Pubdate: Sat,  6 Dec 2003
Source: Wired News (US Web)
Copyright: 2003 Wired Digital Inc.
Contact:  http://www.wired.com
Details: http://www.mapinc.org/media/1055
Author: Charles Mandel

PUBLIC POT COMPANY'S PIPE DREAMS

Online gambling pioneer Warren Eugene is rolling the dice again. This time
the founder of Internet Casinos plans to establish the world's first
publicly traded marijuana company. Eugene said he plans to list Medical
Cannabis Inc. on the Toronto TSX Venture Exchange and on Nasdaq.

"The stock can go sky-high," said Eugene. The company views the current
prohibition of marijuana as similar to that of alcohol and tobacco. If
(liquor baron) Sam Bronfman were alive today, he might very well be lobbying
the government for bonded cannabis warehouses.

However, the flamboyant Internet entrepreneur faces a number of hurdles
before he can cash in his chips, including a potential challenge from Health
Canada, the Canadian agency that currently regulates the use of medicinal
pot.

Eugene's business plan centers on Bill C-38 -- a bill that would allow
Canadians to possess up to 15 grams of non-medical marijuana. He said he
believes if Bill C-38 becomes law, it would eliminate the need for Health
Canada to regulate medicinal pot because people would be able to grow their
own grass. The new law would also create a business opportunity for Eugene.

They will need an independent who can grow it, package it, sell it and be
able to pay taxes to the government to the tune of a billion dollars a year,
he said.

In preparation for marijuana decriminalization in Canada, Eugene said
Medical Cannabis is aggressively acquiring licensed Canadian growers of
medical grass. While Eugene is not licensed to grow medical marijuana
himself, he said he has already hired four licensed growers and is
negotiating for more. Medical Cannabis gave the growers stock, according to
Eugene, who added that Health Canada is not aware of his actions.

Currently, in order to grow marijuana legally, Canadians must have symptoms
associated with a terminal illness with a prognosis of death within 12
months, or symptoms associated with other specified medical conditions. If
the individuals are too ill to grow their own grass, they may have a
licensed party grow it for them. Health Canada has licensed 520 individuals
to grow marijuana as of October.

Eugene estimates the grass crop is worth anywhere from CN$4 billion to CN$7
billion and thinks a money-making opportunity exists as governments move to
decriminalize the drug. He also said a U.S. Supreme Court decision in
October lifting a federal ban on medical marijuana will open the doors to a
larger international market.

Jirina Vlk, a spokeswoman with Health Canada, expressed doubt about Eugene's
plans and said the only company currently authorized to grow pot for the
government is Prairie Plant Systems, a Saskatoon, Saskatchewan-based biotech
firm that is raising weed in an abandoned Manitoba mine shaft. Prairie Plant
Systems has a five-year, CN$5.7 million contract to raise grass for medical
use.

"You can't buy licenses. It's a person, not a company, that has to have a
license," Vlk said, adding that Medical Cannabis is operating outside
Health Canada's regulations in acquiring licensed growers.

Catherine Saunders, another Health Canada spokeswoman, said the practice of
passing on growing licenses is illegal and would be a matter for law
enforcement agencies. She said the government agency would investigate any
patients who transferred their licenses to unauthorized growers.

Brent Zettl, president and CEO of Prairie Plant Systems, confirmed his firm
is Canada's only legal, large-scale producer. The company delivers to about
80 doctors, who in turn pass along the prescription marijuana to their
patients.

Nor is getting medical grass easy. Would-be marijuana users apply to Health
Canada's Office of Cannabis Medical Access. They must give information about
themselves, their medical condition and whether they plan to grow the grass
themselves or have someone do it for them. They must have declarations from
one or more doctors stating that all conventional treatments for their
condition have been tried.

Once approved, plants may be grown indoors or out. The amount that is grown
and stored depends on a daily dosage approved by the individual's physician.
A license is good for up to one year.

To gain his entrance onto the public markets, Eugene is engineering a
reverse takeover, selling 51 percent ownership of Medical Cannabis to a
company already listed on the two exchanges, with a further option for the
firm to purchase the remaining 49 percent. What is unique about this
business proposal,'' he said, is that as a public company everyone now has a
sincere and legal way to potentially make money in a budding marijuana
industry.

Eugene said he believes a publicly listed marijuana company would have
credibility because it could be monitored. We have to file our annual
reports. We're under fiduciary responsibility.

Zettl expressed doubt that Eugene can make a go of it in the marijuana
business. After going through what we've gone through,'' Zettl said, the
testing and re-testing -- a certain ethical and pharmaceutical standard has
to be maintained. It will really be Health Canada's decision. In the future,
time will tell what happens.

Over at the TSX exchange, the weed firm's announcement also raised eyebrows.
"This is the first I've heard of it," said TSX spokesman Steve Kee. He said
the exchange would have to see if Medical Cannabis meets the listing
requirements, a set of regulations governing everything from finances to the
operation of the business, and which could take anywhere from weeks to
months to satisfy.

"It's a huge gamble for me," Eugene said. But if anyone's up to the
challenge, it's Eugene. In the mid-1990s, the entrepreneur -- amid much
skepticism -- established the first online cash casino, and in 1995 he told
Time magazine he believed he was the founder of New York's famous Stork Club
in a past life.

The Internet casino king has put up CN$500,000 of his own money, and said he
intends to raise more through a private placement. "The funds would go
toward development and cultivation of the product as well as branding. The
key to this is branding," Eugene said.

Justice Canada spokeswoman Pascale Boulay pointed out that with the end of
the current session of Canadian parliament, Bill C-38 has been tabled. "Now
it will be up to the new government to decide if they want to resurrect Bill
C-38 at the stage that it was, or even to have a complete new bill," she
said. It would be up to the Canadian parliament to pass a new motion to
bring the bill back.

Despite all the obstacles, Eugene remains optimistic that the bill will
pass, allowing him to move Medical Cannabis forward. He anticipates that
when Parliament resumes in the new year with a new prime minister (Paul
Martin is taking over from Jean Chretien, who has retired) that Bill C-38
will return as unfinished business and that a more sympathetic Health
Minister may be in place.

"It's certainly an idea whose time has come," he said. Instead of (my) going
into organized crime, this is a push to give them (the government) CN$900
million to CN$1.5 billion in potential tax revenue.
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