Two of the more prominent – and transparent – publicly traded companies in the medical cannabis industry released second-quarter financial data this week, offering up a mixed bag for investors.
GrowLife Inc. and Medical Marijuana Inc. reported financial progress in several areas but experienced setbacks in others, reflecting the challenges public MMJ companies as a whole are experiencing.
Many ancillary cannabis businesses, especially those targeting the national market, are still feeling their way along and experimenting with different business models in a rapidly changing industry. That’s made it hard for them to gain financial stability, leading to fluctuations from quarter-to-quarter.
With that as the backdrop, here’s an overview of GrowLife and Medical Marijuana Inc.’s second-quarter results:
GrowLife (PHOT): The cultivation equipment company reported revenue of $872,557 for the April-June period, a fourfold increase from $208,446 in the second quarter of 2012. But its net loss more than doubled, hitting $1.6 million. The revenue picture also isn’t as bright as it appears. Much of the uptick is tied to acquisitions rather than organic growth. On a pro-forma basis – which reflects the revenues of the acquired companies as if they were part of GrowLife a year earlier, providing a better picture of the company’s financial progress – sales fell more than 20%.
Still, the acquisitions have made GrowLife a much bigger company and given it new opportunities to become a leader in the cultivation side of the industry. Robert Hunt, president of GrowLife, said he is pleased overall with the results and indicated that the company should see a big revenue boost in the third quarter when acquisitions made in June are fully reflected in quarterly results. He also said that GrowLife is in the process of restructuring some of its businesses to boost profitability, which will help its financial health going forward.
“We’re making some tough decisions on a couple companies that are part of GrowLife, and that involves looking at ways to make some divisions a lot more profitable,” Hunt said, adding that the moves include reducing overhead and staff in some areas.
The company’s stock is trading at around 4 cents a share, the same price when the company released financials on Tuesday.
Medical Marijuana Inc. (MJNA): Perhaps the most well-known publicly traded cannabis company, Medical Marijuana Inc. reported $6 million in net income on revenue of $8.8 million in the second quarter, up significantly from $2.4 million in sales and a profit of $1.47 million a year earlier.
While that’s impressive on the surface, there are some caveats: Most of the revenue came in the form of an installment payment from a previous deal to sell inventory, licenses and other assets to CannaVest. That revenue therefore isn’t part of Medical Marijuana Inc.’s core ongoing business and wasn’t generated in the quarter via new sales. Without that payment, the company’s sales were about $834,000, which is significantly lower than the same quarter a year earlier and the first three months of 2013.
The company experienced several setbacks, but it made notable progress in other areas. During the quarter, Medical Marijuana Inc. launched a sales and marketing arm called HempMedsPX, which stands to play a key role in the company’s future. It also acquired several new brands and products and relocated its headquarters to a larger building.
All of this ties into a bigger transformation of the company intended to fuel growth for years to come.
“In short, in just a few months we have completed a transition from being a holding company to directly marketing, selling, developing and managing a growing portfolio of cannabis products and industry services ourselves,” Medical Marijuana Inc. said in its quarterly filing. “In an industry that is constantly evolving, we are devoting resources to monitor and respond to changing trends, laws, and emerging opportunities so that we are always in compliance with laws and regulations.”
The company’s shares hovered around 12 cents a week ago but shot up to 23 cents Monday on news that prominent medical expert Dr. Sanjay Gupta now publicly supports medical marijuana. The stock fluctuated significantly after MJNA released earnings on Tuesday before settling back down to close the day at 16 cents. It’s currently trading at 17 cents.