The bankruptcy of U.S.-based GenCanna Global also has dragged down penny-stock cannabis player MariMed, which had invested $30 million (€26.9 million) in the Winchester, Kentucky-based CBD company. Marimed’s predicament is evident in a recent filing to the U.S. Securities & Exchange Commission in which the company said it “expects to incur a pretax loss for the fiscal year ended December 31, 2019 of in the range of approximately $73 to $81 million.”
In asking for an extended deadline to file its tax report for 2019, MariMed wrote that it has written off both its investment in GenCanna plus roughly $33 million in receivables and unearned revenue.
Seed deal falls apart
The $30 million investment by MariMed was for development of a $40 million GenCanna processing facility. In other arrangements indicated in the recent SEC filing by MariMed:
“During the nine months ended September 30, 2019, MariMed Hemp purchased $21.6 million of hemp seeds for its wholesale hemp distribution business and to develop hemp-derived CBD products.
“MariMed Hemp sold a majority of these seeds to GenCanna, a related party, at market value which generated $33.2 million of receipts. The Company provided GenCanna with extended payment terms through December 2019, to coincide with the completion of the seeds’ harvest.”
Not a dime
That deal fell apart when the GenCanna bankruptcy intervened. Through the third quarter (2019), MariMed had reported year-to-date revenue of over $40 million, with $29 million of that in future receivables from GenCanna. “To be clear, the company booked revenue of $29 million from the affilated GenCanna without receiving a dime,” Analyst Alan Brochstein wrote on New Cannabis Ventures.
GenCanna had ambitions to become a global player in CBD production before it filed for bankruptcy in February. The planned hemp processing plant in Mayfield, Kentucky was one of its key growth initiatives. But delays and cost overruns came to light last October when a group of contractors filed liens against property the company had leased for the new processing facility, claiming GenCanna owed them $13 million. Other legal actions followed.
Another Kentucky hemp company, Atalo Holdings, which earlier said it had received an investment from GenCanna, filed for bankruptcy in mid March following the GenCanna bankruptcy petition in February. The two companies had jointly operated a 147-acre Hemp Research Campus where 100 workers were employed.
MariMed, based in the U.S. state of Massachusetts, owns and operates state-licensed cannabis facilities in Delaware, Illinois, Rhode Island, Maine, Massachusetts, Maryland and Nevada.
MariMed’s shares which, reached as high as $4.92 in October 2018, and which were trading at $1.05 Oct. 19, 2019, are currently trading at about 22 cents ($0.22).