Medical Marijuana Inc. (OTCMKTS:MJNA) Comes Crashing Down
Medical Marijuana Inc. (OTCMKTS:MJNA) exploded into motion with the release of its May 2 press release, and managed to prolong its climb for a bit after it published another one – but now all its gains are going up in flames.
And there is a good reason for what we’re seeing now. We’ve observed this phenomenon a thousand times during the marijuana hype of 2014. It unfolds like so – a suspicious OTC Markets company that deals in a controversial product makes some bold claims and draws attention to itself. This sparks an explosion of hype fueled volatility, regardless of whether the claims are reasonable, based in truth or in any way relate to the actual facts of the company’s situation. A couple of days later, heads cool off, investors lose interest, and the ticker comes crashing right back down.
This seems to be precisely what has happened to MJNA. There seems to be little doubt that its latest climb was fueled by little more than hype. As for the company’s dubious nature – take look at MJNA‘s latest financial report:
- Cash – $240 thousand
- Inventory – $4.7 million
- Notes and Loans Receivable – $5.5 million
- Total Current Liabilities – $4.7 million
- Net Loss – $3.6 million
And if you think that’s a bleak collection of numbers, just remember that the MJNA‘s shares outstanding grew from 1.8 billion to more than 2.8 billion between February and December 2015.
That’s a frightful turn of events in and of itself – but it probably should have been expected, seeing as how “At December 31, 2015 [MJNA had] long term notes payable totaling $9,652,688 consist of promissory notes as follows; (i) a convertible note having a balance of $5,011,294 including interest accrued thereon. The note is convertible at holder’s option at any time at a conversion price equal to 70% of the average of the three (3) lowest closing bid prices in the 20-days prior to conversion.”
That’s a 30% discount to the current market price. That same paragraph specifies that there are an additional $2 million worth of debt “convertible at the holder’s option at any time at a conversion price equal to 75% of the lowest closing price in the three trading days prior to conversion.” Need we say more on the matter?
In conclusion – it was obvious that MJNA‘s gains in the first weeks of May were unretainable. True to form, it has already lost most of said gains – and judging by today’s early trading, it would probably be a safe bet that it will continue to do so for a while longer.