Medical Marijuana Inc. Smear Campaign Lawsuit

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Phillip E. Koehnke, Esq. (163912) Phillip E. Koehnke, APC PO Box 235472

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Encinitas, CA 92024 (858) 229-8116

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Attorneys for Medical Marijuana, Inc. And HempMeds PX, LLC 4.

JAN 16 2015

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SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN DIEGO — CENTRAL DIVISION

Medical Marijuana, Inc., an Oregon Corporation; HempMeds PX, LLC, a California Limited Liability Company;

Plaintiffs,

VS.

CannLabs, Inc., a Nevada Corporation, Rifle Mountain, LLC, a Colorado Limited Liability Company, Stewart Environmental Consultants, LLC, a Colorado Limited Liability Company, Genifer Murray, an individual, Jason Cranford, an individual, ProjectCBD.com , a California business entity, Aaron Miguel Cantu, an individual, Martin Lee, an individual, and DOES 1-20 inclusive,

Defendants.

CASE NO. JANI675,='10C3

37-2014-00036039-CU-DF-CTL

FIRST AMENDED COMPLAINT FOR:

1. Libel

2. Trade Libel

3. False Light

4. Negligence

5. Intentional Interference with Prospective Business Advantage

Judge: Joel R. Wohlfeil Dept: C-73

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PLAINTIFFS MEDICAL MARIJUANA, INC. AND HEMPMEDS PX, LLC ARE

INFORMED AND BELIEVE, AND BASED THEREON ALLEGE AS FOLLOWS:

Il-

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FIRST AMENDED COMPLAINT

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PARTIES

1. At all times herein mentioned, Plaintiff, MEDICAL MARIJUANA, INC. was, and

now is, an Oregon Corporation registered to do business in California, doing business in the

County of San Diego, State of California.

2. At all times herein mentioned, Plaintiff, HEMPMEDS PX, LLC was, and now is,

a California Limited Liability Company, doing business in the County of San Diego, State of

California. HEMPMEDS PX, LLC is a wholly owned subsidiary of MEDICAL MARIJUANA,

INC.

3. As used herein, "Plaintiffs" collectively refers to MEDICAL MARIJUANA, INC.

and HEMPMEDS PX, LLC.

4. Plaintiffs are informed and believe, and based thereon allege, that Defendant,

GENIFER MURRAY (hereinafter referred to as "Murray") is, and at all times herein mentioned

was, an individual with continuous and substantial contacts with the State of California,

including, but not limited to, solicitation of business, formulation, publication, and distribution of

statements and posts via the Internet throughout the State of California, as well as in all other

states of the United States, and throughout the world.

5. Plaintiffs are informed and believe, and based there on allege, that Defendant

Murray is, and at all times herein mentioned was, the Chief Executive Officer and President of

CannLabs, Inc., a Nevada corporation with its principle place of business located in Denver,

Colorado, and is publicly traded on the stock market under the ticker "CANL..


JASON CRANFORD (hereinafter referred to as "Cranford") is, and at all times herein

mentioned was, an individual with continuous and substantial contacts with the State of

California, including, but not limited to, conducting business while serving as a Board Member

for KannaLife Sciences, Inc., formulating, publishing, and distributing statements via the

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Internet throughout the State of California, as well as in all other states of the United States,

and throughout the world.

7. Plaintiffs are informed and believe, and based thereon alleged, that Defendant

Cranford is, and at all times herein mentioned was, the owner of Rifle Mountain, LLC, a

Colorado corporation with its principle place of business located in Boulder, Colorado.


CANNLABS, INC. (hereinafter referred to as "CannLabs") is, and at all times herein

mentioned was, a Nevada business entity with its principle place of business in Colorado, and

a business entity with continuous and substantial contacts with the State of California,

including, but not limited to, trading on the stock exchange, solicitation of business,

formulation, publication, and distribution of statements by its officers via the intemet

throughout the State of California, as well as in all other states of the United States, and

throughout the world.

9. Plaintiffs are informed and believe, and based thereon allege, that Defendant, •

Rifle Mountain, LLC, (hereinafter referred to as "Rifle Mountain, LLC") is, and at all times

herein mentioned was, a Colorado business entity with its principle place of business in

Colorado, and a business entity with continuous and substantial contacts with the State of

California, including, but not limited to, solicitation of business, formulation, publication, and

distribution of statements by its officers via the intemet throughout the State of California, as

well as in all other states of the United States, and throughout the world.


Stewart Environmental Consultants, LLC, (hereinafter referred to as "Stewart") is, and at all

times herein mentioned was, a Colorado business entity with its principle place of business in

Colorado, and a business entity with continuous and substantial contacts with the State of

California, including, but not limited to, solicitation of business, formulation, publication, and

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distribution of statements by its officers and/or employees via the intemet throughout the State

of California, as well as in all other states of the United States, and throughout the world.

11. Plaintiffs are informed and believe, based thereon allege, that Defendant

ProjectCBD.com (hereinafter referred to as "Project CBD") is, and at all times herein mentions

was a California business with its principle place of business in California, and a business

entity with continuous and substantial contacts with the State of California, including, but not

limited to, solicitation of business, formulation, publication, and distribution of statements by its

officers and/or employees via the intemet throughout the State of California, as well as in all

other states of the United States, and throughout the world.


Aaron Miguel Cantu ("Cantu") is, and at all times herein mentioned was a writer for Project

CBD.


Martin Lee ("Lee") is, and at all times herein mentioned was, the owner and director of

Project CBD.

14. Plaintiffs are ignorant of the true names and capacities of Defendants sued

herein as Does 1 through 20, inclusive, and therefore sue these Defendants by such fictitious

names. Plaintiffs will amend the complaint to allege their true names and capacities when

ascertained. Plaintiffs are informed and believe, and based thereon allege that each of the

fictitiously named Defendants, including all or some of the DOE Defendants, is responsible in

some manner for the occurrences herein alleged, and that Plaintiffs' damages as herein

alleged were proximately caused by their conduct.

15. Plaintiffs are informed and believe, and based thereon allege that CannLabs,

Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, were acting as agents, independent

contractors, and/or employees of each other, and in doing the things hereinafter alleged, were

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acting within the course and scope of such agency, and with the permission and consent of

such other Defendants. CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD,

Cantu, Lee and DOES 1 through 20, and/or each of them, jointly or separately, acted as

alleged herein for financial gain and to damage Plaintiffs.

16. Plaintiffs are informed and believe, and based thereon allege CannLabs, Rifle

Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, were responsible in some manner for the

formulation, publication, and distribution of false statements concerning Plaintiffs and Plaintiffs'

products.

17. Plaintiffs are informed and believe, and based thereon allege, that at all times

mentioned herein, and in doing the acts hereinafter set forth CannLabs, Rifle Mountain, LLC,

Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, and/or each of them,

were primary participants in intentional and malicious conduct calculated to and actually

causing injury to Plaintiffs in this State, in the remainder of the United States and throughout

the world.

18. Plaintiffs are informed and believe, and based thereon allege, that CannLabs,

Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, acted with actual malice. Plaintiffs are

informed and believe, and based thereon allege, that CannLabs, Rifle Mountain, LLC, Murray,

Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each of

them, jointly or separately, either had actual knowledge that the statements concerning

Plaintiffs and Plaintiffs' product, Real Scientific Hemp Oil (RSHO), included false statements,

were degrading to Plaintiffs, or in the alternative, acted in reckless disregard of the truth.

19. Plaintiffs are informed and believe, and based thereon allege, that the

dissemination of the statements were extensive, and that the defamatory, false, and invasive

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5 FIRST AMENDED COMPLAINT

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1 statements contained therein, have been seen and read by thousands upon thousands of

2 persons in California and elsewhere within the United States and internationally.

3 20. Plaintiffs are informed and believe, and based thereon allege that CannLabs,

4 Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20,

5 inclusive, and/or each of them, jointly or separately, had actual knowledge that the publication

6 and dissemination of statements about Plaintiffs would have injurious impact upon Plaintiffs

worldwide, but particularly in California where Plaintiffs are domiciled. 7

8 21. Plaintiffs are informed and believe, and based thereon allege, that commencing

9 sometime in or about April, 2014, CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project

10 CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each of them, jointly or

separately, knowingly, maliciously and willfully, conspired and agreed among themselves to 11

12 tortiously and/or unlawfully injure Plaintiffs by committing the acts herein alleged in

furtherance of such conspiracy and agreement. 13

22. Plaintiffs are informed and believe, and based thereon allege, that CannLabs, 14

15 Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20,

16 inclusive, and/or each of them, jointly or separately, knowingly and willfully conspired to post

statements on the intemet about Plaintiffs for, among other things, financial gain, with the 17

knowledge that in doing so it would damage the reputation and well-being of Plaintiffs. 18

23. Plaintiffs are informed and believe, and based thereon allege, that the 19

aforementioned conspiracy was operated to perform the tortious course of conduct and the 20

illegal acts described hereinafter, which were done in furtherance of the objectives of the 21

conspiracy, all to Plaintiffs' damages as alleged herein. 22

24. Plaintiffs are informed and believe, and based thereon allege, that CannLabs, 23

Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, 24

inclusive, and/or each of them, jointly or separately, furthered such conspiracy by ratifying and 25

adopting the acts of each of the other members of the conspiracy. As a result of said


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conspiracy, Plaintiffs have suffered the damages set forth herein which were actually and

proximately caused jointly and severally by each and every Defendant.



inclusive, and/or each of them, jointly or separately, knew of some, or all of the wrongful acts

described hereinafter, yet CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD,

Cantu, Lee, and/or DOES 1 through 20, and each of them, nevertheless knowingly assisted in

the performance of those wrongful acts, or otherwise participated in furtherance of the

conspiracy to Plaintiffs' damages as alleged herein.

FACTS COMMON TO ALL CLAIMS

26. Plaintiffs re-allege and incorporate by reference the allegations contained in

Paragraphs 1 — 25 above as though fully set forth herein.

27. Plaintiff MEDICAL MARIJUANA, INC. is a business specializing in investing in

industrial hemp businesses. In particular, Plaintiff MEDICAL MARIJUANA holds interests in a

variety of companies, including HEMPMEDS PX, LLC, a wholly owned subsidiary specializing

in the production, sale, and distribution of cannabidiol (CBD)-containing hennp oil, which is

known by the trade name "Real Scientific Hemp Oil" or "RSHO." Plaintiff MEDICAL

MARIJUANA also holds interests in KannaLife Sciences, Inc. (hereinafter referred to as

"KannaLife"), a business with its principle place of business in New York.

28. Plaintiffs are informed and believe, and based thereon allege, that on or about

March 31, 2014, Defendant Cranford resigned from KannaLife's Board of Directors, allegedly

stemming from a business dispute. Cranford stated this information in an email to other board

members of KannaLife and brought up RSHO in his statements.

29. Plaintiffs are informed and believe, and based thereon allege, that Cranford

owns a business, "Rifle Mountain, LLC", (hereinafter referred to as "Rifle Mountain, LLC"), a


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Colorado medical marijuana dispensary, since December 30, 2011. This business continues

to operate under Cranford's ownership.

30. Plaintiffs are informed and believe, and based thereon allege, that while

conducting business through Rifle Mountain, LLC, Cranford also served on the Board of

Directors at KannaLife, Inc. After leaving the Board at KannaLife, Inc., Cranford and Rifle

Mountain, LLC started selling high CBD products which were competitive with other CBD-

containing products (including RSHO) being sold by HempMeds and Medical Marijuana, Inc.

Accordingly, Cranford had motive to discredit RSHO, HempMeds, and Medical Marijuana, for

his personal financial gains.


April 26, 2014, Cranford created a "public announcement" by posting on Cranford's public

Facebook profile that he would have Plaintiffs' product, RSHO, tested at Colorado State

University veterinary lab (hereinafter referred to as "CSU"), a diagnostic lab for animals and

animals' food, that Cranford acknowledged, “does not specialize in Cannabis." Cranford

stated that CSU's report would be neutral and accurate. Cranford also posted a picture of

CSU's Veterinary Hospital in the same post. This post reached over one hundred twenty (120)

readers nationwide. [See Exhibit A].

32. Plaintiffs are informed and believe, and based thereon allege, that Cranford also

stated in his posting that a child by the name of Jaqie Angel had become sick due to a bad

reaction to Plaintiffs' product. [See Exhibit B].

33. Plaintiffs are informed and believe, and based thereon allege, that Cantu, Lee

and Project CBD used Cranford as a source to state that Jaqie Angel became sick due to a

bad reaction to the Plaintiffs product. [See Exhibit C and M].

34. Plaintiffs are informed and believe, and based thereon allege, that ultimately,

CSU did not perform the test on Cranford's sample.

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1 35. Plaintiffs are informed and believe, and based thereon allege, that on or about

2 May 8, 2014, Cranford then took the purported RSHO sample to Stewart Environmental

3 Consultants, LLC, an environmental testing lab specializing in soil testing. Stewart accepted

4 the sample and performed tests for volatile organic compounds (VOC) and heavy metal

5 concentrations on the purported RSHO sample provided by Cranford.

6 36. Plaintiffs are informed and believe, and based thereon allege, that while waiting

7 for the Stewart results, Cranford continued to post on Facebook that results were coming

8 soon, and that CSU had to outsource some of the tests. [See Exhibit C].


10 May 23, 2014, Stewart caused a preliminary report on the purported RSHO sample submitted

11 by Cranford to be released to Cranford. The preliminary report did not reflect the final

12 reporting values on many analytical parameters, including heavy metals such as lead,

13 molybdenum, nickel, selenium, and silver, among other metals. [See Exhibit D].


15 May 23, 2014, Cranford released copies of "preliminary" test results from Stewart. These

16 preliminary test results were not accurate and did not reflect the true contaminant levels in the

17 purported RSHO sample, and Plaintiffs are informed and believe and hereby allege that

18 Cranford was aware that the preliminary test results were inaccurate. Cranford stated in

19 another Facebook post that the results were posted on Jaqie Angel's Facebook page. [See

Exhibit E]. 20

21 39. Plaintiffs are informed and believe, and based thereon allege, that Murray was

and is the Chief Executive Officer and President of CannLabs and had motives to discredit 22

23 RSHO, HempMeds, and Medical Marijuana, namely to create positive publicity for CannLabs

24 as a cannabis testing facility and to appear as if doing the public a service by discrediting

RSHO, HempMeds, and Medical Marijuana. 25


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May 8, 2014, Murray posted false statements about Plaintiffs and its RSHO on the Internet,

which was then reposted, used and referred to by numerous different social media platforms,

including the Investor Hub chat rooms. The false statements by Murray (hereinafter referred

as "Murray's Post") stated as follows: "Hello Everyone: something has come to my attention .

and I feel I need to share it. The RSHO Real Scientific Hemp Oil was taken to the CSU lab so

they could do extensive tests on it. The preliminary results: The lab I sent RSHO to called me

this morning to warn me about consuming it. They are not finished but already found heavy

metals, fluorides, chlorides and bromine. They said it is dangerous to consume and warned

me not to let anyone take it. They said it is not even hemp oil. Please do not consume this

product until we have more information." [See Exhibit F].

41. Plaintiffs are informed and believe, and based thereon allege, that Murray's

statements were false because on or about Maya, 2014, CSU did not and had not tested any

purported RSHO sample.


May 19, 2014, a Facebook Profile by the name Shannon Moore re-posted a quote of Murray's

Post on a thread conversation on his Facebook account. However, Murray's post was edited

by Cranford as follows: The words "[t]he lab" were replaced by the words "[t]he other lab,"

and "[p]lease do not consume this product until there is more information" was replaced with

"[p]lease do not consume this until there is better understanding." [See Exhibit G].

43. Plaintiffs are informed and believe, and based thereon allege, that as a result of

Murray's Post having been re-posted by Shannon Moore, the false statement regarding

Plaintiffs' RSHO was broadcasted to additional readers, which included Shannon Moore's

followers on Facebook.

44. Plaintiffs are informed and believe, and based thereon allege, that thereafter,

Cranford posted an email for people to contact if they had suffered negative reactions after

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1 taking Plaintiffs' RSHO product. The email address as posted in Cranford's timeline was:

2 rshocomplaintsaomail.com . [See Exhibit B].

3 45. Plaintiffs are informed and believe, and based thereon allege, that as a result of

4 Murray and Cranford's announcements, people throughout the world have read and followed

5 the story and re-posted it on their Facebook timelines, further publishing the false statements

concerning Plaintiffs. 6


8 May 26, 2014, Julian McCulloch, a Facebook profile who followed Cranford's story, posted the

9 photos of preliminary test results from Stewart Environmental Consultants, LLC that Cranford

had previously posted. [See Exhibit H]. 10


12 May 30, 2014, Stewart published the complete and final test results on the purported RSHO

13 sample submitted by Cranford. The final results showed significant different reporting values,

14 especially for heavy metals such as lead, molybdenum, nickel, selenium, and silver, among

other metals [See Exhibit l]. 15


June 1, 2014, despite the knowledge of the final test results from Stewart, Cranford stated that 17 18 he "... [j]ust read a message from a Mom saying her child died from heavy metal poisoning

after use of [Plaintiffs] product. I will post the link." Cranford then posted a link to a statement 19

written by "Sarah Hadigan," a profile on Facebook. The link posted by Cranford stated, "Sarah 20 21 Hadigan" referred to Plaintiffs' product, RSHO, by stating, among other things, "My daughter

is dead because of this product....[m]y daughter had more metals in her liver, kidney, and 22

muscle tissues than fort knox has gold." [See Exhibit J]. 23

49. Plaintiffs are informed and believe, and based thereon allege, that on or about 24

June 5, 2014, Stewart, by and through Michael Glavanovich, its lab manager, stated in an 25

email communication that the preliminary test results published by Cranford were not


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accurate, were possibly contaminated as the sample had been through three (3) different

hands without proper chain of custody record before arriving at Stewart, did not account for

contaminations introduced during the measurement process, did not reflect the final testing

results, and should not have been published. [See Exhibit K].


