March 26, 2010

What is Medical Marijuana Inc?

March 26, 2010

Tomorrow, March 27, 2010, Medical Marijuana Inc. will be holding its second event, a convention in San Diego, CA. Medical Marijuana Inc. bills itself as America’s first publicly traded marijuana company. The stock is selling nicely, investors are pouring in, and its gaining customer’s interest. And why wouldn’t it? After all, medical marijuana is a booming industry, reported to be worth billions of dollars. It is growing exponentially, and Medical Marijuana Inc. is going to lead the way to reaping the benefits of this burgeoning industry; or so they want you to believe.

However, upon close examination, an investor would realize that they are buying into nothing more than smoke and mirrors. Medical Marijuana Inc. is taking advantage of the fact that stock investors know very little about the medical marijuana arena, and on the flip side those that are knowledgeable in medical marijuana have very little knowledge about the stock market. With such a large gap between the stock investors and the medical marijuana industry, very few have called out Medical Marijuana Inc. for what they really are; a scam.

I contacted Medical Marijuana Inc. via e-mail, posing as a possible investor that wanted to expand their company into Oregon. The only response I ever received was a phone number to call their sales representative ‘Bucky.’ One thing that immediately drew my suspicion is the fact that this ‘company’ is based out of Oregon, yet they are nowhere to be found in Oregon. I was expecting some type of response like ‘we are based out of Oregon, and already have several plans for the State.’ But instead, I just received a phone number.

When I called ‘Bucky’ I got the same answers that were provided on the internet, which are very misleading (I will give examples in a moment). I asked him if he got my e-mail, and he said that he had, and that he had called me about it. I thought that was very interesting, considering the fact that I never gave him my telephone number. After a couple minutes of confusion, it was determined that he hadn’t read my e-mail yet, and that he thought I was someone else. He offered to mail me their investor information, but I told him what I really wanted was very specific answers to very specific questions. I have a Bachelor’s Degree in Public Policy (summa cum laude), I am a registered medical marijuana patient in Oregon, and I own a pro-marijuana website; needless to say I am not fooled as easily as their typical inquirer.

The first question I asked ‘Bucky’ was in regards to his products and services. Medical Marijuana Inc. has a ‘Revenue Collection System’ business solution that they claim will “significantly aid the dispensary/collective owner with the accounting challenges they currently face with cash transactions. This will reduce some of the major headaches they face internally as well as satisfy the all levels of government that they are in compliance.” The webpage goes on to say that “Requests have jumped anywhere from 50 to 300 percent, they say, since President Barack Obama took office and signaled that he won’t use federal marijuana laws to override state laws as the Bush administration did.” (click here) However, the memo they reference specifically states “prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the Department.” It can be found in the fourth paragraph in the following link (click here).

When I presented this contradiction to ‘Bucky,’ he adamantly accused me of being wrong, and of misinterpreting the language of the memo. However, he did acknowledge that he had never read the memo himself, and that he was passing on information from the company’s ‘lawyers.’ I think the DOJ memo speaks for itself, and it CLEARLY makes this ‘service’ offered by Medical Marijuana Inc. nothing more than an empty promise to investors. The fact of the matter is that making a profit off of medical marijuana is not codified in any state law as of right now, and CERTAINLY isn’t recognized by the federal government.

Another business solution that is offered by Medical Marijuana Inc. is their ‘Turn-Key Management Solutions.’ This ‘service’ claims to “provide everything that is needed to get up and running and in full compliance from the start, from site location and negotiation, permits and licensing, dispensary design, contracts with suppliers and distributors, security systems and personnel, website design and management, compliance management, accounting services, inventory control, human resources, recruiting, training, marketing, community programs and more.” (click here) However, this information can be misleading.

When they say that the dispensary will be ‘in full compliance from the start,’ what are they referring to? The federal government does not allow dispensaries, very few states allow dispensaries, and even then, local jurisdictions are putting up ordinances and moratoriums at a staggering pace in order to limit dispensaries. For example, a recent ordinance in Los Angeles reduced the number of dispensaries from over 1,000, down to 70. When you consider the fact that many Bay Area municipalities have banned dispensaries all together, I think the picture becomes clearer that there is little money to be made using this ‘service.’ As far as the government is concerned, this company is doing nothing more than assisting people who are distributing an illegal substance, which last time I checked, makes them an accessory to multiple felonies. Although I do not agree with such prosecutions, I think it is crazy that a publicly traded company is building their business model on such practices. If their investors knew this information, would they still be investing millions of dollars into the company?

