Cronos Group Inc (OTCMKTS:PRMCF) Is Too Far Ahead To Fail

A quick look at the Cronos Group Inc (OTCMKTS:PRMCF) price movement shows a firm that is clearly on the rise. Further analysis of its results and announcements reveals the firm’s potential to create even more value for shareholders. In this article, we give an introduction to Cronos Group Inc and reveal some of its more recent reports that have contributed to its increasing share price.First, take a look at its price movement over the past year: PRMCF Daily ChartCompany OverviewCronos Group, formerly known as PharmaCan Capital Corp was founded by Lorne Michael Gertner and Paul Rosen on August 21, 2012, and is headquartered in Toronto, Canada. It is a geographically diversified and vertically integrated cannabis company that operates two wholly-owned licensed producers regulated within Health Canada's Access to Cannabis for Medical Purposes Regulations and holds a portfolio of minority investments in other licensed producers. The company's flagship producers, Peace Naturals Project Inc. (Ontario) and Original BC Ltd. (British Columbia), are collectively situated on over 125 acres of agricultural, licensed land. Cronos Group is focused on building an international iconic brand portfolio, providing patients with personalized care, and creating value for shareholders.The firm seeks to invest in companies either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marijuana for Medical Purposes Regulations (MMPR). The firm typically invests in companies based in Canada. The firm which is primarily an equity investor may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. The firm seeks board representation consistent with the size of the investment but does not need control.Its portfolio includes In The Zone, Peace Naturals, Whistler Medical Marijuana Co., ABcann, Hydropothecary, Vert Medical, and Evergreen Medicinal Supply.Recent DevelopmentsIn November, the firm announced that it had closed its previously announced bought deal public offering, including the full exercise of the over-allotment option. As such, a total of 5.5 million common shares of Cronos Group were sold at of $3.15 per Share for aggregate gross proceeds of approximately $17.2 million.The Offering was underwritten by a syndicate led by PI Financial Corp. as sole book runner and which included Canaccord Genuity Corp.Cronos Group intends to use the net proceeds of the offering for expanding production capacity at its wholly-owned Licensed Producer Peace Naturals Project Inc., developing infrastructure for distribution, research and development initiatives, and for general working capital purposes.The shares were offered by way of a short form prospectus filed by Cronos Group in each of the provinces of Canada, excluding the province of QuébecEarlier in September, PRMCF entered into a supply agreement with Cannamedical Pharma GmbH. Cannamedical Pharma GmbH is a pharmaceutical and narcotics wholesaler that is federally licensed for narcotics import. As of September 2017, Cannamedical was the fastest growing cannabis retailer in Europe with a network of 781 pharmacies and expectation to reach 2,500 by the end of the year.With 82 million people, Germany is the largest federally legal medical cannabis market in the world. Cannamedical has been actively selling cannabis products throughout 2017, but this arrangement will help with the ongoing German medical cannabis shortage. At the time of the agreementCannamedicalhad made arrangements with PRCMF to export one of the single largest shipments of medicinal cannabis in the European Union's history. Its products were scheduled also be formally introduced at the Expopharm exhibition in Dusseldorf in the same month.Company FinancialsOver the last period, the firm recorded sales of $1.95 million and net income of $0.88 million.Gross margins widened from -175.43% to -5.36% compared to the same period last year, with operating (EBITDA) margins now 54.47% from -268.15%.Change in operating cash flow of 168.78% compared to same period last year is about the same as the change in earnings, likely no significant movement in accruals or reserves.Earnings growth from operating margin improvements as well as one-time items.The company’s earnings growth was influenced by year-on-year improvement in gross margins from -175.43% to -5.36% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -268.15% to 54.47% compared to the same period last year. For comparison, gross margins were 46.92% and EBITDA margins were 2.71% in the last reporting periodThe company’s earnings growth was as a result of the increase in its operating (EBIT) margin from -337.87% to 44.02% andnon–recurring items. The company’s pretax margins are now 44.02%, a vast improvement from -337.87% recorded last year.Since the beginning of 3Q2017, the firm successfully raised $72.3 million to fund its operations and capacity expansion plans. Total capital raised was $40 million senior secured credit facility, which happens to be the largest publicly recorded straight debt offering in the cannabis industry and multiple equity raises at increasing share price levels. To reduce possible dilution of equity, the company did not issue convertible notes or warrants along with these funds raised.ConclusionPRMCF has successfully turned around its sales figures, margins, and liquidity position. It has also entered strategic partnerships that promise future rewards for investors.We will be updating our subscribers as soon as we know more. For the latest updates PRMCF, sign up below!Disclosure: We have no position in PRMCF and have not been compensated for this article.Image courtesy of Douglas Sprott via Flickr