The Business of Medical Marijuana

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MEDICAL MARIJUANA, INC. FORMERLY CLUB VIVANET (OTC: CVIV) FILES PATENT APPLICATION TO SATISFY GOVERNMENT

PR-CANADA | Monday, 06 April 2009

Medical Marijuana, Inc. formerly Club Vivanet (PINKSHEETS: CVIV) announced today that it filed a patent application for its invention, that potentially satisfies various governmental and the medical marijuana dispensaries' needs for tax collection in the medical marijuana industry.
Tax Remittance

Using this new invention, the "Point of Sale" System will recognize the dispensary's tax ID number and the tax rates for state and local taxes as well as provide "Automated Clearing House" (ACH) settlement of the taxes to the proper financial institutions. The state sales tax amount is sent to a database and at the end of the day all money in the sales tax database is cleared and posted through an "Automated Clearing House" (ACH) to the state and other appropriate governmental agencies for that day's collected sales tax. The remaining funds are sent to the dispensary's account or other designations.

The Company proudly introduces a Stored Value Platform System with a full slate of inter-active Financial Services made readily available through a patent pending delivery system, a Stored Value Debit Card.

This Stored Value Platform System will provide verifiable solutions for an inter-agency approach to manage the difficult task of Revenue and Taxation Collection for the Emerging Medical Marijuana Industry.

<span class=postbold>Taxability of Medical Marijuana Transactions</span>

In February 2007, the California State Board of Equalization (BOE) issued a Special Notice confirming its policy of taxing medical marijuana transactions, as well as its requirement that businesses engaging in such transactions hold a Seller's Permit. According to the Notice, having a Seller's Permit does not allow individuals to make unlawful sales, but instead merely provides a way to remit any sales and use taxes due. BOE further clarified its policy in a June 2007 Special Notice that addressed several frequently asked questions concerning taxation of medical marijuana transactions.

<span class=postbold>About the Company</span>

Medical Marijuana, Inc. (currently undergoing a 1=10 forward split and symbol change to reflect its new name in the stock market) is positioned to take advantage of opportunities as they appear in the emerging legal medical marijuana industry through an enhanced payment gateway introducing verifiable levels of enhanced security. A trend is in place that clearly indicates medical marijuana is quickly becoming a legal enterprise in need of various solutions in numerous areas.

<span class=postbold>Solutions</span>

Plastic debit cards or medical revenue cards are supplied to the Medical Marijuana Dispensary (or Collective/Co-op as they are legally designated in California). The customers of the dispensary are issued the closed loop "Stored Value Card" (SVC). This "Stored Value Card" (SVC) is loaded for the customer by tendering cash to the Dispensary clerk. The Dispensary clerk will load up the new card for the customer using the "Point of Sale" (POS) System which will also recognize the dispensary location, as well as tax rates for the appropriate government agencies.

<span class=postbold>Advantages</span>

Having a secure platform for the full service engagement of all financial services directly accessed through on integrated system, allows for a much more secure and confident transaction between customer, vendor and supplier.

The ease of access to certifiably secure transactions lessens the risk of loss at each level of the transaction. Users are empowered, operators are empowered and Government Agencies are more confident in assuring their collection of taxes and fees while secure in the function of financial interactions.

Operators have the benefit of establishing deeper and more meaningful relationships with their customer base. As such, the operators' ability to enhance their revenue generating capabilities is much greater with the full access to the suite of financial services provided by our vast networked platform. This enables full creative expansion within any sector to a retail operator of which these facilities may choose to engage.

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Legalized Medical Marijuana Company Now Public Stock, Really (CVIV)

24/7 Wall St. | Posted: April 3, 2009 at 8:50 am


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</object>If you thought that the legalized marijuana for medicinal purposes was a controversial, imagine how controversial it would be if a company was public in the sector of legalized marijuana. Forget the “if” in the equation. This week, a small and formerly unknown company called Club Vivanet announced that it is the first public company to enter the legalized, medical marijuana business. The company even changed its name to Medical Marijuana, Inc. While it does not trade on the NYSE nor on the NASDAQ, the stock does trade over-the-counter under the ticker “CVIV” and is listed as Medical Marijuana, Inc. (OTC: CVIV) on the pink sheets.

This morning the company filed a patent application for an invention that the company says “potentially satisfies various governmental and the medical marijuana dispensaries’ needs for tax collection in the medical marijuana industry.” This is to identify the dispensary’s tax ID number and tax rates for state and local taxes.

Medical Marijuana, Inc. is currently undergoing a 1-10 forward split and a ticker symbol change to reflect its new name in the stock market. The company is spinning off two subsidiaries on a share-for-share basis (pre 10 for 1 forward split) of the shares of Club Vivanet, Inc. (a Florida corporation) and MyNewPedia Corp (a Colorado Corporation).

The company’s description says that it is positioned to take advantage of opportunities as they appear in the emerging legal medical marijuana industry through an enhanced payment gateway introducing verifiable levels of enhanced security. It also states that a trend is in place that clearly indicates medical marijuana is quickly becoming a legal enterprise in need of various solutions in numerous areas.

Bruce Perlowin is serving as the company’s new Chairman and CEO. He has been referred to as the “King of Pot” in various articles and was recently interviewed on CNBC’s most popular feature called “Marijuana, Inc.” Here is a link to that video interview.

Whether or not this one takes off is something we won’t speculate on. If you ever thought that cannabis, pot, weed, or hemp were not going to be applied to a public company, it looks like that has changed. The Mustang Ranch, a brothel in Nevada, had tried to come public before. A brothel in Australia did manage to go public at one time. It seems that even for a legalized medical marijuana company coming public, stranger things have happened.

JON C. OGG
April 3, 2009

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Wednesday, April 8,2009

Marijuana Inc.

<span class=postbigbold>Unusual business opportunities are found surrounding medical marijuana.</span>

Lansing CityPulse by Neal McNamara


Shane Gustafson came into the business of selling vaporizer machines for use with medical marijuana was because of a sick family member.

Gustafson’s 60-year-old father was using medical marijuana for various ailments. But it got to a point where the side effects of smoked marijuana became unbearable, so his father asked if there was another way to ingest it.

“He was ready to quit,” Gustafson said. “Then he asked me to do research into vaporizer machines.”

After two months of researching the machines, which are manufactured for aromatherapy, Gustafson found and bought one for his father and eventually one for himself.

“I became a true believer,” he said. “I saw the relief my father got out of it. So, I got a hold of the manufacturer.”

Gustafson was stationed inside the Gone Wired Cafe in Lansing on Monday, the first day the state was accepting applications for its medical marijuana registry, during a medical marijuana awareness event demonstrating the machines. The marijuana is ground up — Gustafson was selling yellow plastic grinders for $3, emblazoned with images of Che Guevara and, ironically, the astrological symbol for Cancer — and then placed inside the vaporizer, he said, which draws in fresh air through a ceramic heater, neutralizing the marijuana into a vapor. The machine skips the carcinogenic smoke, leaving 96 percent of plant’s medicine, THC, behind for the patient.

Gustafson says he talked the manufacturer of the vaporizers down from the $500 retail price to $379 and sells the machines on his Web site, www.1vaporizer.com. Any profit, he said, would be slim.

“I got them to lower the cost because I’ve seen the benefit from my father,” he said.

The events at Monday’s gathering at Gone Wired may be an indication of a yet-unforeseen side effect of the new medical marijuana law — entrepreneurship.

“We’re trying to cultivate a culture of grassroots cooperatives,” says Greg Francisco, executive director of the Michigan Medical Marijuana Association. “It’s money that makes that happen. We’d just like it to be socially conscious business.”

