What Are Investors Smoking With These Small Cap Marijuana Stocks?

On Friday, small cap marijuana stock The X-Change Corporation (PINK: XCHC) and hemp stock Medical Marijuana Inc (PINK: MJNA) were both giving investors a big high. However, there is a catch for investors: Both small cap marijuana stocks are the subject of paid promotions from stock promoters. That means investors could face a hangover (or whatever the equivalent is with medical marijuana) when the promotion money wears off if these small cap marijuana stocks can’t stand on their own two feet. With that in mind, here is a quick look at whether or not these two small cap marijuana stocks will keep giving investors new highs this week:

The X-Change Corporation (PINK: XCHC) Had $1k in Cash at the End of September

The X-Change Corporation has acquired both the Phytiva Brand of products and all associated rights and Companies and the European JV with Dupetit from Cannabis Science, Inc. The Phytiva products are unique hemp-inclusive products for skin care and rejuvenation with the initial products being lip balms, extracts, supplements and dermal creams, targeting a wide range of cosmetic and ailment-related usages. According to various disclosures, transactions of $5k, $14.5k and $15 have occurred to mention The X-Change Corporation in various investment newsletters. On Friday, The X-Change Corporation surged 55.7% to $0.116 for a market cap of $4.18 million plus XCHC is up 205.3% over the past year and up 346.15% since May 2009 according to Google Finance.

What’s the Catch with The X-Change Corporation? Back in January, The X-Change Corporation issued a total of five press releases – including one on Thursday announcing that within one week, the company will move into the testing stage of development for its unique hemp-based Phytiva brand of products as it prepares to bring these products to European and North American markets. The first testers of Phytiva Brand products are apparently ready for production and packaging. These include anti-aging skin care and rejuvenation products, like hemp-based lip balms, supplements, moisturizer, and sunscreen. However, The X-Change Corporation has not reported any revenues; net losses of $79k (most recent reported quarter), $50k and $1,322k for the first three quarters of 2012 along with net losses of $1,981k (2012), $5,304k (2011) and $353k (2010) for the past three reported years; and had $1k in cash to cover $1,207k in current liabilities as of September 29th. That’s not particularly exciting. So maybe investors will want to wait until The X-Change Corporation moves beyond the testing stage of development for Phytiva.

Medical Marijuana Inc (PINK: MJNA) Recently Reported a 1,100% Revenue Increase

Medical Marijuana is the first publicly held company vested in the medical marijuana and industrial hemp markets and its comprised of a diversified portfolio of products, services, technology and businesses solely focused on the cannabis and hemp industries. According to one disclosure, one group has been compensated 125k restricted shares from the company and $5,000 dollars to mention Medical Marijuana in various investment newsletters while other mentions have not been compensated. On Friday, Medical Marijuana rose 36.2% to $0.305 for a market cap of $224.62 million plus MJNA is up 1,029.6% over the past year and down 47.4% since May of 2009 according to Google Finance.

What’s the Catch with Medical Marijuana? Over the last two weeks or so, three articles about Medical Marijuana have appeared on Seeking Alpha. Otherwise and on January 22nd, Medical Marijuana reported a 1,100% increase in revenue to $5.10 million and net income of approximately $3.39 million. However, there is one caveat: Investors should remember that Medical Marijuana is not a full reporting company yet. For that reason, Medical Marijuana has hired Imbimbo & Associates to audit its fourth quarter 2012 results as well as audit of the company's full year financials. That means investors might want to be cautious and wait for the audits to be completed as well as for the promotion money to stop flowing to see what happens to the stock.