MariMed Inc. (OTCQB: MRMD) designs, develops, finances, and optimizes the success of medical cannabis cultivation, production, and dispensary facilities. MariMed’s team has developed state-of-the-art regulatory-compliant facilities in DE, IL, NV, MD, MA, and RI.
In the recent past, the company stock has shown an uptrend, led by the strong fundamentals and multiple positive catalysts/development’s in the recent past. The company’ robust business and financial risk profile are marked by its diverse platform, continuous flow of capital for new business and product development, strategic acquisitions, and expansion of infrastructure that will enable it to take advantage of this critical time in the industry.
On Nov. 20, 2018, Marimed reported third-quarter 2018 financial results for the quarter and nine months ended September 30, 2018. For the quarter ended September 30, 2018, revenues nearly doubled from the same period a year ago, increasing 98% from approximately $1.7 million to approximately $3.4 million. The Company continued to grow quarterly year-over-year revenue since the second quarter of 2016. Also, during this time period, operating income nearly tripled from the same period a year ago, increasing 200% from approximately $287,000 to approximately $861,000.
“Our results this quarter reflect the execution of our original business strategy and success of our licensed cannabis clients under MariMed’s professional management in multiple states,” said Robert Fireman, CEO of MariMed Inc. “With consistent investment to expand our footprint, and our new Massachusetts and Maryland facilities generating leasing, management, and product licensing revenue, plus strong execution on product sales, we achieved better than expected performance in each of these areas.”
More recently, on Nov. 27, 2018, the company announced that Navy Capital Green Fund, LP, made a $14.725 million investment in MariMed in November 2018. Navy Capital is the first US-based Long/Short Equity Hedge Fund dedicated solely to the legal cannabis industry.
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“Navy Capital’s $14.7 million investment in MariMed reflects our belief that MariMed is one of the best-managed multi-state cannabis operators in the United States,” said Sean Stiefel, Navy Capital portfolio manager. “This investment will help MariMed grow its best-in-class cannabis facilities. We are very impressed with the company and have participated in three financings since we first met MariMed CEO Bob Fireman and his team.”
Referring to MariMed’s recent $30 million investment in GenCanna, a global leader in CBD hemp production, Stiefel added, “MariMed’s investment in GenCanna adds an exciting new revenue stream from cannabinoids that may soon be marketed across the U.S. and globally.”
Analysts tracking the stock believes that MRMD is one of those handful companies that has achieved continuous revenue growth and is well poised to capture the opportunities for growth in Massachusetts and Maryland. The company reported two years of uninterrupted year-over-year quarterly revenue growth. Moreover, Navy Capital’s infusion would help MariMed to maintain that revenue growth in 2019 and beyond. Therefore, Company’s healthy financial position, as well as a robust business profile, makes it a compelling investment/trading option.
About the Company: MariMed is a multi-state cannabis operator that develops, owns and manages cannabis facilities and branded products lines. MariMed’s team has developed state-of-the-art regulatory-compliant facilities in DE, IL, NV, MD, MA, and RI which are models of excellence in horticultural principals, cannabis production, product development, and dispensary operations. Besides, MariMed is at the forefront of precision dosed branded products for the treatment of specific medical symptoms. MariMed currently distributes its branded products in select states and is expanding licensing and distribution to numerous additional markets encompassing thousands of dispensaries. MariMed Inc. is one of the 17 top-performing public cannabis companies in the U.S. tracked on the U.S. Marijuana Index.
Other recent Activities/Announcements: MariMed has begun to consolidate ownership of the operations of MariMed’s cannabis-licensed clients into MariMed and acquire cannabis licensees and producers of cannabis-related products and services. Transactions to date include:
- MariMed has entered purchase agreements to acquire 100% ownership of AgriMed Industries, licensed cannabis cultivation and production company in Pennsylvania, and KPG of Anna LLC and KPG of Harrisburg LLC, two cannabis-licensed MariMed clients that operate medical marijuana dispensaries in Illinois. These transactions are subject to approval by their respective states’ regulatory bodies.
- MariMed’s cannabis-licensed client in Massachusetts, ARL Healthcare Inc., filed a plan of entity conversion with the state to convert from a non-profit entity to a for-profit corporation. ARL holds three cannabis licenses from the state of Massachusetts for the cultivation, production and dispensing of cannabis. Upon approval of the conversion plan by the State, MariMed shall be the sole shareholder of ARL.
