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MJNA Analysis:
The company, incorporated in May 2005, is a development stage company operating in the fields of cannabis and industrial hemp in America. Through subsidiaries and investment holdings, the company is focused on the development, sales and distribution of hemp oil containing naturally occurring cannabinoids, including cannabidiol and other products rich in the product. The products are formulated for the use of the pharmaceutical, nutraceuticals and cosmecuiticals industries including dietary supplements containing prescription based hemp oil in countries which have legalised hemp oil for various treatments. The services include development of cannabinoid-based health and wellness products and the development of compounds for medical use. The company operates through a number of subsidiaries such as Wellness Managed Services LLC and others.
HempMedsPX, LLC is the principal distributor through subsidiaries and associates, including Puerto Rico and Mexico for the portfolio of legal hemp products and the flagship product is Real Scientific Hemp Oil, which is a full spectrum hemp oil containing natural ingredients. The supplements contain between 10% and 30% and are available in three varieties. Wellness Managed Services, LLC provides management support and services to cooperatives and facilities as well as medical clinics. And owns interests in firms that provide consulting and security services in the legal cannabis business. Red Dice Holdings LLC owns the Dixie Botanica brand while CanChew Biotechnologies focuses on the treatment of pain and medical disorders through the use of chewing gum based medical products. Finally Hempwire LLC is a joint-venture for the marketing and distribution of rich hemp oil functional food sales and nutritional supplements.
Legal cannabis industry prospects
Legal cannabis is one of the fastest growing industries in the United States, and well over 20,000 studies in detail the benefits of medical cannabis for people who face a number of diseases ranging from Alzheimer’s to chronic pain to diabetes. It is fast becoming a mainstream product because of the huge amounts of scientific research, favourable public opinion and a more benign legal system. More than 1.2 million people are already using medical marijuana for a number of medical problems. The estimated size of the legal industry in the US is $ 7.1 billion in 2016, which is an increase of more than 25% over the previous year. The increase is because of states like Colorado, Washington and Oregon expected to approve both the medical and recreational use of the substance. The number of Americans who support the legalisation of marijuana for medical purposes is 89% compared to 74% in 2011. The public is becoming increasingly more aware and trusting. 25 states, as well as Washington, DC, and Puerto Rico have already legalised the use of medical marijuana and some of them are expected to authorise recreational use as well. In 2015, alone, $ 996 million of recreational and medical sales in Colorado were witnessed accompanied by $ 661 million in recreational sales in Washington. Tax revenue from the sale of recreational marijuana is already being used for the purposes of education, feeding the homeless and infrastructure improvement. The size of the 2015 hemp market was $ 573 million without taking into account sales data from big box retailers and 56% of physicians support the nationwide legalised sales. 183 million people use marijuana in 2014 according to the UN, which makes it one of the most commonly used drugs in the world.
The bottom line
It should be remembered that the company does not actually manufacture and distribute medical marijuana, but focuses instead on the development and sale of hemp oil and hemp oil derived products. Its operations are carried out through eight fully owned or partially owned subsidiaries. The company has a current market capitalisation in the region of around $ 460 million and, because the earnings have been negative, it is not possible to calculate a price/ earnings ratio. There are several other risks to be taken into account as well. The negative earnings have resulted in a continuous weakening of the cash position and the company will need to raise more cash through the use of debt or the dilation of equity through the raising of additional equity. Debt has already become an issue because of the existing long-term liabilities of $ 12 million and current liabilities of $ 5 million. Solvency will continue to be a major worry. However, what should console potential investors is the possession of marijuana as a growth industry.
Broad Street Alerts has not been compensated for this report by anyone and the opinions if any are that of the author Ramakrishnan Iyar. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.