news releases began to flow in February.
Mission Viejo, Calif., penny-stock company announced it
was leaving behind the world of nutritional supplements
to enter "the growing billion-dollar marijuana
newly rechristened CannaBusiness Group Inc. soon touted
its purchase of The NorCal Connection, an online
storefront for smell-proof marijuana containers. Next,
the company announced it had acquired 17.3 acres in
Butte County, Calif., which it said were already leased
to a licensed medical marijuana grower.
push paid off. In a matter of weeks, CannaBusiness’
stock skyrocketed from around 2 cents a share to more
than 40 cents per share. On March 17, the most frenetic
day of trading, 46.8 million shares changed hands, or 82
percent of the shares outstanding.
shares have bounced back toward earth since then, losing
three-quarters of their value off that peak. They still
are priced higher, though, than when the company focused
on diet and energy pills.
wild ride of CannaBusiness and its CEO, Michael
Cummings, provides a window into the "green
rush" of investment dollars targeting anything
associated with the newly legalized business of
also shines a light on the mercurial world of penny
stocks — in this case, a company that’s reported a
minor year-end profit just once in its 34-year history,
using seven names and a series of reverse mergers and
acquisitions to bounce among six different industries,
from film distribution to professional baseball to
are going to be some really amazing companies that come
out of this," said Troy Dayton, CEO of The ArcView
Group, a San Francisco investor network focused on the
marijuana industry. "It’s just hard to know which
boom started in early 2013 as more states legalized
medical marijuana. Pot stocks surged in over-the-counter
markets but then quickly cooled off, continuing that
downward trend for the rest of the year.
marijuana became legal in Colorado, while Washington
started ramping up to allow retail sales in June.
President Barack Obama signed a farm bill that loosened
rules prohibiting hemp production.
despite federal laws prohibiting it, 20 states plus
Washington, D.C., had agreed to allow medicinal
marijuana in some form.
when the flood began," Dayton said. "They see
this as the next great American industry."
established pot-related penny stocks began riding the
resulting wave of price spikes and valleys. Meanwhile,
many new players started jumping on the green bandwagon.
the past three months, there have been numerous penny
stocks from all kinds of industries — gold and oil
mining, biofuels, music rights, to name a few — that
have decided to undergo yet another change of their
business and came up with announcements about joining
the marijuana industry," said Georgi Kamburov, who
follows the industry as a writer for HotStocked.com.
CEO, Cummings, didn’t respond to multiple requests
over several weeks to be interviewed for this report.
frequent name changes, scarce financial data and a
sudden volley of promotional materials should all be red
flags to investors, said Gerri Walsh, senior vice
president of investor education with the Financial
Industry Regulatory Authority, a not-for-profit
organization based in Washington, D.C., that helps
regulate securities in the United States.
issued two alerts in the past seven months warning
marijuana stock investors to watch for "pump and
dump" scams, where companies drive up prices and
demand with lofty promises, then sell their shares and
leave investors with worthless stock.
so much attention focused on the marijuana boom, it’s
not surprising that thinly traded penny pot stocks are
increasingly drawing the attention of small investors,
whipped up by websites such as 420Investor.com and
BEGIN OPTIONAL TRIM)
from that green bubble, CannaBusiness Group recently
upgraded from a strip mall in Mission Viejo to a
15-story building across from the Irvine Spectrum.
the CEO, leases space in a suite shared by businesses
including an estate attorney and a software developer,
with a receptionist waiting to greet visitors on the
ninth floor. CannaBusiness Group is listed in the
digital directory of the building’s lobby under
Freebird USA Inc., another company owned by Cummings.
Group stated in a March 6 news release that it bought 17
acres in Butte County for $275,000. Searches with the
Butte County assessor’s office turned up no record of
any land deal that size and price range, or any similar
purchase under Cummings’ name or the company’s name
dating back to January 2013. It could not be determined
if a sale wasn’t showing yet because it was still in
escrow or for other reasons; Cummings did not respond to
repeated requests for details.
Connection CEO Jeff Jirod also didn’t reply to
requests for an interview about being bought by
CannaBusiness Group. An April 7 news release promoted
Jirod’s plans to move his corporate offices and launch
a new warehouse in Vacaville, Calif.
April 8, CannaBusiness announced it purchased the
private security firm National Security Solutions Inc. A
news release states the company will help marijuana
growers and dispensaries affiliated with CannaBusiness
keep their operations secure.
reporting requirements for penny stocks are minimal,
CannaBusiness filed an annual disclosure statement for
2013 that shows the company ended the year with $17,291
cash. The figures aren’t particularly helpful for new
investors, however, because the company listed $1
million in assets that, according to Hotstocked, went
away along with a recently divested supplements maker,
stated in a March news release that he’s having an
independent firm audit CannaBusiness, with plans to
become a fully reporting company. The company is also
looking to raise $5 million from accredited investors
through rule 506(c) of the Jump-start Our Business
Startups or JOBS Act, which allows companies to
advertise shares to the general public.
dearth of reliable financial data makes penny stocks, in
general, high-risk investments, said FINRA’s Walsh.
with reviewing any financial reports, Walsh said
investors should compare those figures with what the
company is promising in press releases. The filings are
often quite forthright, she said, laying out the fact
that company revenue is low or even negative.
stocks carry their own set of risks, Walsh added, since
the legality of marijuana itself is the subject of
investors that are interested in getting in on the
ground floor of any new opportunity, whatever that
opportunity is, we always warn about the risks of
start-up ventures," she said. "Many are widely
successful but many more ultimately fail."
STORY CAN END HERE)
company now known as CannaBusiness Group Inc. first
incorporated in 1980 as World Wide Motion Pictures
Corp., a Huntington Beach, Calif.-based film
distribution company. Securities and Exchange Commission
records, newspaper reports and interviews with those
involved paint a picture of its recent deal making:
World Wide Motion Pictures Corp. needed cash after years
of posting annual losses. A company called Buckeye
Ventures Inc. was created to allow a reverse merger,
with the film distributor remaining as a subsidiary.
Buckeye Ventures bought businesses in the plumbing,
heating, ventilation and air conditioning industries.
As revenue soared from a few thousand dollars a year to
$13 million, Buckeye Ventures changed its name to Energy
King Inc., one of its acquisitions. That same year,
World Wide Motion Pictures split off.
Energy King bought out Venue Media, a small mobile and
social media company based in Mission Viejo and run by
Michael Cummings. Cummings was put in charge and the
company changed its name to Godfather Media Inc.
The company name changed to Embark Holdings. A news
release said it would move into "entertainment,
technology, medical, energy and business services."
Embark bought a majority interest in the Orange County
Flyers baseball team and another team based in Yuma,
Ariz. The O.C. team had been formed eight years earlier
as the Fullerton Flyers, a charter team for the Golden
Baseball League. Cummings announced he was creating a
new league called American West Baseball League.
Cummings left the baseball venture and the league never
took the field.
Embark Holdings issued 1,000 preferred shares to buy
Muscle Warfare International Inc. Cummings stepped aside
while Muscle Warfare — whose supplements are available
in such stores as the GNC chain —rebranded the company
with its name.
Muscle Warfare CEO Daniel Amato returned his stock and
took Muscle Warfare back from Embark Holdings.
In February, Cummings rebranded Embark Holdings as
CannaBusiness Group Inc., in the marijuana business.