Francisco’s association bills itself as the largest nonprofit medical marijuana patient advocacy group in the state. It helped organize Monday’s event at Gone Wired and also arranged the shuttling of patients to state offices to turn in medical marijuana registry applications on Monday, the first day they could do so under the new law. By 1 p.m., about 50 patients had been taken to turn in their registrations. The association was also selling T-shirts with its logo.

Gustafson wasn’t the only medical-marijuana entrepreneur at Gone Wired.

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“I took botany in college and I thought I could use my hobby to help people,” MoM said.

She had only found one patient at Gone Wired — another, who lived in Ypsilanti, was too far from MoM’s Grand Blanc home to serve — but guessed that she probably wouldn’t ever make money off the arrangement. Under the state law, a caregiver may have 12 marijuana plants for each patient, but it is also provided that caregivers can receive compensation for expenses and services. A caregiver, however, could never sell medical marijuana.

“They’re like babies,” MoM said of cultivating marijuana plants. “With marijuana versus regular plants, it grows fast. You have to make sure you have right nutrients and the right temperature. It’s like running a nursery, and it can be expensive.”

But perhaps the most interesting businessman at Gone Wired was Paul Stanford of Portland, Ore. Stanford, a former owner of a hemp paper company, is the executive director of the Hemp and Cannabis Foundation, a nonprofit that matches qualified medical marijuana patients with doctors that will write them a recommendation to get cannabis.

Stanford’s foundation recently opened an office in Southfield with Dr. Eric Eisenbud, an ophthalmologist. The foundation, which began in Portland, has offices in eight states and claims to have helped 60,000 patients get medical marijuana.

“We’ve seen about 400 patients,” Stanford said, gesturing to several stacks of medical marijuana registry applications on a table inside Gone Wired. “About 70 came in today to turn in their paperwork.”

Stanford started the Hemp and Cannabis Foundation in 2001 after a lawyer suggested to him on his cable access television show that he should start seeing medical marijuana patients. From there, he opened offices in Oregon, Hawaii, Colorado, California, Montana, Nevada and now Michigan.

Patients go to offices with their medical records in hand and must have a qualifying condition under state law that is less than 3 years old. About two-thirds of patients make the first qualification and are then seen by a doctor. After that, said Stanford, about 99 percent of patients are given a medical marijuana recommendation by the doctor.

“We’re planning to spread out with offices in Marquette and Houghton Lake,” Stanford said. “About 5 to 10 percent of the patients that go to Southfield are from the Upper Peninsula.”

Patients are charged $200 per year for the service, which includes, if necessary, criminal defense. Less well off patients pay on a sliding scale down to $150 — some patients are seen for free.

Nikki Clute, of Monroe, who goes to the Southfield office, was at Gone Wired Monday. She said that she had a long history of migraines and sought medical marijuana for relief. Before cannabis became legal in Michigan, Clute kept her own stash at home and was once arrested for possession. Without medical marijuana, she said, she would have to resort to using heavy pharmaceuticals.

“I would be so up on migraine meds that I wouldn’t be able to operate,” she said. “I’m into natural medicine. I’d rather see someone sucking on a dandelion root than on oxycontin.”

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SOAWorld Magazine | April 9, 2009

Gulf Onshore Announces Name Change to Cannabis Science, Inc. and Selection of Its First Pharmaceutical Cannabis Product for FDA Testing


Gulf Onshore Inc (OTCBB: GFON) has changed its name to Cannabis Science, Inc., reflecting its new business mission, and has requested a new stock trading symbol, which will be will be assigned by NASDAQ OMX in the near future. Cannabis Science Inc. has also launched its new website www.cannabisscience.com reflecting its new name.

The Company’s first pharmaceutical cannabis product for DHHS- and FDA-qualified testing will be a whole-cannabis extract in the form of a lozenge. The Company has applied for its DEA handling license and is interviewing researchers to complete and sponsor its IND (Investigational New Drug) test protocols.

The lozenge is a part of the assets and know-how developed by Steven W. Kubby and Dr. Robert J. Melamede and acquired by the Company from Cannex Therapeutics of California.

Initial findings from informal human trials using the whole-cannabis extract demonstrate the lozenge has the capacity to enhance rapid onset through oromucosal absorption. Last year, an early version of the lozenge was tested at Vancouver Island Compassion Society (VICS) (www.thevics.com), a non-profit medical cannabis organization located in Victoria, B.C, which is at the forefront of this patient-centered approach to cannabis research.

Cannabis Science, Inc. President & CEO Steven W. Kubby, himself a cancer patient, stated, “As our proof of concept, the study saw seven VICS staff members initially receive 15 lozenges each for a 48 hour period during which they did not use or ingest any other cannabis products. Participants then gave detailed feedback on their experiences by answering a ten-item questionnaire in detail. The study conducted by VICS found that cannabis-based medicine would fill the gap in the market that exists between the fast-acting but short-effect methods of ingestion like smoking, and the long-lasting but slow acting methods like oils and edibles. As well, the VICS Study showed that this type of product would be useful for people suffering from chronic pain or other conditions that appear to benefit from orally-ingested cannabinoid medicines, as well as for those who will not or cannot smoke or vaporize cannabis or who wish to use cannabis-based medicines in an easy and discrete manner. Six of the participants (87.5%) reported feelings of relaxation and/or pain relief. One subject reported "pain relief in my knees with no lethargy or cloudy head," while another "felt really relaxed" and noticed "relief to my muscle aches within 15-20 minutes." The lozenge as a method of delivery is simple and elegant, and the time of onset and length of effect suggests at least modest oromucosal absorption. Naive or elderly patients would respond well to the familiar packaging of a lozenge and to the slower method of delivery and onset of effect compared to smoking or vaporization. It is very important to note that we are not re-inventing the wheel, as another company already has an alcohol-based whole-cannabis extract in FDA Phase 3 human trials in the US so there is ample precedent for such a product. However, we believe patients will be more receptive to our products, which contains no alcohol.”

Dr. Robert Melamede, Chief Science Officer for Cannabis Science, Inc., added, "We have determined that the lozenge should be the first modality we use to bring to pharmaceutical cannabis products to market because it brings relatively fast relief to patients in a way that allows them to control their own dosage and does not involve inhalation. It also has the ability to rapidly deliver a wide variety of cannabis pharmaceutical formulations for a broad range of medical needs. The advanced stages of development that Cannex Therapeutics of California has achieved on its lozenge, and the positive informal human testing results it has attained, can speed our process and serve as a guide for formal human testing stages, which all FDA approved drugs must secure before they are released to market in the US."

The Company looks forward to formal human testing to bring various products to market targeting Cancer, Pain relief, Asthma, and Sleep disorders.

<span class="postbold">About Cannabis Science, Inc.</span>

Cannabis Science, Inc. is at the forefront of medical marijuana research and development. The Company works with world authorities on phytocannabinoid science targeting critical illnesses, and adheres to scientific methodologies to develop, produce, and commercialize phytocannabinoid-based pharmaceutical products. In sum, we are dedicated to the creation of cannabis-based medicines, both with and without psychoactive properties, to treat disease and the symptoms of disease, as well as for general health maintenance. Please visit www.cannabisscience.com for more information.

<span class="postbold">Forward Looking Statements </span>

This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement containing works such as “anticipate,” “seek,” “intend,” “believe,” “plan,” “estimate,” “expect,” "project," "plan," or similar phrases may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the events or results anticipated by these forward-looking statements may not occur. Factors that could cause or contribute to such differences include the future U.S. and global economies, the impact of competition, and the Company’s reliance on existing regulations regarding the use and development of cannabis-based drugs. Cannabis Science, Inc. does not undertake any duty nor does it intend to update the results of these forward-looking statements.




© 2008 SYS-CON Media Inc.

