It’s been a volatile year for Medbox Inc.
The West Hollywood firm, which broadened its business from selling high-tech marijuana-dispensing machines to consulting with dispensaries, restated several years’ earnings in March and has seen its shares shed 99 percent of their value since last summer, falling as low as 5 cents a share.
Seeking a turnaround, Medbox recently got new leadership, a $3.5 million infusion from investors and is embarking on a new business line in the cannabis cultivation space. It has also negotiated a deal with founder and majority shareholder Vincent Mehdizadeh that will see him relinquish his majority stake in the company.
In a filing with the Securities and Exchange Commission last week, the company said it would accelerate the payment of a $328,000 promissory note held by VM Group, which is affiliated with Mehdizadeh. At the same time, he agreed to retire 2 million shares of preferred stock and 3 million in common shares, “effectively relinquishing VM Group’s majority voting position.”
Mehdizadeh said in a statement that he still holds about 11.8 million shares in the company, which closed Aug. 26 at 15 cents a share.
As Mehdizadeh steps back, Jeff Goh, recently appointed president and interim chief executive, said the cultivation push is not a last-ditch effort to save the firm. Rather, it’s something Medbox has been planning since last year.
“We listened to our customers and others in the industry, and it became quite clear for us to achieve our mission we had to have a high-quality product out there for patients who need it,” said Goh, who joined Medbox in April after consulting for the firm since last summer. “We needed to get involved in helping operators and cultivators develop high-quality products.”
To that end, the firm earlier this month acquired a 320-acre Colorado property where it wants to bring in third-party operators who will cultivate cannabis. Medbox plans to partner with farmers and operators already licensed to grow cannabis in the state and either charge rent or take a cut of revenue or profit.
The federal government still designates marijuana as a controlled substance, making cannabis cultivation tricky for publicly traded companies. Many have found ways to distance themselves from directly handling marijuana while focusing instead on auxiliary services within the industry.
Medbox sees being on the frontline of cultivation as much more lucrative, and Goh, who was general manager of Frito-Lay Inc.’s China operations in the mid-1990s and helped set up everything from factories to potato farms, said revenue is expected to pick up by the first quarter of next year.
“There were things done in the past in terms of dilutive financing that have affected the stock,” he said. “I believe a lot of what’s happening with the stock will be short term. The best way to overcome that issue is to deliver revenues that are sustainable with real profit.”
Insurance ‘Tidal Wave’
Few health insurance brokers will be planning Christmas vacations this year.
The Dec. 1 start of open enrollment for Medicare and Covered California’s individual plans will overlap with an influx of business from small employers whose plans are set to expire at year’s end, the result of a 2014 strategy to delay the impact of Obamacare for a year.
On top of that, some larger employers with 50 to 99 workers could choose to renew their health insurance plans at the same time.
“This time frame is going to be exceptionally busy,” said Genesis Financial & Insurance Services Vice President Dede Kennedy-Simington, who works out of the firm’s Pasadena office. “I haven’t been sleeping the last two Christmases anyway. This one is going to be really brutal.”
Her company added two part-time seasonal employees with insurance experience to its eight-person office to help handle the anticipated high volume.
Some brokers have even increased year-round staff. Pasadena brokerage Polenzani Benefits & Insurance added two full-timers to its nine-person office about a year ago with an eye toward this busy season, said Robert T. Hawkes, a company vice president.
“It was a direct result of the increased complications and needs of what’s going on right now,” he said. “Those items are culminating in what looks to be a tidal wave of activity.”
Checkups
Westwood biopharmaceutical firm Puma Biotechnology Inc. has increased the size of its board to five directors from four and appointed Dr. Adrian Senderowicz to the new position. … Miracle Mile home care services firm LivHome Inc. has hired Dr. Cody D. Legler as chief clinical officer. … Santa Monica’s Montalba Architects recently won honors from the American Institute of Architects for its work on a mobile dental office in the Bay Area. The firm, which designs luxury retail stores, converted a 230-square-foot trailer into a light-filled, wood-paneled dental office complete with two treatment rooms as well as sterilization and waiting rooms.
Staff reporter Marni Usheroff can be reached at [email protected] or (323) 549-5225, ext. 229.
