NEW YORK (TheStreet) -- These stocks are hoping to ride the green rush of marijuana trading following the recent push to legalize marijuana, but investors need to be aware that many are not as green as they seem. These penny pot stocks have very similar stories.
Most began life in a different line of work and only recently jumped into cannabis. It's a hot trend and many investors don't bother to look any further than the name. Some of these companies are serial name changers. They frequently issue shares in the hundreds of millions. They tend to pay bills and settle debts with stock. They have little cash on hand. Some don't even have a marijuana product yet, but investors don't care, as these stocks are rapidly approaching bubble heights.
Take Rapid Fire Marketing, for example. This less than a penny stock is eyeing the dry vaporizer market. Dry vaporizers are a favorite among pot smokers as the heat vaporizes the pot and consumers can smoke without ashes and smell. The company, however, touts a dry vaporizer prototype on its Web site, promising an "update on start of production coming as soon as we have it." Rapid Fire also sells vaporizers for oils and extracts on the Cannacig.com Web site. The company's last quarter only booked gross profits of $2,000. Typical of many of these penny stock firms, it issues millions of shares in order to pay its bills. In the nine months ending September 2013, Rapid Fire issued 780,000,000 shares and at the same time only has $1,812 cash. Yet the stock has gone from less than half a cent to half a cent. Now these aren't big numbers, but they are big percentages. Investor Relations for Rapid Fire said the company expects to launch the dry product vaporizer before the end of the current quarter, saying it's on the front burner.
Easton Pharmaceuticals, a speciality pharmaceutical company which trades at 7.5 cents, has been looking to gain a foothold in the medical marijuana space. Last August it announced that it had entered into discussions with two private independent companies in Canada for a proposed joint venture or partnership to share medical marijuana revenue. In October, it announced an application to obtain a distributorship license towards its Canadian medical marijuana initiatives. Last month, Eastern Pharmaceuticals said that it is "moving towards" signing a contract to retain and hire a legal expert on medical marijuana in Canada to file a growers'/distributorship license on the company's behalf. Last week, Easton Pharmaceuticals said that it has entered into "high level negotiations" with a private company based out of British Columbia which has been approved for a medical license to grow and distribute medical marijuana throughout Canada. The company couldn't comment on the timing when contacted by TheStreet and would only say that it's in serious discussions with a company that has a license to grow and distribute marijuana.
Away from medical marijuana, the company's first product is a female sexual enhancement gel marketed under the brand name Viorra. It also has a minority interest in a cancer drug Xilive. Easton Pharmaceuticals has changed its name twice in the last five years and frequently files its earnings late. It has more liabilities than cash - $197,754 as of September 2013. It also issues stock to generate cash. (During the period between July 2013 and September 2013 the Company issued 84,200,000 shares of its common stock). In October, when Easton announced its application for a distributorship license, the stock was 1/3 of a penny. Now, the stock is 7 cents. That's a 3,765% increase in six months just for filing an application.
Cannabis Sciences had $462 cash on hand as of September 2013, most of its assets are in marketable securities and it has a $90 million deficit. It, too, issues stock to pay the bills. Cannabis Sciences is also part of the name change game. The company changed its name from National Healthcare Technology, Inc., to Brighton Oil & Gas, Inc., in 2007 and converted to a Nevada corporation. On March 25, 2008 the Company changed its name to Gulf Onshore, Inc. On April 7, 2009, it changed its name to Cannabis Science, Inc. The firm did not file a tax return from 2008 to 2012. The company tried to get into a Colorado dispensary but had to terminate because it wasn't from Colorado. Most of the company's income ($70,000) comes from video-based cannabis education and the business needs $750,000 by September 2014 to pay lab and equipment fees. The stock is up 489% over the past six months and almost trades at a quarter. This company has sold no medical marijuana and did not return calls for comment.
Cannabis Sativa (CBDS) was a tanning bed company as recently as September 2013. It sold that business for $60,000 and will now go into plant-derived lotions and creams. Cannabis Sativa is in development stage and has no products yet. In January, it signed an agreement to buy a patent for a new super-potent cannabis strain called CTA from Steven Kubby. Kubby was named CEO and will get $5,000 a month in salary and $1 million of stock. The company believes this strain is unique, even though there are hundreds of cannabis options already available. The patent, though, has been under review for three years. This stock is up 2,007% for the past year and is trading at roughly $10.75 a share on the news that Cannabis Sativa bought a potential patent. Cannabis Sativa also did not return a request for comment.
Vitamin Blue (VTMB) is a T-shirt company known for its board shorts and surfboard accessories. The company was recently very excited to receive an order from Tower Paddle Boards, a company owned by Mark Cuban. It, too, is jumping into the green rush by making three products out of hemp fibers, one a t-shirt featuring a pot leaf. Vitamin Blue sales increased from $99,254 in the nine months ending 2012 to $115,816 for the same period in 2013. However, during the summer of 2013, Vitamin Blue announced a new plan to branch into edible medical marijuana, creating a new subsidiary called Vitamin Green. It also plans to branch out into making grow tents. The stock is down 60% for the past year, but thanks to Vitamin Blue's inclusion in lists of pot stocks, even though it has no pot business to speak of, the stock has jumped 377% in the past three months. While it's still a penny pot stock at less than half a penny, this return is substantial. Vitamin Blue did not answer a request for comment regarding the Vitamin Green business.
BreedIT Corp is an Israeli online gaming platform and currently sells social media gaming products like CanUpuzzle. In August 2013, the company announced that it was entering into an MOU (Memorandum of Understanding) with the Institute of Plant Science and Genetics to produce software for agricultural breeding of medical marijuana. The technology will improve cannabis strains and breed new hybrids. In the 6 months since BreedIt said it was going to develop cannabis software, the stock is up 1,757%. Investors are buying stock in a company whose revenues for the last nine months ending September 2013 were $4,338. According to its most recent 10-Q filing with the Securities and Exchange Commission, this company needs to make $6,000 a month to maintain its operations for the next 12 months, and like many other penny pot stocks, it plans to sell stock to cover bills and debts. The company has not yet sold any cannabis software. Neither the telephone number nor the email address listed on its OTC page for contact information work. The phone number on its most recent press release is not in service
As its name suggests, Anything Technologies Media offers a range of services in its portfolio, from DVD duplication and replication to printing and Web site design. It has also targeted the marijuana market. In April 2013 the company announced the acquisition of R-Quest Hydroponics, paying for the deal with shares (Anything Technologies Media issued 115 million shares in 2013 alone). In September the company announced that its R-Quest Hydroponics subsidiary had sold its first 100 EMC-5000 Systems for Medical Marijuana grow rooms. This, however, is clearly a busy space - last month ATM entered into a partnership with IMD Companies, Inc. which saw IMD pay 100 million shares for a 51% interest in R-Quest Hydroponics. Anything Technologies Media will continue to manufacture the EMC-5000 as part of the partnership.
As for the company's financials, its balance sheet as of September 2013 shows only $13 cash on hand. A 10-Q filing with the Securities and Exchange Commission also shows that, in 2012, ATM, along with a shareholder, had to work out a payment plan to Pacific Gas & Electric for $85,000. Still, the stock is up 1,053% for the past six months. It's a whopping $0.015 now. Anything Technologies Media did not respond to TheStreet's request for information.
Written by Debra Borchardt in New York.Follow @WallandBroad