Does Medical Marijuana, Inc. (MJNA) own Dixie Elixirs?

Posted on Sept. 22, 2013, 8:54 p.m.
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One of the biggest misconceptions in the cannabis investing sector is the belief that Medical Marijuana, Inc. (MJNA) acquired the Colorado-based Dixie Elixirs & Edibles in 2012.  Nothing could be further from the truth.  If you already know this, then there is no need to continue.  But, if you have any question about the relationship between MJNA and Dixie, read on.

First, don't blame yourself if you were confused.  I don't want to accuse MJNA of fooling people on purpose, but there were many times when they blew smoke to obfuscate the reality.  I described this earlier this year in a Seeking Alpha post.   So what's the real deal?

MJNA created a subsidiary called "Red Dice Holdings",  which is 60% owned by MJNA and 40% by Left Bank LLC (dba Dixie Elixirs & Edibles).  MJNA kicked in $1.45mm, while Left Bank contributed the brand (Dixie) and intellectual property.  The deal was described in an OTC Markets disclosure for Q2-2012: 

Sorry that this is crooked, but this is the lame way MJNA was doing its disclosures.  Thankfully, they progressed from using a scan!  

So, Red Dice Holdings licenses the brand.  The big question, and this Cannabis Financial Analyst doesn't know the answer, is this:  Will MJNA benefit from Colorado THC sales ever?  This is very important, as Dixie Elixirs is obviously doing very well in Colorado, but MJNA shareholders don't benefit at all.  My guess is that they never will, as the deal was struck to take advantage of new markets.  Even there, Dixie has been pretty clear that it isn't benefiting at all from THC yet.  Why not?  A year and a half after the deal, despite the fact that 20 states have adopted medical marijuana, Red Dice hasn't recognized a single penny in THC revenues.

So, the bottom-line:  MJNA does NOT own Dixie Elixirs & Edibles.  Instead, it is a partner through Red Dice Holdings, which allowed them to realize all of $156K in sales in Q2, which included only the web-based sales of Dixie Botanicals CBD products.  The $64K question is when and to what extent MJNA can recognize THC sales. The other interesting angle is that MJNA subsidiary HempMedsPx will be launching competing products (manufactured by CannaVest) shortly, as I explained in this post .

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Alan Brochstein

I have worked in the investment industry since 1986 and earned the CFA charter in 1997. I worked for Kidder, Peabody in bonds from 1986-1992 and then First Boston's investment management subsidiary from 1992-1994, both in NYC. I then joined Criterion Investment Management (later acquired by Nicholas Applegate and then West LB) as a portfolio manager helping to manage $10 billion in fixed-income investments. In 2000, I made the move to stocks, joining a small firm in Houston as an analyst and portfolio manager. I left in 2006 and formed my own business, AB Analytical Services.

From 2007 until March, 2014, when I made the decision to devote my time exclusively to the cannabis sector, I worked as a research consultant to several investment advisors. Additionally, I offered a model portfolio service to individual investors from 2008 (www.InvestByModel.com), adding a private blog in 2011. In 2009, I began working with an independent research firm that focuses on evaluating the management teams of publicly-traded companies. In 2013, I came to the Marketfy platform and launched The Analytical Trader, with the goal of providing swing-trading ideas that would offer 4:1 reward-to-risk over a two-week time-frame. Later in the year, sensing an unmet need in the market for objective information on cannabis-related stocks, I launched 420 Investor as the go-to place to help investors capitalize on the "Green Rush". Finally, I have been one of the most successful bloggers at Seeking Alpha since early 2007. You can access my 600+ articles at http://seekingalpha.com/author/alan-brochstein/articles

I am very dedicated to the idea that people can manage their own money and get market-beating performance at a reasonable all-in cost, avoiding costly middlemen who tend to deliver mediocre performance, at best. My goal is to help you by providing ideas that are based on sound processes and decades of experience, letting you make the ultimate judgment regarding the commitment of capital. I enjoy interacting with subscribers and look forward to working with you.

You can find me on LinkedIn: http://www.linkedin.com/pub/alan-brochstein/1/182/165