October 14, 2014, Cantu, By and through Lee and Project CBD published an article titled

"Hemp Oil Hustlers- A Project CBD Special Report on Medical Marijuana Inc., HempMeds &

Kannaway," (hereinafter referred to as "Hemp Oil Hustlers"). This article claimed to have

evidence that RSHO was contaminated with heavy metals and solvents without verifying the

accuracy of the results from Stewart Environmental. Project CBD also alleged that multiple

people became ill after using RSHO due to heavy metals and other toxins based on

Cranford's opinion. Lee wrote a forward for Cantu's article, asserting opinions and rumors as

fact without proof or citation, and published Cantu's article on his Project CBD website. [See

Exhibit M].

51. Plaintiffs are informed and believe, and based thereon allege, that the Hemp Oil

Hustlers article from October 14, 2014, has been republished on at least seventy- eight other

websites. [See Exhibit U.

52. Despite knowledge that the preliminary results were inaccurate, CannLabs, Rifle

Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately continued to publish these results.

53. Plaintiffs are informed and believe, and based thereon allege, that CannLabs is

in the cannabis and hemp industry and competes against Plaintiffs. CannLabs, by and through

Murray, published untrue statements of fact concerning RSHO, HempMeds, and Medical

Marijuana to create positive publicity for CannLabs as a cannabis testing facility and to appear

as if doing the public a service by discrediting RSHO, HempMeds, and Medical Marijuana.

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1 54. Plaintiffs are informed and believe, and based thereon allege, that Rifle

2 Mountain, LLC is in the cannabis and hemp industry and competes against Plaintiffs. Rifle

3 Mountain, LLC, by and through Cranford, published untrue statements of fact concerning

4 RSHO, HempMeds, and Medical Marijuana, which and who are competing product and

5 businesses of CannLabs' business, for its financial gains.

6 55. Plaintiffs are informed and believe, and based thereon allege, that in the month

7 of March, 2014, Medical Marijuana's stock price, trade by the ticker "MJNA" was at

$0.34/share. 8

9 56. Plaintiffs are informed and believe, and based thereon allege, that ever since

10 CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1

11 through 20, inclusive, and/or each of them, jointly or separately, made these announcements;

12 Plaintiff MEDICAL MARIJUANA INC.'S stock price has plummeted and has not been able to

recover. 13

14 57. Plaintiffs are informed and believe, and based thereon allege, that as a direct

15 and proximate result of the Defendant's actions, Plaintiffs have been damaged and continue to

16 suffer damages in excess of one hundred million dollars ($100,000,000).

FIRST CAUSE OF ACTION 17

18 (For Libel as to Defendants CannLabs, Rifle Mountain, LLC, Murray, Cranford,

Project CBD, Cantu, and Lee) 19

20 58. Plaintiffs re-allege and incorporate by reference the allegations contained in

Paragraphs 1 — 57 above as though fully set forth herein. 21

22 59. Plaintiffs are informed and believe, and based thereon allege, that between May

23 1, 2014 and June 1, 2014, CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD,

24 Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately,

published negative statements of fact about Plaintiffs on Facebook, which contained untrue 25

and false statements regarding Plaintiffs' product, RSHO.


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60. The statements of fact about Plaintiffs are and were false, untrue, and

defamatory. The statements published by CannLabs, Rifle Mountain, LLC, Murray, Cranford,

Project CBD, Cantu, Lee and/or DOES 1 through 20, inclusive, and/or each of them, jointly or

separately, were libelous on its face and the statements wrongfully accused Plaintiffs, and

were intended to wrongfully accuse Plaintiffs, of actions and statements that were false,

defamatory, and damaging.

61. The statements published by CannLabs, Rifle Mountain, LLC, Murray, Cranford,

Project CBD, Cantu, Lee and/or DOES 1 through 20, inclusive, and/or each of them, jointly or

separately clearly expose Plaintiffs to hatred, contempt, ridicule and obloquy because they

falsely accuse and depict Plaintiffs, among other things, as companies which supply a product

(RSHO) that contains high heavy metal concentrations and bleach, and as companies that

misrepresent the nature of their product.

62. CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee,

and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, knew that

statements published by Murray and Cranford as it applied to Plaintiffs to be false, and were

intended by CannLabs, Rifle Mountain, LLC, Murray, Cranford, and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, to convey a false or defamatory

statements about Plaintiffs.


and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, wrote,

published, and circulated, and/or caused to be written, published and circulated, the libelous

statements concerning Plaintiffs either with knowledge of the falsity of the statements or with

reckless disregard for the truth.

64. The statements appearing in the posts written by CannLabs, Rifle Mountain,

LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, were so

understood by those who read the statements to have the defamatory meaning ascribed to by

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Defendants. CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee,

and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, intended the

statements to be read by consumers nationally, internationally, and specifically within the

State of California where Plaintiffs were and are domiciled.

65. At the time the statements were being publicly distributed and circulated

throughout the United States and the world, CannLabs, Rifle Mountain, LLC, Murray,

Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each of

them, jointly or separately, were in possession of evidence which would raise serious doubt

about the truth of their statements.

66. At the time the statements were publicly distributed and circulated throughout

the United States and the world, CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project

CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each of them, jointly or

separately, failed to sufficiently investigate the truth of their statements. Thus, Defendants,

and each of them, lacked any substantial reason to believe in the truth of the allegations

contained within the posts. The untruthful statements were therefore made with actual malice,

with the knowledge that each such statement was false and the statements were published

with reckless disregard of their truthfulness.

67. The statements were written and published with reckless disregard for the truth

of the matter, and Defendants knew at the time the statements were formulated that they were

false and injurious to Plaintiffs with respect to their reputation, character, and business.

68. As a legal result of the statements made by CannLabs, Rifle Mountain, LLC,

Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each

of them, jointly or separately, Plaintiffs have suffered loss of reputation, shame and

mortification, all to their general damage in a sum to be proven at trial.

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69. The defamatory statements were not privileged in any manner. The statements

were intended by Defendants, and each of them, to directly injure Plaintiffs with respect to its

reputation, character, and business.

70. As a legal result of the defamatory statements, Plaintiffs have suffered loss of

reputation and general damage, the exact amount of which to be proven at trial.

71. As a legal result of the intentional and malicious conduct of CannLabs, Rifle

Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, Plaintiffs have suffered with respect to its

property, business, trade, profession and occupation, all to its special damage in a sum to be

determined at time of trial.

72. By engaging in the misconduct alleged above, CannLabs, Rifle Mountain, LLC,

Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1 through 20, inclusive, and/or each

of them, jointly or separately, intended to cause Plaintiffs injury or engaged in that misconduct

with the willful and conscious disregard for the rights of Plaintiffs.


and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, were aware of

the probable dangerous consequences of their misconduct and willfully and deliberately failed

to avoid those consequences, including subjecting Plaintiffs to cruel and unjust hardship, in

conscious disregard of Plaintiffs' rights. Thus, the award of exemplary and punitive damages

is justified.

SECOND CAUSE OF ACTION

(For Trade Libel as to Defendants CannLabs, Rifle Mountain, LLC, Murray,

Cranford Project CBD, Cantu and Lee)



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75. Plaintiffs are informed and believe, and based thereon allege, that Plaintiffs'

product, RSHO, previously enjoyed a good reputation in the community.



inclusive, and/or each of them, jointly or separately, intentionally, wrongfully, without

justification, and without privilege made statements that Plaintiffs' product (RSHO) was

dangerous to consume, contained heavy metals, fluorides, chlorides, bromine, and bleach at

high concentration, that it was not even hemp oil, that it caused the death of a child [known as

"Jaqi Angel" on Facebook].



inclusive, and/or each of them, jointly or separately, published these statements on Facebook,

an international social network media with billions of participants and readers. Defendant

Murray's Facebook page had a total of four thousand nine hundred eleven (4911) followers

and friends. Defendant Cranford's Facebook posts also received hundreds of shares and

likes.

78. Plaintiffs are informed and believe, and based thereon allege, that followers of

CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1

through 20, and/or each of their Facebook statements reposted and broadcasted CannLabs's,

Rifle Mountain, LLC's, Murray's, Cranford's, Project CBD, Cantu, Lee, and/or DOES 1 through

20, and/or each of their statements on other various social media outlets, including Investor

Hub. Investor Hub is a popular social media platform wherein investors and interested

business persons discuss the business potential of various products and businesses.


Post and/or DOES 1 through 20's statements were quoted and publicized in a paper by

Project CBD, an online information website calling for the legalization of medical marijuana,

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and Aaron Miguel Cantu, an employee of Project CBD. The "Hemp Oil Hustlers" article has

been reprinted and updated as of November 4, 2014.


Post and/or DOES 1 through 20's statements were quoted and publicized worldwide in an

article, "Intrigas, dinheiro e cannabidiol," published online by Super Interessante, a major

online newspaper in Brazil.

81. These statements were made about and concerning Plaintiffs' product, RSHO,

and were understood by readers to refer to Plaintiffs' product, because these statements

specifically mention Plaintiffs' product, RSHO, which is a product owned and/or sold by

Plaintiffs. By reading the statements made explicitly about Plaintiffs' RSHO, a reader would

understand that the statement's referred to Plaintiffs' product.

82. These statements are false. Plaintiffs' product is not dangerous to consume;

Plaintiffs' product does not contain heavy metal, fluorides, chlorides, bromine, and/or bleach

at such concentrations; Plaintiffs' product is hemp oil derived from industrial hemp plants.

83. These statements disparaged Plaintiffs' product in that they specifically told

readers not to consume Plaintiffs' product; falsely indicating that Plaintiffs' product contained

heavy metals, fluorides, chlorides, and bromine; that Plaintiffs' product was not even hemp

oil; that Plaintiffs' product was dangerous to consume; and that Plaintiffs' product contained

bleach.



inclusive, and/or each of them, jointly or separately, made these statements with knowledge of

their falsity or with reckless disregard for their truth or falsity.



inclusive, and/or each of them, jointly or separately, made these statements with negligent


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disregard for their truth or falsity, in that CannLabs, Rifle Mountain, LLC, Murray, Cranford,

and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, sent Plaintiffs'

food product to a soil testing lab, then brandished preliminary results before acquiring more

information. 4

86. Plaintiffs are informed and believe, and based thereon allege, that Defendant

Murray is a scientist with a Bachelor of Science Degree in Microbiology from Colorado State

University, and is the Chief Executive Office of a cannabis testing company. A reasonable

person with Defendant Murray's educational and professional background would understand

that preliminary results are inconclusive. Yet, Defendant Murray specifically told her Facebook

audience "...[n]ot to consume Plaintiffs' product until they had more information."

87. The statements proximately caused damage to Plaintiffs in that they have

deterred customers from purchasing Plaintiffs' above-described product. They have also

deterred customers from conducting business with Plaintiffs. As a direct and proximate result

of these statements, Plaintiffs have suffered pecuniary loss in a sum to be proven at trial.

88. The statements were motivated by Defendants' malice and oppression in that

Defendants submitted an unsealed and unverified sample of Plaintiffs' food product (RSHO) to

a soil testing lab, published the preliminary results, and published false statements of facts

concerning Plaintiffs' product, and warned consumers not to consume Plaintiffs' product

before any results were even published. Therefore, Plaintiffs are entitled under Civil Code 19

section 3294, subd. (a) to punitive damages in an amount sufficient to punish Defendant and

deter similar conduct in the future. 21

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THIRD CAUSE OF ACTION

(For False Light as to Defendants CannLabs, Rifle Mountain, LLC, Murray,

Cranford Project CBD, Cantu, Lee)




May 19, 2014, CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee

and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, without

Plaintiffs' consent, put Plaintiffs in a false light by writing, publishing, and circulating negative

statements about Plaintiffs on Facebook, which contained untrue statements of fact regarding

Plaintiffs and Plaintiffs' product, RSHO.

91. Plaintiffs are informed and believe, and based thereon allege, that the

disclosure by Defendants, and each of them, jointly or separately, created publicity in the form

of a public disclosure to a large number of people, as Defendants' posts are and were read

by thousands of people in the state of California, throughout the United States and throughout

the world.

92. The publicity created by Defendants, and each of them, jointly or separately,

placed Plaintiffs in a false light in the public eye, in that the posts were fabricated by

Defendants, and each of them, and publicly conveyed, and was intended to convey, a

calculatedly false and inaccurate impression of Plaintiffs as companies which supplied

products with toxic contaminations, which misrepresented the nature of the product, and of

Plaintiffs' food product, RSHO, as a product containing bleach and high concentrations of

heavy metals and other organic compounds.

93. The publicity created by the posts was highly objectionable to Plaintiffs, and

would be to any company of ordinary sensibilities. The posts made Plaintiffs the object of

scorn and ridicule by many residents of the State of California, citizens of the United States,

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and in general, people throughout the world, and were intended to and did directly injure the

Plaintiffs with respect to their reputation, character and business

94. The formulation and publication of the posts by CannLabs, Rifle Mountain, LLC,

Murray, Cranford, Project CBD, Cantu, Lee and/or DOES 1 through 20, inclusive, and/or each

of them, jointly or separately, were each done with actual malice in that each was done with all

or some of Defendants' knowledge of the posts' falsity, or in reckless disregard of the truth. At

all relevant times, all or some of the Defendants were aware, or should have been aware, of

facts contrary to the Defendants' malicious allegations.


Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee and/or DOES 1 through 20,

inclusive, and/or each of them, jointly or separately, were also negligent in publishing the

posts; as with ordinary and reasonable care, Defendants would have realized, or could have

discovered, that the statements made in various Facebook posts by Defendants were

obviously false and grossly libelous, offensive, and damaging to Plaintiffs.

96. As a legal result of the statements, Plaintiffs have suffered loss of reputation,

character and business, all to their general damages in a sum to be determined at trial.

97. As a further legal result of the above-mentioned disclosure, Plaintiffs have

suffered injury to its business all to their special damage in an amount to be proven at trial.

98. In making the disclosure described above, CannLabs, Rifle Mountain, LLC,


of them, jointly or separately, are guilty of oppression, fraud, or malice in that Defendants

made the disclosure with a willful disregard of Plaintiffs' rights. Defendants' acts in formulating

and publishing the posts were done with the knowledge by Defendants that such acts would

cause Plaintiffs to suffer injury. Defendants' acts were therefore willful, wanton, intentional,

and actually malicious and oppressive, thereby justifying the award of exemplary and punitive

damages according to proof at trial.


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99. As a legal result of the posts and the false statements, Plaintiffs have suffered

loss of reputation, character, and business, all to their general damage in a sum to be proven

at trial.

100. The defamatory statements contained in the posts were not privileged in any

manner. The statements were intended by Defendants, and each of them, to directly injure

Plaintiffs with respect to their reputation, character, and business.

101. As a legal result of the articles, Plaintiffs have suffered general damage, the

exact amount of which to be proven at trial.

102. As a legal result of the intentional and malicious conduct of CannLabs, Rifle


inclusive, and/or each of them, jointly or separately, Plaintiffs have suffered with respect to

their property, business, trade, profession and occupation, all to their special damage in a sum

to be determined at the time of trial.

103. By engaging in the misconduct alleged above, CannLabs, Rifle Mountain, LLC,


of them, jointly or separately, intended to cause Plaintiffs injury or engaged in that misconduct

with the willful and conscious disregard for the rights of Plaintiffs. Defendants CannLabs, Rifle


inclusive, and/or each of them, jointly or separately, were aware of the probable dangerous

consequences of their misconduct and willfully and deliberately failed to avoid those

consequences, including subjecting Plaintiffs to cruel and unjust hardship, in conscious

disregard of Plaintiffs' rights. Thus, the award of exemplary and punitive damages is justified.

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FOURTH CAUSE OF ACTION

(For Negligence as to all Defendants)



105. Plaintiffs are informed and believe, and based thereon allege, that defendants

CannLabs, Rifle Mountain, LLC, Stewart, Murray, Cranford, Project CBD, Cantu, Lee and/or

DOES 1 through 20, inclusive, and/or each of them, jointly or separately, were negligent in

publishing the statements. With ordinary and reasonable care, Defendants would have

realized, or could have discovered, that the statements were obviously false, grossly libelous,

offensive, and damaging to Plaintiffs.

106. Plaintiffs are informed and believe, and based thereon allege, that Stewart,

and/or DOES 1 through 20, inclusive, and/or each of them, jointly or separately, were

negligent in publishing the preliminary testing results of the purported RSHO sample

submitted by Cranford. With ordinary and reasonable care, Defendant Stewart would have

realized, or could have discovered, that the preliminary results were obviously false, grossly

libelous, offensive, and damaging to Plaintiffs.

107. As a legal result of the negligent conduct of CannLabs, Rifle Mountain, LLC,

Stewart, Murray, Cranford, Project CBD, Cantu, Lee and/or DOES 1 through 20, inclusive,

and/or each of them, jointly or separately, Plaintiffs have suffered with respect to its property,

business, trade, profession and occupation, all to their damage in a sum to be determined at

time of trial.

FIFTH CAUSE OF ACTION — INTENTIONAL INTERFERENCE WITH

PROSPECTIVE BUSINESS ADVANTAGE



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109. Plaintiffs are informed and believe, and based thereon allege that Plaintiffs have

an existing prospective relationship with multiple companies regarding the use of its products.

110. Plaintiffs are informed and believe, and based thereon allege that Plaintiffs have

a probability of future benefit from their existing prospective relationship with multiple

individuals and companies.



inclusive, and/or each of them, jointly or separately, have intentionally interfered with Plaintiffs'

existing prospective relationship with multiple individuals and companies.



and/or each of their false and misleading publications to the public was wrongful and made

with Defendants' knowledge and intent.

