Marijuana Companies: The Good And The Bad

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Includes: CANN, CBCA, CBGI, FRTD, FSPM, GBLX, NGBL, PHOT
by: Small Cap Reporter

Summary

Publicly traded companies in the recreational marijuana industry are poised to take off.

Recent actions by federal agencies to protect investors suppress stock prices, but cannot stop recreational marijuana from becoming a new economy.

Identifying and deciphering the marijuana companies with a clean track record from those with inaccurate, misleading information and/or manipulative trading in their stock.

Only invest money you can afford to lose in recreational marijuana stocks.

In early January 2014, new laws regarding the legalization of marijuana for medical and recreational purposes went into effect in a number of states. At the same time, media coverage of the issue increased, as did investor interest in marijuana-related companies. Many are comparing this new investor craze to the internet boom. However, even though the internet boom included companies that literally created millionaires out of early shareholders, there were also a few bad apples that took advantage of such high investor interest and misled investors with inaccurate information.

This too has begun to take place in the marijuana industry as recent press releases by FINRA and the SEC show. In addition, the SEC has halted trading in some marijuana companies' stock to investigate the accuracy of the information being disseminated. This is a GOOD thing for marijuana investors. As regulators put an end to "fake" marijuana companies, the door will be wide open for "real" ones to flourish.

Some of the marijuana companies to have already fallen victim to an SEC halt include:

It would be wise to stay away from companies that have had their stock halted by the SEC.

The truth is that an early investment in the right marijuana company could result in similar returns as seen during the Internet Boom. But with so many companies claiming to have entered the marijuana business, knowing which one to choose is key. If you are confused about which marijuana company to invest in, this report is specifically for you, as I rank a few of my top choices based on their technology, operations, and growth potential.

GrowBLOX Sciences, Inc. (OTCQB:GBLX)

With four separate revenue drivers, a unique first-of-its-kind technology, and individual proprietary cannabis strains for treatment of specific medical ailments, GrowBLOX Sciences, Inc. is my top marijuana company. The company's technology is being built to set the standard for manufacturing and medical cannabis producing technology, and has it positioned to become a key player in the industry.

According to the company, its GrowBLOX technology is specifically designed to produce optimal environmental growing conditions for medical cannabis cultivation while offering the ability to monitor and control the growth process. Through these methods, GrowBLOX is able to produce high-grade medicinal marijuana. The GrowBLOX™ hydroponic technology allows for "continuous, healthy cycles of cannabis plants to reach optimized medicinal potency during the bloom cycle. Each fully enclosed chamber physically isolates each plant to protect from the onset and spread of insect and mite infestations in the grow operation and keep harmful contaminants, such as pesticides, insecticides, and vehicle exhaust out of the medicinal plants growing inside."

GrowBLOX™ also has an integrated, intelligent control system that continuously monitors and analyzes the operation for optimal growth. The company's website explains that its remote-access capabilities allows growers to make real-time adjustments while they are on-the-go from their smartphone or computer. In addition, it uses "90% less water than standard growing operations and energy-efficient LED lights supplemented with magnetic induction lights for optimal growth at the lowest cost." The company explains that its LED system reproduces the specific wavelengths of sunlight needed to promote rapid plant growth. The LED lights are "extremely efficient and last five times as long as the current standard MH and HPS lights used in conventional grow operations."

The Company's four main revenue drivers include specialized cannabis strains for treatment of ailments such as cancer, HIV, AIDS, headaches, concussions, insomnia, stomach problems, seizures, chronic pain, glaucoma, arthritis, anorexia, depression, and more. Continuing, GrowBLOX will produce cannabis oil in licensed conversion labs which utilize GrowBLOX™ units that meet strict operating standards.

The last two revenue drivers are in-state partner/supplier networks and contractual cultivation. The consumer market increasingly demands more effective and consistent cannabis products. GrowBLOX Sciences will partner with in-state growers to help them cultivate cannabis that meets patients' needs. Lastly, the Company empowers universities, medical research facilities, and clinical trial teams to grow consistent yields of cannabis by supplying them with GrowBLOX™ systems and its cannabis strains. Partnering with these entities will lead to more reliable and accurate test outcomes, facilitate recreation of desired results, and fast-track innovation within the company as well as the industry.