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Thursday, June 18, 2009
Cannabis Science Development Team Recommends Patent Filings for Its Cannabis Processing and Drug Delivery Systems

SAN FRANCISCO, Jun 18, 2009 (BUSINESS WIRE) ----Cannabis Science Inc. (NASD OTCBB: CBIS), an emerging pharmaceutical cannabis company, announced today that patent filings are expected for two of its key innovations. "The Drug Development Team members recognize the importance of having our first cannabis-based medicine covered, not just by one patent, but by two," Dr. Mary J. Ruwart, Vice President, Research & Development explained. "A competitor can sometimes engineer a way around a single patent. Patenting both the manufacturing process as well as the delivery system virtually guarantees that our product will be immune to 'invasion' by a competing company."

Cannabis Science CEO, Steve Kubby, is the inventor who will assign both of his patents to Cannabis Science. "Our new manufacturing process allows for the rapid and uniform harvesting of cannabis 'trichomes,' the part of the plant containing the active ingredient, THC," Kubby told potential investors today. "Just as the cotton gin made cotton harvesting economically feasible, our innovative process will revolutionize trichome harvesting."

"Having a creative mind like Steve Kubby's at the helm gives us a competitive advantage," Dr. Robert Melamede, Chief Scientific Officer commented. "The new manufacturing process is only the tip of the proverbial iceberg. The unique drug delivery system he has designed enhances the stability and uniform absorption of the active ingredient. We expect our first product to outshine the competition with rapid---and prolonged---blood levels of THC."

Cannabis Science management has authorized expenditures for patents; the two described above will be the company's first official filings. "Naturally, Cannabis Science will use both of its discoveries for its own drug production," Chief Financial Officer, Richard Cowan said. "However, other firms will likely want to license these inventions for their own use as well. Cannabis Science will be able to supply other companies with superior trichome preparations or provide our unique drug delivery systems for other pharmaceutical preparations. The entire industry, the American public, and, of course, Cannabis Science and its investors, will reap the benefits."

<span class="postbold">About Cannabis Science, Inc.</span>

Cannabis Science, Inc. is at the forefront of medical marijuana research and development. The company works with world authorities on phytocannabinoid science targeting critical illnesses, and adheres to scientific methodologies to develop, produce, and commercialize phytocannabinoid-based pharmaceutical products. It is dedicated to the creation of cannabis-based medicines, both with and without psychoactive properties, to treat disease and the symptoms of disease, as well as for general health maintenance.

This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement containing works such as "anticipate," "seek," intend," "believe," "plan," "estimate," "expect," "project," "plan," or similar phrases may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the events or results anticipated by these forward-looking statements may not occur. Factors that could cause or contribute to such differences include the future U.S. and global economies, the impact of competition, and the Company's reliance on existing regulations regarding the use and development of cannabis-based drugs. Cannabis Science, Inc. does not undertake any duty nor does it intend to update the results of these forward-looking statements.

SOURCE: Cannabis Science Inc.

Cannabis Science Inc.
Steven W. Kubby, 888.889.0888
President & CEO
info@cannabisscience.com
www.cannabisscience.com
or
Brokers and Analysts:
Wall Street International
John Campo, 1-410-236-8200


Copyright Business Wire 2009

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<small>Thursday, July 9, 2009</small>
Startup Cannabis Science ousts CEO

San Francisco Business Times - by Ron Leuty


Cannabis Science Inc. — the San Francisco startup trying to develop a cannabis lozenge to treat hypertension — fired its president and CEO and replaced him with its chief scientific officer.

Steven Kubby “failed to conduct his duty in the manner that … is in compliance with his fiduciary duties to preserve shareholder value and corporate integrity,” the company said in a filing Thursday with the Securities and Exchange Commission.

Kubby will remain a director of Cannabis Science (OTCBB: CBIS).

Dr. Robert Melamede was appointed president and CEO and secretary. Melamede, who will continue as chief scientific officer of the company, is the retired chairman of the biology department at the University of Colorado at Colorado Springs.

Melamede, the company said in a press release, is a leading authority on the therapeutic uses of cannabis. He serves on the advisory board of The Journal of the International Association for Cannabis as Medicine and the scientific advisory board of Americans for Safe Access.

Richard Cowan was appointed treasurer and chief financial officer, the company said in its SEC filing.

Email Ron Leuty at rleuty@bizjournals.com / (415) 288-4939

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Steve Kubby, Mary Ruwart, Ray Carr and Lee Wrights resign from Cannabis Science corporation Board of Directors


July 11th, 2009 · Independent Political Report

<span class=postbold>Steve Kubby and Mary Ruwart are former candidates for the Libertarian Party Presidential and Vice Presidential nominations, and Kubby was the 1998 Libertarian candidate for Governor of California. Mary Ruwart and Lee Wrights are At Large members of the Libertarian National Committee. Ray Carr is Mary Ruwart’s husband.</span>


From Steve Kubby, via facebook: “Dr. Ruwart, Ray Carr and Lee Wrights joined me in walking out of a company I created. As Libertarians, we all share the same commitment to the same principles. When it became clear that our company had become entangled in fraud and deception, we demanded answers. Instead, those behind the fraud illegally removed me. Yes, we could have fought it and won, but attorneys repeatedly waned us that it is only a matter of time before the SEC will be investigating the company’s many questionable activities. Actually, these guys have done me a great favor, because they have removed me from a stinking mess and assumed the liability for themselves. Is a new company already in the works? Stay tuned…”

This was just followed by an email to Steve’s list: “The Truth Shall Set You Free

Yesterday I thought I had paid a high price by choosing to tell the truth, but today I know it has propelled me to a new level. The response to my resignation has suddenly filled my life with sunshine and amazing new opportunities. Our wonderful project, once mired in fraud, has been cleansed. As one member of our team put it: “We’ve been dragging around a 5,000 pound gorilla and now we’re finally free.”

Karma works!”

A more detailed note about the resignation was posted by Steve Kubby to facebook a couple of day ago:

<hr class=postrule>

My Resignation from the Cannabis Science Board of Directors
Share
Thu at 7:30pm

The challenges of launching our company, during the worst financial crisis since the Great Depression, forced us to move quickly and decisively, resulting in a lot of snap decisions and rushed actions that I felt needed to be reviewed. Hence, I recently asked our COO, Ray Carr, to perform an internal review, so we could determine what actually happened and where we are now.

In the course of his review, Ray Carr spoke by phone with Raymond Dabney, who had brought us the deal with Gulf Onshore to do a reverse merger. Our COO wanted to determine what stocks had been issued and to whom. When Mr. Carr attempted to get details about certain unusual consulting contracts, Dabney refused to provide answers and told our COO, “it’s none of your business.”

For Dabney to tell our COO what he did, was disturbing and unacceptable to Mr. Carr, and when I found out about it, disturbing to me, especially since I have been increasingly troubled by Dabney’s demands that we sign stock deals with consultants with vague responsibilities and identities. It was then that our COO advised me that he believed something might be going on that required an internal investigation of Raymond Dabney’s stock deals and the advice of our SEC attorney.

It was our Chief Science Officer, Dr. Robert Melamede, who brought Raymond Dabney to my attention and gave him a strong personal recommendation. Despite the recommendation, I did a search on Dabney and came up with this:

“In November 2005, for example, the commission suspended Ray Dabney, the president of Xraymedia, after he admitted sending out 22 false news releases about the company. Several Xraymedia directors serve on Goldmark’s board, and the two companies share the same Vancouver address, according to filings with the Pink Sheets. Xraymedia was the subject of a 2003 spam campaign, according tospamnation.info, a Web site that tracks penny-stock spam. Shares of Xraymedia are quoted on the Pink Sheets. Although barred from the Pink Sheets, Goldmark shares may still trade if a broker is willing to sell them to investors (few are).”

http://articles.moneycentral.msn.com/In ... spx?page=2

Dr. Melamede and, in particular, Richard Cowan, our CFO, argued that this was only a civil infraction and had more to do with the Vancouver Exchange than any real wrongdoing on the part of Dabney.

