Medican Enterprises Inc (OTCMKTS:MDCN) Fires Up the Dilution Machine Again
Medican Enterprises Inc (OTCMKTS:MDCN) has really been a nightmare of a ride over the last few months. The stock popped at the end of March when everybody started talking about the upcoming acquisition of a couple of properties in Arizona which were supposed to be leased to a licensed medical marijuana dispensary. People were absolutely ecstatic, but right now, things are a little bit different.
Out of the last ten sessions only two ended in the green and MDCN lost a whopping 81% of its value in a matter of just two weeks. Yesterday, it took a 27% hit and it closed the day at $0.0058 on a dollar volume of $325 thousand. Things are not looking much better today. About twenty minutes after the opening bell the stock is sitting at $0.0053 – another 8.6% in the red.
A lot of people trusted a huge amount of cash with the stock not that long ago and MDCN bitterly disappointed them. What went wrong? Actually, “What didn’t go wrong?” would be a more appropriate question in this case.
Take the historical performance, for example. People failed to notice that they were pouring money into a stock that had dropped from over $4 per share to just $0.0007 in a matter of less than twelve months.
They were also jumping in despite the fact that MDCN were late with their annual report. And once the 10-K came out, some investors were left rather shocked by how horrific the company’s financial situation was at the end of 2014. Here’s a summary of the figures:
- cash: $79 thousand
- total assets: $112 thousand
- current liabilities: $8 million
- NO revenue since inception
- yearly net loss: $56.5 million
The figures were, indeed, pretty underwhelming, but some people refused to give up hope. They were littering the message boards with forward-looking statements and projections of how rich the company will be once the acquisition of the Arizona properties goes through.
Instead of closing it, however, MDCN announced that the deadline has been extended for the umpteenth time and informed us that a reverse split is coming the shareholders’ way. At that point, the whole hype and excitement was starting to give way to frustration and anger. MDCN effectuated the 1 for 10 split on April 20, and immediately after it, the ticker started plummeting towards the ground – a process that, as we mentioned already, is continuing to this day.
At the end of last month, the management team decided that it’s time to cushion the fall. They said that they are working towards the acquisition of a branding company in the marijuana field called TWYNS Products Inc. MDCN managed to close the deal in record time for a change, but unfortunately, things start to look a bit murky as soon as you dig a bit deeper.
For one, TWYNS, the company that is supposed to add $400 thousand to MDCN‘s annual revenues, doesn’t appear to have a website. And according to California Secretary of State’s database, it was incorporated mere days before the acquisition. It’s headquarters looks like this.
We don’t know whether this is contributing to MDCN‘s horrific performance, but we do know that the company’s printing press is firing on all cylinders again. And this, as the stock has already shown us, could have some rather devastating effects on retail investors.
The number of issued and outstanding shares grew from just over 40 million in April 2014 to more than 447 million in April 2015. The split then reduced it to 44 million, but, thanks to a Schedule 13 form from Friday, we know that it’s now sitting at over 146 million. In other words, MDCN was diluted by more than 200% in a matter of less than a month.
The company is late with its Q1 report which means that we’ll need to wait until we find out who and why got the newly printed stock. What we do know at the moment is that MDCN has quite a lot of debt on its books. And some of it is convertible into shares at discounts that could reach 65%.