Cannabis Capital Corp. (OTCPK:CBCA)

For those of you looking to invest in a wide range of cannabis companies, Cannabis Capital Corp. could be your best bet. The Company "actively pursues investment opportunities in the rapidly growing global Medical Cannabis Industry. CBCA invests in companies positioned to make a significant impact within the global medical and legal marijuana markets." According to the company, these early stage investments "provide emerging companies with access to larger capital sums to help elevate their status from start-ups to a mature and durable brand leader." Management finds that recent legislative changes around the world are "creating compelling investment opportunities in which Cannabis Capital is positioned to be an identifier of and an early stage investor in promising companies in the industry."

Cannabis Capital is a global firm specializing in "incubator type business development", high tech pharmaceutical development, and medical technology. The Company is merging cannabis industry sectors into traditional industrial business sectors, such as medical, high tech, education, manufacturing, and service etc. A prime example being the recent strategic acquisition of WebCongress.

The package deal is valued at over $25 Million, based on CBCA's current share price, and consists of a combination of cash, shares, and management fees. Since the launch of WebCongress in 2008, over 100,000 people have come together to be inspired and educated by, and network with, leading executives in the technology space from a variety of major industries. Having hosted more than 27 events in 9 different cities, such as Barcelona, Miami, Bogota and San Francisco, just to mention a few, while attracting powerful speakers from Google (NASDAQ:GOOG), Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), YouTube, Spotify, BlackBerry (NASDAQ:BBRY), Microsoft (NASDAQ:MSFT), Skype, Samsung (OTC:SSNLF), Intel (NASDAQ:INTC) and Ericsson (NASDAQ:ERIC), WebCongress Conferences are considered to be among the "most important digital marketing events in the world."

An April 2014 press release explains that WebCongress produces "global digital marketing and strategy events, attracting thousands of technology professionals across the world" and has done so for such companies as Nestle, Merck (NYSE:MRK), NBC Universal, Pfizer (NYSE:PFE), Starbucks (NASDAQ:SBUX), American Airlines (NASDAQ:AAL), IKEA, and Redbull. WebCongress, Inc. also "houses an international business mentoring and training academy and a digital solution agency."

Chad S. Johnson, Esq., Director, President & CEO of Cannabis Capital Corp. stated, "WebCongress possesses both a successful, high-growth business model and a strong executive management team that align well with our combined growth plans. We acquired WebCongress on mutually beneficial terms and at the right time, being in our early stage of growth and development. We believe this acquisition provides CBCA with a profitable business combination that will enhance and support each company's core mission, expanding international operations and harmonizing the current services and offerings of WebCongress with CBCA's development. WebCongress's accelerated growth will generate ongoing novel opportunities and platforms for the legal cannabis industry on a global basis. This is a key step in the direction of increasing long-term CBCA shareholder value, and we are more than excited to make this announcement."

MedBox, Inc. (MDBX)

MedBox Inc. sells and services vending machines and dispensing systems for prescription medicines. The company has created a buzz for providing dispensing systems that can be used for safely storing and dispensing medical marijuana.

Through its wholly owned subsidiary, Medicine Dispensing Systems, MedBox Inc. has "grossed $13 million dollars since it began doing business in 2010." According to the Company, it has been awarded United States & Canadian Patents "concerning the software and hardware related to their medicine dispensing systems." The company's founder and CEO has appeared in interviews with CNN, ABCNews, Reuters, BBC, Fox Business, Bloomberg TV, CNBC, Associated Press, and NPR. MedBox has also been featured in articles appearing in Newsweek, Bloomberg BusinessWeek, Los Angeles Times, Chicago Tribune, and the Wall Street Journal, as well as "over 30 other news agencies around the world concerning their cutting-edge products and services."

Industry Update

There are currently 21 states and D.C. that have legalized the use of marijuana for medicinal purposes with an additional 6 pending legislation. Although these states legalized medical marijuana, it is still technically considered illegal by the federal government. This past April, Virginia Congressman Morgan Griffith introduced a federal medical marijuana bill. Griffith (R-VA) has filed House Resolution 4498, the Legitimate Use of Medicinal Marijuana Act. This bill would prohibit the federal government from preventing the prescription, possession, transportation, and distribution of marijuana for medical purposes in compliance with applicable state law. The bill would also reclassify marijuana from a Schedule I drug to a Schedule II drug.

Also in April, Clark County (Las Vegas) reported receiving more than 200 applications for medical marijuana businesses. A total of 206 applications for medical marijuana businesses were filed by 109 legal entities with the county's Business Licensing Department before the deadline. That total includes 90 applications for dispensaries, 70 applications for cultivation facilities, 45 for production facilities and one for an independent testing laboratory.