- MariMed has invested $30 million in GenCanna, a vertically-integrated agriculture-technology company specializing in the production of Hemp CBD. The companies have created a strategic partnership, including a long-term supply agreement, whereby, MariMed will work with GenCanna to develop Hemp-derived CBD products that the companies plan to distribute domestically and internationally into what is expected to be a $22 billion hemp market by 2025 according to the Brightfield Group. Separate from its cannabis business, MariMed intends to create a product and branding business unit focused on the development and distribution of Hemp CBD-derived products.
- MariMed entered into an exclusive global licensing agreement with Vitiprints for the production and distribution rights in all legal cannabis markets of a proprietary technology that prints precision-dosed dissolvable cannabis into a paper-thin, low-calorie, fast-absorbing product that is delivered sublingually, transdermally, or by drinking when dissolved in liquid. The process, which does not use any filler products, also allows for the printing of any graphic, such as a bar code or website address, on each product.
- MariMed made a strategic investment in an entity that markets “Sprout,” a software targeting, marketing, and CRM platform designed for the cannabis industry. MariMed shall assist in the ongoing development and design of Sprout, and marketing Sprout to companies within the cannabis industry.
- Subsequent to the close of the third quarter of 2018, MariMed acquired BSC Groups LLC, a multidisciplinary cannabis advisory firm that provides operational, marketing, and licensing management services to companies within the cannabis industry.
Industry Outlook: From an industry perspective, the legal cannabis industry has accelerated at a remarkable pace in the recent past. North American consumers spent $6.9 billion on legal cannabis products, up 34% from 2015 and by 2021, legal market sales are expected to surpass $21 billion. If we take that call, then that adds extreme value further.
- Revenues of approximately $3.4 million, up 98% year-over-year
- Operating income of approximately $861,000, up 200% year-over-year
- Net loss of approximately $10.1 million, primarily due to non-cash amortization
- Cash of approximately $6.0 million, up from approximately $1.3 million at 12/31/17
- Notes and mortgages payable of approximately $12.2 million, down 25% from 12/31/17
- Revenues of approximately $8.4 million, up 88% year-over-year
- Operating income of approximately $2.0 million, up 75% year-over-year
- Net loss of approximately $18.2 million, primarily due to non-cash amortization
Commentary on financial performance:
The increase in revenue was primarily due to (i) the growth of rental income from MariMed’s facilities in Maryland and Massachusetts, which were fully and partially developed respectively and leased to tenants, (ii) increased supply procurement services provided to cannabis-licensed clients and other cannabis entities, and (iii) management fees and additional rental revenue which MariMed earns based on a percentage of revenue generated by its cannabis-licensed clients.
Operating income increased as the result of the aforementioned increase in revenue, coupled with modest increases in selling, general and administrative expenses. Operating expenses decreased as a percentage of revenue, thanks to MariMed’s leveraging of infrastructure to generate higher profitability.
The net loss for the period is due to two non-cash items—the amortization of stock option and warrant issuances, and the settlements of debt via the issuance of common stock—required by generally accepted accounting principles. These items did not affect operating income or liquidity. Excluding these non-cash items, net income for the three and nine months ended September 30, 2018, was approximately $406,000 and $936,000, respectively.
Key risk factors and potential stock drivers:
- Company’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements.
- Notwithstanding the recent boom, this is still a nascent stage space and only time would differentiate between real winners and laggards. As far as choosing an option with a relative advantage is concerned, MRMD is the preferred choice with upside potential.
- The inherent competition in the cannabis industry would continue to impinge the business risk profile of MRMD. Moreover, if cannabis becomes legal in the U.S., Canadian companies will have to compete with its American counterparts as well
- MRMD’s ability to acquire and incubate other marijuana companies as the sector consolidates
- On Friday, December 7th, 2018, MRMD closed at $3.96, on an above average volume of 726,722 shares exchanging hands. Market capitalization is $841.322 million. The current RSI is 43.76
- At $3.96, shares of MRMD are trading below its 50-day moving average (MA) at $4.33 and above its 200-day moving average (MA) at $2.64
- The present support and resistance levels for the stock are at $3.76 & $4.28 respectively.