CannaBANK Takes Hit Of $2.5M Sale

(Blogger's Note: Ugh, how I deplore these puns writers still insist on using...and in a serious business publication, no less. What does it mean anyway... to say that "an investor is not exactly puffing on its latest deal." What a stretch to get a lousy pun inserted in a headline.)

by By Beina Xu and Michael Wursthorn
Source: blogs.wsj.com


A 1942 photo shows hemp growing in Fayette County in Central Kentucky. 
(AP Photo/Louisville Courier-Journal)

This hemp investor isn’t exactly puffing on its latest deal.

CannaBANK Inc., a self-described San Diego private equity firm that focuses on hemp-based businesses, sold an 80% stake in biotechnology company PhytoSPHERE Systems LLC to Medical Marijuana Inc. for $2.5 million. CannaBANK will hold the remainder of the company’s interests.

But despite the names of the companies involved, this isn’t some deal that’s furthering the sales of marijuana — legal or otherwise. Instead, PhytoSPHERE uses a system known as TerraSphere to create plant-based biocompounds for pharmaceutical and the so-called nutraceutical markets.

Michael Llamas, president of Medical Marijuana, a company that trades on the Pink Sheets and on the Over-The-Counter bulletin board, said PhytoSPHERE extracts hemp – a completely legal process, as it’s derived from hemp seeds and is categorized as food. One of the commodities emerging from the hemp industry is cannabidiol, an extract that comes in the form of crystal, oil or powder, where a “majority of the medical benefits” can be found, Llamas said.

He claims that it helps with treating digestion problems, acting as a super antioxidant, among other things.

“[It’s] completely organic,” Llamas said, “It’s been known to be beneficial in treating things from Alzheimer’s to pain management to multiple sclerosis [and] Crohn’s disease.”

In fact, while hemp and marijuana are from the same species of plant and appear to be similar, they are quite different, according to the North American Industrial Hemp Council Inc., an industry association representing the U.S. hemp industry. Hemp contains no THC, the active ingredient found in marijuana, making it unusable as a drug, unlike marijuana, the NAIHC said.

Medical Marijuana, also based in San Diego and involved with extraction and delivery methods of hemp-based compounds for use in pharmaceutical products, isn’t involved in “selling pot at all,” Llamas said.

But the similar-sounding name and familiar-looking plant have cast a stigma on the hemp industry, according to Llamas.

The Hemp Industries Association, a non-profit trade group, said in June that the retail sales of hemp food and body care products in the U.S. reached $40.5 million in 2010, but that excluded retailers such as Whole Food Market and The Body Shop. The Washington-based trade group estimates that with the excluded retailers included, the total retail value of annual North American hemp-based product sales have been between $121 million and $142 million.

CannaBANK, the largest stakeholder in Medical Marijuana, didn’t return calls seeking comment on Thursday. The firm is backed by two unnamed individuals who have used their own money to fund CannaBANK’s investments so far, according to Llamas.