However, before I agreed to work with Dabney, I sent our CFO to meet with him in Vancouver. Cowan reported that Dabney was perfect for us and we agreed to work with him.

Recently, I have become increasingly concerned about large blocks of S-8 free trading shares that Dabney insisted I immediately transfer to unknown individuals and companies. Due to the large amounts of stock involved and the lack of any information about the individuals and companies involved, I continually requested opinions by our Board of Directors. In each case, it was the opinion of Dr. Melamede and our CFO that these transactions were necessary and legal. Additionally, I was reassured by Dabney that his scrape with the SEC had been resolved and he had been cleared.

Despite these assurances, I became so concerned about what was happening, I refused to sign the most recent stock transfer he submitted, which awarded 850,000 shares, per year, to a company that had no clear duties and did not even have an address.

Then, when our COO told me about Dabney’s refusal to answer his questions, I decided to do a another search on Raymond C. Dabney. Within just a few minutes, I was shocked to find new information about him that is, on its own, troubling, but taken in the context of what Dabney has been doing in our company, it appears that immediate action is required.

One paragraph in an SEC report, dated August 8, 2008, on Dabney is especially disturbing:

“The Commission’s complaint further alleges that, from July 2005 to September 2006, Alliance, Richard Dabney, Raymond Dabney, Young, Smith, and O’Neal participated in an unregistered distribution of Alliance securities through a series of purported stock offerings by Alliance to North American Funding, Inc. (NAF), a Texas corporation controlled by Smith. According to the complaint, Raymond Dabney, Young, and Smith arranged for Alliance to issue stock to NAF in offerings that purportedly were exempt from registration. The complaint alleges that, in fact, the transactions between Alliance and NAF were not exempt from registration and were merely a device to evade the registration provisions of the federal securities laws. According to the Commission’s complaint, the stock was immediately distributed to third parties and sold into the market, without being paid for by NAF. Richard Dabney, an officer and director of Alliance, and O’Neal enabled Alliance to engage in those transactions by providing the necessary corporate resolutions and legal opinions, respectively. The Commission’s complaint also alleges that Young, Smith, and O’Neal received some of the Alliance stock through the unregistered distribution and sold it into the market without registration or a valid exemption from registration. According to the complaint, Lewis, Richard Dabney, and Raymond Dabney received a portion of the proceeds that Young obtained by selling the Alliance stock.”

Frankly, this seems to be exactly what Dabney is doing now, with our company. I then advised our COO that we had a fiduciary responsibility to conduct an immediate, confidential internal investigation of Raymond Dabney, to determine the following:

1. Are the stock deals arranged by Dabney legal?

2, Is the stock issued to the consultants that Dabney has recommended being distributed to third parties and sold into the market, without being paid for or properly registered, or exempted by us, as happened in the previous stock offerings by Alliance to North American Funding, Inc. (NAF)?

3. Given that Dabney never disclosed his history of SEC complaints about his attempts to create phony schemes to evade federal securities laws, are we still bound by contracts he created and had us sign, such as the Control Shareholder’s Agreement? That agreement gives Dabney a major role in the operation and decision making of the company, a role he would never had been allowed to assume, had I known the truth about him.

4. What legal options and obligations do we have to deal with this situation?

The results of that investigation are in and it appears that the level of fraud and illegal activities, as well as bogus or incompetent filings, appears to be systemic.

Yesterday, the Dabney group took actions to remove me as a Director, that are clearly a violation of Nevada state law. Dabney and group then contacted the investors and vendors of CSI to tell them I had been removed. By these two actions, I believe this group has so damaged CSI and its reputation, that I have no choice but to resign and do what I can to protect future investors by ending any appearance of support for CSI.

Also, I’ve learned that Dabney et al have issued themselves preferred stock, without my knowledge, any proper authorization, placing themselves in a majority position. If the CEO and COO are being left out of such fundamental actions as the issuance of stock, then the Dabney group is acting so far out of the law that I am again compelled to remove myself.

Furthermore, based on what we learned from our internal investigation, I now believe that the two court cases against CSI are not bogus as we all believed, but are actually the fault of Dabney’s failure to provide proper contracts or safeguards to assure a legal closing of his deal.

Another major problem is S-8 stock issuance with I believe was based on a fraudulent attempt to circumvent SEC rules with bogus contracts and fraudulent misrepresentation of services rendered, in order to create the appearance of legal activity, that was really intended to channel money back to Dabney and to the company.

These is also the matter of the Dabney group directing one of our investors to deposit $200,000 into our company lawyer’s CDN Trust account. However, the account to which our investor was told to deposit the $200,000 was NOT our corporate attorney’s trust account, but was actually Mr. Dabney’s own private attorney’s trust account. Mr. Dabney had attempted the same illegal diversion of funds a few days prior and had been warned by me that he had no authority and to cease any further activities, yet he brazenly repeated his attempt to divert these funds with the assistance of two of our CSI Directors, Richard Cowan and Robert Melamede.

I spoke to Annie Chan, secretary to Jeffry Wing, a Vancouver lawyer about the attempted diversion of funds. She told me that although Wing is Mr. Dabney’s personal attorney, he has not done any work for my company, nor, to her best knowledge was such a transfer known or authorized by Jeffry Wing. Mr. Wing and Ms. Chan can be reached at 604 689-2828. believe Mr. Dabney committed bank fraud by representing the account our investor was supposed to send money to was a Cannabis Science trust account when that is clearly not the case. So from my point of view, this attempt to divert funds appears to tie Mr. Dabney and his group to bank fraud, stock fraud, violation of the BC SEC order against him and attempted embezzlement. Not just once, but twice.

Dabney and his group claim they are partners with me, under the terms of a Control Shareholders Agreement I signed. However Dabney’s name appears nowhere in the document. The legal opinion of our corporate attorney, Faiyaz Dean, is that Dabney has no authority to say or do anything under the Control Agreement. According to Mr. Dean, there are at least three clauses that in the Control Agreement that nullify Dabney’s claims. Yet, in fact, Dabney has installed himself as COO, refusing to release files to us, using his own phone number and email to answer all inquiries to Cannabis Science. Dabney has done this with the full support of Melamede and Cowan, who appear to have entered into an agreement to take over CSI through unauthorized and fraudulent activities.

As long as my name is associated with Cannabis Science, innocent investors who know me and my reputation, will be investing their hard earned dollars into a company that is deceptive and fraudulent. Given what I have learned about the activities of Dabney, Melamede and Cowan, I believe it is my duty to resign and call attention to what I believe is an criminal conspiracy to defraud our investors.

Steve Kubby
July 9, 2009

[palmspringsbum]

Cannabis Science to investigate “apparently fraudulent activities” by ex-CEO

<table class="posttable" align="right"><tr><td class="postcell"><img class="postimg" src="bin/cannabis-science-share-image.jpg" width="300"></td></tr></table>
SiliconBeat
Posted by Jack Davis on July 14th, 2009 at 12:42 pm


Cannabis Science, the San Francisco company dedicated to developing medicines derived from marijuana, filled in a bit more detail on why it fired former Chief Executive Steve Kubby last week in a filing today with the SEC. The company has authorized an internal investigation and “review by counsel” of Kubby’s “apparently fraudulent activities using the position he held as President & CEO as his authority to carry out these activities that damaged the Company and its shareholder value.”

Also disclosed in the filings were the resignations of the company’s chief operating officer, Raymond Carr, and its newly hired vice president in charge of research and development, Mary Ruwart, which were accepted by the board on Friday.

Among the “apparently fraudulent activities” Kubby is accused of in the filing are the “inappropriate and unauthorized signing of financial and share agreements” with both Carr and Ruwart, as well as with an unnamed “private party” and an “independent financial group”, all of “which were not disclosed to nor approved by the Board, using unauthorized company shares as collateral or consideration for his personal gain.”

