Amigula Inc. (AMJL)

[dapoopa]

AMJL had a rough day yesterday, weaker by more than 10% at the open and never able to pull out of the rut. Closed the day down 14% at $0.55 per share. The market seemed to react badly to an article that came out on CannabisNews.com:

http://www.cannabisnews.com/news/thread18585.shtml

This story ties in with Amigula because the company the other week issued a press release saying they planned to participate in this pharmacy pilot project in B.C. Meanwhile, the government is clearly failing to adequately run its medical cannabis project, and it is also clear that private, licensed growers (such as Amigula) are the ones who really should be supplying the patients. In fact, I wouldn't be surprised if Amigula is already lobbying for a contract with Health Canada to replace or work alongside Prarie Plant Systems.

However, it would still be negative if the pharmacy project were cancelled due to a "lack of demand" before it got off the ground. There is only a lack of demand because the product is awful! And the demand for quality medical cannabis is not going away anytime soon - indeed, calls may only become more vocal over time in protest against the government inefficiency and delays. After all, time is of the essence for many of these patients who only have months to live. So in my view, the government can delay for a while but cannot stem the tide. Momentum seems on the side of the pro-legalization movement, which is the main reason why people have been buying into this stock.

There was also a mention of AMJL in the March 29 issue of Barron's magazine. Unfortunately, the article was using the company as an example of why, in the opinion of its author, the market has gotten a bit frothy of late:

"From the standpoint of the stock market, the revival that began a bit over a year ago has produced excesses that trouble the graybeards, and we don't just mean the liftoff in the likes of Yahoo, Amazon and eBay back to bubble valuations. A bubble is more substantial than smoke, which is what the market appeared to be going up in. That is, according to no less an authority than AM New York, a newspaper distributed free of charge and apparently aimed at Gothamites not in the habit of picking up a daily paper. Last Monday's lead story, chosen no doubt with its readership's interests in mind, was headlined, "Pot goes public." It seems that Amigula, which bills itself as "the world's first marijuana company" and trades on the Bulletin Board under the symbol AMJL, wants to make the leap to the Nasdaq or the Amex. The company has contracted with 50 Canadian growers to provide medicinal marijuana and is looking to raise $7 million in equity financing for the venture. Heady stuff, to be sure, but hardly symptomatic of a sober approach to the market."

But in my opinion, you can read this two ways. The words "heady stuff" is a weak attempt at humor, but it also implies ambitious plans on the part of management. It is also an implicit acknowledgment of the potential size and profitablility of the medical cannabis market. And they do mention numbers: Amigula says it has fifty contracts with growers already, and the company is looking to raise millions in private equity. So if you can ignore the editorial slant, this article is at least encouraging and provides some valuable exposure to the company.

Having said that, the stock is clearly performing poorly of late, and the market will need something more concrete to hang onto, and soon, if it is to avoid early penny-stock retirement. What investors must realize is that this is a longer-term bet, and that it will take several months for court rulings and legislative progress to occur. In the meantime, the share price could go lower, and even much lower. The company's press releases have at times bordered on fluff, so it seems the next move must be the announcement of a stock split backed by private equity, or other concrete news such as acquisitions, mergers or listings on other exchanges. Otherwise, the short sellers could very well eat this thing up.

Who will come out on top is anybody's guess at this point, but for sure this story is far from over. Just remember - a couple of favorable rulings or laws being passed and interest in this company could shoot right back up. So investors should continue to scour the headlines at CannabisNews.com and elsewhere for near-term catalysts. In the meantime I'll continue to cover daily stock movements.