Medical Marijuana Inc (MJNA)

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My Take On EARNINGS and Seeking Alpha's Responses

Lets start by discussing MJNA from a technically and fundamental POV, with as little emphasis on my opinions. I'll close the article with a nice, opinion laced rant about Seeking Alpha but I'd like to discuss the important info first.

Technical Info
Technical analysis is not necessarily applicable to penny stocks because volume can be so erratic but MJNA seems to have some wind at its back after the recent activity. Shortly after the "golden cross" (50 MA taking over the 200MA) in February, MJNA went parabolic and pulled back immediately due to profit taking. The stock has held .25 support but is weakened daily. Right now, the MACD is looking at positive divergence which can be interpreted as bullish. The pps is nestled in the center of the BBs and RSI / StochRSI levels. On the bearish side, there are some unclosed gaps up at .17 and .08. The gap at .17 is a little worrisome and may be a number to watch out for. Calling resistance and support is somewhat useless because MJNA has barely traded at these levels for long and there has been little capitulation either up or down. That being said, should MJNA dip to .18, expect to see a lot of buying. To the contrary, should it hit .35, expect profit taking. And thats all from inside the crystal ball.

Fundamental Info and Earnings
Fundamentally, Medical Marijuana Inc appears to be making money. The profit margins are still quite high according to the current earnings report. Quarter ending March 31, 2012, MJNA reported revenue of $1,788,445 according to their first ever earnings report (see Link 1 below). Same quarter 2013, MJNA reported revenue of $8.45m (see link 2) for a growth rate of roughly 470%. Based on that growth rate, calculating for 2012 reported revenues, Q2 2013 should bring in $11.3m, Q3 2013 seeing $14m, and Q4 2013 being $24.5m (See chart on link 1). Those estimates put 2013 year end revenue over $55m which is $8m more than projected earnings of $47m (see Link 1). By all means those numbers are interesting and show healthy growth. Positive upcoming events include the first ever US Cannabis Cup in Denver providing a possible revenue injection and some great brand exposure for Colorado based Dixie products. Also pending is looming federal response to marijuana prohibition, a response regarding the initiative to uplist the equity and the international expansion of MJNA portfolio companies. The wait begins for the next earning report.

Now for the caveats. The issues facing Medical Marijuana Inc include the following;
Transparency. The Company's earnings reports are less than detailed. It contains an awful lot of fluff about business prospects via various entities but little hard numbers to elaborate revenue streams. Earnings reports from SEC listed companies are full of details regarding specific assets, revenue steams, liabilities, debt, and so forth. MJNA provides a bottom line but not much else, making it difficult to understand sequential growth patterns or cycles but those could become more apparent as more reports are issued.

Management. The first ever report released February included a line about pursuing legal options regarding the Seeking Alpha article from Infitalis but there has been no follow up since. The issue may still be pending but some clarity would be nice. The unrelated legal matters with Mr. Llamas also need clarification which will likely come with further appearances in court. Some insight into his position as a shareholder and controlling member would be good. Concerning the legitimacy of the earnings reports, the officers of MJNA and the auditors are well aware of the consequences for filing false information. For know, there is little reason not to trust current earnings reports. Comparing other legal matters to potential securities fraud is a non sequitur. The unrelated personal and legal issues of MJNA's management are innocuous and do not seem to interfere with the Company's ability to make profits. Similar issues are prevalent throughout management of Fortune 500 companies and its often the unreported activity that is far more worrisome.

Competition. MJNA is well positioned in the cannabis market. Currently MJNA is the market leader but the market is still in its infancy with little to no interest from financial institutions as they are legally forbidden to commit money to the cause. With federal legalization, the worry becomes that large, existing commercial operations like Pal Mal or InBev could enter the market and push establishing companies like MJNA out of relevancy. However, this is a double edge sword because MJNA could potentially be bought out for a large sum since the company is not just a bunch of stoners cooking up products in their apartment. MJNA has established brands, products and distribution that can be seen on programs like 60 Minutes and in Time Magazine.

And now to close with a mindless personal rant.

Seeking Alpha
I have tried numerous times to post articles and responses on Seeking Alpha but have been denied repeatedly, being told MJNA is too speculative a subject to publish my articles or MJNA is too easy to manipulate to allow the writing to be accepted. As you have seen, I have offered a slightly optimistic, but relatively balanced opinion of MJNA, similar to what I have submitted to SA. Despite the censorship from SA, the site still publishes 3rd grade book report worthy analysis from some of the regular "contributors", in addition to comments and replies far more offensive and disorganized than mine. Most of those contributors are hack writers just slinging garbage about certain stocks in order to get their $10 per 1000 views. Asharf is clueless regarding the cannabis industry, using the economics 101 term "low barrier to entry" to describe it, insinuating the development of a profitable marijuana related business is a relatively simple endeavor. Sure buuuudy, the only "low barrier to entry" obstacles are what? The liquor lobby who are threatened by another legal intoxicant to steal market share. The privatized legal institutions like prisons and public law enforcement organizations who draw revenue from prohibition. The century of systematic propaganda demonizing cannabis and hemp from competitive interests like WR Hearst to J Edgar Hoover. The pharmaceutical companies who's products could be trumped by a natural and non-lethal plant. Oh yeah, and that whole US federal government's "opinion" that marijuana and hemp are dangerous, therefore illegal in society. And that does not even include the enormous costs to growing high grade marijuana, let alone knowledge and risk. That sounds like a real easy market to just slide into. I wonder if he has even seen a Dixie product or talked to an MJNA rep or seen the power, water, nutrient requirements of a 500 plant grow op? The other guy, Alan is pretty much a lapdog for Asharf, answering comment after comment, regurgitating praise for some of the most inane comments and contributing little with his "analysis". I am disappointed that Seeking Alpha has banned my writing because it has been pretty objective up to this point. The one comment I did post on SA under this same ID addressed his article point by point but Asharf and Alan apparently cannot handle fact based debate.

Finally, I post on this board and others anonymously for personal choice. I'm not looking for recognition. I'm not looking for money for writing. The only other stock I have aggressively analyzed as much as MJNA (and a ERBB / CBIS) was AAPL in 2005 when I loaded up after buying an iPod. Apple computers and cannabis are two of the things I have used most of my life and both investments have paid off in spades.

Link 1.
http://www.medicalmarijuanainc.com/index.php/press/49-press-releases/2013-press-releases/224-medical-marijuana-inc-releases-2012-annual-share-holders-report-and-first-ever-corporate-revenue-forecasts

Link 2.
http://www.medicalmarijuanainc.com/index.php/49-press-releases/2013-press-releases/240-medical-marijuana-inc-reports-record-first-quarter-2013-revenue-and-income