Alan Brochstein's  Instablog

I just got an email from Google today:

Upgrading to enhanced campaigns

Hello,

In February 2013, we announced improvements to AdWords called enhanced campaigns. Today's consumers are constantly connected and using many different devices, so we've developed enhanced campaigns to help you reach them more easily and effectively.

We're writing to remind you to upgrade your campaigns by July 22, 2013. As you might already know, all new campaigns that you create will be enhanced campaigns by default. Starting July 22, 2013, we plan to upgrade all current AdWords campaigns to enhanced campaigns.

We're working hard to make it faster and easier for advertisers to upgrade so you can start to use all of the new features. This week, we started to roll out the Upgrade Center which provides you with:

• A custom dashboard to show the exact upgrade status for all your campaigns • Suggestions for which campaigns to upgrade or merge • A setup flow to help you merge campaigns

If you click the link above, which I had not seen, there is the following point:

Smarter ads optimized for varying user contexts
People on the go or near your store may be looking for different things than someone sitting at their desk. With enhanced campaigns, you'll show ads across devices with the right ad text, sitelink, app or extension, without having to edit each campaign for every possible combination of devices, location and time of day.

Example: A national retailer with both physical locations and a website can show ads with click-to-call and location extensions for people searching on their smartphones, while showing an ad for their e-commerce website to people searching on a PC - all within a single campaign.

I don't know if this is the alleged "work-around" - doesn't seem like it to me.

Here is something else:

http://www.google.com/adwords/enhancedcampaigns/index.html

Context matters

AdWords has always allowed you to reach potential customers based on their intent. That's what makes it so effective. But now AdWords also lets you capture the power of context. Context such as location, time of day, and device matter and provide you more opportunities to reach people with more relevant messages.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

NOTE: This was my article I pulled before publication because the company did issue its filing at a few minutes before midnight PST. Some of my concerns about the company's true financial condition look justified, and I will address the filing (which was not complete - the footnotes stopped suddenly on note 4) shortly.

Medical Marijuana, Inc. (MJNA.PK) last addressed the public on April 30th, when it shared a press release intended to address the falling share price and to outline the future direction of the company. Chairman and COO Michelle Sides promised "we will let our actions, products and revenue speak for themselves". Two weeks later, the company appears to have stumbled badly on a very important issue, its Q1 earnings release and filing, and may also have delayed its launch of CanChew Gum.

Delayed Financial Filings

In the press release, the company clearly stated:

1ST QUARTER FINANCIAL FILINGS ON OR BEFORE MAY 15, 2013:

The auditor is performing the final verifications of the 1st Quarter filing and will have it posted shortly thereafter.

As of midnight (EST), there was no sign of a press release or a filing on the OTCMarkets website. CannaVEST (CANV.OB) filed an NT 10-Q on the 15th indicating that it would be delayed in filing its 10-Q until the 20th due to a change in auditor that it had announced the previous day. The delay is unfortunate for shareholders of MJNA, as it will be important to evaluate how CANV accounts for its transaction related to PhytoSPHERE. As a reminder, I have addressed my concerns overaggressive revenue recognition from this deal, which the company confirmed in its 4/30 press release. In its 10-K, CANV indicated through mid-April, it had sold only $1.275mm of CBD oil:

To date, our operations have consisted of selling $1,275,000 of raw Cannabidoil product to third parties, such raw product obtained by us through inventory acquired from PhytoSPHERE Systems, LLC and contracts with various suppliers in Europe.

This is important because through Q1, MJNA will have recognized $10.5mm in revenues from the transaction ($4.5mm received in January and as of 12/31 and $6mm received in April and as of 3/30). Of course, this is all stock. This is extremely aggressive accounting where the revenue recognition is way ahead of the end-market consumption of the product.

Potential CanChew Gum Delay

It's not clear what has transpired with CanChew Gum, a product that has been delayed for quite some time. CanChew Gum is an innovative patented over-the-counter gum that delivers 10mg of CBD per stick. MJNA owns 50% of the company, CanChew BioTechnologies, that developed the gum. In a press release last July, the company suggested that the OTC gum would launch "on or around October 1st". The initial plan was to offer it on the internet but also in Colorado, California, Arizona and Washington DC "by Q4 2012". On October 2nd, the company issued a press release describing a "market trial" beginning November 15th, with a launch of the product now projected for "early 2013".

The April 30th press release shared the following update:

The Company has successfully launched of the CanChew Gum website (canchewgum.com) and is taking sales and product requests. We experienced a delay in the launch of the products due to last minute changes and approvals that we required from attorneys involved to ensure that all marketing and packaging was done correctly and in compliance with the appropriate regulatory bodies.

At that time, the website was operational and the company was promising shipments by 5/15. As of 5/14, the verbiage changed:

All Product is currently OUT OF STOCK , new stock is expected shortly and all orders are expected to ship within 24 hours after product arrival.