The filing also cites Kubby’s “inappropriate and unauthorized acceptance of funds into a company account to which he had blocked and removed access by other officers and directors without approval or resolution”, as well as “inappropriate and unauthorized distribution of Company funds for his personal gain, while leaving essential obligations of the Company unmet.”

Finally, Kubby is said to have made “libelous accusation against the Company’s Directors and a key consultant, while misrepresenting his own actions to the public and the media in a manner injurious to the Company’s interests.”

Cannabis Science was formed earlier this year through a reverse merger with Gulf Onshore, a Texas-based energy company that traded as a penny stock under the symbol GFON.

In March, Gulf Onshore agreed to acquire Cannex Therapeutics, a private San Francisco company involved in medical marijuana research founded by Kubby, two of whose patents Cannabis said last month it was on the verge of filing with the U.S. government.

Cannabis Science shares lost two cents between Thursday and Friday, ending last week at 16 cents per share. They shed three cents Monday, and are currently down three more cents today, currently trading at 10 cents per share.

[palmspringsbum]

<small>Tuesday, July 14, 2009</small>
Startup boss under investigation — company
San Francisco Business Times - by Ron Leuty


Ousted Cannabis Science Chairman, President and CEO Steven Kubby distributed company funds for personal gain, signed financial and share agreements without board consent and blocked the access of other officers and directors to a company account, the company said in a regulatory filing.

The San Francisco startup (OTCBB: CBIS), which wants to tap the active ingredient in marijuana to develop a lozenge to treat hypertension, said it has started an internal investigation of Kubby's "apparently fraudulent activities," according to the filing with the Securities and Exchange Commission.

Fired as president and CEO last week as the company said he failed in his fiduciary duties, Kubby resigned from the Cannabis Science board on Friday. At least two of Kubby's hires over the past two months — COO Ray Carr and vice president of research and development Mary Ruwart — as well as another employee, Lee Wrights, also have resigned.

Carr and Ruwart are husband and wife.

The company appointed Dr. Robert Melamede, the retired chairman of the biology department at the University of Colorado at Colorado Springs, as CEO. Melamede had been Cannabis Science's chief scientific officer.

The company said in its SEC filing that Kubby signed financial and share agreements with Ruwart, Carr and a private party that were not disclosed to or approved by the board, "using unauthorized company shares as collateral or consideration for his personal gain." Another deal with an "indepedent financial group" could have diluted or damaged shareholder interest, the company said in its SEC filing.

The company also alleged that Kubby accepted funds into a company account that he had blocked — and removed access by other officers and directors — and distributed company funds for his personal gain, according to the SEC report. That happened "while leaving essential obligations of the company unmet," according to the SEC filing.

Cannabis Science also said Kubby made "libelous accusation" against company directors and a key consultant "while misrepresenting his own actions to the public and the media in a manner injurious to the company's interests."

Kubby, a former candidate for the Libertarian Party presidential nomination and the Libertarian candidate for California governor in 1998, wrote to the website Independent Political Report that he was ousted after Carr uncovered unusual contracting contracts by another person connected with the company.

Cannabis Science went public in April, after it bought a public shell. Its legal address is in San Francisco, but Kubby said last month that the company largely has been operated from his home in Oakland.

Kubby has said that he started the company after he developed the lozenge to treat his rare, typically fatal form of adrenal cancer.

rleuty@bizjournals.com / (415) 288-4939

[palmspringsbum]

Someone Is Lying

<span class="postbigbold">Kubby Fired By Cannabis Science; Accuses Melamede and Cowan of Theft, Etc. Are You A Thief If You Don’t agree With Me?</span>

MarijuanaNews.com | 11 Jul 09
by Richard Cowan | Cowan@MarijuanaNews.com


The Kubby/CSI dispute involves some very complicated issues, but my decision to vote to remove him as CEO was based on a few very simple points:

First, when someone tells me that if I disagree with him I am therefore a thief, then I really must disagree with him.

Second, when agreeing with him would require me to falsely accuse two people of theft, and I do not believe the accusations be true, I would have no choice. It is a question of morality, and simple decency.

Besides, I have been slimed before, and there is too much “collateral damage” to the stakeholders, including those who need cannabinoid medicine.

Third, when one of the persons being targeted is a leading figure in cannabinoid science, and therefore the company’s most valuable employee, and if he were driven from the company under circumstances that would make it almost impossible to replace him with anyone who was not desperate, it is a question of good business.

The point is that Cannabis Science Inc. can be rebuilt by Dr. Melamede, but it cannot be rebuilt by Kubby.

Fourth, when I become the target of absurd extortionate threats, I have to conclude that the person making those threats and accusations really should not be running a public company.

Finally, when the person accusing others of theft is using company funds for his own purposes and is ignoring the basic practices of corporate governance and doing actual harm to the company, we really must act.
Below you will find a very abbreviated history, and some of the recent emails between Kubby and me.

After you read them, I think you will understand why I acted as I did, but if you still think that I have looted Kubby’s billions, please tell everyone that I spent it all on sex. That would do wonders for my reputation.
RC

<span class=postbold>History:</span>

In the Spring of last year, Steve Kubby called me and said that some wealthy friends of his had expressed interest in the pharmaceutical cannabis business, and he was sure he could raise a significant amount of money for such a venture in a short time.

I had been acting as Kubby’s “campaign manager” in his unsuccessful bid for the Libertarian Party presidential nomination, so he asked me if I would serve as the Chief Financial Officer, because – many years ago – I had had experience in corporate finance, and he wanted someone he could “trust” in that position. (You will soon see the irony in that, but it seemed logical because I had been defending him through all of his legal difficulties, since his arrest in 1999, and had nominated him for the LP Vice Presidential candidacy in 2000.)

I agreed, but Kubby was only able to raise $50,000 from a wealthy neighbor, and that was all that he was ever able to raise, with some dubious exceptions, which we will hear about soon.

Kubby was, nonetheless, able to recruit Dr. Robert J. Melamede as the company’s “Chief Science Officer”. Dr Melamede is one of the world’s most respected authorities on cannabinoid medicine, so that was something of a coup. A friend of Dr. Melamede also introduced us – by telephone – to a fellow in Vancouver, Raymond Dabney, who could arrange a “merger” with a public company, which might make it easier for us to raise money. We knew that Dabney had had some problems with the SEC, but we did not consider them serious enough to prevent us from doing business with him. He was the victim of some bad legal advice, but it makes him an easy target.

I went to Vancouver and negotiated a deal, but the stock market crash killed it before we could raise any financing. We put together another deal, but everything that could go wrong did, and no one was able to raise any money.

Needless to say, I was not getting paid, and I was also feeling my age (I am now 69), and I kept telling Kubby that I did not want to continue as CFO. He asked me to stay on in just a nominal capacity, because he wanted to have someone he could “trust.” During all this time, my stress was greatly aggravated by the problem that Kubby simply could not grasp the nature of public companies, and he said that he did not want to deal with corporate finance. In other words, I realized that I had made a serious error.

Inasmuch as we had been unable to raise cash to pay for essential corporate services, Dabney proposed that we use a provision in the SEC rules that would allow us to issue shares for them. The Board – including Kubby – approved the proposal unanimously. I am not an expert on securities laws and/or SEC regs, but the deal was vetted by the company’s lawyer and the shares were issued.

I have found Dabney to be both competent and honest, and he has always insisted that everything be done in a legal and honorable way. However, he and Kubby have never gotten along well.
In the meantime, Kubby had moved into a large house in the Oakland hills, and was having trouble paying the rent ($3,000 per month). The company’s bills were also mounting, and Kubby was complaining about stress and urging Dabney to sell stock at any price, so he would not be evicted. (Kubby sent that email to all of the company’s employees, and that began a series of increasingly bizarre messages.)

