In case you haven't noticed, the legal marijuana industry has been practically unstoppable in recent years. Research firm ArcView, in partnership with BDS Analytics, recently reported legal weed sales growth in North America of 33% in 2017 to $9.7 billion. Further, it foresees 28% compound annual growth through 2021, and North American sales powering to more than $47 billion by 2027. That's the type of growth aggressive investors absolutely love, and it's a big reason marijuana stocks have jumped substantially over the past two years. 

The biggest catalyst at the moment is the expected legalization of recreational cannabis in Canada by this summer. With a pretty clear pathway to legalization, Canada is set to become the first developed country in the world, and only the second overall behind Uruguay, to legalize adult-use weed. It'll also be opening the door to billions in additional annual sales.

A cannabis plant growing in the sunlight.

Image source: Getty Images.

As a result, many investors view the legalization of marijuana as the greatest thing since sliced bread. Demand for the drug is robust, and the expectation is that it'll have more than just growers and consumers seeing green. Though estimates vary, profitability is eventually expected for many of the Canadian growers involved.

There's no way I'd buy these pot stocks under any circumstances

Yet we have to remember that not all pot stocks are created equally. In fact, some could prove to be downright dangerous for your portfolio. Here are three marijuana stocks -- two of which are intricately tied at the hip -- you couldn't pay me to buy.

Medical Marijuana Inc. and AXIM Biotechnologies

If I were to choose two marijuana stocks right off the bat that I'd rather watch from the sidelines and never buy, it'd be medical cannabis company Medical Marijuana Inc. (MJNA -10.71%) and cannabinoid-based drug developer AXIM Biotechnologies (AXIM -9.34%). The reason they're listed together is because Medical Marijuana Inc. owns 22.67 million shares of AXIM, which is about 40% of its outstanding share count. Their futures really are tied together.

The component here that I really don't care for is AXIM Biotechnologies, which is planning to use its cannabinoid-based drug technology via chewing gums and other delivery mechanisms to fight a host of diseases. While listing 16 separate studies on its website, just three of these studies have moved beyond preclinical testing and into human trials. Despite these three clinical studies -- two of which are in phase 2, and the other in phase 1 -- AXIM hasn't demonstrated much in the way of efficacy so far, but somehow, it still commands a market cap north of $320 million. That doesn't make a lot of sense.

A doctor holding a cannabis leaf between his hands.

Image source: Getty Images.

What's more worrisome is AXIM's ability to generate capital to run its studies and keep the lights on. In its full-year report, filed in mid-March, AXIM lists $2.11 million in current assets and $7.71 million in current liabilities. It simply doesn't have the funding (as of now) to survive another year, and the company's 10-K explicitly states, "We will not consider taking on any long-term or short-term debt from financial institutions in the immediate future." Essentially, common stock offerings and shareholder loans are its only source of capital, and it expects to spend $12 million just for research and development expenditures in 2018. In short, this is a going concern if I've ever seen one.  

Meanwhile, Medical Marijuana Inc. has shown sparks of success with its hemp oil-based products, and it recently recorded a 255% increase in year-over-year sales in its fiscal third quarter. Unfortunately, a sizable chunk of its asset value is tied to AXIM's stock, which I suspect could perform poorly in the years to come.

Furthermore, Medical Marijuana Inc., despite being the first publicly traded pot stock, has an ever-growing accumulated deficit (i.e., aggregate loss since inception) of $82.3 million. Year after year of losses should be more than enough reason for investors to keep their distance. 

The Supreme Cannabis Company

A third marijuana stock I'd rather have nothing to do with is The Supreme Cannabis Company (SPRWF), a Canadian-based grower in Ontario.

Like most Canadian growers, Supreme Cannabis is gearing up for the waving of the proverbial green flag this summer, when recreational weed is likely to become legal. If signed into law in June, sales to adults could begin in either August or September. The company's 7Acres facility, which spans 340,000 square feet of indoor growing space and utilizes the sun, rather than limited-spectrum lamps and lighting, to grow cannabis, looks to be one of a number of niche players in the recreational marketplace. While no specific annual production yield has been announced, it wouldn't be surprising to see the company generate 30,000 kilograms or more in cannabis per year. 

An indoor cannabis growing facility.

Image source: Getty Images.

While that might sound great on paper, I have two concerns. First, it's a small fish in a big pond. Even though it's signed a few notable supply agreements, Supreme Cannabis could struggle to negotiate long-term supply deals when competing against considerably larger growers with deeper pockets also fighting for market share. It could be on the outside looking in when all is said and done.

More important is that dilution that could decimate shareholders over time as a result of its capital raises via bought-deal offerings. On the bright side, Supreme Cannabis did end 2017 with $60.6 million in cash and cash equivalents, so it has more than enough capital to make its greenhouse visions and capacity expansion a reality. However, its Canadian-listed share count has ballooned from less than 10 million in 2013 to almost 165 million as of 2017. 

What's more, its six-month report through Dec. 31, 2017, lists around $36.4 million in convertible debentures -- i.e., debt that can be converted to common stock -- almost 89.3 million outstanding warrants, and close to 16.8 million outstanding stock options. Dilution may very well drown existing shareholders of Supreme Cannabis Co., which makes me want no part of this pot stock.