The Haze Lifts: 96% Of Medical Marijuana Inc. Q4 Sales From Questionable Transaction

Medical Marijuana Inc. (OTCPK:MJNA) has been selling off for the past two months despite an abundance of good news, including bullish guidance for 2013 and 2014 and a strong Q1. Not even the 4/20 celebration was able to shake the stock out of its downward trajectory, as the stock just tested the low price since rocketing to .50 earlier this year, trading as low as .185 as it sold off on massive volume before closing near .21:

For some background, I have written about MJNA several times since mid-February:

My thesis has been that the company has questionable financials, and that is the issue I want to explore more closely now that they have amended their Annual Statement as of 4/24. In my last article, I had suggested that we need to wait until 5/15, the date by which the company intends to file its audited Q1 report, to better understand how it is accounting for its transaction with CannaVEST (CANV.OB) that I described in the second article. Investors should be aware that the company has booked $4.5mm in sales in Q4 on the basis of shares received from an affiliated company in January, weeks after the quarter ended. This revelation is a smoking gun for those of us who have been questioning the financials of the company.

MJNA's Strong 4th Quarter

On January 22nd, MJNA issued a press release with a captivating subtitle:

The company reported a net income of $3.39mm on sales of $5.1mm for the 4th quarter, massive growth from the prior quarter or the year-ago 4th quarter. The rest of the press release covered a lot of issues but provided little clarity regarding how the company had shown such impressive growth. As you can see in

This article was written by

Alan Brochstein, CFA profile picture
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Author of 420 Investor
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Alan Brochstein, CFA, was one of the first investment professionals to focus exclusively on the cannabis industry. He has run 420 Investor, a subscription-based due diligence platform for investors interested in the publicly-traded cannabis stocks that he is moving to Seeking Alpha, since 2013, and he is also the managing partner of New Cannabis Ventures, a leading provider of relevant financial information in the cannabis industry since 2015. Alan is based in Houston. He and his wife have two adult children.

Before focusing exclusively on the cannabis industry in early 2014, Alan had worked in the securities industry since 1986, primarily with the responsibility for managing investments in institutional environments until he founded AB Analytical Services in 2007 in order to provide independent research and consulting to registered investment advisors. In addition to advising several different hedge funds and investment managers, including Friedberg Investment Management, where he participated as a member of its investment management committee, Alan was also a senior analyst for the independent research firm Management CV. In 2008, he began providing a first-of-its-kind subscription-based service for individual investors, Invest By Model, which offered two different portfolios that investors could replicate in their own accounts. Alan also offered The Analytical Trader at Marketfy, where he used fundamental and technical analysis in a disciplined process to offer specific trade ideas geared towards swing traders.



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