Finally, on June 25th, I insisted that my resignation as CFO finally be accepted.

<span class="postbold">Excerpt:</span>

“I have been saying for some time that I do not feel qualified to serve in this capacity, and my inability to produce results speaks for itself. Although my health problems are not “life-threatening”, it is clear to me that I do not have the stamina to do the job properly.”

<span class="postbold">Here is Kubby’s response on the same day:</span>

“Richard,

I regretfully accept your resignation, but only because this appears to be affecting your health. The last thing we want is for your health to suffer.
As for your, “inability to produce results,” I must remind you that the ultimate responsibility for these decisions rests with me. You advised me, but I was the one who committed us to a program that has not produced the results we all anticipated.

I do think you should continue as a Director of CSI.

On behalf of the entire Team, please accept our profound appreciation for the work that you’ve done on our behalf.

Best wishes,”

Steve

Then just a week later, on July 2, I received the following email:

from Steve Kubby <steve@kubby.com>
to Richard Cowan <richardccowan@gmail.com>
date Thu, Jul 2, 2009 at 6:38 PM
subject Confidential

Full text:
“Richard,

You know me well enough to know that I never bluff and I never back down.

I want you to send me ALL the stock certificates and CFO files you are holding by Monday, July 6th, or I will file charges against you for stock fraud, embezzlement, and bank fraud.”

Steve

<span class="postbold">Here is part of my response:</span>

July 3, 2009

“Dear Steve,

Let peace begin with me.

First, you say that I know you “well enough to know”.

No, I do not know you at all, because this threat does not come from the Steve Kubby that I have been defending and/or promoting for the last ten years. What a fool I have been!

May I remind you that I had been trying to resign as CFO for many months, and you kept begging me to stay because you wanted someone there whom you trusted. Ironic, eh?

In fact, nothing would make me happier than to be able to walk away from this deal, but – speaking of ironic – you have made it almost impossible for me to do so, because I have a fiduciary responsibility as a result of the position you wanted me to take and your actions that threaten the shareholders.

Second, you say you want me to send you “ALL the stock certificates.”

I will be happy to send you the CSI certificate for CANNEX. I do not have a cert in your name, and you have absolutely no right to demand any other certs, but I will also send Bob and Raymond theirs. Heretofore, no one has requested them, but I am happy to get rid of them.

Third, regarding the “CFO files”, may I remind you that we have done all of our transactions electronically, and you should have virtually all of these “files”.

They all exist in “Googleland”, and you can find them on your own .There really are no physical “CFO files”.

Fourth, you threaten that you will “file charges: against me for stock fraud, embezzlement, and bank fraud.”

Well, if I had committed those felonies, how would that be cured by my sending you certificates that are not yours and electronic copies of files that you should already have? Actually, you are threatening me with arrest for not making you an accessory-after-the-fact in crimes that – fortunately – I have not committed.

Stock fraud? I have done nothing that has not been vetted by the lawyers and approved by the Board, and nothing that I have done is dishonest.
Embezzlement? I have taken NO money from any source, directly or indirectly related to CSI, or on its behalf, and I have not been paid anything in such a long time that I have forgotten when the last time was.
Bank fraud? What bank did I defraud? I have had no transactions with any bank on behalf of CSI other than helping you open the WF account.
My purpose in going through all the above is NOT to defend myself, but rather in hopes that you will reflect on the absurdity of it all.

Unfortunately, your actions over the last few days have given us such grave concerns about your health.

Do you really think that Bob, Raymond and I are involved in some sort of vast criminal conspiracy, and plotting against you at the same time? Can’t you see how irrational that is?

When you first started this deal you asked me to help you and you said that you would have money in a “week” – or something like that. Now you are saying that Raymond’s plans have failed, but the only deal that you have come close to doing (since Gordon’s $50K) is the now uncertain “C” deal, which would be possible only with the public company that Raymond provided.

The serious flaws with the “C” contract you signed without Board approval were confirmed by “C”, but your only response was to announce that you were consulting an attorney about voiding the… deal with the very people who had pointed out those problems. Everyone on that call was astonished by that statement in that context.

Also, I assume that you are prepared to proceed without Dr. Melamede, since you say you do not trust him. And after all this, why should he trust you?

If you prevail, you will have to have a new Board. Who would want to sit on your Board after what has happened? How are you going to raise money after wrecking the company?

What is your plan for going forward with the company?

R”

As you can see, I raised a number of substantive points asking his plans for how he would go forward, but his response, “No middle ground”, demanded that I again explain a deal approved by him and the lawyers, and ended with this:

<span class="postbold">Excerpt:</span>

Dick,

“There is no middle ground, now that the fraud is so obvious. Either you wake up and recognize the fraud and join the effort to expose it, or I can only conclude that you are a willing co-conspirator with Bob and Raymond.”

In other words, if I did not agree with him that Dr. Melamede is a thief, then I must also be a thief. Except of course, he had already accused me of being a thief the day before, so I did not feel that there was any point in trying again.

That is the sum total of the basis of his accusations against me. As it happens, I have the greatest confidence in Dr. Melamede’s integrity, while I have learned the hard way about Kubby.

Don’t Point Your Finger When Your Hand Is In the Cookie Jar:
We had also learned that he had proceeded with the “C” deal mentioned above, without Board approval, and he had blocked my access to the Company’s bank account without Board approval, so he could take in $20,000 without Board knowledge or approval, and had paid himself $3,000, without Board approval, while leaving vitally important company obligations unpaid.

We have also learned that Kubby used promises of Company shares to borrow money from Company employees and at least one other person without Board approval.

The total amount of money involved was not great, but the way he was doing it endangered the company and put the Directors in an impossible position.

Consequently, because his behavior had became so irresponsible that the Board had to remove him as CEO, he resigned as a Director and then sent his libelous accusations to the media, claiming to be acting from noble motives.

There is one more illustrative point. A month or so ago, Dr. Melamede, who is not a wealthy man, loaned Kubby $2,000 to pay his rent, and Kubby has repaid him only with venom.

That reminds me of Mark Twain’s famous line: “A dog won’t bite the hand that feeds him, and that is the principle difference between a man and a dog.” .

Now I hope that you will understand why I voted as I did.

RC

[palmspringsbum]

California sprouts marijuana 'green rush'

The San Francisco Chronicle
By MARCUS WOHLSEN and LISA LEFF, Associated Press Writers
Sunday, July 19, 2009

(07-19) 11:00 PDT San Francisco (AP) --

A drug deal plays out, California-style:

A conservatively dressed courier drives a company-leased Smart Car to an apartment on a weekday afternoon. Erick Alvaro hands over a white paper bag to his 58-year-old customer, who inspects the bag to ensure that everything he ordered over the phone is there.

An eighth-ounce of organic marijuana buds for treating his seasonal allergies? Check. An eighth of a different pot strain for insomnia? Check. THC-infused lozenges and tea bags? Check and check, with a free herb-laced cookie thrown in as a thank-you gift.

It's a $102 credit card transaction carried out with the practiced efficiency of a home-delivered pizza — and with just about as much legal scrutiny.

More and more, having premium pot delivered to your door in California is not a crime. It is a legitimate business.

Marijuana has transformed California. Since the state became the first to legalize the drug for medicinal use, the weed the federal government puts in the same category as heroin and cocaine has become a major economic force.

No longer relegated to the underground, pot in California these days props up local economies, mints millionaires and feeds a thriving industry of startups designed to grow, market and distribute the drug.

Based on the quantity of marijuana authorities seized last year, the crop was worth an estimated $17 billion or more, dwarfing any other sector of the state's agricultural economy.