113. Plaintiffs are informed and believe, and based thereon allege that as a result of

CannLabs, Rifle Mountain, LLC, Murray, Cranford, Project CBD, Cantu, Lee, and/or DOES 1

through 20, and each of their conduct, Plaintiffs have been injured and have suffered

damages in an amount to be proven at trial.

DEMAND FOR JURY TRIAL

Please take notice Plaintiffs hereby demand a trial by jury in this action.

PRAYER

WHEREFORE, Plaintiffs pray for judgment against Defendants, and each of them, as

follows:

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22 1. For general damages according to proof but in excess of One Hundred Million

Dollars ($100,000,000).

2. For special damages in an amount to be determined at trial and for interest thereon

at the legal interest rate;

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3. For punitive and exemplary damages in an amount to be determined at trial;

4. For costs of suit herein incurred; and

5. For such other and further relief as the court may deem just and proper.

/s/ PhiIli E. Koeh ke, APC 1/14/2014

Phillip E. oehnke, APC Date Attorney for Plaintiffs

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1

EXHIBIT A

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EXHIBIT B

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EXHIBIT D

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Ailitlytis

_Digest, oil/total,

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Laboratory Report

Client:

.ort Cranford

6525 Gtutpark Dr #370-236 Boulder CO 80301

Attn: Jason Cranford

i;rOfoottp 4684 LAB

Date giunpted:

Date Received:

Babb No:

LabOratory

Matrix: Sample Name:

51/2014 12:00:00 PM .5/R12014

31802

8141330903 Liquid Crab RSHO Hemp OH

Results Units MRL Method Anatysis Sent

Date Analyst Out Laboratory aml: 21 INgfl EPA 3031

••■••••••.....alalms•••■•••••••■• 5/16/2014 Tilf

195 well 0,05 EPA 200,7 5116'2014 WVS <3 ppm 0,03 EPA 200.7 51162014 W VS 7 6,01 ppm Cf,02 EPA 200.7 5/1612014 WVS fl 10,1 ppm 0.002 ETA 200.7 5/16/2014 W VS Cl

<0.05 ppm 0.0005 EPA 200.7 5/1612014 wVS 9.36 ppm 0.01 EPA 2U0.7 5116 12014 WVS

cf ppm 0_5 F2A 300.0 5/ 13 12014 NS _1 <03 men 0.0U3 EPA 200.7 51161014 W VS

444 ppm 0,05 EPA 200.7 5/16/2014 WV S 1 214 PM 0-5 EPA 300.0 I. 511312014 INS -1

c.0.5 ppm 0.005 EPA 200.7 5116014 W VS .. 1 6.12 ppm 0,005 EPA 200.7 5/16/2014 4V VS L..1 5.71 ppm 0.1 EPA 300.0 5/13(2014 ,114& '1 10.4 ppm 0.0 t EPA 200.7 5i16/2014 W VS 1 26.6 ppm 0.02 EPA 200.7 5/16.'2014 W VS -1 c. 1 ppm 0.01 ETA 200.7 511612014 WVS 1 21.2 ppm 0.005 EPA 200.7 5116,2014 W VS "I 8.85 ppm 0,01 EPA 200.7 5/1612014 WVS 1 1.24 ppm 0.C.d5 ETA 200.7 5/162014 WVS 61$I ppm 0.01 EPA 200.7 5116/2014 WVS 77 13Pul 0.1 E,PA 200.7 5/1612014 WVS

32.6 ppm 0.005 EPA 2130.7 all 02014 wvs fl 164 ppm 0.1 EPA 200,7 5/16/2014 WVS 1.77 ppm 0.001 EPA 200,7 5/16/2014 WVs E

<2 ppm 0,02 EPA 200.7 5/16#2014 WVS C 54 ppm 0.005 EPA 200.7 5116.2014 wvs

Stewart Environmental Consultants LLC 3801 Automation Way, Suite 200 Fort Collins, Co 80526 Phone 970-228-5500 + Fax:970-228-4945

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EXHIBIT E

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Laboratory eport

\on Cranford

6525 Gunpark Dr #370-236

Boulder CO 80301

Mtn: Jason Cranford

hilt' cats 46#4 LAB

Data Sampled: Date Received; Batch No: LabOratory Matrix: Sample Name:

51,2014 12:00:00 PM 5/R/2014 31802 S14 13309'03 Uquid Crab RSLIO Hemp Oil

Antityals Seat

Prg # 0 EPA 3031 --7/167-20-174 !u131110.05 EPA 2001 511612014 WVS Ii ppm 0,03 EPA 200.7 5116'2014 WS'S 7 ppm 0,02 EPA 200.7 511612014 WVS :73 ppm 0.002 EPA 200.7 5/1612014 WV& Cl ppm 0.0005 EPA 200.7 5/1612014

E ppm 0,01 PA 200.7 5/162014 ppm 0.5M 300.0 5113/2014

0.003 EPA 200.7 5/16'2414

0,05 EPA .200.7 5/16/2014

0.5 EPA 300.0 5/13/2014

(1.003 /IPA 200.7 5/1612014

0,0115 EPA 200.7 5/16/2014

0.1 EPA WS 5/13/20/4

0,01 EPA 200.7 5116/2014 WVS

0.02 EPA 200.7 5116:2014 WVS

0.01 EPA 200.7 5/1612014 WVS

0.005 EPA 200.7 5/16/2014 WVS

0,0/ EPA 200.7 5/161014 WVS

Q.0 6/20

05 EPA 200.7 5/114 WVS

0.81 EPA200.7 5/14/2014 WVS

0.1 • EPA 200.7 5/16/2014 wys

0.005 EPA 200.7 .51612014 VAIS 1-:PA 720,7 5916/2014 VETS

0.001 EPA 2007 5/16/2014 Wvs

<2 0,02 FYA 200.7 5/164014 WV PM'

s

54 0.005 EPA 200.7 5/162014 WAN

Analysk

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;AVM" Anal&

Lead Lithium Sfairaottum Wolybienum Nickel Selenium

Sodium Simutium TM tiac

2;

195 <3

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ag4

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6.12 17/ 10.4 *6.6

<1 21.2 US 114 63.9 27? 32.6 164 1.77

Results Units Mad Method Date Anabot Om Laboratory

.=1•■•

y . Environmental Consultants LW 3801 Automation Way, Suite 200 + Fort Collins, CO 80626

Oat\ Phone 970-226-5500 + Fax970-2264946

www.cannabidial.com

EXHIBIT F

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Genifer Murray ;

Hello Everyone: something has come to attention and I feel I need to share it The RSHO Real Scientific Hemp Oil was taken to the CSU lab so they could do extensive tests on it. The preliminary results:

The lab I sent FISHO to called me this morning to warn me about consuming It. They are not finished but already found

heavy metals, fluorides, chlorides and bromine. They said it is dangerous to consume and warned me not to let anyone take it. They said it is not even hemp oil.

Please do not consume this product until we have more information.

Corhnic Share

_ .

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EXHIBIT G

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EXHIBIT H

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6/412014 10296655 1015421M3960035 8134689757638591011_nwg (960x843)

INQUIRING MINDS WANT TO KNOW.'.. WHAT'S THE TRUTH ABOUT RSHO?

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Above, lab results from a container of RSHO, or what is also known as Real Scientific Hemp Oil. With this many chemicals in the product, it has to be scientific, right?

Above, lab results from a testing facility showing the level of MC in this batch of RSHO is illegal as defined by the DFA How can this be promoted as legal when it clearly is not legal, qualifying as a Schedule I drug?

https://fbaln-spholos-h-a.alcarnsihd.nettnphdos-ak-xpf1M34.0-12/10295655 10154217823960035 8134689757638591011 n.loaTciFe086963d7f44b2c92f396931... 1/1

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EXHIBIT I

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Laboratory Report Date Sampled: Date Received: Batch No: Laboratory BD: Matrix: Sample Name:

5/8/2014 12:00:00 PM 5/8/2014 31802 S141330903 Liquid Grab RSHO Hemp Oil

:Prokali 4684 LAB

Analysis Results Units MRL Metltod Analysis Sent

Date Analyst Out Laboratory

VOC 8260 Batch # 133 Batch # 0 EPA 8260 B 522/2014 WVS 0 .Acetotte <5 ppm 0,04 EPA 826013 5/22/2014 0 .Benzene <0.3 ppm 0,001 EPA 8260 B 5/2212014 .Bromobenzene <0,3 PPm 0.002 EPA 8260 B 5/22/2014 0 .Bromochloromethane <0.3 PPm 0,002 EPA 8260 B 5/2212014 .Bromodlehloromethane <0,3 PPm 0.002 EPA 8260 B 5122/2014 0 .Branoform <0.3 PP9I 0.002 EPA 8260 B 5/2212014 0 .Bromot»ethane <1.5 PPm 0.01 EPA 8260 B 5/22/2014 •Butmone, 2- (/1EK) <5 Plam 0,04 EPA 82603 5/22/2014 ,Butylbenzene, n- 0.371 PMIL 0.002 EPA 8'260B 52212014 0 .Butylbenzane, sec- <0.3 PPm 0.002 EPA 8260B 5222014 ,Butylbenzene, tort- <0.3 PPm 0.002 EPA 82608 5/222014 0 .Carbon Tenathloride <0.3 PPm 0.002 EPA 8260 B 5/22/2014 .Chlorobenzene <0.3 PPE9 0.002 EPA 8260 B 5/2212014 .ChlormIlbromotottbane <0.3 ppm 0.002 EPA 826013 5/22/2014 0 .Chloroethane <0.75 PPm 0.005 EPA 8260 B 5/22/2014 .Chloroform <03 PPm 0.002 EPA 8260 B 5122/2014 0 .C,bloromethane <1.5 ppm 0.01 EPA 826013 5/22/2014 0 .Chlorotoluene, 2- <0.3 PPm 0,002 EPA 8260B 5122/2014 0 .Ch lomtoluene, 4- <0.3 PPm 0.002 EPA 8260 B 5/2212014 0 .Dibromo-3-chloropropane, <0.75 ppm 0.005 EPA 8260 B 512212014 0 1,2-

,Dibromoothene, 1,2- <0.3 PPIn 0.002 EPA 826013 5/2212014 0 .Dibromomethane <0.3 ppm 0.002 EPA 82603 5/22/2014 ,Diehlorobenzene, 1,2- <0.3 ppm 0.002 EPA 8260 B 5/222014 0 .Dichlombenzene, 1,3- <0.3 PPla 0.002 EPA 8260 B 5/222014 0 .Diehlombenzeno, 1,4- <0.3 PPm 0.002 EPA 8260 B 5122/2014 .Diehlorodlfluoromethane <1.5 PPm 0.01 EPA 8269 B 51222014 .Dlebloroethane, 1,1- <0.3 ppm 0.002 EPA 8260 B 512212014 0 .Dichloroethane, 1,2- <0.3 PPm 0.002 EPA 8260 B 5/2212014 .Diehloroethykne, 1,1- <0.3 P11111 0.002 EPA 8260 B 5/224014 0 .DichloroethyIene, cis-1,2- <0.3 PPm 0.002 EPA 8260 B 51222014 0 .Diehldroethylene, trans-1,2- <0.3 ppm 0.002 EPA 8260 B 5/222014 .Dicbloropropone, 1,2- <0.3 ppm 0,002 EPA 8260 B 5/22/2014

Vol Stewart Environmental Consultants LLC . . /..05A 3801 Automation Way, Suite 200 • Fort Collins, CO 80526

Phone 970-226-5500 Fax:970-226-4948

www.cannabidial.com

Date Sampled: Date Received: Batch No: Laboratory ID: Matrix: Sample Name:

5/8/2014 12:00:00 PM 5/8/2014 31802 5141330903 Liquid Grab RSHO Hemp Oil

;Project# 4684 LAB

Analysis Results Units Ha Method Analysis Sent

Date Analyst Out Laboratory .Dichloropromme, 1,3- <03 ppm 0.002 EPA 8260 B 51222014 .Diehloroprvpane, 2,2- <0,3 PPm 0.002 EPA 8260B 5222014 ,Dicbloropropene, 1,1- <0,3 PPm 0.002 EPA 8260B 5/22/2014 .Dichloropropene, cis-1,3- <03 PPm 0,002 EPA 8260B 5/22/2014 0 .Dicbloropropene, trans-1,3- <0.3 PPITI 0.002 EPA 8260B 5/22/2014 ,Ethylbenzene <0.3 ppm 0,002 EPA 8260 B 5/222014 0 .Fluorotrichloromethane <0.3 PPm 0.002 EPA 8260 B 5/22/2014 .Hexachlombutadlene • <03 PPE 0,002 EPA 8260 B 5/2212014 0 asopropylbenzene <03 PPril 0.002 EPA 8260 B 5/22/2014 isopropyltoluene, 4- 2.35 PPm 0.002 EPA 8260 B 5/22/2014 Ci .Merhylene Chloride <0.3 Plml 0.002 EPA 8260B 5/22/2014 0 .Naphthalene <0,3 ppm 0.002 EPA 8260B 522/2014 0 .Propylbenzene, n- <03 PPm 0.002 EPA 8260 B 5/22/2014 fl .Styreno <0,3 ppm 0,002 EPA 826013 5/222014 0 .Tetrechlorethanc, 1,1,1,2- <0.3 ppm 0.002 EPA 8260 B 522/2014 0 .Tetrachloroethane, <03 PPm 0.002 EPA 8260 13 5/22/2014 .Tetracbloroethylenc <03 PPm 0.002 EPA 8260 B 5/22/2014 0 .Tolaene 0.786 ppm 0.002 EPA 8260 B 5/22/2014 .Trichlorobenzene, 1,2,3- <0.3 PPR) 0.002 UM 8260 B 5/22/2014 1.3 .Trichlorobenzene, 1,2,4- <0.3 PPm 0.002 EPA 8260 B 5/22/2014 Srichloroettene, 1,1,1- <0.3 ppm 0.002 EPA 8260 B 522/2014 .Trichloroethsne, 1,1,2- <03 ppm 0.002 EPA 8260 B 5/22/2014 .TrIchloroethylene <0.3 PPm 0.002 EPA 8260 B 522/2014 0

1,2,3- .Trichloropropane, <0.3 PPm 0.005 EPA 8260 B 5/2212014 0 .Trimedrylbenzene, 1,2,4- <0.3 ppm 0.002 EPA 8260 B 5/2212014 0 .Trimethylbonzene, 1,3,5- <0.3 ppm 0.002 EPA 8260$ 5222014 0 .Vinyl Chloride <0.3 PPm 0.002 EPA 8260 B 522/2014 0 Xylem, m,p- 0334 PPm 0.002 EPA 8260 B 5222014 .Xylene, o- <03 ppm 0.002 EPA 8260 B 5/2212014 0 _Digest, oil/total, Batch 21 Dig /I 0 EPA 3031 5/162014 '1T4 0 Aluminum 195 ppm 0.05 EPA 200.7 5/1612014 WVS 0 Antimony <3 PPm 0,03 EPA 200.7 5/1612014 WVS 0 Arsenic 6.01 PPm 0.02 EPA 200.7 5/1612014 WVS 0 Barium 103 WTI 0.002 EPA 200.7 5/16/2014 wvs Beryllium <0.05 ppm 0.0005 EPA 200.7 5/102014 wvs Boron 9.36 PPm 0.01 EPA 200.7 5/1612014 WVS 0 Bromide < PPm 0.5 EPA 3000 5/131'2014 INS 0

Tee Stewart Environmental Consultants LLC 3801 Automation Way, Suite 200 Fad Collins, CO Phone 970-226-6500 F=970-226-4948

80525

www.cannabidial.com

Date Sampled: Date Received: Batch No: Laboratory 3D: Matrix: Sample Name:

5/812014 12:00:00 PM 5/8/2034 31802

814 1330903

Liquid Grab RSHO Hemp Oil

'IPT-oject1/4684 LAB

Analysis Results Units MRL Method Analysis Sent

Date Analyst Out Laboratory Cadmium <0.3 PPm 0.003 EPA 200.7 5/16/2014 WV8 Calcium 484 ppm 0,05 EPA 200.7 5/16/2014 WVS 0 Chloride 21.4 ppm 0.5 EPA 300.0 5/13/2014 1NS 0 Chromium <0.5 PPm 0.005 EPA 200.7 5/1612014 WVS Copper 6.12 ppm 0.005 EyA. 200.7 5/1612014 WV S 0 Fluoride 5.72 PPm 0.1 EPA 300.0 5/13/2.014 MIS 0 Iron 10.4 PPm 0.01 EPA 200.7 5/16/2014 WVS 0 Load <2 ppm 0.02 EPA 200.7 5/1612014 WVS 0 Lithium <1 ppm 0,01 EPA 200.7 5/16/2014 WVS Magneshun 21.2 PPM 0.005 EPA 200.7 5/16/2014 WVS 0 Molybdenum <1 PPm 0.01 EPA 200.7 5/16/2014 WVS 0 Nickel <0.5 ppm 0.005 EPA 200.7 5/16/2014 WVS Selenium <2 PPm 0.01 EPA 200.7 5/1612014 WVS 0 Silica 277 PPm 0.1 EPA 200.7 5/16/2014 Wvs Silver <05 PPm 0,005 EPA 200.7 5/1612014 WVS 0 Sodium 164 PPm 0.1 EPA 200.7 5/1612014 WVS 0 Strontium 1.77 Plan 0.001 EPA 200.7 511612014 %Ts 0 Tin <2 ppm 0,02 EPA 200.7 5116/2014 WVS 0 Zinc 54 ppm 0.005 EPA 200.7 5/16/2014 WVS 0

Results Approved by: 444 avtorifrunici--

Michael GismoWeb, Laboratory Ilanaga

Date Reported: 5/13/2014

V:, Stewart Environmental Consultants LLC . . , lir *II 3801 Automation Way, Suite 200+ Fort Collins, CO 80525

Phone 970-228-5600 • Fauc970-228-4946

www.cannabidial.com

Stewart Environmental Consultants, LLC Engineering for Life

Laboratory Quality Control Report

Anions EPA 300.0

Date of Analysis 10511312014

Blank

Analyte Tested Value (ppm) RC Acceptance Limit (ppm) Bromide ND < 0.5 Chloride ND <0.5 Fluoride ND <0.1

Nitrate as N ND <0.1 Nitrite as N ND

Phosphate as P ommin

ND <0.5

Independent Reference Material .. Quality Control Sample Analyte Spike Amount (ppm) Observed And (ppm) Recovery Acceptance Limn Bromide 1.00 1,02 102% 80% b 120% Chloride 2.00 2.00 100% 80% to 120% Fluoride 1.00 1.00 100% 80% to 120%

Nitrate as N 2.00 1.82 91% 80% to 120% Nitrite AS N 1.00 0,70 70% 80% b 120%

Phosphate as P 3.00 3.01 100% 80% to 120% Sulfate 4.00 3.92 98% 80% te 120% •

Blank Spike

A:Wyly Ref, Value (ppm) Recovery Acceptance Limit Ekomide 1.00 1.03 103% 80% to 120% Chloride 1.00 0.96 96% 80% to 120% Fluoride 1.00 0.94 94% 80% to 120%

Nitrate as N 1.00 0,97 07% 80% lo 120% Nitrite es N 140 0.79 79% 80% to 120%

Phosphate as P 1.00 0.98 98% 80% to 120% Sulfate 1.00 0.99 99% 80% to 120%

<0.5

Blank Spike Duplicate

Anelyte Tested Vs use (ppm)

I Bromkie 1.03 1.07 4% . __ _

<20% Chloride 0.06 0.98 2% <20% Fluodde 0.04 0.95 1% <20%

Nittate as N 0.97 0.99 2% <20% Nitrite es N 0.79 0.82 4% <20%

Phosphate as P 0.98 1.04 6% Sulfate 0.99 1.03 4% <20%

Deviation l Acceptance Limit

ND - Not detected.

