Pubdate: Wed, 10 Dec 2014
Source: SF Weekly (CA)
Copyright: 2014 Village Voice Media
Author: Chris Roberts


Bhang Chocolate is one of the fledgling marijuana industry's most 
recognizable brands. The company's tasty and potent cannabis-infused 
chocolates come in snazzy packaging that make them instantly 
recognizable to a seasoned edibles consumer and just as alluring to a 
first-timer without brand loyalty.

Bhang is Oakland-bred, but licenses production out to other firms. 
This means Bhang products are sold in Colorado, Washington, and other 
places where cannabis is legal. This makes Bhang one of the few 
national brands in the weed game and one of the only major marijuana 
businesses operating across state lines.

As such, Bhang is exactly the kind of opportunity investors are 
salivating for right now, as marijuana in America continues its 
transformation from an outlaw cottage industry to a 
multibillion-dollar, multistate big business.

Bhang is also now part of a cautionary tale. Following a lawsuit 
filed in federal court, Bhang and its onetime financier, Mentor 
Capital, are headed to arbitration after an investment deal between 
the two entities soured.

Under the deal, publicly traded San Diego-based Mentor was to invest 
$39 million in the company in exchange for a 60 percent ownership 
stake - which valued Bhang at an eye-popping $65 million.

The landmark deal was sealed in February and announced with 
considerable fanfare. It was, after all, capital's first major foray 
into the marijuana industry.

But by June, Bhang had pulled out, claiming that Mentor never ponied 
up $7.5 million in promised seed money, despite the capital firm 
making public claims that it was now part-owner of the company.

Mentor countered with an August lawsuit, alleging Bhang failed to 
sell Mentor the requisite amount of shares and failed to adequately 
"publicize" the deal, according to court documents (despite press 
coverage of the deal in the East Bay Express and elsewhere).

Mentor is also demanding that the $1.5 million allegedly paid upfront 
to Bhang executives Scott Van Rixel and William Waggoner be returned 
(on top of attorneys' fees, of course).

The two sides sparred in federal court in San Francisco until 
November when a judge approved Bhang's request for binding arbitration.

The deal may have been doomed from the start. There were warning 
signs: About six weeks before the Bhang deal, Mentor announced a plan 
to sink $7 million into HempCon, Inc., the organization that hosts 
weed trade shows in San Jose and elsewhere. But just 11 days after 
making the announcement, Mentor issued a press release saying that 
the plan was terminated. From the outside, it appears Mentor was 
looking for something to sink money into and something to publicize, quickly.

In other words, it had the hallmarks of an aborted "pump-and-dump" 
scheme, when iffy stocks get a boost long enough for certain 
investors to make their mint.

And as it turned out, the Bhang deal wasn't all bad. Anyone paying 
close enough attention to short stocks at the right time made out 
like a bandit.

Mentor's stock skyrocketed after the deal was announced. Shares in 
the firm soared from $2.74 in February to as high as $8.99 a share on 
March 11. That's when the crash began.

A month later, shares had plummeted to $1.51. Mentor lost steadily 
throughout the year and was hovering at around $0.80 last week.

Voicemails left for Chet Billingsley, Mentor Capital's CEO, were not 
returned. Van Rixel and Waggoner, who according to court documents 
reside in Miami and New Mexico, could not be reached by press deadline.

Watching how quickly Mentor's stock surged and then imploded, it 
looks as if Bhang was indeed the bait in a pump-and-dump hustle, as 
East Bay-based activist and cannabis businessman Mickey Martin first 
noted on his blog.

Prominent cannabis industry insiders and would-be investors contacted 
by SF Weekly declined to go on the record. However, privately, some 
point to the complicated terms of the deal - still posted online for 
all to see - and ask if it was designed to fail.

But if the reaction at the recent Marijuana Business Conference in 
Las Vegas is any indication, nobody cares.

The Bhang-Mentor saga wasn't mentioned once at the conference, one 
attendee told me, not in the scheduled presentations or in casual conversation.

Business is going on as usual. Investors are wooing marijuana firms, 
and weed businesses are going around looking for funding in 
anticipation of more states going legal.

But after this "deal," whether Bhang or Mentor will be around to 
enjoy full legalization is open to question.


Yet another service offering medical marijuana on order via Web or 
smartphone launched in San Francisco.

This one, Nestdrop, is similar to predecessors Eaze and Meadow, both 
of which launched to headlines heralding the "Uber of Marijuana." But 
of the three, Nestdrop probably deserves the "Uber" title the most.

For one, it has an app (the other services are still web-based only). 
More importantly. it's been sued by regulators.

Nestdrop started offering marijuana delivery in Los Angeles in 
October. On Dec. 2, the L.A. city attorney filed suit, alleging that 
the company violated local dispensary regulations and lacked the 
necessary permits.

The company vowed to hold fast, claiming that it's a technology 
company, not a cannabis business, and therefore needs no permits... 
just like the unlicensed deliveries that have been doing business in 
Uber's hometown for years.

Uber of marijuana, welcome home.
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MAP posted-by: Jay Bergstrom