Cannabinoid Research Firm Cannabis Science, Inc. Could Go Under

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By Anne Holland  [Updated as of 4/25/12]  According to its annual 2012 report filed today, Cannabis Science, Inc. (PINK:CBIS), may be in danger of shutting its doors. The company’s Form 10-K stated, “At this time, our ability to generate any significant revenues continues to be uncertain. There is substantial doubt about our ability to continue as a going concern.” Although this type of doom-saying is normal for financial filings, which must include worst-case scenarios, Cannabis Science’s financials, as presented, do not appear to be encouraging. The company’s stock has been hovering just over 5 cents all day, compared to nearly 11 cents a year ago.

Despite this uncertainty, the company, which develops cannabinoid-based (CBD) therapies for the treatment of cancer and infectious diseases, is continuing to fight on. Just last month, it announced the appointment of another member of its scientific advisory board, Michael McGrath, a professor of medicine and lab medicine at the University of California, San Francisco. As we’ve reported in the past, credible medical studies have shown that CBDs may be effective in fighting some forms of cancer. The overall future of CBD-based treatments may be very bright indeed … but the legal situation surrounding them is still murky.

Although Cannabis Science only has two full-time employees, its general and administrative expenses increased by more than $1.2 million during 2012, from $3 million to $4.3 million, largely due to management and consulting fees owed under purchase agreements related to its acquisitions of GGECO University Inc and Cannabis Consulting, Inc. in the first quarter of 2012.

Several investor advisory publications and bloggers are using Cannabis Science as an example, saying MMJ-related stocks are altogether too risky for investors.

However, we feel this is too simplistic.

While the stock market itself is inherently risky, and due to legal factors MMJ-related stocks are even more so, some medical cannabis companies may be worth looking into. The key is to find companies with growing revenues in ancillary industries that do not depend entirely on FDA or other federal approval to continue.