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Page 1 02

:lois Date 05/14/14

*Ms Batch Number(s) • Digest Batch 21

Total Metals EPA 2.00.7

Parameter

Arsenic

Sedum

cadmium

calcium chromium

CoPPer Lead

Manganese

Molybdenum

Nickel

Selenium

Silver Zinc

Digest Blank

Tasted Values (pmn)

ND

NP

ND

ND

ND

ND

ND

ND

ND

ND

ND

ND

ND

Acceptance Limit (ppm)

<0,02

<0.001

0.003

<0.02

<0,005

<0,006

<0.02

<0.002

▪ 0.01

<0.006

< 0.02

<0.005

< 0.005

Stewart Environmental Consultants, LLC Eng!naming for Life


Independent Reference Material -Quality Control Sample Parameter Tested Values (ppm) Reference Value (ppm) Recovery Acceptance Limit

Arsenio 1.01 1.00 101% 90% - 110% Barium 1.01 1.00 101% 90%- 110%

Cadmium 0.98 1.00 98% 90%- 110% Caldum 1.01 1.00 101% 90% - 110%

Chromium 0.98 1.00 98% 90%- 110% Copper 0.99 1.00 99% 90% - 110% Lead 0.98 1.00 98% 90% - 110%

Manganese 1.02 1.00 102% 90% -110% Molybdenum 1.01 1.00 101% 90% - 110%

Nickel 1.00 COO 100% 90% • 110% Selenium 1.02 1.00 102% 90% - 110%

Silver 0.98 1.00 98% 90% - 110% Zinc 1.01 1.00 101% 90% - 110%

ND = Not detected

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Stewart Environmental Consultants, LLC Engineering for Life


Total Metals EPA 200.7

Page 2 of 2

alyals Date 05/14114

alysis Batch Number(s) Digest Batch 21

• Digest Blank Spike Parameter Spike Amount (ppm) Recovered Amt. (ppm) Recovery Acceptance Limit

ArseMc 0,40 0,440 110% 80% - 120% Barium 0.20 0210 106% • 80% - 120%

Cadmium 020 0200 100% 80% - 120% Calcium 4.0 4.81 116% 80% - 120%

Cnromlum 020 0,210 106% 80% - 120% Copper 0.20 0210 105% 80% - 120% Lead 0.40 0.410 103% ao% - 120%

Manganese 0.20 0210 105% 80%- 120% Molybenum 0.40 0.430 los% 80% - 120%

Nickel 020 0200 100% 803 - 120% Selenium 0.40 0.420 105% 80%. 120%

Silver 0,40 0.330 83% 80% - 120% The 020 0210 105% 80%. 120%

Blank Spike Duplicate Parameter Tested Values (ppm) Deviation Acceptance Limit

Arsenic 0.440 0.450 2% <20% .13arkun 0.210 0.220 6%

Cadmium 0.200 0.210 6% Calcium 4.81 416 3% <20%

Chromium 0.210 ' 0210 0% <20% Copper 0.210 0210 0% <201i Lead 0.410 0.420 2%

Manganese 0.210 0.220 6% <20% Mblybenum 0.430 0.450 6% <20%

Nickel 0.200 0.210 5% <20% Selenium 0.420 0.440 6% <20%

Sliver 0.330 0,340 3% <20% zhe 0.210 0.220 5% <20%

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EXHIBIT J

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message From: Michael Glavanovich<michael.glavanovich(iv,gmail.com> Date: Thu, Jun 5, 2014 at 1:01 PM Subject: Re: FW: Cranford INFAIIIIMOraltafffifallaNNININWINawar

MIL The samples were received in our lab from Jason Cranford. Apparently the samples went through three different hands before we received them. Not that this is in an of itself bad, just not ideal. We were asked to test for volatile organic compounds, metals, and pesticides. There was insufficient volume to test for pesticides, so we were able to eliminate that test. The volume of sample, about 1-2mL was small for the remaining two analyses, but we went ahead with it. The analysis for volatile organic compounds is straight forward. The analysis for metals is complicated in that the sample must first be oxidized with potassium permanganate and sulfuric acid, a process called "wet ashing". Subsequently the oxidized sample is treated with nitric and hydrochloric acid to solubilize any metals that may be present. In the oxidizing of the oils, a significant background of interference is created that must be accounted for. Without this correction the sample will look like it is testing positive for some metals. Occasionally a client will call and ask for the report ahead of our normal processing schedule, and this happed to be the case. Sadly data went out before the metals background correction was made. A day or two later, it was noticed that this happen, the corrections were made and the corrected report was sent to the client.

While this occurence is rare, it is not unheard of. All the follow-up procedures were made: phone call, email, and a new report.

To go forward, I recommend additional testing for metals. In an

ideal world, about 3-4 mL of oil is preferred. This way we have sufficient amount to run a duplicate analysis. I have attached a chain of custody should you wish to test fresh oil with our laboratory.

Kind regards, Michael Glavanovich Lab Manager Stewart Environmental Consultants, LLC

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vg4 Sample Receipt Checklist STEWART ENVIRONMENTAL CONSULTANTS, LLC. 3803. Automation Way, Suite 200, Fort Crams CO 80525

cirenrirs,Con trtoria4 initials: >ill Date: tight( Time: I 31.5 C MsT/mur

To be filled out by laboratory courier, If applicable: . . Were samples rebievad bya taboratTY.99uricrrY. .

2 .Were. sarppIesphiceprin a refrigerated state upon fetrieyalt _ Courier Millais: Date: Time'

To be filled out by laboratory samplo receiving:

3 Sh0.9118 95.e.kier./.41019r

4 Chain of Custo4yfC09) Eresent?

5 Sample bottles Intact? • samples onblue-ioe

7 P.rnEles .. •

8 Samples received within 4 hours of samplim?

1

9 Record temperature of sample babies within cooler with Infra-red thermometer.

{ C; t ntainer#141‘4rd I

10 11 COO complete, ierztale, signed end dated? 12 bPili.9:?.9°P1PICrte end VIA? ......... . 13 CDC the mementwith sample bottle labels? • 14 _Pmr container tiled Tor anatma restiaated? 15 Sample! requIring.prasentaffoqRreeerveti. aorrerge _ 16 Sufficient sample volume for analyses requested? • 17 Samples within holdiNtimes for analyses requested? • 18 8911.0.PsfPritOna!!!1.1008.0199.grefteeall°,109acKl..1

(VOC, TVPH, BTIDC, Ethanol, Radon) If no, size of bubble: < green pea,

• If no, document on Chain of Custody.

(Pavved..9.Pd clanYS? *

_> green pea

Notes.:

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EXHIBIT L

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PROJECT

MID projectcbd.org

HEMP OIL HUSTLERS A Project CBD Special Report on Medical Marijuana Inc., HempMeds & Kannaway

By Aaron Miguel Canto

October 14, 2014

© 2014. Project CBD. All rights reserved.

www.cannabidial.com

Project CBD Special Report Hemp Oil Hustlers

Forward by Project CBD A half year ago, Project CBD assigned a writer to investigate and report on Medical Marijuana Inc., a penny stock umbrella company that markets "hemp oil" products infused with cannabidiol (CBD), a medicinal component of the cannabis plant. Originally we had hoped to shed light on the complex financial machinations of Medical Marijuana Inc., a subject that had been addressed by a few stock market analysts but not by journalists in general interest publications.

Project CBD was poised to publish Aaron Miguel Cantes research when we heard complaints from several sources that people were getting sick, in some cases "violently ill," when they ingested "Real Scientific Hemp Oil," Medical Marijuana Inc.'s flagship product We decided to delay the release of our report until we had a chance to look into whether there was any truth to these allegations.

Our investigation proceeded in an unanticipated direction, involving analytical lab tests, hemp oil production tours, and a crash course in scientific data regarding toxic solvents, heavy metals, and other contaminants. We have presented our findings in this report.

These findings should not be construed as justification to attack the medical marijuana community or impose ever-more capricious restrictions on patients and providers. Nor do we wish to cast aspersions on companies that are working with industrial hemp to create CBD-rich products. We believe that industrial hemp is not an optimal source of CBD, but it can be a viable source of CBD if certain hemp cultivars are grown organically in good soil and safe extraction and refinement methods are employed.

2014 marked the first year that industrial hemp was grown legally (albeit for research purposes) in the United States in a long time. There's no doubt that the surge of national interest in CBD has been a key factor in catalyzing the rebirth of industrial hemp in the United States. Project CBD maintains that federal law should be changed to facilitate CBD production from the most prolific natural source of cannabidiol available—CBD-rich cannabis with little THC. This would entail legalizing the whole plant, not just a single compound or a single strain.

Project CBD wishes to acknowledge the following people who helped in various ways with this report: James Neal-Kababick of Flora Research Laboratories, Dr. Noel Palmer of PhytaTech, Daryl Bornhop, Jahan Marcu, Brandon Krenzler, Jason Cranford, Felicia Carbajal, Brittany Warrior, Michael Hayes, Vanessa Waltz, Michelle Sexton, Fred Gardner, Josh Hartsel, Chris Boucher, Regina Nelson, Angela Bacca, and Cerilia D'Anastasio and Rick Carp of the Emerging Journalist Fund.

Martin A. Lee Director, Project CBD


www.cannabidial.com

Project CBD Special Report: Hemp Oil Hustlers

HEMP OIL HUSTLERS

S omewhere in San Diego on a Friday night in February 2014, six fidgeting men in identical white t-shirts sat clustered together on adjacent sofas, facing a computer webcam. 1 ASPIRE HIGHER,

their shirts behooved viewers.

"Can you feel it?" asked the group's bespectacled leader, Christopher Hussey. A solemn hush fell over the room. "It's the calm before the storm."

"The ICanna-storm," added one of the other men, prompting light chuckles from his compatriots.

The group was on Google Hangout with men and women from across the country, all of whom had come together that night to celebrate their progress in building what they called "the Kannaway Nation." Like a band of partisans, these men discussed how many people they'd roped into their ranks in the last few months, marveling at their success and confidently forecasting even cheerier prospects for the future.

Yet despite abundant use of words like "revolution," "nation," and "movement," these men were not calculating how to build the ranks of a nascent political vanguard. They were trying to recruit more people into a multi-level marketing company called Kannaway, which relies on a loose network of independent distributors to sell products. 2 Kannaway has little infrastructure beyond a website, PDF promotional materials, and various "hemp oil" products infused with cannabidiol (CBD), a versatile, non-psychoactive cannabis component with exciting medical prospects.

Around the same time that the Kannaway soldiers were "aspiring higher" in their Google Hangout, a young mother named Brittany Warrior desperately clutched her 21-month old daughter's tiny body, watching as her baby Jaqie writhed in pain.' For days Jaqie's diarrhea and vomiting would not go away, despite a steady regimen of electrolyte-charged victuals and Pedialyte. At her wits end and scared for her daughter's life, Warrior finally checked Jaqie into the emergency room of a Denver hospital.

The culprit for her daughter's illness, according to Warrior, was something called Real Scientific Hemp Oil (RSHO) Gold, a product sold by a company called HempMedsPX. 4 Warrior's daughter is epileptic, and according to Warrior, representatives of HempMedsPX reached out to her online and gave her free samples of RSHO Gold, a CBD-infused product, to try on her daughter. CBD-rich oil, a remedy of last resort for children with catastrophic seizure disorders, has proven effective in some cases of treatment-resistant epilepsy, and HempMedsPx (since renamed HempMeds) sought to profit from CBD's growing reputation as a miracle compound.

What, if anything, do six guys hustling hemp oil products on Google Hangout have to do with a sick child in Denver?

0 2014. Project CBD. All rights reserved. 9

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Kannaway enlists independent vendors to peddle products supplied by HempMeds. 5 Warrior alleges that Real Scientific Hemp Oil, the flagship product of HernpMeds, sickened her girl. Warrior isn't the only person making such claims. Several people, adults as well as children, say they became ill after ingesting Real Scientific Hemp Oil. Others maintain they've gotten positive results with RSHO. And some assert that the hemp oil derivative didn't do much for them one way or another.

The ties between Kannaway and HempMeds run deep. Both companies are controlled by the same circle of businessmen, and both are subsidiaries of a shadowy umbrella corporation known as Medical Marijuana Inc., which has numerous subsidiaries and affiliates.

The Kannaway Kraze Launched in January 2014, Kannaway looped in an army of newly-minted CBD zealots with little prior experience in the field of cannabis therapeutics. 6 A YouTube search of "Kannaway" yields hundreds of videos of independent distributors frantically pitching their cause to the world. Distributors also pummel Craigslist with invitations to potential recruits, and then barrage any responders with rapid-fire hyperbolic emails. "Time To Join. The Movement," rhapsodized one Kannaway representative in an email message. ? Another distributor implores recipients to secure a spot within "an industry that is expected to be larger than the steel industry within 5 years."'

Kannaway claims that its products are legal in all 50 states because oil extracted from industrial hemp contains little to no tettahydrocannabinol (THC, aka The High Causer)? However, it is against the law for the company to make therapeutic claims about its products, or advertise them as medicine, and Kannaway treads this line haphazardly. Wary of attracting scrutiny from the FDA or DEA, the company informs distributors that they cannot incorporate Kannaway's name in the distributor's personal branding.'

Here's how it works: When you sign up to be an "independent business owner" for Karuiaway, you must purchase a product from HernpMeds, which can include a "hemp-based, cannabidiol-rich" salve, a vape pen, or CBD-rich food chew squares."

Kannaway appears to be a pyramid scheme. The company is structured in such a way that its distributors are more incentivized to recruit other distributors than to actually sell anything. An official company information packet says that once you sign up as a Kannaway distributor, you make a commission from anybody you can convince to become a distributor, and your commissions compound as your recruits also recruit others. The more recruits, the higher a distributor ascends the eleven ranks of commission earners until they reach the coveted status of a "Royal Diamond" distributor. All distributors also have to pay a $15 monthly fee or risk losing commissions from previous months, according to a Kannaway Compensation Plan obtained by Project CBD. 12

The Federal Trade Commission warns that if a multilevel marketing company "sells more products to distributors than they do to the public," then it is likely a pyramid scheme, a business arrangement that is inherently unsustainable because it is built on an ever-increasing number of distributors?

Pyramid schemes inevitably go bust, but while they're around, those at their helm stand to make a lot of money. Sitting at the apex of Kannaway is Smart Titus, the owner of General Hemp,

2014. Project (ID All tights reserved. 3

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Kannaway's parent company.' 4 Titus ipreviously helped raise capital to launch Medical Marijuana Inc.,15 and he also financed the creation of another company, CannaVest, which for over a year supplied the hemp oil used in Medical Marijuana Inc.'s CBD product line.'

To untangle this complicated network of business entities, let's start from the beginning when Medical Marijuana Inc. was whipped up into existence by two men hustling on the fringes of a different industry. The company's original purpose had less to do with healing the sick than cashing in on uniquely placed historical opportunities.

Rotten Roots Two former marijuana smugglers, Bruce Perlowin and Don Steinberg, founded Medical Marijuana Inc. in 2009. 17 The company actually started as something called the Berkshire Collection, identified by the Security Exchange Commission (SEC) as one of 59 shell companies operating under the umbrella of a fraudulent telecom enterprise called Blackout Media: 8 The mastermind of Blackout Media, Sandy Winick, went to prison for the rest of his life after a court found him guilty of swindling investors out of $140 million.19

In 2005, Perlowin and Steinberg issued a 1,000:1 "reverse split" on shares of Berkshire. 2° That means the number of all Berkshire shares was suddenly reduced by a ratio of 1,000, and the value of each share correspondingly increased 1,000 per cent. Those who held the most shares—Perlowin and Steinberg—were sitting pretty, while those who had fewer than 1,000 shares were trumped out of the market. A reverse split is a desperate—and rarely used—option of last resort for legitimate firms hoping to shore up the value of their stock, but it can also be a trick to con small-time investors out of their money.

