Medical Marijuana, Inc. (OTCMKTS:MJNA) Drops After Annual Report

Immediately before the markets opened yesterday, Medical Marijuana, Inc. (OTCMKTS:MJNA) published its annual financial report for fiscal 2013 and a press release summary to go with it. In the wake of the news the ticker moved up briefly, then reversed and proceeded to end the session over 5% down by the closing bell.

It would appear that the annual report was the catalyst that finally got MJNA moving, only it was not in the direction investors had hoped. The company logged its biggest red close for the past month, after simmering quietly around the $0.30 mark for a long time. So, what did investors find in the filing that made them frown? Let’s try and look for a possible answer.

Here is the raw number rundown, as seen in the annual report (even if seen just barely due to the report being filed, once again, as scanned, smudgy pages and not a formatted text file):

• $481 thousand in cash
• $1.4 million in Q4 sales, $5 million for 2013
• $45 thousand in Q4 net ordinary income, $211 thousand for 2013
• $5.2 million in Q4 net income after extraordinary items, $24.6 million for 2013

The gap between ordinary income and income after extraordinary items comes from the asset purchase deal MJNA concluded with CannaVest Corp. (OTCMKTS:CANV) in early 2013. PhytoSphere, a MJNA subsidiary, offloaded its valuable hemp oil inventory and other assets to CANV in a deal valued at $35 million. That sum was paid by CANV in stock, collared at prices ranging between $4.50 and $6.00 per share. CANV is currently traded, however thinly, at $47.5 per share. A Forbes piece published two days ago called “Inside the Pot Stock Bubble” mentioned that CANV‘s CEO is planning a private placement of 10 million restricted shares priced at $1.50.

MJNA‘s uplisting situation remains as vague as it had been for the last 9 months. The report informs that as of December 2013 there were 16 out of 24 months audited, as per the company’s intention to provide two full years of audited reports and uplist.

A section of the report deals with the lawsuit Dixie Elixirs filed against MJNA but there is not much clarity on the development of that either, except that the two parties are ‘in settlement discussions’ and the matter is currently ‘pending’.

Longs are cheering at the QoQ revenue growth but the thin net income before factoring in the CANV share payments may have disappointed some investors. Whether the report will leave a bigger dent in MJNA‘s share price remains to be seen.