10-K season just came to an end for cannabis stocks. Actually, to be precise, extra innings came to an end, as the filings were due 03/31 for companies with years ending in December with the ability to extend to April 17th. One of the filings that caught my attention was Axim Biotechnologies (OTC: AXIM), which filed its 10-K yesterday along with many others who waited until the last minute.

AXIM’s stock had a tremendous 2016 and is up dramatically over the past year despite a recent decline from an all-time high in January:

The 10-K updated on the number of shares outstanding, and there are 52.57mm as of April 15th. Additionally, there are another 1mm shares of preferred shares that convert 1:1 to common, giving the company 53.57mm shares outstanding before considering the convertible notes ($1.85mm that converts at $0.2201 would add 8.4mm shares, while $216,100 convertible at $0.10 adds another 2.16mm shares for a total of 10.56mm shares). This gives the company a market cap of $712mm. Adding in those convertible notes would boost it to 64.13mm shares for a market cap of $853mm.

As of year-end, the company had assets of just $1.45mm but liabilities of $3.82mm. In 2016, sales fell from $49,139 in 2015 to just $47,059 as the company continues to struggle with marketing its CanChew CBD gum. It reported an operating loss of $3.76mm and a net loss of $5.8mm. The company used $1.29mm to fund its operations in 2016 and ended the year with just $713K in cash.

While the company is pursuing drug development, it spent only $235,579 on R&D in 2016, down 50% from the $571,455 it spent in 2015. For comparison, GW Pharma (NASDAQ: GWPH) spent $129mm in FY16 on R&D. Zynerba (NASDAQ: ZYNE) spent almost $17mm (and has a lower market cap than AXIM despite having Phase 2 trials funded and underway).

If this isn’t enough to give pause, consider that the company says it needs to raise $12.8mm over the next year:

The company has a market cap that is insane in my view and has been unable to raise money on reasonable terms to date. Holders of AXIM should expect substantial dilution, in my view, if the company is actually able to raise the $12.8mm it needs. If it can’t raise the money, then it surely isn’t worth over $700mm.

Exclusive article by Alan Brochstein, CFA

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email