Investor Due Diligence Q&A with Medbox
Question: “What is Kind Clinics and does it generate any revenue or otherwise take any revenue away from Medbox or its subsidiaries?”
MDBX: Kind Clinics operates the website www.kindclinics.com and is 100% owned by Medbox’s CEO, Dr. Bruce Bedrick. Kind Clinics is a marketing company that works with Medbox to develop leads interested in alternative medicine consulting services. Kind Clinics does not generate any revenue, nor does Medbox or its subsidiaries pay Kind Clinics for increased exposure. It is contemplated that because Kind Clinics’ website has obtained a top rank in search traffic results that it may be of interest to purchase the domain by Medbox for an agreed upon sum, with the consent of the board of directors of Medbox.
Question: “Why did the company declare a 100% dividend and what are the exact details of the dividend?”
MDBX: Bedrick and Mehdizadeh, the two largest Medbox shareholders, wanted to reward existing shareholders with a transfer of equity, to the common shareholder base. The class of shares receiving the dividend is the common shares only and not the preferred class of shares held by Bedrick and Mehdizadeh. Prior to the dividend, common shares held just under 50% of stockholder equity and voting power. After the dividend, common shares currently hold 2/3 of stockholder equity and voting power.
The company declared a 100% dividend that was announced by FINRA on February 3, 2014. The record date for the dividend was December 18, 2013. The shares were issued on a one-year restricted basis and carry the same value of the company’s common shares.
Question: “Has CEO Bruce Bedrick sold shares publicly within the last 6 months?”
MDBX: Mr. Bedrick was on a 10b-5 share sale program. As such, the sales were based on a daily volume formula and conducted by his broker. Mr. Bedrick’s public share sales were well below the 1% legal limitation for sale. For the entirety of his employment with Medbox, Mr. Bedrick only sold shares into the public market for a limited period spanning from the end of October 2013 through February 2014. The company is advised by counsel that affiliates are restricted from selling any shares for a period of 90 days after the company’s registration statement is deemed to be effective by the SEC, which occurred March 24, 2014. As such, company affiliates have ceased any and all sales during this period.
Question: “In company filings it shows that as of 3/24/14 Vincent Mehdizadeh, through his holding companies, PVMI and Vincent Chase, owned 16,238,940 shares but at 12/31/13, filings indicate that he owned 17,882,240 shares. The difference is 1,643,000. What explains the difference in share count?”
MDBX: As the majority shareholder and founder of Medbox, Mr. Mehdizadeh undertook efforts to attract talent to the board and executive management team for the benefit of the company and its shareholders. Mr. Mehdizadeh used his personal shares over the last few years in many ways to directly and indirectly benefit the company. As a non-reporting pink-sheet company during the period in time referenced, Mr. Mehdizadeh had no obligation to document private share sales/transfers. However, he did voluntarily disclose his ownership in quarterly reports filed with OTC Markets as well as registration statements filed with the Securities and Exchange Commission. Now that Medbox is an SEC filer, Mr. Mehdizadeh is required to file Form 4’s every time there is a change in his ownership.
Question: “Why did Vincent Mehdizadeh resign from the board of directors on April 10, 2014?”
MDBX: Mr. Mehdizadeh resigned from the Medbox board as part of an effort to strengthen the board and add independent, high-quality and experienced directors to make the company more attractive to institutional investors. In addition, Mr. Mehdizadeh has acknowledged blemishes on his record from issues occurring prior to founding Medbox, making him a target for “Short-Journalists”. He believes that his resignation from the board will make the company less susceptible to attack. Mr. Mehdizadeh remains as President/CEO of the company’s 2 main subsidiaries of Medicine Dispensing Systems and Vaporfection International. Mehdizadeh was also named Founder and Senior Strategist of Medbox, Inc.