10 Stats You Need to Know

  • $1.53 billion: The amount the national legal marijuana market is worth, according to a Nov. 2013 report from ArcView Market Research, a San Francisco-based investor group focused on the marijuana industry.
  • $10.2 billion: The estimated amount the national legal marijuana market will be worth in five years, according to that same ArcView report.
  • $6.17 million: The amount of tax revenue collected in Colorado on legal marijuana sales in just the first two months of 2014.
  • $98 million: The total tax revenue that Colorado could reap in the fiscal year that begins in July, according to a recent budget proposal from Gov. John Hickenlooper.
  • $190 million: The amount in taxes and fees legal marijuana is projected to raise for the state of Washington over four years starting in mid-2015, according to the Economic and Revenue Forecast Council, an independent agency that advises the state government on the budget and tax revenue.
  • $105 million: The estimated annual sales tax revenue generated by medical marijuana dispensaries in California, according to the Marijuana Policy Project, a Washington, D.C.-based group that supports legalization.
  • $142.19 million: The estimated size of the medical marijuana market in Arizona in 2014, according to the ArcView Market Research report, up from $35.37 million last year. Arizona has a record 80 medical pot dispensaries currently open, with more expected to open this year, according to AZMarijuana.com.
  • $36 million: The amount of estimated tax revenue Maine would earn every year if it legalized and regulated marijuana, according to a 2013 estimate from the Marijuana Policy Project. Portland, Maine's largest city, voted to legalize weed in November, and a grassroots campaign to get state legalization on the ballot in 2016 is underway.
  • $21.5 to $82 million: The amount of estimated tax revenue Rhode Island would earn every year if it legalized and regulated marijuana, according to an April 9 report from the non-profit organization Open Doors. Rhode Island legislators are considering a bill this session that would tax and regulate marijuana like alcohol.
  • $134.6 million: The amount of estimated tax revenue Maryland would earn every year if it legalized and regulated marijuana, according to a 2014 estimate from the Maryland Department of Legislative Services. Maryland Gov. Martin O'Malley signed a law legalizing medical marijuana on April 14, and state lawmakers are considering a bill this session to legalize weed for recreational purposes, too.

Fastest Growing Market in the U.S.

Legal marijuana is among the fastest-growing markets in the United States, and it's growing at a rate poised to outpace the expansion of the global smartphone market, according to a new report obtained exclusively by The Huffington Post.

Researchers surveyed hundreds of medical cannabis retailers, processors, dispensary owners and industry leaders over the course of six months and predict industry sales to grow by 64%, to $2.34 billion in 2014. By comparison, recent figures show the smartphone market expanded by 46% from 2012 to 2013.

"Cannabis is one of the fastest-growing industries," said Steve Berg, a former managing director of Wells Fargo Bank and editor of the report, the second edition of the State of Legal Marijuana Markets. "Domestically, we weren't able to find any market that is growing as quickly."

"Entrepreneurs and private investors are flocking to cannabis markets," Berg said. "Those who really understand market dynamics will reap large rewards."

Public Support for Legalized Marijuana

  1. Support for marijuana legalization continues to grow. A 54% majority of Americans say the drug should be made legal.

2. About seven-in-ten (69%) Americans believe alcohol is more harmful to a person's health than marijuana. If marijuana became as widely available as alcohol, 63% still believe alcohol would be more harmful to society.

3. Nearly half (47%) of Americans say they have tried marijuana, and 11% in the past year, which the 2012 National Survey on Drug Use and Health says is the most commonly-used illicit drug in the U.S. The government survey showed that 18.9 million Americans aged 12 or older (7.3%) had used marijuana in the prior month.

The Opportunity, The Risk

The numbers don't lie. The marijuana industry is exploding and has been called "the next great American industry." With some marijuana stocks already gaining hundreds, even thousands, of percent, it is widely believed that the next wave of new millionaires will come from this industry. But not without large amounts of risk. All of the halted marijuana companies listed earlier in this article resumed trading, dropping dramatically in share price and leaving many with near worthless investments. If you are planning on investing in a marijuana company, make sure to do thorough research and only invest what you are prepared to lose.

FINRA and the SEC are cracking down on the companies issuing false and misleading news to provide marijuana investors a fair marketplace and give them the best opportunity to invest in the next huge craze. This is great news for investors as the REAL marijuana companies poised for massive growth will become easier to identify.

More and more states are passing legislation for medical marijuana usage while public perception continues to shift in favor of a country-wide acceptance. It seems as though it is only a matter of time before marijuana is legalized throughout the country for medicinal uses. If the industry has seen such massive growth figures and revenue with less than half the country legalizing it, what do you think will happen when all 50 states give the ok?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.