As the US Gets High on Weed, So Does West Hollywood’s Medbox

Twenty-three states and the District of Columbia have legalized marijuana for medicinal use. President Barack Obama has declared that marijuana is no more dangerous than alcohol. And The New York Times, the most influential news medium in the nation if not the world, has declared that it’s high time (excuse the pun) that the federal government legalized marijuana use.

Maybe Vincent Mehdizadeh is onto something.

Mehdizadeh, 35, is the founder of Medbox, a West Hollywood-based company that has garnered publicity in the business press for its “Medbox,” a marijuana vending machine that resembles one of those contraptions into which one would push dollar bills or drop quarters for a bag of potato chips or a candy bar.

Mehdizadeh invented the Medbox dispensing machine in 2008. And he’s quick to point out that, as alluring as the idea of a public vending machine for weed might be, that’s not what Medbox is.

The refrigerated and armored machine, which sells for $25,000, actually sits behind the counter at licensed marijuana dispensaries. Rather than making marijuana easier to buy, Medbox is all about making sure that owners of the growing number of dispensaries in the United States are able to follow the still-restrictive laws governing the sale of the drug. The machine can identify the fingerprint of a patient with a state-issued medical marijuana card. It tracks what a customer has purchased, and it keeps records of marijuana inventory and sales on which states collect taxes. In other words, Medbox is an inventory control system.

Mehdizadeh moved Medbox from its former location in Calabasas into a suite of offices that rents for more than $14,000 a month in the posh Piazza del Sol building at 8439 Sunset Blvd. near Queens Road, which houses the famous Katana restaurant.

“In looking for a place to really set up our headquarters… after we started doing really well, I thought that the Sunset Strip and West Hollywood, it’s pretty iconic,” Mehdizadeh said. “This could be a great place to entertain clients,”

Those clients are typically entrepreneurs setting up marijuana dispensaries for the first time. Medbox’s team of 30 employees and consultants works with those small-business owners to help them apply for necessary permits in this highly restricted business. “We give all the necessary oversight work — it is the main part of our business,” Mehdizadeh said. “We’re the only company in the marijuana sector that generates millions in revenue without actually touching the product.”

Medbox stock is traded over-the-counter at present, although Mehdizadeh said he hopes to have the company listed on NASDAQ by the end of the year. That means it will be able to raise capital from the public and that investment funds might put money into the company. Its stock has sold for as high as $46.75 a share to as low as $4.06 a share in the last 52 weeks, with the share price at $14.25 as reported by MarketWatch on Wednesday. (And Medbox shares actually climbed to $215 at one point in late 2012.) That’s far higher than the share price of most medical marijuana companies, which typically trade for less than a dollar a share. Mehdizadeh said that hundreds of investors have put their money into Medbox and earned millions of dollars.

He conceded that there have been highs and lows. “There were times when cash flows weren’t where I would want them to be,” he said. “It was either pay the rent, or some other kind of expense.”

Mehdizadeh said Medbox has grossed over $13 million in revenue since 2010. It clearly has been on an upward path, reporting revenue of $5.22 million in 2013, up 48 percent over the year before. It did, however, report a loss last year of $490,000 before allowances for interest, tax and depreciation.

Mehdizadeh’s invention of the Medbox machine, and the patent he holds on it, which he recently transferred to the company, perhaps make him its biggest asset. A history of alleged legal, tax and financial issues also has made him somewhat of a liability.

A report last Fall by the Southern Investigative Reporting Foundation, a non-profit business investigative journalism group, said Mehdizadeh’s Herbal Nutrition Center marijuana dispensary had been raided by the federal Drug Enforcement Administration in 2007. Roddy Boyd, author of the SIRF report, also said Mehdizadeh “was accused of posing as a lawyer and a real estate agent at different times … A search of Los Angeles area criminal records databases shows that from 1997 to 2007, Mehdizadeh was arrested or pleaded no contest for breaking and entering, solicitation, trespassing and credit card fraud. He declared bankruptcy in July 2010, after landing up to his neck in back taxes owed to the Internal Revenue Service.”

Mehdizadeh is said to have posed as a lawyer for an organization called the Active Lawyers Referral Service, which allegedly referred people to lawyers who didn’t provide the services they were paid for. The SIRF report said he also worked with his father, Parviz Mehdizadeh, to offer legal services to immigrants, billing them for work they didn’t do. The Los Angeles County Department of Consumer Affairs said in June 2013 that Mehdizadeh and his father had pled guilty to charges of grand theft in relation to both situations and agreed to a settlement in which they would repay clients nearly $500,000 in lieu of a jail term.

The SIRF report also questioned the background of a number of senior officials in Medbox’s early years. The company has reshuffled management, with Mehdizadeh now holding the title of founder and senior strategist. Last month it announced that Guy Marsala, former president of EZ Lube Inc., the automobile service company whose Southern California locations are now owned by Valvoline, would serve as CEO, president and chairman of its board. And this Spring it added two outside directors to its board — Mitch Lowe, a founder of the Redbox video vending machine and a co-founder of Netflix, and Ned Siegel, former U.S. ambassador to the Bahamas.

As for the mistakes of the past, Mehdizadeh wants to put them behind him.

“Everyone has a past and none of my actions in the past have resulted in any jail time,” Mehdizadeh told WEHOville. “I am focused on the present and the future. All of the investors that have believed in me and my ideas, from 2010 to now, have made many times their initial investments. That has resulted in financial futures being secured, college tuitions’ being funded, credit cards and mortgages being paid off. Through the success of my company, I have positively touched many lives.”