After the reverse split, Berkshire became "My Newpedia," which subsequently merged with a company called Club Vivanet Another reverse stock split—this time 20:1—took place shortly after the merger. 21 Club Vivanet, Inc. was a multilevel marketing arrangement that sold prepaid phone cards.' Its biggest shareholders were Steinberg, his wife, and a company owned by a woman with intimate ties to supposed nobility in the Dominion of Melchizedek, a fake island used to facilitate international banking fraud. 23

Club Vivanet, Inc. was around for less than a year before CNBC asked Perlowin, an ex-con, to appear on a documentary about his marijuana smuggling days. 24 It would be the shot of publicity he

" The company was called New Compendium Corporation, owned by Sadia Barrameda, who holds the majority of New shares. Banarneda has a child with David Korem, former "vice president" of the Dominion of Melchizedek. She defended him in an affidavit at one of his arraignments. (See Fantasy Island: The Strange Tale of Alleged Fraudster Letsiaran by Peter Jamison)

2014. Project CBD. All rights reserved. 4

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and Steinberg needed to reorganize their business yet again After a forward stock split' . of 1:10, they renamed the company Medical Marijuana Inc. 25

In early 2009, Perlowin and Steinberg issued themselves millions of shares to become the CEO and President, respectively, of Medical Marijuana Inc. 26 Former employees say the two men began rounding up boat captains from their smuggling days and idealistic cannabis do-gooders who were taken in by Perlowin's stratospheric ambitions for the company.

Medical Marijuana Inc. churned out press releases, and Perlowin gave frothy proclamations to business publications. He told Bloomberg Newswire that he intended his company to be "the McDonald's of marijuana!' The CEO's enthusiasm had a rousing effect on employees. At his encouragement, they sold thousands of "MJNA" shares to relatives and friends.

"When Perlowin came to me and said, We have access to billions, we're going to blow up the business and legitimize it,' I thought 'holy cow this is what I was hoping for," said Rob Griffin, founder of 420 Magazine, who was recruited to be Medical Marijuana Inc.'s chief operating officer. 28

For the first few months, Griffin and others roamed the state to attend seminars and expos and help get the company's name out. Advertisers and investors began flooding the MJNA phone lines, looking for ways to attach themselves to Medical Marijuana Inc.

There was just one problem: Few seemed to know what Medical Marijuana Inc. was really selling. Officially, the company said it offered "education programs" and "turnkey solutions" to government clients and the medical marijuana industry. 29

Initially, Medical Marijuana Inc. (listed as MJNA) was little more than a blip presence on the OTC [Over-The-Counter] stock market—the risky, unregulated arena where investors can buy ultra-cheap shares from new, lightly capitalind companies. Since "Pink Sheet" rules require minimal transparency, it was difficult for folks outside the Perlowin-Steinberg inner circle to assess the company's cash flow. After a while, some grew suspicious, especially when complaints started coming in.

"People were calling and wanted answers but I had nothing to tell them," said Julie Black, who acted as Perlowin's financial and legal secretary. 3° Black had convinced several friends to buy MJNA shares. "At six months to a year the stock was supposed to grow," she said, but it never did. She wound up losing friendships—and money—as a result.

t According to the Financial In du strv Regulatory Au thority, a forward split is "the division of outstanding shares of a corporation into a larger number of shares," while a reverse split is "the division of outstanding shares into a smaller number of shares."


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Griffin also lost faith in Medical Marijuana Inc. "[It] took me six months to figure out [that the] press releases" were the most important thing the company produced, he recounted. "I came up with half the ideas for these guys, and they'd write the press releases from my ideas." It was all smoke and mirrors, according to Griffin, who said that MJNA lacked a coherent business plan and staff meetings went nowhere.

A year into the business, Griffin and Black had already left Medical Marijuana Inc. By that time the staff was mostly composed of former pot smugglers and boat captains with little experience navigating the bureaucracy of drug law and federalism." Nevertheless, they began hawking $100,000 "franchise licenses" to buyers who wanted to vend federally prohibited medicinal pot under the company's name.32 In return, the company promised to bestow its turnkey wisdom on weed start-ups.

`We have a feeding frenzy for people wanting to open up centers. We have a feeding frenzy for people who want this information and knowledge," enthused Pedowin to Salon in March 2010, in his typically stirring pitch.' Around this time, the company also launched a proto-Kannaway multilevel marketing effort called "The Hemp Network." As with ICannaway, The Hemp Network encouraged independent distributors to pay an initial fee to lock in an early place in a multilevel marketing scheme selling hemp products, but it appears that it never reached the distribution stage. As of October 2014, the Hemp Network's website was still urging viewers to "pre-enroll" and it featured no purchasable products?

It's unclear what prompted Perlowin and Steinberg to sell the majority of their MJNA shares in March 2011. Around that time, Perlowin began giving public presentations about his plans to "creat[e] 1,000 millionaire women through quantum economics!" 33 Nevertheless, even after they sold Medical Marijuana Inc., Steinberg still held 8.59% of the company's shares and Periowin 5.06%26 Perlowin never returned Project CBD's request for a comment.

The Handoff In 2011, Michael Llamas purchased majority ownership in Medical Marijuana Inc through another firm he controlled, the Hemp Deposit and Distribution Corporation." Stock market analysts would soon raise questions about Medical Marijuana Inc.'s new, young owner, who had a shoddy financial history involving complex mortgage fraud, according to federal investigators.

When 26-year-old Michael Llamas became interim president and CEO of Medical Marijuana Inc. in 2011, he was also serving as CEO of North American Companies, a holding company founded by his father. 38 One of North American's subsidiaries, Colbalt One LLC, was implicated in a massive, multi-state ponzi scheme for which Llamas was indicted along with five other defendants in September 20122 9

Court documents describe how Llamas approached new home and condominium builders through Colbalt LLC and offered to buy distressed homes at a 30%-50% discount from their public listing price. After purchasing the properties, he sold them at full price to a group of investors whose retirement funds were ensnared in another co-defendant's scheme. Investors were never told that the properties were originally purchased at a steep discount. The federal plaintiff alleged that Llamas

Cl 2014. Project CBD. All rights reserved. 6

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and his co-defendants split the difference and got rich off the dirty deals. Llamas would plead not guilty to the federal charges. 40

Soon after Llamas was indicted for mortgage fraud, Medical Marijuana Inc. announced that he had resigned as interim president and CE0. 41 But he continued to be a major shareholder in the company. With Llamas calling the shots from behind the scenes, Medical Marijuana Inc. would morph into a high-profile umbrella corporation with significant holdings in at least seven different subsidiaries, each at varying levels of capitali7ation. 42

By emphasizing non-psychoactive CBD in its product line, MJNA was able to stake out a position at the forefront of a rapidly evolving business terrain. Simply the name "Medical Marijuana" was enough to seduce investors who hoped to profit from the much anticipated pot.com boom. But the public support it seemed to enjoy at the outset may have had less to do with the company itself and more with the movement it symbolized.

An umbrella corporation like Medical Marijuana Inc., with a complicated network of portfolio companies, can impress outsiders the same way a frill-necked lizard wards off predators: by making itself seem bigger (and thus more credible) than it actually is. MJNA stitched together a network of subsidiaries and affiliates, which grew to include HempMedsPX, Red Dice Holdings, Dixie Botanicals, PhytoSphere Systems, ICannaway, CanChew BioTechnologies, Canpia Holdings, Ace Hydro, KannaLife Sciences, and Wellness Managed Services.

Medical Marijuana Inc. often cited these entities as sources of revenue, but some of them appear to be illusory. For example, MJNA asserted in a press release that its collection of health and wellness facilities operated by Welhiess Managed Services experienced "an accumulative 3941% revenue increase"' throughout 2011, but it's hard to figure out exactly how that happened. 4 The website for Wellness Managed Services contains distorted stock photos and typos on the "About" page, and appears not to have been updated in two years. Phone calls to Wellness Managed Services by Project CBD were routed back to Medical Marijuana Inc.'s line, which never returned our messages.f

Pump and Dump? As suspicions grew about MJNA's machinations, frequenters of Internet investor forums began to warn of potential "pump-and-dump" financial fraud carried out by the company's management' s

Pump-and-dump schemes, like the one that drives the plot in The Wof of Wall Street, are mass deceptions that begin when high-level representatives of weak companies buy the majority of their own shares. These shares are inherently worthless because they represent equity in a company that hardly exists or may not even exist at all. But their value is "pumped up" by a constant stream of

As of October 8, 2014, the most recent update to the Wellness Managed Service website was a press release posted on June 19 2012.

© 2014. Project CBD. All rights reserved. 7

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enthusiastic press releases that embellish (or outright lie about) the current and future prospects of the firm. As excitement builds and novice traders buy more shares, their price rises, buttressed by a mirage of contrived optimism. When the company's representatives bait enough traders to drive the value up as much as possible, they sell the shares at an inflated price, "dumping" them onto ignorant investors. And when the supply of these shares rapidly increases, demand falls, causing their value to plummet Everybody outside the company's inner circle is then left with rubbish shares they can't sell.

According to the Financial Industry Regulatory Authority, pump and dump schemes rely on scanners who puff up a questionable company via online investing message boards, am -its, texts, and a plethora of press releases portending great things about its future. These are the kind of press releases that Medical Marijuana Inc. was spitting out several times a month after Llamas got involved."

Of course, every MJNA press release includes a "Forward-Looking Disclaimer," a legal protectant that shields the company from ramifications if "the actual results, performance, or achievements of Medical Marijuana Inc. [are] materially different" from predictions made in its press releases. Such disclaimers are typical in press releases issued by publicly traded companies.

MjNA's financials didn't seem to jive with the promises touted in the company's press releases. During the first half of 2011, for example, Medical Marijuana Inc. announced that it was going to transfer shares to Hemp Deposit and Distribution Corporation in exchange for a facility that would "generate in excess of $40 million in revenue annually."" Over a year later, however, an audited financial statement for Medical Marijuana Inc. revealed that the company only had $16 million in assets, and of that, less than $15,000 was derived from facilities and real estate."

Was Medical Marijuana Inc. dissembling about the transfer in order to pump up enthusiasm for its stock?

The complex enmeshing of "shell companies"—companies that act as vehicles for business transactions without actually having any assets or operations themselves—is another hallmark of pump and dump schemes, says Seattle-based Canna Law attorney Robert McVay.

"Novice investors will see the complicated structures and holding companies that have a bunch of shell companies attached to them, and [then] people put trust in these companies because they seem large and professional," McVay told Project CBD."

Corporate start-ups can also bolster their legitimacy—or shroud their stock market schemes—by entering into strategic relationships with affiliate firms whose public image is mutually enhanced by the partnership. Companies reference each other in their press releases, McVay explained, "and they're able to pump each other up in terms of how they're doing. You see it a lot when a company is involved in fraudulent action."

CannaVest and PhytoSphere Medical Marijuana Inc. went into damage control mode in September 2012 when its interim CEO Michael Llamas was indicted for mortgage fraud. A MJNA press release quickly announced that he

C 2014. Project CBD All rights reserved. 8

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was stepping "down from his position in order to focus his attention on personal business matters that are entirely unrelated to MJNA." 5°

A few months later, Michael Mona Jr. left his post as Management Committee Chairman of Red Dice Holdings, a MJNA subsidiary, to launch a new company called CannaVest. 51 A corporate brochure published by CannaVest states that "Mr. Mona worked as a consultant to Medical Marijuana Inc. until early 2013 when he was named President and CEO of CannaVest Corp."'

From January 2013 onward, CannaVest and Medical Marijuana Inc. not only pumped each other up in their press releases, they also formed a production and distribution line for CBD-infused "hemp oil" imports that bound the two together like the intestinal tract of conjoined twins. And they regularly exchanged shares with each other, lending an appearance of growth and productivity to outsiders.

The corporate headquarters of CannaVest is located on Rainbow Avenue in Las Vegas, Nevada, in the same Sin City suite that was also home base for a company called Roen Ventures. Co-founded by Mona and Llamas, Roen Ventures was hit with a $17.77 million legal judgment in 2012 for facilitating fraudulent land transactions in California."

Before January 2013, CannaVest was known as Foreclosure Solutions, where Mona served as President and CEO. 54 In order for Foreclosure to transition into CannaVest, some of Mona's associates in other industries began buying CannaVest shares. Mona also funneled a $3 million loan through Roen Ventures to CannaVest, a maneuver that rankled Far West Industries, the creditor that had won the $17.77 million settlement against Roen Ventures. Far West Industries said that loan "was intended to prejudice creditors like Far West by concealing and wasting assets that would otherwise be available to satisfy the [$17.7 million] judgment" 55

But no matter. It was a new year, and Mona and his partner Llamas, the disgraced majority shareholder of Medical Marijuana Inc., had positioned themselves at the top of a nascent industry where investors were clamoring to get a piece of the action. Voters in Colorado and Washington had recently cast their ballots for legal recreational cannabis and the value of any stock even tenuously connected to ganja went soaring.

In a glowing press release dated March 1, 2013, Medical Marijuana Inc. announced that it was selling its subsidiary PhytoSphere (which processed the hemp paste from abroad) to CannaVest for $35 million in "CANV" shares.56 It sounded impressive on paper, but CannaVest scarcely had an operation to justify any meaningful valuation of its shares." SEC filings show that CannaVest only had a total of $431 in assets at the time the transaction was announced. 58

"The terms of the transaction were the result of arms-length negotiations between the parties, unaffected by any prior relationships," explained Michael J. Mona, III, VP of Operations for CannaVest (the CEO's son)."

Throughout 2013, Medical Marijuana Inc. reported that it was handing off incremental parts of its portfolio company PhytoSphere to CannaVest for piecemeal infusions of $35 million in CannaVest

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shares.° Each new pronouncement gave a momentary jolt to the price of Medical Marijuana Inc. shares, their value inflated by overblown press releases and a cannabis-crazy zeitgeist.

"Medical Marijuana Inc. has never sold a single share of CannaVest, so it's done no good for the company," said Alan Brochstein, founder of 420 Investor, in a phone conversation with Project CBD. Brochstein is cautious about labeling the MJNA-CANV collaboration a "fraud," but he acknowledges that the whole thing is suspect.

"They put an arbitrary price of $35 million, and said it was all going to be paid in [CannaVest] stock and not cash. But [CannaVest] was a shell company that had no operation, so the whole thing looks fraudulent," he said. "How did they come to $35 million?"'

Brochstein isn't the only investment analyst who has challenged the financials of weed start-ups like Medical Marijuana Inc. "Most of these over-the-counter weed penny stocks are just vehicles for their insiders to sell shares to retail investors caught up in the hype of the legalized marijuana revolution," wrote Cody Willard in the Wall StreetJourna/Market Watch blog."

Insiders at CannaVest and Medical Marijuana Inc. held much of each other's shares, and some would later sell them to credulous traders at a significant markup.

For example, Stuart Titus, the owner of ICannaway's parent company, General Hemp, and a key financier for Medical Marijuana Inc., sold over $4 million worth of CANV shares in early 2014 as their value reached an astronomical $166.17 each." The rise and fall of CANV's price trajectory looks like the Burj Khalifa skyscraper shooting up from the streets of Dubai."

One reason why CANV shares spiked so high is that Medical Marijuana Inc. sold PhytoSphere "assets" to CannaVest for $35 million (almost exclusively) in CANV shares, a transaction that bolstered both companies' profiles at little actual cost CannaVest also issued 900,000 of its shares to PhytoSphere as part of that deal." The whole transaction was somewhat like the episode of Beavir and Buttheadin which the two teenagers sell all their chocolate bars to each other for the same pair of dollars.

The mega-valuation of CANV shares may have temporarily boosted MJNA's valuation because of "a weird feedback loop" created by Medical Marijuana Inc., writes a representative of Rolling 0 Research on the investor website SeekingAOha. "[Medical Marijuana Inc.] mentions ... CannaVest in their PR. Some readers then think that CannaVest sold much more product than it likely did, which increases the price of CANV shares. That increases the value of MJNA's CannaVest holdings on the balance sheet, providing support to a higher [MJNA] stock rip cep6o

MJNA stock peaked at about 50 cents, but since then its price has hovered below 20 cents per share. ° By October 2014, CANV shares had dropped precipitously to $3.00, a change facilitated by a barrage of bad press. An article in Forbes, "Inside the Pot Stock Bubble" (March 26, 2014), disclosed that CEO Mona was attempting to sell 10 million CANV shares for $1.50 each. These restricted shares couldn't be traded publicly for another six months. When queried about this deal, Michael Mona III of CannaVest told Project CBD that this offering had been terminated on April 23."


www.cannabidial.com


On May 9, purchasers of CANV stock filed a class action lawsuit against CannaVest. The lawsuit followed a disclosure by CannaVest to the SEC that it had "misreported" its financial position throughout 2013. 69

"We believe the claims are without merit and intend to vigorously defend the company and management," CannaVest VP Michael Mona, III, stated in an email to Project CBD.'

The Hemp 011 Pipeline PhytoSphere, the centerpiece of the questionable MJNA-CannaVest deal, processed imported hemp paste for Medical Marijuana Inc.'s CBD-infused products. Imported from where? That's a secret Canada? Germany? Eastern Europe? Yunnan, China? All of the above? Rumors abound.

