4) growing rooms (the "Phase 2 Grow Rooms") comprising 6,800 square feet, in the aggregate. Three (3) of these rooms, totaling approximately 5,200 square feet, were completed in September 2017. Health Canada licenced these three rooms on October 6, 2017. The first crops were immediately planted with all three rooms being expected to be harvested in December 2017. The fourth grow room, of approximately 1,600 square feet, is expected to be fitted-out and equipped for cultivation by summer 2018 after the completion of the expansion outlined below. After completion of the Phase 2 Grow Rooms, the Corporation expects the existing facility will allow it to produce approximately 2,000 kilograms of medical cannabis annually. The Corporation also plans to retro-fit its three (3) incumbent grow rooms in January 2018 in order to improve environmental control of those rooms.
So they didn't take the exisiting rooms offline after the harvest earlier this month to start the retro-fitting as IR told they were plainning on doing. They are going to do one more harvest and then do the work. This means they are going to have ample supply for Q1 and probably most of Q2. Note that they are now saying summer 2018 for the completion of the last room, they had previously said spring 2018.
Emblem has designed and has commenced construction of a 30,000 square foot expansion to the existing facility. A major component of this expansion is a Good Manufacturing Practice ("GMP") extraction facility, laboratory and pharmaceutical production facility. This GMP facility will enable Emblem to produce oils and other advanced formulations of cannabis medication to exacting standards and at considerable scale. It will also facilitate the research and development activities required to pursue these advanced formulations. The 30,000 square foot expansion building will also house additional administration space, a Level 9 vault, warehousing, shipping, receiving and materials handling space. Emblem expects the expansion to be commissioned in June or July 2018.
So that settles that argument, they have commenced construction. This also sheds some light on the CapEx increase, they increased the size of the facility 20% from 25K to 30K sq ft. I don't this would account for all of the 70% increase in spend though.
On June 23, 2017 and July 27, 2017, the Corporation completed the acquisitions of two (2) contiguous parcels of land aggregating about eighty (80) acres located at 539 and 557 Paris Road Paris, Ontario, a short distance from its current 10 Woodslee Ave. facility. The new lands will house Emblem’s cultivation capacity expansion for the anticipated adult recreational market - see "Description of the Business – Adult Recreational Market". Production capacity is expected to be built in phases that will include cultivation space in the first phase sufficient to produce up to 15,000 kilograms per year together with additional space to house ancillary functions (drying, trimming, curing, vaults, packaging, fulfillment, materials handling, administration etc.). Emblem expects to break ground on the newly acquired lands in early 2018 and be in production by spring, 2019. Future expansion phases will be dependent on the size and growth of the recreational market.
So they previously said the first module will have 60,000 sq ft dedicated to cultivation and the subsequent 2 will have 70,000 sq ft so if we pro-rate this we get the following:
2,000KG - Exsisting Facility
15,000KG - Module 1
17,500KG Module 2
17,500KG Module 3
52,000 KG total - Pretty close to my estimate of 45-50K provided they buildout 3 modules which they are no longer giving guidance about. We could end with less or more depending on demand. I think this is a more prudent approach than just saying let's raise as much money as we can to build out as much capactiy as we can as fast as we can.
On October 3, 2017, the Corporation announced that it had entered into a collaboration and licensing agreement (the “CL Agreement”) with Canntab Therapeutics Limited (“Canntab”). Under the terms of the CL Agreement, the Corporation and Canntab will collaborate on the preclinical formulation, clinical development, regulatory approval, manufacturing and commercialization of a Canntab developed patentpending oral sustained release formulation for cannabinoids.
We already know about this one but thought I would include it for any newbies reading this since it is a significant development.
Emblem commenced extraction activities in December 2016 and, as noted above, expects to be in a position to sell cannabis oil products to authorized patients by November or December 2017, subject to receipt of all necessary approvals from Health Canada. Once approved, Emblem expects to be able to produce up to 5,000 bottles per month of various cannabis oils by November 2017. Emblem plans to begin installing production lines in December 2017 that will allow it to produce capsules containing cannabis oils and, subject to Health Canada approval, begin selling oil filled capsules in the second quarter of 2018. Capsules will be an improved dosage format as each capsule will contain a measured dose and therefore allow physicians and patients to titrate the medication. Emblem expects that oil filled capsules will, to some extent displace simple oils, but that in the aggregate, capsules will be accretive to the total cannabis oils markets. The Corporation further expects that as dried flower is displaced in the medical cannabis market by oils and oils are, in turn, displaced by more advanced pharmaceutical formulations, the affect will be accretive to the market. Emblem intends to participate in the development of such advanced pharmaceutical dosage formats. In pursuit of this strategy, Emblem entered into the CL Agreement with Canntab to collaborate on the preclinical formulation, clinical development, regulatory approval, manufacturing and commercialization of a Canntab developed patent pending oral sustained release formulation of cannabinoids. The Corporation expects to be selling, subject to Health Canada approval, sustained release pills or capsules in early 2019.
Also nothing new here but important information nonetheless.
The federal government recently announced that it is considering authorizing certain cannabis concentrates (including vape pens) and cannabis edibles for sale to adult consumers by a target date of July 2019. The Corporation had already been researching vape pen and the related concentrate technology, and now intends to dedicate additional resources to be ready to supply a premium vape pens product into the adult recreational market as soon as lawfully permitted. The Corporation is also reviewing the best approach to acquiring extraction grade cannabis to service the expected vape pen, edibles and concentrate market.