OrganiGram Growing Like a Weed

OrganiGram Holdings Inc. (OGI.V) (OGRMF) saw its shares rally after the company released a preliminary review of its second quarter results. During the quarter, OrganiGram reported more than $55,000 in net income and that it achieved positive year-to-date EBITDA and cash flow from operations.

OrganiGram is a licensed medical marijuana producer in Canada and the company operates through its subsidiary, OrganiGram Inc. The company’s facility is located in Moncton, New Brunswick and are regulated by the Marihuana for Medical Purposes Regulations.

Growing Like a Weed

Highlights from OrganiGram’s second quarter preliminary results include a 38% increase in revenue and a 14% improvement in gross margin. The company plans to release full financial statements on April 25, 2016.

OrganiGram continues to grow at rapid rates and is in the process of expanding its current location in order to increase production capacity. When completed later this year, OrganiGram’s expanded facility could bring production capacity to 3,500 kilograms per year.

The company’s facility still has a lot of room to grow and its existing acreage and infrastructure will allow OrganiGram to increase production levels by 5x in order to satisfy higher demand.

An Execution Story

One of the reasons why OrganiGram is positioning itself for growth is because of the October 2015 election of Justin Trudeau as Canada’s Prime Minister. Trudeau and the Liberal Party said that they will make marijuana legalization a priority and this would be a major catalyst for OrganiGram.

OrganiGram recently entered into an engagement agreement with XIB Consulting Inc., to help with the company’s corporate development initiatives which include M&A activities, strategic business development and market awareness.

The agreement has a six-month term and OrganiGram will satisfy XIB’s engagement fee by issuing them 123,456 shares of common stock at $0.81 per share.

Future is Bright

After a few months of relatively flat trading, both OGI.V and OGRMF started to break out following their preliminary second quarter results. We expect to see shares continue to move higher as the company continues to penetrate the Canadian medical marijuana market and we view recreational marijuana as a potential major catalyst.

After Prime Minister Trudeau was elected, OGI.V and OGRMF rallied more than 150% and we expect to see an even greater rally once Trudeau legalizes recreational marijuana. Some of the companies levered to this potential catalyst include Canopy Growth Corp (CGC.V) (TWMJF) and Aurora Cannabis Inc. (ACB.CN) (ACBFF). 

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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