Medical Marijuana Inc. reportedly opened an office in Bucharest in 2012, but the company hasn't disclosed whether Romania is the source (or one of the source countries) of the industrial hemp that it uses to make its paste. Because the industrial hemp paste is relatively high in CBD and low in psychoactive THC, it's legal to buy, sell, and possess products made from this paste in all fifty U.S. states, according to Medical Marijuana Inc.

Denver-based Dixie Botanicals, a Medical Marijuana Inc. affiliate, was the first company to mass market CBD as a "wellness" product on a nationwide scale. For a year or so, Dixie was MjNA's showpiece—a real business ostensibly manufacturing and selling real products. Medical Marijuana Inc. supplied the CBD-infused hemp oil for Dixie's tinctures, capsules, and a topical "pain relief salve."

Dixie also sells THC-dominant offerings to Colorado residents. But quality control has not been Dixie's strong suit. Independent lab analyses found that the amount of cannabidiol contained in Dixie's "X Dew Drops" CBD tincture was significantly lower than what the label indicated, as 0 'Shaughnesy's disclosed in Spring 2013. 7' More than a year later, the Denver Post and other news media would report mislabeling problems that overstated the THC content in Dixie's edibles.'

Medical Marijuana Inc. and Dixie consummated their relationship in the spring of 2012 with the creation of a co-owned company called Red Dice Holdings. Medical Marijuana Inc. agreed to give Dixie hundreds of thousands of MJNA shares in exchange for intellectual claim and licensing rights toDixie's brand and its cannabinoid-infused tinctures, drops, candies, soda, etc. Dixie owner and managing director Vincent ("Tripp") Keber became president and CEO of Red Dice Holdings and a board member of Medical Marijuana Inc. "I make companies to sell companies," Keber boasted to The Datly Beast. "Make me an offer, and I'll ride off into the sunlight with saddlebags of gold.""

Less than a year after forming Red Dice, Medical Marijuana Inc. and Dixie had a falling out. Dixie took Medical Marijuana Inc. to court for allegedly never handing over all the MJNA shares and for breach of contract after Medical Marijuana Inc. allegedly engaged "in a pattern of behavior intended to mislead and defraud investors, affiliates, subsidiaries, and business partners." 74 They would eventually make amends, agreeing on an amicable split, Th but not before Tamar Wise, formerly Dixie's chief scientist, blew the whistle on both companies. After she left Dixie, Wise posted this message on Facebook (since removed):

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"I'm tired of so called CBD companies claiming that what they provide is medicine. Anyone using a • CBD from hemp product please be aware of what you're actually getting b/c it is not what you think. These formulations start with a crude and dirty hemp paste contaminated with microbial life! I have seen this and these organisms decompose the paste. The paste perhaps even contains residual solvent and other toxins as the extraction [is] made in a process that actually renders it unfit for human consumption. What these companies are doing is criminal and dangerous . . I cannot keep quiet any more. And since I formulated most of these products as head of Dixie science, I feel responsible for spreading the truth. I left Dixie for ethical reasons but it is not enough to just walk away. These frauds need to be exposed for what they are .... Let's keep this industry pure and safe."765

Alarmed by what she saw in Medical Marijuana Inc.'s hemp paste, Wise shared her concerns in a phone conversation with Dr. Jeffrey Raber of the Los Angeles-based Werc Shop, which tests medical marijuana products for cannabinoid content, mold, and pesticide residue. Wise suspected that Medical Marijuana Inc. was extracting its CBD paste from retted hemp—industrial hemp that had been specially treated with micro-organisms and moisture to dissolve cellular tissue, thereby expediting the removal of the slippery raw fiber, which is used for producing textiles and other goods.

Chris Boucher, director of U.S. Hemp Oil, the CannaVest subsidiary that supplies CBD-infused "hemp oil" to Medical Marijuana Inc., adamantly denies all of Wise's claims. "She's insane," Boucher told Project CBD. "That's what happens in this business. People shoot arrows at people's back for no reason. 3,77

A true believer in the plant's economic and medicinal potential, hemp industry veteran Boucher served as lead project coordinator for an experimental hemp grow at the U.S. Department of Agriculture's research center in California's Imperial Valley in the early 1990s. Boucher is currently VP of business development for CannaVest, which tasked him to run U.S. Hemp Oil when it launched in June 2013. Initially, U.S. Hemp Oil was "a joint venture between MJNA and CannaVest," Boucher told the Marijuana Business Da4.78 Now CannaVest owns U.S. Hemp Oil outright.

CannaVest supplied the hemp oil that Medical Marijuana Inc. turned into something called "Real Scientific Hemp Oil," a CBD-infused concentrate. (There are two grades of Real Scientific Hemp Oil: "Blue," said to be around 17 percent CBD, and "Gold" at around 25 percent CBD, though these percentages may vary somewhat from batch to batch.) CannaVest also manufactured and

S Dixie responded to Wise in a strongly worded defense of their products and manufacturing practices, claiming "Ms. Wise and members of her science team resigned after a dispute with the company" over intellectual property rights, and were motivated to make false allegations by their desire to embark on a new endeavor "that will compete directly with Dixie Botanicals."


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packaged an array of other CBD-infused hemp oil products—chewing gum, tinctures, vape pen cartridges, topical creams—that were sold through Medical Marijuana Inc.'s marketing subsidiary HempMeds.

Real Scientific Hemp Oil (RSHO) is much more expensive than hempseed oil, a widely available nutritional supplement An 8-ounce bottle of Nutiva Hempseed Oil retails on Amazon for $9.02, while a 2-ounce bottle of MJNA's Cibdex Hemp Oil tincture—sold by HempMeds—fetches $160. Real Scientific Hemp Oil with 2,200 mgs of CBD (assuming the label is accurate) sells online for $549.

'We have no control over the price:' Boucher maintains. CannaVest says it sells its hemp oil wholesale to "qualified individuals" and businesses for around ten cents per milligram. "And they in turn mark it up," according to Boucher. 79

What's in RSHO that commands such a high retail price? HempMeds promotional literature states that RSHO is derived from "hemp seed and stalk." But CBD is not produced or pressed from hemp seeds. Cannabidiol can only be extracted from the flower, leaves, and, to a very minor extent, the stalk of the hemp plant.

CBD-rich "hemp oil" is not the same as protein-rich hempseed oil. The obfuscation of nomenclature is problematic to Eric Steenstra, president of Vote Hemp and a founding member of the Hemp Industry Association. "Our biggest concern, from an industry standpoint, is the conflation of hemp oil with cannabidiol," explained Steenstra. "The reality is that the best source of CBD is high resin strains of cannabis—the drug kind.""

Legal In All 50 States? MJNA's promotional strategy for its RSHO product line has relied heavily on social media, press release hyperbole, and a relentless email barrage from "The CBD Guy," whose messages are often comically alarmist: 'Right now, know it or not,you are likely CBD Ifyou know what is good foryou,

you will add some. Any amount is better than none.'

" On June 26, 2014, the Hemp Industries Association (HA) issued a press release stating its position on CBI) Extracts Misbranded and Marketed as "Hemp Oil." The press release asserted: "It is important for America farmers and processors of hemp to understand that most CBD in products mislabeled as 'hemp oil' is a co-product of large-scale hemp stalk and fiber processing facilities in Europe where the fiber is the primary material produced at a large scale. CBI) is not a product or component of hemp seeds, and labeling to that effect is misleading and motivated by the desire to take advantage of the legal grey area under federal law. Hemp seed oil does not contain any significant quantity of CBD." In order not to mislead consumers, the HIA maintains that "CBD products in the market should not be termed 'Hemp Oil' and we are working with vendors of such products to rebrand CBD extracts to remove the market confusion this causes."


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Repeated missives from The CBD Guy hyped various MJNA products, including CanChew, a chewing gum infused with cannabidiol. Several websites sell a CBD-infused chewing gum product—not to be cmyrused with Can Chew marketed by HempMeds—that also contains Kratom, an opiate receptor agonist (activator) that is banned in several Asian countries."

Another announcement trumpets: "Stronger CBD Vape Oils [are] on the Way!"

Apparently vaping hemp oil and whatever else was in there didn't pack much of a therapeutic punch, but The CBD Guy promised better times ahead: "I am working with a few vape oil manufacturer (sic) seeing if I can get a special 'batch' of vape oil that may indeed have enough CBD per 'puff to make it a practical way of adding CBD to your daily diet." 82

And, of course, every email blast featured MJNA's marketing mantra: "Legal in all 50 states."

Not so fast, says the Food and Drug Administration. When queried in July 2013 regarding the legal status of cannabidiol, Lisa Kubaska, who works for the FDA's Center for Drug Evaluation, told Fred Gardner of 0 'Shangbnery's: "CBD meets the definition of schedule I under the Controlled Substance Act The DEA is the regulatory agency.""

Thus far, the DEAL has not moved against Medical Marijuana Inc. or any of its subsidiaries. Does this mean that CBD products are legal to possess or distribute throughout the United States? Medical marijuana dispensaries are illegal under federal law, but these facilities operate openly in several states.

Although it is nontoxic, non-addictive, and non-psychoactive, cannabidiol is still illegal, according to the Drug Enforcement Administration. The DEA categorizes CBD and all other plant cannabinoids under "tetrahydrocannabinols," which are Schedule I substances.

On July 28, 2014, a bipartisan group of Congressmen introduced a bill in the House of Representatives to exclude industrial hemp and CBD from the definition of marijuana under the Controlled Substances Act. Such a bill would not be necessary if CBD extracted from foreign-grown industrial hemp was already legal throughout the USA, as Medical Marijuana Inc. blithely asserts. Meanwhile, draconian legal restrictions make it nearly impossible for American scientists to access plant-derived CBD to conduct medical research.

Those who insist that federal policy allows the importation and distribution of hemp-derived CBD rest their case on a 2004 federal appeals court ruling, which protected the domestic sale of hemp-

ft Robert Esty, CEO of Mastica Mediu, which manufactures CanChew for MedicalMarijuana Inc., asserts that CanChew does not contain Kratom. 'We lab test all of the hemp oil we receive from any company for CBD %, micro, metal, pesticide and solvents as required by GMP regulations," Esty noted in an email to Project CBD. "So far, all of the hemp oil has passed testing (including all of the Cannavest oil) before being used in production." (October 14, 2014)

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containing foods, not hemp-derived drug compounds. Although U.S. farmers were still not permitted to grow it, industrial hemp remained legal for import and sale in the United States as long as (1) the hemp product is derived from the seed or stalk of the plant, not from the leaves and flowers; and (2) the THC content measures below 0.3 percent. °

But cannabidiol was never mentioned in the appeals court ruling. Nor was CBD mentioned in an October 9, 2001, DEA interpretive memo pertaining to retted fiber hemp products and essential fatty acid-rich (not CBD-rich) hempseed oil. Neither of these rulings explicitly addressed the legality of CBD as a drug compound extracted from industrial hemp.

It may be a moot point, anyway, given that several lab reports showed THC levels higher than 0.3% in samples of Medical Marijuana Inc.'s Real Scientific Hemp Oil. A tube of RSHO analyzed by CannLabs in Denver weighed in at 1.01 percent THC. ° The Werc Shop in Los Angeles found THC levels at 1.14 percent when it tested RSHO. ° PhytaLab in Seattle got a 2.56 percent THC reading for RSHO Gold. ° HempMeds promotional literature even included a certificate of analysis of hemp oil paste with THC measuring .79 percent by dry weight, more than double the apparent legal limit (see Appendix A).

Many other lab tests of RSHO samples, it should be noted, found less than 0.3 percent THC in accordance with DEA policy.

Overall, these inconsistent results undermine Medical Marijuana Inc.'s tortured argument that its products are legal in all 50 states. In terms of federal law, anything above 0.3 percent THC, or anything extracted from the leaves and flowers of hemp, would not be legal in any state. It shouldn't be this way—the laws banning hemp are absurd—but it is.

Patented CBD Troubles were mounting for Medical Marijuana Inc., which reported a paltry $45,000 in total revenue from its CBD-rich hemp oil products for the first quarter of 2014. 88 Poor sales, the pending class action suit against its hemp oil supplier CannaVest, and the erratic THC levels found in its hemp oil products were among a series of problems that called into question the company's long term prospects.

In the spring of 2014, during the countdown to the much-ballyhooed ICannaway "buzz launch," a controversy erupted at another MJNA portfolio company, KannaLife Sciences. Linked to Medical Marijuana Inc. in numerous ways, KannaLife featured a familiar cast of characters on its board of directors, including Stuart Titus, owner of ICannaway's parent company, General Hemp. KannaLife is also wed to Kannaway in a five year sales and distribution contract that allows KannaLife to certify products sold through the Kannaway Network. °

KannaLife Sciences, a recipient of $1.5 million in financing from Medical Marijuana Inc. and CannaVest, was purportedly engaged in the research and development of cannabinoid-based medicinal agents. 90

But KannaLife's executive director Dean Petkanas did not have a background in cannabis science. Instead, he got his professional start in the early 1990's as the chief financial officer of Stratton Oakmont, the corrupt penny-stock company featured in The }For of Wall Street.'


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Petkanas left Stratton Oakmont before the FBI and SEC popped the firm for pump-and-dump fraud. 92

Petkanas subsequently was hired by Xechem International, a publicly traded company, to commercialt7e a "phyto-pharmaceutical" compound for treating Sickle Cell Disease. But Xechem, which had acquired rights to an indigenous African plant compound, declared bankruptcy and folded after its Nigerian subsidiary was targeted by multiple lawsuits from creditors, consultants, former officers, and third parties?'

Petkanas was also executive director of a publicly traded energy drink company called Full Motion Beverage (FMBV). That company has not filed with the SEC since 2009, and had zero sources of revenue flow in 2012, yet the website Penny Stock Research discovered that third party companies were paid to heavily promote FMBV shares that were virtually worthless."

It's somewhat of a head-scratcher how Petkanas was able to convince the U.S. government to award Katmai ire Sciences a patenting license to commercialize CBD. In 2003, the U.S Department of Health and Human Services had secured a patent tided "Cannabinoids as Antioxidants and Neuxoprotectants" based on preclinical research involving CBD and THC. Nine years later, the National Institute of Health (NIH) "granted an exclusive license to the patent to Kannafife to develop drugs ... for the treatment of hepatic encephalopathy [brain damage caused by a diseased liver]," Renate Myles of NIH confirmed in an email to Project CBD. 95

Myles noted that other companies and investigators could still apply for licenses for the same patent to develop a CBD-based pharmaceutical for treating neurological diseases that are not liver-related. Thus far, however, no other company has done so during the patent's eleven-year existence.4

Thanks to the U.S. government, PetIcanas and his Medical Marijuana Inc. cohorts had another tool to hustle their stocks and products while donning the cloak of official credence. A "Kannaway Executive Summary" lists the NIH patent among several bulleted highlights for potential salesmen and women who are seeking "a ground-floor opportunity with an explosive-growth and breakthrough nutraceutical network marketing company." In addition to dubiously claiming that "MJN.A controls the seed supply of CBD rich hemp" and "CBD-rich hemp oil products are already legal in all 50 states," the Kannaway Executive Summary hypes the "exclusive tights to NIH patent #6630507 on therapeutic use of cannabinoids."

if In 2003, the U.S Department of Health and Human Services secured a patent titled "Cannabinoids as Antioxidants and Neuroprotectants" based on prerlinical research, which revealed that cannabinoids, specifically CBD and THC, "have antioxidant properties [and] are found to have particular application as neutoprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer's disease, Parkinson's disease and HIV dementia."


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Project CBD Special Report: Hemp OH Hustlers

Myles from the NIH told Project CBD that Kannaway's "use of the patent for marketing purposes does not fall within the scope of [the NIH's] patent." However, a U.S. Patent Office representative conceded that Kannaway's use of the patent for marketing is technically not a violation of the law."

But KarinaLife Sciences may have overstepped when it entered into a five-year sales and distribution contract with Kannaway. Partnering with what appeared to be a tawdry pyramid-scheme seemed opportunistic and in poor taste to some. It sparked a mutiny among members of KannaLife's scientific advisory board. Two science advisors, Dr. Michelle Sexton and Jason Cranford, quit in protest.

'We had a big scientific advisory board, but we never had one advisory meeting," said Cranford, who also served on KannaLife's corporate board. `We never had a board of directors meeting. When KannaLife started merging with ICannaway, I demanded a board meeting to bring it to a vote, but they refused. So I resigned." 97

Hard to Stomach Jason Cranford, a horticulturist, CBD-rich strain breeder, and proprietor of a medical marijuana dispensary in Colorado, would become a major thorn in the side of Medical Marijuana Inc. In addition to growing cannabis for patients and giving away CBD-rich clones to needy families, Cranford ran a non-profit charity, the Flowering Hope Foundation. He gained notoriety in 2013 when he developed a strain of CBD-rich cannabis called Haleigh's Hop; which later became the name of a bill (Haleigh's Hope Act) that legalized CBD-dominant marijuana for research purposes in Georgia, one of several states that have passed so-called "CBD-only" bills this year.

The KannaLife fiasco prompted Cranford to take a closer look at the machinations of Medical Marijuana Inc. Concerned about the quality of its aggressively marketed products, he put out feelers on Facebook, asking whether anyone had problems with Real Scientific Hemp Oil. The first person to respond to Cranford's inquiry was Brittany Warrior, whose epileptic daughter Jaqie suffered severe gastro-intestinal distress and was hospitalind in Denver after she ingested RSHO.

After conferring with Cranford, Warrior contacted the FDA and filed a complaint against HempMeds. She sent the FDA the hemp oil that allegedly made her daughter sick. This prompted the FDA to open an investigation into Medical Marijuana Inc.

Warrior also sent Cranford some of the RSHO she'd given Jaqie. He had it tested at CannLab in Denver. The results indicated a THC level higher than 0.3 percent, but that wasn't the only thing Cranford suspected was wrong with the hemp oil. After hearing serious complaints about RSHO from more than a dozen families, he decided to have a RSHO sample tested for heavy metals and other toxins.

