Medican Enterprises Inc (OTCMKTS:MDCND) Suffers A Severe Crash
On April 20 Medican Enterprises Inc (OTCMKTS:MDCN) implemented a 1-for-10 reverse stock split. As a result the company moved from a share price of close to $0.006 to $0.06. The problem is that the company is having some serious troubles maintaining such price levels. In fact the performance of the stock has been nothing short of depressing since the reverse split.
The ticker was able to post one really impressive session when it added exactly 150% to its value but during the next couple of trading days it wiped all of its gains. Yesterday the negative momentum got even stronger and the stock plunged towards the bottom of the chart losing over 45% of its price in a single session. When the closing bell rang MDCN were sitting at $0.023 and if the trend continues they may very well drop into the double-zero price ranges once more.
If you have followed our articles about the company you should know why Medican are unable to move in the right direction on the chart. The company has been trying unsuccessfully to complete two acquisitions located in Phoenix, Arizona. Investors were hoping that at least the acquisition of the 67 000 sqr. ft. property would be closed by March 31 but a PR dated April 17 announced that the closing date has been moved yet again. The annual report for 2014 that was filed recently stated that the other acquisition is now supposed to take place on or before May 31.
Despite the fact that the company can’t complete these two planned acquisitions, one of them was announced nearly 6 months ago, on April 28 they announced a new deal. This time MDCN signed a definitive purchase agreement to acquire TWYNS, a cannabidiol (CBD) branding company. According to the PR the transaction is valued at approximately $1 million and is going to be paid entirely in stock.
Well, the fact that MDCN is going to rely on its shares in order to pay for the deal shouldn’t be that surprising when you take a look at the financial results contained in the annual report. At the end of 2014 the company was in a dire state with:
• $80 thousand cash
• $113 thousand total assets
• $8 million total current liabilities
• $ZERO revenues
• $56.4 million annual net loss
However, there is an even greater red flag than the lackluster financials – the rampant dilution of the common stock. Out of the $8 million current liabilities reported at the end of December $5.6 million consisted of convertible notes. The issuance of discounted shares caused the outstanding shares of the company to balloon from 47 million to over 447 million in less than four months. The reverse split helped the company reduce that count and as of April 20 the O/S should have shrunk to around 50 million shares. For how long will it stay at that number though? MDCN may continue to print new shares and yesterday’s daily volume of 30 million shares definitely hints at exactly that.
The risks involved in trading MDCN’s stock are extremely serious. It remains to be seen if this time they will keep their promise and close the acquisition of the 7,200 sqr. ft. facility by the end of the month.