While it's possible that the company had gum and sold out and now is out of stock again (I called to inquire but could not reach anyone at the company), it's just as likely that they haven't shipped yet. Hopefully the delayed press release detailing Q1 results (which were pre-announced in early April) will address this issue.

A Thaw in the Chill

On 5/14, the company apparently received some good news, as traders were reporting that the DTC Chill had been lifted at TD Ameritrade. The company had indicated in the press release that it had filed the necessary papers with DTC. The SEC describes a DTC Chill:

Occasionally a problem may arise with a company or its securities on deposit at DTC. In some of those cases DTC may impose a "chill" or a "freeze" on all the company's securities. A "chill" is a restriction placed by DTC on one or more of DTC's services, such as limiting a DTC participant's ability to make a deposit or withdrawal of the security at DTC. A chill may remain imposed on a security for just a few days or for an extended period of time depending upon the reasons for the chill and whether the issuer or transfer agent corrects the problem.

The net effect has been a restriction on buying the stock at some brokerages. It's not clear what the reason for the Chill has been. The SEC cites one typical cause as an issue with the transfer agent not being in compliance with DTC rules, but these are usually resolved quickly. The SEC gives some other potential causes, including violation of state of federal laws by some or all of an issuer's securities or questions about a security being freely transferable. In any event, after a long delay, the Chill appears to be behind MJNA, which is positive.

It's unfortunate that MJNA management appears to have missed its own deadline that it shared two weeks ago for reporting its Q1 results, as the company is trying to restore credibility. Given its goal to uplist to OTCQX, it is important too that the stock, which closed at .19 but has traded over the last few weeks between .12 and .23, remain above .10 (on a closing basis), or it could delay potential uplisting. The first hurdle is to complete two years of audits (the company audited Q4 of 2012). The stock must close above .10 for 90 consecutive days prior to applying for the uplisting according to OTC.

It's very clear to me that investors are looking for a way to take advantage of the trends towards marijuana legalization. I profiled several companies that could potentially benefit a few months ago. While the prices have fallen substantially since then, the fiduciary concerns are too substantial with most of these companies. MJNA is one of the two or three best possible choices, but, until management delivers on its promises and becomes more transparent, I think the stock is quite risky. The current market cap is approximately $160mm (based on a presumed 850mm shares approximately, which is up from 808mm at year-end). This is an expensive proposition in my view for a CBD oil company with a call option on THC, but, if management delivers on its "potential" of $155mm in sales and $95mm in operating income in 2014 that it shared in February, then the price will prove to be a real bargain.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Medical Marijuana Inc. (MJNA.PK) held several conference calls last year. The last two were with Ted Caligiuri. He had joined in September, where the press release described his background:

SAN DIEGO, Sept. 17, 2012 /PRNewswire/ -- Medical Marijuana Inc. (OTC: MJNA), a leading hemp industry innovator, announces today that its Interim President and CEO, Michael Llamas, is taking a leave of absence effective immediately. According to the company, Mr. Llamas will be stepping down from his position in order to focus his attention on personal business matters that are entirely unrelated to MJNA.

The Company has appointed Ted Caligiuri as the new Interim President and CEO. Mr. Caligiuri has served on the Board of MJNA since the Company was acquired by Cannabank and has been instrumental to the overall development of the company, especially in the area of Hemp-based CBD production.

His tenure didn't last until year-end, though the company never disclosed his departure with a press release. In the annual report (filed in mid-February), he was listed as a director without his title. In the updated annual report filed in April, he was mentioned similarly. The last time he was mentioned, they didn't even refer to him as "interim", calling him just "President/CEO" on 12/20 as he discussed Can-Chew gum. He is no longer listed on the company website as a director or officer.

The company last held an interview with its I.R. firm on 12/4 that was posted to the internet by SmallCapVoice on 12/6. You can listen here.

At the 1:46 spot, Caligiuri, who should know what he is saying, fully supported my assertion that the company confuses investors in how it describes the relationship to Dixie Elixirs, calling it a "subsidiary", which is NOT the case at all. I detailed some other discrepancies regarding how the company confuses shareholders in a recent article. Ironically, I received criticism for stating the obvious and misstating the relationship simultaneously. Even today, I see plenty of evidence that the public still doesn't fully understand this relationship.

Another big question that is not answered in their filings is the very large jump in the share-count last year. At 4:15, Caligiuri attempts to address the issue, describing a situation where two institutional lenders required an increase in the share-count in order to provide a line of credit once the fictional uplisting takes place (fictional is my view). He explains that the shares were given to HDDC to use to pledge as collateral. Huh?

On 9/10, an interview with Llamas and Keber had another bold-faced lie. At the 26 minutes roughly, Llamas explains how the authorized share-count will remain at 750mm, but we know it that wasn't true, as the Q4 filing showed that it went to 950mm at year-end.