Enertopia Corp. (OTC: ENRT), an aspiring licensed producer under Canada’s Marihuana for Medical Purposes Regulations (“MMPR”), has been making steady progress towards securing a license since our initial coverage and follow-up coverage detailing its three projects. While the timeline depends largely on Health Canada, management has been actively improving its facilities in preparation.
On July 14, 2014, the company released its 10-Q filing with the SEC showing $1,215,899 in cash and equivalents along with a robust current ratio of 6.2x, setting it apart from many other debt laden competitors. The company’s market capitalization of approximately $15 million is also significantly lower than many of its peers despite its experienced management and past MMAR experience.
In this article, we’ll provide an update on the company’s three medical marijuana-growing operations within Canada based on discussions with management.
The Green Canvas project, located on 160 acres of farm land Northwest of Regina, Saskatchewan, where management is actively working on security upgrades on its 14,000 sqft growing space (scalable to 55,000 sqft) in which it has signed an agreement to obtain a 75% interest over three years (currently owning 49%).
The GTA project, located in the Burlington, Ontario in partnership with Lexaria Corp., recently received municipal approval for medical marijuana projects within the city limits. The joint venture is engaging David Hyde & Associates for security design and implementation, as well as KNY Architects Inc. to complete necessary design upgrades on the initial 30,000 sqft facility that can be expanded to 75,000 sqft.
“It needs to be mentioned that there was no negative feedback during the public hearing process [for the GTA facility], a true testament to growing acceptance of medical marihuana being used as a medicine for people in main or other chronic conditions,” said Enertopia Corp. CEO Robert McAllister in a recent press release announcing the municipal approval of its GTA facility.
The World of Marijuana project, located in Mission, British Columbia, is awaiting its Health Canada site visit, as the government organization works through its backlog. As a former producer under Canada’s former Medical Marihuana Access Regulations (“MMAR”) with 2,500 sqft of production, the joint venture with an option for 51% revenue interest.
Canada’s regulatory environment surrounding the MMPR program remains somewhat uncertain due to a large backlog and ongoing lawsuits by home growers wishing to retain their privileges. Under the new law, all medical marijuana would have to be purchased from licensed producers under the MMPR program, rather than growing at home, as was permitted under the MMAR program.
The lengthy approval processes could be due to either factor, but there is no official word from Health Canada as to the cause. MMPR applicants like Enertopia and Endexx Corp. (OTC: EDXC) are therefore resigned to waiting to hear back from the government organization without any specific idea as to the exact timeline for inspection.
The benefits of investing in Enertopia include management’s extensive industry experience, and the fact that many of its projects were former producers under the country’s MMAR program. With this experience in hand, investors can be assured that the projects will be more ready to address the approval process than many of the hundreds of other applicants trying to become licensed producers under the MMPR.
Enertopia trades with a market capitalization of about $15 million, which is significantly less than many of its peers, despite its diversification, past experience, and management’s expertise. These factors suggest that the equity could be relatively undervalued, making it worth a second look for investors looking for exposure in the space alongside companies like Tweed Inc. (OTC: TWMJF).
In recent days, the market has started to recognize this undervaluation, as the stock soared more than 36% on heavy volume following its latest press release. These types of responses could become more common as investors embrace the legitimacy of its projects and integrity of its management team. If successful in becoming a licensed producer, the company could see its market cap expand significantly.
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