Alan Brochstein...'s  Instablog

Alan Brochstein, CFA
Send Message
Alan Brochstein, CFA has worked in the securities industry since 1986. He founded AB Analytical Services (www.ABanalytical.com) in 2007 in order to provide independent research and consulting to registered investment advisors. In addition to advising several different hedge funds and investment... More
My company:
Invest By Model, provided by AB Analytical Services
My blog:
MyOwnAnalyst
  • Can't Invest In CannaVest 9 comments
    Jul 31, 2013 7:47 PM | about stocks: MJNA, CVSI

    CannaVest (CANV.OB) filed an 8-K.

    *They reincorporated - now Delaware rather than Texas corp (as expected).

    *THIS IS BIG:

    At the meeting of the Board of Directors of CannaVEST Texas (the "Board") on July 25, 2013, the disinterested members of the Board approved an amendment to the Promissory Note to provide for an increase in the amount of loans to be provided in the future in an amount of up to $6,000,000 and the ability of Roen Ventures to convert, in its sole discretion, the outstanding balance under the Note into shares of the common stock of the Registrant at a conversion price to be determined following the conclusion of an independent valuation of the common stock of the Registrant. As of July 30, 2013, the balance of the loans evidenced by the Note was $4,180,500. The Note is an unsecured obligation of the Company accruing interest at 5% that is due and payable on March 1, 2015. The Registrant's President and Chief Executive Officer and member of the Board of Directors, Michael Mona, Jr., holds a 50% interest in Roen Ventures.

    Pursuant to the terms of the Note, upon an "Event of Default" (as defined in the Note), all obligations evidenced by the Note shall become due and payable. Events of Default include failure to make payment when due, the Registrant's default under any other agreement relating to indebtedness of the Registrant and bankruptcy.

    *CEO Mona gets paid

    At the meeting of the Board on July 25, 2013, the disinterested members of the Board approved certain compensation arrangements for Mr. Michael Mona, Jr., the President and Chief Executive Officer of the Registrant. The Board set Mr. Mona's monthly base salary at $10,000 and approved a stock option grant to Mr. Mona under the Registrant's 2013 Equity Incentive Plan, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference, of 500,000 shares of Common Stock at an exercise price, and fair market value, to be determined following the conclusion of an independent valuation of the Common Stock. 125,000 shares of the option shares shall vest as of August 1, 2013, and 125,000 additional option shares shall vest on the first, second and third anniversaries, respectively, of the date of grant, conditioned on continued engagement by the Registrant as an employee, advisor, consultant or member of the Board.

    1) Despite some incorrect statements on this board and others, it should be clear that the other company will be a minority owner

    2) Anyone invested here should pay attention to what's going on here. Mona has options that need to be priced. It will be interesting to see what this valuation comes up with - will they use the market price or the fact that the investors here paid $0.05 in November or that the minority investor agreed to a $4.50-6.00 collar? Cash flow analysis would suggest that Mona could end up with options WAY below the current $14 bid.

    3) My paranoid screw-the-minority-investor theory just upticked, especially if the options are done at a low price. Remember, the initial investors are in at just a nickel. Roen has first crack at everything in a default situation, and Mona/Llamas (presumably) has invested $1mm (roughly) with credit line initially at $2mm but now approved to go to $6mm. If they tried to steal the whole company for $1-2mm, they might run into legal challenges. $6mm though - that is a big enough investment to steal PhytoSPHERE and probably not face that risk. Let's see where those options get priced, because if they are really low, then this is horrible news for CANV, as the conversion rights on the note will be low too. For that $6mm investment, Roen might get a boat load of shares.

    4) Now we know: CANV ain't selling doodly-squat. They had to borrow MORE from Mona/Llamas already. Not selling CBD oil...

    I think CANV could end very badly for not only CANV but clearly for its large minority investor, MJNA (OTCPK:MJNA)

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

    Stocks: MJNA, CVSI
Back To Alan Brochstein, CFA's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • chumps
    , contributor
    Comments (4) | Send Message
     
    So a sketchy company on the wild-west frontier of barely-legal pot-based consumer products, and invested in by other equally dubious pot based companies which go through name changes on a regular basis, is not selling any actual pot-based products. These guys will vaporize as legalization gains steam and bigger players life Herbalife enter the market with an actual business plan.
    13 Aug 2013, 09:07 PM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7902) | Send Message
     
    Author’s reply » Update: CANV 10-Q confirmed lack of traction. AR is still higher than cumulative sales (I still don't understand how that happens). Cash flow lacking on just $108K in sales - way down from Q1.

     

    http://1.usa.gov/14IN6JB
    13 Aug 2013, 09:10 PM Reply Like
  • factcheckup
    , contributor
    Comments (2) | Send Message
     
    FYI:
    http://bit.ly/1alEuxM

     

    This made me very concerned about all of this
    5 Sep 2013, 09:26 AM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7902) | Send Message
     
    Author’s reply » Yes, I have seen that info on Mona from 15 years ago, though the link isn't working that you provided. Not sure what to make of it. Here is a cached-version: http://bit.ly/14mF4IO
    5 Sep 2013, 09:31 AM Reply Like
  • factcheckup
    , contributor
    Comments (2) | Send Message
     
    Thanks for helping with the link. I was looking to invest in medical marijuana but found this company to be part of a tangle of companies controlled by this guy Mona or his associates (looked at SEC filings, Google searches and Nevada Corporation Search.) Very scary.
    I'll check and see if you've researched other investments in this area that would make more sense.
    5 Sep 2013, 05:28 PM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7902) | Send Message
     
    Author’s reply » GWPH is one of the few clearly legitimate companies. That's not to say that some others might not be legitimate too, but GWPH stands out. Many are not legitimate - HEMP tops the list.
    5 Sep 2013, 05:34 PM Reply Like
  • alpinementor
    , contributor
    Comments (7) | Send Message
     
    Any idea who is buying CannaVest? Double up in a week to $30 yesterday?
    6 Sep 2013, 10:00 AM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7902) | Send Message
     
    Author’s reply » Not very much volume in terms of $. It could be "painting the tape". You have to remember that over 99% of the shares are closely held.
    6 Sep 2013, 10:15 AM Reply Like
  • alpinementor
    , contributor
    Comments (7) | Send Message
     
    TY Alan,.. Ill have to look up "Painting the Tape" . Its heading to $40 a share.
    10 Sep 2013, 04:26 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.