Experts say most of that marijuana is still sold as a recreational drug on the black market. But more recently the plant has put down deep financial roots in highly visible, taxpaying businesses:

Stores that sell high-tech marijuana growing equipment. Pot clubs that pay rent and hire workers. Marijuana themed magazines and food products. Chains of for-profit clinics with doctors who specialize in medical marijuana recommendations.

The plant's prominence does not come without costs, say some critics. Marijuana plantations in remote forests cause severe environmental damage. Indoor grow houses in some towns put rentals beyond the reach of students and young families. Rural counties with declining economies cannot attract new businesses because the available work force is caught up in the pot industry. Authorities link the drug to violent crime in otherwise quiet small towns.

"For those of us who are on the front lines. It's not about pot is bad in itself or drugs are bad," said Meredith Lintott, district attorney in Mendocino County, one of the country's top marijuana-producing regions.

"It's about the negative consequences on children. It's about the negative consequences on the environment."

Still, the sheer scale of the overall pot economy has some lawmakers pushing for broader legalization as a way to shore up the finances of a state that has teetered on the edge of bankruptcy. The state's top tax collector estimates that taxing pot like liquor could bring in more than $1.3 billion annually.

On Tuesday, Oakland will consider a measure to tax the city's four marijuana dispensaries, which the controller projects will ring up $17.5 million in sales in 2010. The city faces an $83 million budget shortfall, and expects the marijuana tax to raise $300,000.

Advocates point out that making pot legal would create millions if not billions of dollars more in indirect sales — the ingredients used to make edible pot products, advertising, tourism and smoking paraphernalia.

With a recent poll showing more than half of Californians supporting legalization, pot advocates believe they will prevail. And they say other states will follow.

Tim Blake is the proprietor of a 145-acre spiritual retreat center which holds an annual marijuana bud-growing contest in the heart of Northern California's pot-growing country.

Politicians, he says, are "going to see the economic benefits, they're going to see the health benefits and they're going to jump on the bandwagon."

___

On a property flanked by vineyards, Mendocino County farmer Jim Hill grows marijuana for up to 20 patients, including himself and his wife. He believes passionately in marijuana's purported ability to treat the symptoms of diseases ranging from cancer to Alzheimer's; he says his wife suffers from a serotonin imbalance, and he uses the drug to treat digestive problems and intestinal cramping.

Hill's plants enjoy careful nurturing in a temperature-controlled greenhouse. On a recent spring day, his college-age son spread bat guano to fertilize two dozen 6-foot-tall plants.

Hill is 45 years old; he says he spent $10,000 to set up the garden. Patients receive their drugs free in exchange for helping with his crop.

"It's kind of like living on an apple orchard," Hill said. "You don't pay for an apple."

Though marijuana is cultivated throughout California, the most prized crops come from the forested mountains and hidden valleys of Mendocino, Humboldt and Trinity counties — the Emerald Triangle.

The economic impact of so much pot is difficult to gauge. Authorities say the largest grows are run by Mexican drug cartels that simply funnel money from forest-raised crops back into their own bank accounts.

Still, marijuana money from outdoor and indoor plots inevitably flows into local coffers. Marijuana increases residents' retail buying power by about $58 million countywide, according to a Mendocino County report. The county ranks 48th out of 58 counties in median income but, by counting pot proceeds, could jump as high as 18th.

Businesses benefit from mom-and-pop growers who cultivate pot to supplement their incomes and from marijuana plantation workers who descend on the Emerald Triangle from all over the country for the fall harvest. Pot "trimmers" can earn more than $40 per hour.

In Ukiah, the county's largest city, business owners say the extra cash is crucial. "I really don't think we would exist without it," says Nicole Martensen, 37, whose wine and garden shop is stocked with bottles from county vintners.

The skunk-like smell of marijuana hangs over the town of about 11,000 during the October harvest, when cash registers brim with $100 bills. Sometimes the wads of cash spent in Martensen's shop come dusted with pot.

But Ukiah banker Marty Lombardi says existing businesses cannot compete with pot industry wages for workers. Lombardi's bank does not make loans to anyone suspected of trying to fund a pot operation, but he said most growers do not need them.

"I don't think you or I have any sense for how much money is generated," he said.

Mendocino County Sheriff Tom Allman says medical marijuana operations that follow state and county laws will face no hassles from his department. His deputies left intact 154 marijuana grows they visited last year, he said

"If you're living in the boundaries, I'm not going to mess with you," Allman said.

Which is not to say that there is no legal risk to growing, selling or buying marijuana. Federal laws still apply, and pot dealings not deemed medicinal are considered criminal by the state.

Local, state and federal authorities pulled up 364,000 plants across Mendocino last year. And the state Department of Justice reported more than 16,000 felony arrests and nearly 58,000 misdemeanor arrests for marijuana offenses in 2007 — the highest numbers in a decade.

Sparky Rose sits in the federal prison in Lompoc, serving a 37-month term. Law enforcement officials insist he is one of many sellers who have used the medical marijuana law as a guise for old-time drug dealing. Rose does not disagree, although he would like to think he helped some legitimate pot patients in the process.

A one-time Web designer, he started out in 2001 making $15 an hour as a "bud tender" working the counter at an Oakland club. Four years later, he was overseeing a dispensary chain with stores in seven cities, 283 employees and sales reaching $5 million a month.

That's not as much as it seems, he says. Much of the money went to pay salaries, to purchase equipment and to buy 200 pounds of marijuana each week.

Rose says he was making $500,000 a year before his 2006 arrest, a sum he considers fair given the chain's volume and the risk he assumed as the company's public face. Before opening a new location, he would meet with local officials and police to get their implicit OK.

"We operated out in the open, and the feds knew who we were and they let us do it for four years, so as time goes on you get this comfortable feeling," he says.

"While I was still in the business, a lot people would ask me, 'I'm thinking about starting a club, what advice do you have?'"And I'd say, 'The biggest warning is sooner or later, you will start to think it's legal.'"

___

Even people accustomed to buying marijuana over the counter are impressed when they visit the Farmacy, a dispensary-cum-New Age apothecary with three locations in Los Angeles. Decorated in soft beige and staffed by workers in lab coats, the Venice store sells organic toiletries, essential oils and incense along with 25 types of pot stored in glass jars, including strains such as Beverly Bubba and Third Eye.

Anyone can shop there, but to buy the cannabis-infused gelato, olive oil, soft drinks and other "edibles," customers must show a doctor's recommendation, have the information verified by the doctor's office and obtain a patient identification number for future visits.

During a two-hour span, the dozen or so customers who made a purchase all bought pot products and paid the 9.25 percent state sales tax on top of their purchases. The clubs, which are not supposed to turn a profit, call their transactions "donations."

Allen Siegel is 74; he is dying of cancer and wants to try smoking marijuana to ease his pain without knocking him out like prescription drugs do. So his wife Ina brought him to the Farmacy for his first visit as a legal pot patient.

"You go in there and they have so many choices," she says.

California's "green rush" was spurred by a voter-approved law 13 years ago that authorized patients with a doctor's recommendation to possess and cultivate marijuana for personal use. Although a dozen other states have adopted similar laws, California is the only one where privately owned pot shops have flourished.

Los Angeles County alone has at least 400 pot dispensaries and delivery services, nearly twice as many outlets as Amsterdam, the Netherlands capital whose coffee shops have for decades been synonymous with free-market marijuana.

Promoted as a way to shield people with AIDS, cancer and anorexia who use marijuana from prosecution, the 1996 Compassionate Use Act also permitted limited possession for "any other illness for which marijuana provides relief."

The broad language opened the door to doctors willing to recommend pot for nearly any ailment. In a survey of nearly 2,500 patients, longtime Berkeley medical marijuana advocate Dr. Tod Mikuriya found that more than three-quarters of the patients used the drug for pain relief or mental health issues.