Most cannabis testing labs do not test for heavy metals, so Cranford submitted the RSHO sample to Stewart Environmental Consultants in Fort Collins. The initial results appeared to confirm what Cranford and Warrior had suspected: The RSHO contained high levels of several heavy metals, including nickel, selenium, molybdenum, arsenic, and silver.


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A few days later, Stewart Environmental Consultants issued a second report that contradicted its earlier findings: Five numbers, all pertaining to heavy metal toxins, were changed from unsafe to safe levels (see Appendix B).

Stewart maintained that its lab technician had erred in his haste to get results for Cranford. But Stewart did not comply with Project CBD's request for a copy of the corrective action report that a lab is supposed to generate for internal quality control when test results are modified. A corrective action report would explain why the RSHO sample was retested and what accounts for the discrepancies between the first results and the second set of findings.

Nor did Stewart explain why the same lab technician who supposedly botched the first test also conducted the second test when there were two other lab technicians who could have retested the RSHO sample. Several more red flags suggested lab-testing improprieties, which Project CBD noted in a detailed memo to Stewart (see Appendix B). Stewart did not respond to our questions.

Be that as it may, Medical Marijuana Inc. proceeded to post the second set of innocuous test results online along with an upbeat press release claiming that a "top laboratory" gave the company's flagship product a clean bill of health."

Subsequent testing by other analytical labs, including a DEA and FDA registered facility, would not give Real Scientific Hemp Oil a dean bill of health.

Brave Mykayla In the fall of 2013, Brandon Krenzler was contacted via email by Charles Vest, vice president of HempMeds, then the marketing arm of both Medical Marijuana Inc. and CannaVest. He offered to send samples of Real Scientific Hemp Oil to Krenzler to give to his 8-year-old daughter, Brave Mykayla, who was undergoing chemotherapy for leukemia.

Krenzler was already administering cannabis oil to help his daughter. He told Vest that Brave Mykayla responded better to high-THC oil than high-CBD concentrates. But Vest persisted, even offering to travel to Oregon to meet Krenzler and his family at their home. Krenzler finally relented—what did he have to lose?

Before long, Vest and a man who identified himself as Michael Mona of CannaVest were sitting in Krenzler's living room, speaking with him and his wife about their hemp oil products. It turns out it wasn't Michael Mona; it was Michael Llamas, former CEO of Medical Marijuana Inc., pretending to be Mona for reasons unclear."

Vest explained to the Ksenzlers that HempMeds would loan them a certain amount of RSHO if they agreed to spread the word and sell it to their friends. There was little talk of medicine or helping sick children—the meat of the conversation was about marketing and making money, according to Krenzler.

Then Vest said something that stunned Krenzler. Vest wanted to know if the family was interested in branding RSHO "Brave Mykayla Oil." "I wasn't comfortable with that," Krenzler told Project


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Project CBD Special Report Hemp Oil Hust lers

CBD. "[CBD oil] wasn't the oil that worked for Mykayla, so why would they even consider asking that?"1°3

Despite harboring some doubts, Ksenzler agreed to share a few samples of RSHO with others in Oregon's medical marijuana community. Vest and "Mona" encouraged him to tell his friends that RSHO was safe for use.

ICrenzler gave some RSHO to Mykayla. Almost immediately, she complained of severe stomach cramps. When he tried it himself, Krenzler's guts started camping soon after ingestion. Other people he'd sent samples reported similar gut-wrenching reactions.

Krenzler complained to HempMeds, but Vest denied there was a problem. Interviewed by Project CBD, Krenzler recounted what he told Vest over the phone: "I said, Please Charles, as a human being, stop selling this oil. Please stop.... I don't care if you give it to adults. I don't care if it's marketed as a supplement. Stop specifically giving it to children. You're going to poison them." 101

Krenzler subsequently provided two samples of RSHO oil—one Gold, the other Blue—to Project CBD. Dr. Noel Palmer of PhytaTech, an analytical lab in Denver, Colorado, was enlisted to scnitini7e this material. Project CBD also sent PhytaTech a RSHO Gold sample from a Crohn's patient who said that she and a friend both became "violently ill" after they ingested the oil. In addition, PhytaTech analyzed two other random samples of RSHO Blue that Project CBD submitted.

The three RSHO Blue samples tested clean. But Dr. Noel Palmer found significant levels of hexane, a highly toxic industrial solvent, in both RSHO Gold vials: en Symptoms of hexane poisoning include nausea, vomiting, headaches, dizziness, and mental confusion. Concentrations of hexane in excess of 50 grams can be fata1. 1°3

Chromatographs of the RSHO Gold samples also showed a second major peak, presumably another chlorinated solvent, which PhytaTech was unable to identify due to equipment limitations (see Appendix C).

In an effort to verify PhytaTech's findings and identify the mystery peak, Project CBD contacted Flora Research Laboratories, a DEAL and FDA registered facility in Grants Pass, Oregon, which agreed to examine the two RSHO Gold samples strictly because of public health and safety concerns, not for commercial purposes.

James Neal-Kababick, director of Flora Research Laboratories, confirmed the presence of significant levels of hexane and other solvent residues in the RSHO Gold sample from Krenzler (see Appendix D). 1°4 A smorgasbord of contaminants were found in this item, including variants of pentane, butane, and ethyl acetate (as in nail polish remover).

These are all "class one solvents, the most dangerous and toxic class of solvents," explained Dr. Jahan Marcu, a Project CBD science consultant 105


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In his lab analysis, Neal-Kababick noted that the first sample he tested ended up clogging his equipment: "Major residue left on needle and found on vented caps of used vials.... Ran multiple vials of water to dean system of carryover.. . . Carryover dissolved after triplicate runs of water vials." Neal-Kababick had never encountered such a problem before: "Carryover issues not observed in historical samples of other matrices tested." 106

These carryover issues may have been a factor as Neal-Kababick was unable to conduct a satisfactory analysis of the second RSHO Gold sample from the Crohn's patient. That sample showed no peaks at all, underscoring the need for another battery of tests, which are pending.

Buying Legitimacy On April 1, 2014, a Medical Marijuana Inc. press release announced the launch of new PR campaign aimed specifically at families with disabled children. lin The "Don't Move" campaign, as it was called, urged families not to move to states with legal medical marijuana to access CBD-rich cannabis strains, some of which are known to work wonders for children suffering from catastrophic seizure disorders. 'We are launching the new 'DON'T MOVE' advertising campaign to further increase awareness of the CBD-rich hemp oil products we represent," Vest stated in the press release. "Rather than move to another state, consumers need only to move to the nearest computer or smart phone to order online."

In an effort to burnish its public image and increase its market opportunities, Medical Marijuana Inc. has spread lots of cash around. A "featured member" of the National Cannabis Industry Association (NCIA), it has foot the bill for some of the association's meetings. "As the sponsor of the NCIA's Educational Series conference during the historic '420 week,' HempMeds is showing support for all cannabis businesses in this rapidly growing and changing industry," HempMeds VP Charles Vest crowed in another press release. 108

The show of support for all cannabis businesses included a HempMeds web banner ad, which implored (without a hint of irony): "Invest in medical marijuana penny stocks and weed out scams."F"

On Memorial Day weekend 2014, AutismOne, an organization that promotes alternative therapies for autistic children, held a conference at the Intercontinental Hotel near the O'Hare Airport in Chicago. The "exclusive gold sponsor" for this event was HetnpMedsPX, which occupied a spacious lounge area where well-meaning parents purchased Real Scientific Hemp Oil and other Medical Marijuana Inc. products for their ailing offspring.

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Medical Marijuana Inc. has also sponsored events hosted by the American Herbal Products Association, Americans for Safe Access, and other groups allied with Project CBD. 55 But some cannabis advocacy organizations were less receptive to MJNA's blandishments. When a ICannaway rep tried to set up a vending booth at the Patients Out of Time conference in Portland, Oregon, in May 2014, he was promptly told to leave. Apparently the Kannaway salesman had signed up for a booth under a different company name.

HempMeds also approached Project CBD about "forming a strategic alliance." An email dated June 3, 2014, from Jennifer Yarbrough, an independent account manager working with HernpMeds, indicated that "we may be interested in an investment" in Project CBD. n° Project CBD did not respond to this overture.

"HempMeds is trying to buy legitimacy within the medical marijuana community and beyond," says Project CBD director Marlin A. Lee. "But legitimacy can only be earned by offering high quality products at reasonable prices. It appears that Medical Marijuana Inc. falls short in this regard."

Lee is concerned that the activities of Medical Marijuana Inc. could discredit the entire grassroots cannabis community and the industry it has spawned—from mom-and-pop organic growers and cannabis oil artisans to well-heeled start-ups. Drug war defenders doubtless will revel in any fact or rumor suggesting that an ethically challenged cabal has been swindling stockholders and peddling poisonous, THC-laden products in all 50 states. This will be grist for the mill of diehard prohibitionists who are looking for any excuse to roll back the gains made by medical marijuana and industrial hemp advocates.

But the problem, in this case, is not cannabis or CBD or THC. The problem is greed and conunerris1i7at1on. "The questionable nature of Medical Marijuana Inc.'s business dealings and its overpriced products suggest that they are trying to make a fast buck by preying upon people who are desperate for miracles," says Lee.

Site Visit In July 2014, a Project CBD delegation visited the laboratory facilities of CannaVest in San Diego, where the imported hemp paste is refined into oil. We were greeted by lab director Joshua Hartsel and CannaVest executives Chris Boucher and Michael Mona III.

Hansel, the lead scientist at CannaVest, sperin1i7es in medicinal organic chemistry. He earned a PhD at Virginia Tech and completed a postdoctoral fellowship at the University of California. He

§S HempMeds provided funds for the national conference of Americans for Safe Access in April 2014. This conference included a panel discussion on CBD with critics and representatives of Medical Marijuana Inc. The American Herbal Products Association has hosted several meetings involving critics of Medical Marijuana Inc. in an effort to sort out proper nomenclature for marketing hemp products.

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subsequently founded Delta-9 Technologies, an analytical testing lab that serviced California's medical marijuana industry. Hartsel's clients included CannaVest, which sent the first of several batches of its CBD-infused extract to Delta-9 Technologies for evaluation in March 2013.

A half year later, Hartsel was hired by CannaVest to establish an in-house laboratory and oversee research and development for the company. Hartsel got the job after being interviewed by CannaVest CEO Michael Mona Jr. and Michael Llamas, the former CEO of Medical Marijuana hic.m

Prior to September 2013, CannaVest did not have a science department, according to Hartse1. 112 But CannaVest, through its subsidiary PhytoSphere, had been providing CBD-infused hemp oil to Medical Marijuana Inc. for several months before Hartsel came on board.

The exact role of PhytoSphere in the hemp oil pipeline remains somewhat of an enigma. Originally a wholly owned subsidiary of Medical Marijuana Inc., PhytoSphere was supposedly sold to CannaVest in exchange for $35 million in CANV shares. But CarmaVest insiders told Project CBD that Medical Marijuana Inc. never fully dissolved its portion of PhytoSphere. ns "At one point, we had a PhytoSphere and they had a PhytoSphere," said Michael Mona

To allay confusion as to the status of Phytosphere—and perhaps also to distance itself from any problems that may have arisen prior to forming an in-house science team—CannaVest changed the name of Phytosphere to CannaVest Laboratories, LLC.

Project CBD was invited to tour the lab by the CannaVest management team, which sought to make a good impression by showing their "full portfolio of scientific instrumentation." The lab was equipped with gas chromatography, liquid chromatography, and mass spectrometry machines. We saw a binder filled with chrornatographs and charts indicating CBD content and other data, but we did not have a chance to examine these reports.

The CannaVest lab was also equipped with distillation tools for processing crude hemp paste and refining it into a CBD-rich oil concentrate. We saw dozens of 25-kilogram drums filled with thick, black, tarry paste that lacked the compelling aroma of cannabis. We were told that the raw CBD paste was extracted from hemp strains certified by the European Union. "It's a mix between Italian and Czech cukivars," said Boucher. "We use super-critical CO2 technology to extract the or'

The initial extraction is done in Europe and the paste is shipped to the United States. "Our oil is cleared through Customs, Homeland Security, and the FDA on a regular basis," according to Boucher: 16

After it arrives at the lab, the paste is heated and decarboxylated in large stainless steel pans. The hemp paste is further refined through what seemed to be a two-stage vacuum distillation process, resulting in a CBD oil concentrate.

Hartsel utilizes additional separation equipment to brew "CBD Simple," a super-refined oil, which reportedly measures close to 100 percent pure cannabidioL This oil has won awards for highest CBD concentrate at several High Times cannabis cup competitions that were sponsored by


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HetnpMeds, Medical Marijuana Inc.'s marketing arm. Each High Times award was followed by self-congratulatory PR from HernpMeds, incorrectly implying that the prize-winning CBD concentrate is the same as the RSHO products sold over the Internet. ***

When Project CBD visited CannaVest, the lab did not have equipment to test for heavy metals or fungi-derived mycotoxins. But after allegations surfaced that RSHO was making people sick, CannaVest began sending oil samples for heavy metal analysis on a regular basis to Chemical Solutions, a firm in Philadelphia. Moreover, Hartsel indicated that they would soon be installing state of the art, rapid screening technology to identify the DNA of pathogens. 'We're trying to do this the right way," he assured us.'"

Project CBD does not doubt Hartsel's sincerity, but somewhere along the line it appears that a bad mistake was made, resulting in a poisonous batch of RSHO. Project CBD does not maintain that this batch is typical of all the oil marketed by HernpMeds. We do not know the extent of the problem. Nor do we purport to know who is ultimately responsible for the tainted RSHO Gold, when it was made or what may have happened to the oil after CannaVest supplied it to HempMeds.

A Phyto-Remedial Plant Irrespective of what the lab tests show, there are inherent problems with extracting cannabidiol from industrial hemp stalk, which contains meager amounts of CBD and a trace of THC. ttt

The notion that CannaVest only extracts CBD from hemp stalk strains credulity. But theoretically it might be possible. Let's assume for the sake of argument that CannaVest is actually abiding by federal regulations and forgoing the leaves and flowers. Given how little CBD can be drawn from hemp stalk, a huge amount of plant material would be required for sufficient oil extraction.

Moreover, hemp is a bioaccumulator—it sucks up contaminants from the soil. Once in the soil, heavy metal pollutants are very difficult to remove. Fungi-derived mycotoxins that resist decomposition are another concern. "The more plant material you have to concentrate, the greater the chance of dragging contaminants into it," explained Dr. John McPartland, coauthor of Hemp Diseases and Pests.'

".

Our High CBD awards are given to whatever flower, concentrate, and edible score the highest m CBD content based on the results we get from the labs who test our entries," says High Times senior editor Bobby Black "Unlike the majority of our awards, these are given out based solely on the lab results without any subjective input from judges."

flt Hemp stalk is dotted with tiny sessile trichomes, which are shaped like inverted commas, unlike the mushroom-shaped trichomes on cannabis buds and leaves that are densely packed with carinabinoids and other medicinal compounds. Chris Boucher acknowledges that CannaVest would prefer to extract cannabidiol from CBD-rich cannabis rather than industrial hemp and they hope to do so when the legal environment improves.

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CannaVest says it processes 700,000 tons of industrial hemp annually and turns it into 150,000 kilos of concentrated CBD-rich 011: 19 Hemp's phyto-remedial properties increase the probability that heavy metals, mycotoxins or other poisons will be extracted and concentrated along with the CBD. This problem will vex any business purporting to extract CBD from industrial hemp stalk

When Project CBD visited CannaVest, we heard complaints about the Kannaway campaign and Michael Llamas's mercurial, behind-the-scenes management style. `We're separate, but everyone thinks we're one," CannaVest CEO Michael Mona Jr. insisted. "HempMeds is not CannaVest, and CannaVest is not HempMeds." 12°

But even as it tried to distance itself from Medical Marijuana Inc., CannaVest was burdened by its own corporate history. In June 2014, CannaVest, a MJNA offshoot, announced that it had disposed of several million shares of KannaTife Sciences, a MJNA subsidiary, in exchange for a half million shares of CANV, which had previously been issued to Phytosphere. 121 Shades of Beats and Butthead again.

Divesting from ICannaLife Sciences foreshadowed the split with Medical Marijuana Inc. that CannaVest disclosed in its Second Quarter 10-Q report on August 18, 2014. The text of the 10-Q filing indicates that CannaVest terminated its agreement with HempMeds, its main distributer, because the latter allegedly reneged on several commitments: "[CannaVest] had previously notified HetripMeds that it was in breach of various provisions of the HempMeds Agreement including provisions regarding HempMeds distribution of competing products, the requirement that HerapMeds obtain prior approval of marketing and promotional material% rannaVesesj ability to access HempMeds sales data, and HempMeds payment of amounts due under the HempMeds Agreement, amongst others." 122

In September 2014, CannaVest filed a lawsuit against Kannaway, General Hemp, and the Hemp Deposit and Distribution Corporation, alleging trademark infringement and fraud. 123 This falling-out could mean that Medical Marijuana Inc. will need to find a different source of cannabidiol to remain a viable enterprise, while CannaVest repositions itself to sell cheap, bulk CBD oil directly to nutraceutical producers and third-party distributors.

Medical Marijuana Inc. ultimately is an artifact of prohibition, an opportunistic creature rooted in the cracks and contradictions of a government policy built on lies. Give these hemp oil hustlers their due for realizing early on that there was a large, untapped market for non-psychoactive cannabis concentrates. They shamelessly played the CBD card and pushed the envelope willy-nilly into grey areas of the law.

