By Pat Anson, Editor

A California company that claims to be developing a cannabis-based skin patch to treat chronic pain is “a fundamentally unsound company” with a long history of misleading the public and its own shareholders, according to analysts. The founder and former CEO of Cannabis Science has even accused the company’s current management team of fraud and deception.

At various times in its history, Cannabis Science has gone under the name Patriot Holdings, National Healthcare Technology, Brighton Oil & Gas, and Gulf Onshore. Now it has a slick new website, and is passing itself off as a pharmaceutical development company with a pipeline of cannabis-based drugs to treat asthma, HIV and chronic pain.

“I'm not sure if Cannabis Science is a biotech firm, an oil and gas exploration company, an educational university or a pot distributor, the only thing I am certain of is that Cannabis Science is in the business of moving money from public investors to executives' pockets,” wrote John Brody Gay in a lengthy analysis published by Seeking Alpha, an investing website.

Gay and other analysts say Cannabis Science is a classic “pump and dump” penny stock that produces little revenue, but a steady stream of press releases to promote its business activities, which never seem to come to fruition.

Often other websites are hired by pump and dumpers to publish their press releases or write glowing reviews about a company known as “advertorials.” Others are simply ignorant and don't do their homework. The publicity and fake news generates a brief flurry of interest in the company’s stock, which is when executives and other insiders often sell their shares. By raising the stock price by a few pennies, company insiders can double or triple the value of their holdings.

On November 2, Cannabis Science issued a press release saying it was developing skin patches to treat pain caused by fibromyalgia and diabetic neuropathy.

"The development of these two new pharmaceutical medicinal applications are just the tip of the iceberg for what we see as the future for Cannabis Science. While we strive to increase our land capacity for growth and facilities to produce our own product to supply our scientists with proprietary materials to make these formulations, we are also busy researching more potential needs for Cannabis related medical applications,” Cannabis Science CEO Raymond Dabney was quoted as saying in the news release.

Dabney is no stranger to accusations of deception and stock manipulation. In 2005, he admitted issuing 22 bogus news releases to promote another penny stock. For that he received a five year trading ban from British Columbia’s Securities Commission, according to Forbes and the Vancouver Sun.

A former CEO and president of Cannabis Science has also accused Dabney of fraud. Steve Kubby and other directors resigned after learning that Dabney, who was then working for Cannabis Science as a consultant, diverted company funds into a private account.

“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 warned us that it is only a matter of time before the SEC will be investigating the company’s many questionable activities,” said Kubby in the Independent Political Report. “Actually, these guys have done me a great favor, because they have removed me from a stinking mess and assumed the liability for themselves.”

Kubby himself was accused by the company of "using unauthorized company shares as collateral or consideration for his personal gain."

Calls to Cannabis Science and Dabney for comment on the allegations were not returned.

‘Substantial Doubt’ About Company

The bottom line in all of this is that Cannabis Science is nearly broke and considers its own future questionable, which it discloses in its most recent financial statement to the Securities and Exchange Commission.

“The Company is not currently in good short-term financial standing. We anticipate that we may only generate limited revenues in the near future and we will not have enough positive internal operating cash flow until we can generate substantial revenues,” the company said. “There is substantial doubt as to the Company's ability to continue as a going concern without a significant infusion of capital.”

In the first six months of 2016, Cannabis Science reported revenue of only $5,787, and debt and liabilities of over $5 million.

What the company has plenty of is stock. Nearly two billion shares of Cannabis Science are currently trading on the over-the-counter “pink sheet” market, and the company is authorized to release another billion shares whenever it wants. It pays its executives, debtors and vendors in newly issued shares, which are typically sold at opportune times.  

Chief Financial Officer Robert Kane, for example, was paid with 20,000,000 shares on March 8. In October, Kane sold over 9 million shares for $384,000.

Nice work if you can get it.

With more and more states legalizing both medical and recreational marijuana, the cannabis industry is estimated to be worth $7 billion and growing quickly. So is the opportunity for fraud.

The Financial Industry Regulatory Authority (FINRA) warned about a profusion of marijuana stock scams three years ago, advice that still holds true today for investors, as well as pain patients.

“Like many investment scams, pitches for marijuana stocks may arrive in a variety of ways – from faxes to email or text message invitations, to webinars, infomercials, tweets or blog posts,” FINRA said. “The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success.”

Cannabis Science was out with yet another press release today, this one talking about its plan to build a 33,000 square foot marijuana greenhouse in Nevada. No details were offered on when the greenhouse would be built, how much it would cost, or who would pay for it.

"It is such an incredible feeling to see our great plans finally coming to fruition," Dabney was quoted as saying.