Another facet to Medical Marijuana Inc.’s business model is their ‘Marijuana Testing & Gradation’ solution. I specifically asked ‘Bucky’ about this, considering it says on their website that “MMI is in discussions to acquire an institutional level testing and grading solutions company and its products. MMI intends to provide testing and grading products and services to the Medical Marijuana Industry, from personal test kits for safety to institutional level testing and grading to determine quality and potency, as well as to identify potential contaminants. MMI testing equipment and services will soon be available to individuals, growers, dispensary operators and government institutions for public safety.” (click here)

I asked him where the testing company is going to be located, and when they will finalize the purchase. Understandably, he couldn’t give out that information until the deal was finalized, in order to not jeopardize the purchase. However, I pointed out the fact that Full Spectrum Laboratories was raided by the DEA in Colorado, just a handful of weeks ago, because it was suspected of testing medical marijuana that was involved in a ‘for profit’ scheme. When another laboratory in Colorado applied for a license to do the same thing, they were also raided. When I pointed this out to ‘Bucky,’ all he could say is that their lab is going to be different. If people want to invest millions of dollars into something that is based upon 100% speculation of future events, I have no problem with that. However, investors need to know that this ‘solution’ is far from a guaranteed thing; which is a message that is hard to find on Medical Marijuana Inc.’s website.

When you strip away the three previously mentioned ‘solutions,’ Medical Marijuana is nothing more than an education service/pyramid scheme. What do they have for concrete, physical evidence of their multimillion dollar, publicly traded company? One educational convention in Los Angeles, that had a little over 200 people in attendance…that’s it (click here). I have been to meetings at my medical marijuana center in Eugene, OR that had more people in attendance than that; which by itself is not an issue. But when you consider the fact that people are lining up at the door to invest millions of dollars into Medical Marijuana Inc., this could pose a big problem to investors in the future. I don’t think it will be on the magnitude of a Bernie Madoff scam, but the principle is still the same. At the time of the posting of this article, when you click on the ‘Products Page’ tab of Medical Marijuana Inc’s website homepage, it has NOTHING on it. Do you need any more evidence than that? (click here)

Once again, if people want to invest in something that is 100% speculation, like building a business model around something unproven, and most likely illegal, then by all means pony up the cash. But I get the feeling that people are investing money into this company because they think it is going to provide them lab testing, nationwide dispensary services, and tax solutions. When in actuality they can help you start an ‘education center’ where you can explain to people the rules of medical marijuana in their jurisdiction…that’s it. And when you get ‘enough’ people coming in on Tuesdays and Thursdays to get a lecture on ‘State Medical Marijuana Program 101,’ Medical Marijuana Inc. will do a weekend seminar for your center…maybe.

In EVERY medical marijuana state, this information is FREE to the public on government websites, by calling the state agency that oversees the program (easy to find online), at compassion/medical marijuana centers, NORML chapters, etc. Hell, we even have that information on MY website for free. Why are people investing MILLIONS of dollars into a company that is doing nothing more than charging for services that are free in every medical marijuana state? My opinion is that it’s is due to the fact that the company does a really good job of giving generic information that sounds good, but is EXTREMELY unrealistic, and most likely unlawful. But as ‘Bucky’ told me, ‘there is no grey area in education,’ so from a Medical Marijuana Inc. standpoint they are doing nothing illegal. Whether what they are doing is illegal is debatable, but whether or not it is immoral to take money in exchange for smoke and mirrors is not open for debate. If people want to invest millions of dollars into a ‘medical marijuana education company’ be my guest, but know that when you invest in Medical Marijuana Inc. you are not getting much more than that.

Click here for a great article about Medical Marijuana Inc.’s CEO, Bruce Perlowin.

Click here for a great article about how/why Medical Marijuana Inc. may be fraudulent. They put a disclaimer on their publications, so that may protect them from legal liability. But disclaimers can only protect a company so much!

Click here for a third party opinion from a stock investor named Timothy Sykes.