Several independent hemp oil entrepreneurs are poised to rush through the "CBD-only" door that Medical Marijuana Inc. has opened. All are banking on the presumption that the U.S. government

© 2014. Project CBD. All tights reserved.

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won't risk a public relations fiasco by targeting a CBD-related enterprise!* And those who say they're extracting CBD only from the stalk of industrial hemp are almost certainly being disingenuous. Either they are bluffing to make it appear as though they are operating legally—or they are extracting the oil in a way that makes a dangerous product more likely. Extracting cannabidiol from hemp stalk ups the risk of concentrated, bio-accumulated contaminants because so much plant matter has to be processed to get any CBD.

At the very least, the sketchy saga of Medical Marijuana Inc. underscores the importance of implementing sensible regulations for therapeutic cannabis—let's ditch the hemp pretense—in accordance with standards that apply to other medicinal herbs. All cannabis oil products should be lab tested for contaminants and labeled accurately for content. If tainted products are discovered, they should be recalled without delay. And should it come to pass that regulations are implemented to protect against corporate abuse while encouraging grassroots innovators who make high quality CBD-rich products, then perhaps something positive might emerge from this sordid affair.

1# On July 7, 2014, the FDA issued this tepid statement in an email to Project CBD: 'FDA is aware that there are products that are sold on the Internet, marketed as available in all 50 states, and labeled as 'hemp oil' and as containing cannabicliol (CD) The Agency is also aware that there is a growing public interest in CBD oils to treat childhood epilepsy, among other diseases. It is important, however, for patients and their caregivers to understand that these products have not been approved by the FDA, and those who choose to purchase these cannabidiol products cannot be assured by the FDA that they are safe or effective. We encourage patients and their caregivers interested in experimental treatments [to] gain access to these drugs through a clinical trial or through an expanded access IND that has been submitted to FDA and has been allowed to proceed."


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En dnotes

'Kannaway Buzz Launch Event ianour witimmarLedasmil,Funt _cQc R Dietrich T Christopher Hussey, CEO Jeff Rogers, Troy Nihart, and Eric Vending. YouTube. Published on March 4, 2014. Accessed on October 10, 2014. 2 Kannaway to Unveil New CBD-Rich Hemp Oil Product. ICantrawg website. Published on May 21, 2014. Accessed on October 10, 2014. 3 Interview with Brittany Warrior by Aaron Cantu. May 15, 2014. 4 Real Scientific Hemp Oil. HemjsMeds imbrue. Accessed on October 10, 2014. 5 CannaVest Corp. Clarifies Relationships With General Hemp and Kannaway. Press release. Globe Newswire. March 6, 2014. 6 KannaLife Sciences. Inc. and Kannawav, I.LC Sign Long Term Salesivfarketing and Product Development Agreement. Press release. KannaLife website. Published on March 31, 2014. Accessed on October 11, 2014. 7 Email from Kannaway distributor to Fred Gardner. Received on April 2, 2014. 8 Email from Kannaway distributor, [email protected] , to Aaron Cantu. Received on April 1, 2014. 9 Bacca, Angela. Kannaway Prepares to Launch High-CBD Hemp Products MLM Marketing Campaign. Cannabis Now webs/k. Published on March 4, 2014. Accessed on October 11, 2014. 10 May I use ICannaway. KWay, or Kanna as part of my own personal branding? Kannaway website FAQ Published on April 18, 2014. Accessed on October 10, 2014. 11 Kannaway Compensation Plan. Kam:away website. Accessed on October 10, 2014. 12 ibid.

13 The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes. Federal Trade Commission, Bureau of Consumer Protection and Division of Consumer and Business Education. October 2009. 14 CannaVest Corp. Clarifies Relationships With General Hemp and Kannaway. Press release. Globe Nerstvire. Match 6, 2014. 15 Vardi, Nathan. Inside the Penny Stock Bubble. Forbes magazine. March 26, 2014. 16 CannaVest Corp. Clarifies Relationships With General Hemp and Kannaway. Press release. Globe Newswire. March 6, 2014. 17 Douglas, Brett. The Golden Gate Smuggling Company: A San Francisco Marijuana Empire. eBook. October 20, 2011. 18 Securities and Exchange Commission v. Blackout Media Corporation and Sandy Winick. United States District Court for the Southern District of New York, Civil Action No. 09 CV 5454 (GBD). June 12, 2009. 19 Yew, Madhavi Acharya-Tom. Penny stock fraud: Alleged mastermind Sandy Winick once lived the high life in Toronto. The Star. August 15, 2013. 20 OTC filing for Berkshire. OTC Bulletin Board Accessed on October 10, 2014. 21 Club Vivanet, Inc. Information and Disclosure Statement. United States Securities and Exchange Commission. December 31, 2008. See also Medical Marijuana Inc. Information and Disclosure Statement. United States Securities and Exchange Commission. June 30, 2009. =Medical Marijuana. Inc Formerly Club Vivanet INKSHEETS: Today Announced That It Is the First Public Company. Reuters. March 31, 2009. 23 Club Vivanet, Inc. Information and Disclosure Statement United States Securities and Exchange Commission. June 30, 2008. 24 Smuggler Bruce Perlowin / Marijuana Inc. CNB C January 12, 2009. 25 Medical Marijuana Inc. Information and Disclosure Statement. United States Securities and Exchange Commission. June 30, 2014. 26 Ibid

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27 Medical Marijuana Inc. Appoints New President and Reduces. Bloombetg. February 3, 2010. 28 Interview with Robert Griffin. March 26, 2014. 29 Medical Marijuana Inc. Information and Disclosure Statement. United States Securities and Exchange Commission. June 30, 2009. " Interview with Julia Black April 1, 2014. 31 Campbell, Greg. Will the King of Pot Go Up in Smoke? Salon. March 8, .2010. 32 Ibid. 33 Ibid. 34 The Hemp Network website. Accessed June 30, 2014. 35 Wheeler, Matt. Bruce Perlowin—Creating 1000 millionaire women with quantum economics. Examiner. February 7, 2011. 36 Medical Marijuana Inc. Information and Disclosure Statement United States Securities and Exchange Commission. June 30, 2011. 37 Medical Marijuana Inc. Information and Disclosure Statement United States Securities and Exchange Commission. June 30, 2011. 38 North American Companies. Michael Llamas.wmv. You Tube. Published December 9, 2009. Accessed October 10, 2014. 39 Roseville Wealth Aci . eLeeomis/1 { Others Charged in the 50-Count Indictment Unsealed Today. Press release. US Attorng's Office, Eastern District of California. September 14, 2012. 40 US VS. Lee Loomis Indictment, case no. 2:12-CR-315 41 edical Marcuana Inc. Announces that Interim Pre 'dent and CEO Michael Llamas is Takin a Leave of Absence from the Company. Press release. Medical Marijuana Inc. webrite. Published September 17, 2012. Accessed October 11, 2014. 42 Long, Josh. Hemp Marijuana Execs Pasts Raise Concerns in Investor Community. Natum1Products Insider. July 23, 2014. 43 Medical Marijuana Inc. announces its wholly owned subsidiary wellness managed services signs an additional management contract increases annual-revenue. Press release. Medical Marijuana Inc. website. Published April 24, 2012. Accessed October 10, 2014. '44 Medical Marijuana Inc. Announces 4th Quarter 2011 Results. Press release. Medical Marijuana Inc. website. Published February 2, 2012. Accessed October 10, 2014. 43 Eassa, Ashraf. Medical Marijuana: It's Just a Pump and Dump. SeekingAOha. Accessed on February 18, 2013. 46 Major Worldwide Announcement to Create Waves Throughout Europe. Press release. Medical Marijuana Ina website. Published on June 10, 2013. Accessed on October 11, 2014. 47 CannaBANK Transfers First Asset to Medical Marijuana. Inc. Press release. Medical Marijuana Inc. white. March 29, 2014. 48 Brochstein, Alan. How Management Misled Investors When It Gained Control Of Medical Marijuana Inc. Seeking Alpha. April 29, 2013. 49 Interview with Robert McVay by Aaron Canta. May 2014. 30 Medical Marijuana Inc. Announces that Interim President and CEO. Michael Llamas is Taking a Leave of Absence from the Company. Press release. Medical Marijuana Inc. website. September 17, 2012. 31 Dixie Holdings LLC vs Medical Marijuana. Inc. Case no. 37-2013-000513302-CU-BC-CM July 18, 2013. Medical Marijuana Inc. owned 60% of Red Dice. 52 u e\V 2014 ex o list of se kers. Sloth Side West website. Accessed October 11, 2014. 53 CannaVest 2013 Annual Report. United States Securities and Exchange Commission. 54 CannaVest Corp profile. OTC Markets website. Accessed on October 11, 2014.

2014. Project CBD All rights reserved.

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55 Ibid. 56 Medical Marijuana. Inc. Announces Sale of PhytoSPHERE Assets and Acquisition of CannaVEST Corp. Stock. Press release. Medical Marijuana Inc website. Published March 1, 2013. Accessed on October 10, 2014. 57 Eassa, Ashraf. Medical Marijuana's Journey To $0: CannaVEST Payment Was Worthless. SeekingAlpha. May 8, 2014.

CannaVest 2013 Annual Report. United States Securities and Exchange Commission. 59 Email from Michaeli Mona, III to Aaron Canta. Received on June 30, 2014. 68 Vardi, Natha. Inside the Penny Stock Bubble. Forbes magazine. Accessed on October 11, 2014. 61 Interview with Alan Brochstein by Aaron Canto. 62 Willard, Cody. Growlife still halted; marijuana penny stocks still doomed. Markenvatch. April 4, 2014.

CannaVest Schedule 13D Amendment No. 2 to SC 13D, United States Securities and Exchange Commission. November 20, 2013. 64 CannaVest 5 year stock price chart. OTC Markets rvebsite. Accessed on October 11, 2014. 65 Medical Marijuana, Inc. Announces Sale of PhytoSPHERE Assets and Acquisition of CannaVEST Corp. Stock. Press release. Medical Marijuana Inc. website. Published March 1. 2013. Accessed on October 11, 2014. 66 Medical Marijuana Inc.'s Fourth Quarter Update: Less than It Appears. SeekingANa. January 27, 2014. 67 Medical Marijuana Inc. 5 year stock price chart. OTC Markets nrebsite. Accessed on October 11, 2014. 68 Email from Michaell Mona, III to Aaron Cantn. Received on June 30, 2014. 69 INV TORERT: Cl ass Action Lawsuit Against nAL VEST Corp. Announced by Law Offices of Howard G. Smith. Bloomberg. May 6, 2014. 7° Email from Michael J. Mona, III to Aaron Canto. Received on June 30, 2014. 71 Lee, Martin A. A Review of Dixie Elixir's CBD Products. O'Shaughnesry!r. Spring 2013. 72 Baca, Richard. Edibles' TI-IC claims versus lab tests reveal big discrepancies. Denver Post, March 9, 2014. 73 Dokoupil, Tony. Will Pot Barons Cash In on Legaliza 'on? The Daily Beast. October 22, 2012. 74 Dixie Holdings LLC vs Medical Marijuana. Inc. Case no. 37-2013-000513302-CU-BC-CTL. July 18, 2013. 75 Dixie Holdings and Medical Marijuan a Inc.. Agree to Resolution of Red Dice Holdings Partnership. Press release. Medical Marijuana Inc. April 30, 2014. 76 Posted by Tamar Wise on Facebook. November 20, 2013. Since removed. 77 Interview with Chris Boucher by Aaron Cantu% April 1, 2014. 78 Harnessing the Hemp Industry: O&A With Chris Boucher of CannaVest. Marijuana Business Daifr. August 4, 2014. 79 Email from Chris Boucher to Aaron Cant& Received on May 29, 2014. 88 Email blast from "The CBD Guy." Received on February 3, 2014. 81 See for example: http://cbdgum.networkofhemp.comiorder-cbdicbd-kratom-capsules ,

www.cbd ore.co cbd-kratom http://buychdonline.co/product-categoryikratom/ and http://botanicsolutions.com/products/cbd-kratom-capsules . Accessed on October II, 2014. 82 Email blast from "The CBD Guy." Received on June 1, 2014. 83 Email from Lisa Kabuska to Fred Gardner. Received on July 29, 2013. 84 Hemp Industries Association; All-One-God-Faith, Inc.. dba Dr. Bronner's Magic Soaps. Atlas Corporation; Nature's Path Food USA Inc.; Hemp Oil Canada, Inc.; Hempzels. Inc.; Kenex LTD. • Tierra Madre LLC; Ruth's Hemp Foods, Inc.; Organic Consumers Association v. Drug Enforcement Administration. United States Court ofAppeals for the Ninth Cinwit. No. 03-71366. February 6, 2004.

CannLabs test results for Brittany Warrior. April 29, 2014. (See appendix.) 86 Lab report from Werc Shop. March 25, 2014. (See appendix.) 87 Phytal ab test results, RSHO Gold, August 8, 2014. (See appendix.)

© 2014. Project COD. All rights reserved. 28

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88 Medical Marijuana Inc. Announces First Quarter 2014 Shareholders Report: Product Sales Increase More Than 100°/0 Quarter OverQuarter: Company Posts Sificant Increase i n Revenues From Hem medspx . Recaps Company Growth for the First Quarter of 2014. Press release. Medical Marijuana Inc. website. Published July 8, 2014. Accessed on October 11, 2014.

KannaLife Sciences Inc. and Kannawa LLC Lo Term Sales Marketin and Product Develo merit Agreement. Press release. Kat:nab:1e website. Published on March 31. Accessed on October 11, 2014. 90 KannaLife Sciences Announces 1.5M Series A Financing From Medical Marijuana Inc. (OTC:MJNA) And CarS irm.22_1 _).C: FCLS Press release. Medical Marijuana Inc. website. Published on March 7, 2013. Accessed on October 11, 2014. 91 Maier, Thomas. Businesses bring in lobbyists in push for legalization—and big profits. Newsday. August 27, 2014. 92 Khalaf, Roula. Boca Raton. here we come (investigation into enn stock firitp_a_._g ).1 0aitmnt Inc. Forbes. June 7, 1993. 93 Xechem International. Inc. and Xechem. Inc. Files Chapter 11. Bloomberg. November 10, 2008. 94 Walker, Brian. PHOT FMBV — Pump And Dump Alerts 6 27 12. Ferny Stock Researrb. June 27, 2012. 95 Email from Renate Miles to Aaron Canta. Received on April 11, 2014. 96 Email from Renate Miles to Aaron Cantii. Received on June 4, 2014. 97 Interview with Jason Cranford by Martin A. Lee. June I, 2014. 98 Medical Marijuana Inc.'s HempMeds Makes Global News Headlines and Report Issued by Top Laboratory. Press release. Medical Marijuana Inc. website. Published on June 12, 2014. Accessed on October II, 2014. 99 Email from Brandon Krenzler to Martin A. Lee Received August 5, 2014. 100 Interview with Brandon Krenzler by Martin A. Lee. June 9, 2014. 101 Ibid.

102 Emails from Dr. Noel Palmer to Martin A. Lee. Received on August 25, 2014 and August 29, 2014. See Appendix C for PhytaTech results. 103 Laboratory Safety te (tents. RHO'S Labonatog Safebi Specialist. See also Apple pledges to cut down on use of toxic chemicals (Manning, Craig). Daifr Digest News. August 15, 2014. 104 CBD Product Headspace Study: R&D Analysis for potential contamination responsible for AERs. Flora Research Laboratories report received by Project CBD. October 2, 2014. 105 Interview with Jahan Marcu by Martin A. Lee. October 4, 2014. 105 CBD Product Headspace Study: R&D Analysis for potential contamination responsible for AERs Flora Research Laboratories report received by Project CBD. October 2, 2014. 107 Photo Release—Medical Marijuana Inc.'s HempMedsPX Launches DON'T MOVE Awareness Campaign; Campaign Focuses on Cannabidiol (CBD)-Rich Hemp Oil and Its Availability Nationwide. Eliminating the Need to Relocate to Colorado or Legalized Medical Marijuana States for Access. Press release. Medical Marifuana Inc webs/tn. Published April I, 2014. Accessed October 11, 2014. ma Medical Marina= I-IempMeds Title Sponsor of iorial Cannabis Industry Association Denver Conference. Organization Advocates on Behalf of Fair Policy and Treatment of Cannabis Businesses Nationwide. Press release. Medical Marijuana Inc website. Published on April 15, 2014. Accessed on October 11, 2014. 'invest in medical marijuana penny pot stocks and weed out scams. HempMeds website. Accessed on October 11, 2014. HO Email from Jennifer Yarbrough to Project CBD. Received on June 3, 2014.

Interview with Joshua Hartsel by Martin A. Lee. July 1, 2014. 112 Ibid.

113 Email from Chris Boucher to Aaron Cantti. Received on June 25, 2014.

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Project COD Special Report Hemp Oil Hustlers

114 Michael Mona III. Remarks during CannaVest Laboratories site visit. July 15, 2014. 115 Chris Boucher. Remarks during CannaVest Laboratories site visit. July 15, 2014. 116 mid.

117 Joshua Hartsel Remarks during CannaVest Laboratories site visit. July 15, 2014. 118 Email from John McPartland to Martin A. Lee. Received on August 9, 2014. 119 Chris Boucher. Remarks during CannaVest Laboratories site visit July 15, 2014. 128 Michael Mona Jr. Remarks during CannaVest Laboratories site visit. July 15, 2014. 121 House, Douglas W. CannaVEST sells KannaLife. Seeking.Alpha. June 20, 2014. 122 CannaVest Makes Big Non-Cash Profit and Terminates HempMedsPX. Seck.ingA0ha, August 18, 2014. 123 CannaVest Corporation v. Kannaway LLC, General Hemp LLC. IIDDC Holdings LLC CaliforniaSouthern District Court. September 9, 2014.

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