Dispensaries began selling marijuana, although they were risking federal charges. Some operators have become less fearful since U.S. Attorney General Eric Holder said this year that the Justice Department would not target pot operations following state laws, reducing the risk of random federal raids that existed under the Bush administration.

California's pot dispensaries now have more in common with a corner grocery than a speakeasy. They advertise freely, offering discount coupons and daily specials.

Justin Hartfield, a 25-year-old Web designer and business student, founded WeedMaps.com, where pot clubs and doctors who write medi-pot recommendations list their services and users post reviews. Hartfield says the site has brought in nearly $250,000 in its first year.

Hartfield exhibited at THC Expo, a two-day trade show at the Los Angeles Convention Center that attracted an estimated 35,000 attendees in June. There was hydroponic gardening equipment and bong vendors and bikini-clad models wearing leis made of fake marijuana leaves.

Like just about everyone else connected to the cannabis trade, Hartfield has a letter from a doctor that entitles him to buy medical marijuana from a dispensary. But he sees no point in pretending he is treating anything more than his taste for smoking weed.

"It is a joke. It's a legal way for me to get what I used to get on the street," he said.

He recalls telling the doctor who provided the referral that he suffered from insomnia and anxiety, though neither was true. As he signed the paperwork, the doctor "congratulated me like I was getting my degree from Harvard."

___

What would happen if marijuana was legal — not just for medical uses, but for all uses?

Assemblyman Tom Ammiano, D-San Francisco, wants to tax and regulate all pot as it does alcohol. State Board of Equalization chairwoman Betty Yee, a supporter, projects the law would generate $990 million annually through a $50-per-ounce fee for retailers and $349 million in sales taxes. (The state now collects $18 million each year in taxes on medical marijuana.)

The state would not start collecting taxes on marijuana under Ammiano's bill until the federal government lifts its restrictions on the drug.

That's not enough for pro-pot activists who want Californians to vote next year on a proposal that would allow adults to legally possess up to one ounce of pot and allow cities to sell and tax the drug.

"Local governments are malnourished and in need of revenue badly," said Aaron Smith, state policy director for the Marijuana Policy Project, which advocates legalization. "There's this multibillion-dollar industry that's the elephant in the room that they're not able to tap into."

Lintott, the Mendocino prosecutor, is not convinced that legalization would put an end to the underworld's marijuana operations. She argues that big-time growers would never bother filing tax returns. "Legalizing it isn't going to touch the big money," she says.

But others predict the black-market business model would fall apart.

Large-scale agri-businesses in California's Central Valley would dominate legal marijuana production as they already do bulk wine grapes, advocates argue. Pot prices would fall dramatically, forcing growers to abandon costly clandestine operations that authorities say trash the land and steal scarce water.

And legalization, supporters insist, would save state and local governments billions on police, court and prison costs.

But others survey California in 2009 and say the cannabis future is now. Richard Lee has parlayed a pair of Oakland dispensaries into a mini-empire that includes a marijuana lifestyle magazine and a three-campus marijuana trade school. Oaksterdam University's main campus is a prominent fixture in revitalized downtown Oakland.

All without legalization.

"It's like here's reality, and here's the law," Lee says. "The culture has gone so far beyond the law, people have gotten used to being able to get quality product. They are not going to go back."

[palmspringsbum]

<small>Kn@ppster | Tuesday, August 25, 2009</small>
Depends on what the meaning of "owns" is


From Cannabis Science, Inc.'s quarterly report:

In the first quarter of 2009, the Company acquired all of the assets of Cannex Therapeutics, LLC from Cannex and Steven W. Kubby, and committed itself to research and development of cannabis based medical products. The Company owns intellectual property related to a whole cannabis extract lozenge, which has demonstrated some efficacy in non-blind informal testing.


Like all such acquisitions, this one was accomplished by way of a contract.

The thing about contracts is that they generally include considerations by and to all sides. In this case the contractual cost of acquiring assets from Cannex and Kubby was 10.6 million shares of stock in the acquiring companies (1.2 million shares of Gulf Onshore and 8.5 million shares of K&D Equity Investments, a Gulf Onshore shareholder). And pursuant to a subsidiary Control Shareholder Agreement, the bulk of that stock is assigned to Steve Kubby.

Thing is, Kubby tells me he's seen neither hide nor hair of that stock ... which calls into question the claim that CSI actually "owns" the stuff it claims to have "acquired," especially since K & D Equity Investments has since filed suit alleging breach of contract and seeking rescission of the acquisition.

CSI also has yet to comply with SEC rules [PDF] (specifically Item 5.02, "Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers") pertaining to its July 8-K filings:

if the director furnishes the company with any written correspondence concerning the circumstances surrounding his or her resignation, refusal or removal, the company must file a copy of the correspondence as an exhibit to the report on Form 8–K regardless of whether the director requests that the company take such action. The company must provide the director with a copy of the disclosures it is making in response to this item no later than the day that the company files the disclosures with the Commission. The company must also provide the director with the opportunity to furnish a letter addressed to the company as promptly as possible stating whether he or she agrees with the company’s disclosures in response to this item and, if not, the respects in which he or she does not agree. Finally, the company must file any letter it receives from the director with the Commission as an exhibit by amendment to the previously filed Form 8–K within two business days after receipt by the company.


All of which lends credibility to Kubby's claims concerning what's going on at CSI.

From where I sit, it looks like one or more bad actors involved with CSI are simply stalling to keep Kubby broke, powerless and out of the loop while they suck whatever quick cash they can find out of the enterprise before discarding its drained carcass and moving on in search of the next victim. All of which makes for great gossip, but ...

... what about the idea and the product? From what I can tell, Kubby still has every right to proceed with it on his own, since he's never received the contractually specified payment for it -- and since CSI's continued gaming of the situation is likely driving the prospective value of that payment down by the minute.

If I was Kubby, I think I'd just get back to work developing the product and building a new company around it -- a company prepared to lawyer up as necessary to protect its right to produce a lifesaving product that CSI has no plausible claim to, but that it pretends to own and may try to sell off in a final orgy of cashing-out as it circles the drain.

-----
Some End Notes

I'm neither an employee of, nor an investor in, CSI or any other company alluded to in this piece, but I did do some volunteer work and then some contract work (for which I remain unpaid, but I'm not terribly concerned about that) for Cannex Therapeutics early on.

I'm not a lawyer, I'm not an investment adviser, I'm not omniscient, and I am biased. This piece is my opinion, hung on some factual claims which I've checked but upon which I offer no guarantee or warranty. If you buy (or sell) stock, invest (or decide not to invest) in a company, litigate (or decide not to litigate) an issue, or take (or refrain from) any action whatsoever entirely, or even substantially, on the basis of what you read here, you're an idiot and it's all on you, Bubba.

[palmspringsbum]

2 Sep 09 - Why I don't buy Medical Marijuana Inc, Examiner.com

[palmspringsbum]

Feds' New Stance on Medical Marijuana May Be Boon for West Palm-Based "GreenCard"


New Times | By Thomas Francis
Thu., Oct. 22 2009 @ 9:59AM


Now that the U.S. Justice Department has committed -- at least rhetorically -- to an "efficient and rational use" of its enforcement powers against marijuana users and sellers, there's money to be made. Maybe Commerce Online of West Palm Beach will emerge as a kind-of mountain cabbage Mastercard.

The company, whose website is here, this week announced the launch of its GreenCard, a debit card through which people with permission to use marijuana for medical purposes can pay for it electronically.

In a statement, Commerce Online CEO Kyle Gottschalk said:

<blockquote>"With recent economic issues and more stringent requirements within the banking industry, many Americans may no longer have or qualify for a credit card or checking account to pay for essential needs or medical services and do not want to exchange or carry large amounts of cash to these locations. The Commerce Online "GreenCard" will essentially be the logical choice as a low cost, effective cash alternative to regulated medical marijuana industry"</blockquote>