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Marijuana Stocks 2010 Opinion

February, 2010

With all the buzz surrounding medical marijuana, we expect an influx of new publicly traded companies jumping on the bandwagon in 2010. It's a hot topic. Medical marijuana is controversial -- life changing for many patients -- and as a business, potentially very profitable. Acceptance for reform continues to grow among the U.S. population resulting in increased momentum both politically and in the media. Only a handful of publicly traded companies operate in this emerging industry as of this writing. For better or worse, expect those numbers to increase this year.

In roughly one quarter of U.S. states, with a doctors recommendation, laws exist to legally grow, posses, and/or use cannabis as medicine. Legislative measures are pending in another 15 states with several more eyeing the possibilities. Where legal (for medical use) opportunities exist for caregivers to service one or more patients. There are provisions for collectives and clubs, and in some areas for-profit commercial operations. Around these opportunities are additional layers of products, services and revenue streams including: education, taxation, marketing and advertising, payment systems, growing supplies, alternatives to smoking (vaporizing and ingestibles), accounting, medical, security, electrical, transportation/delivery services, legal consulting, real estate and many other basic (and niche) business needs. receives emails daily regarding questions specific to many of these areas.

Expect emergence of franchising models and growth in public corporations who will dedicate specialized central resources to assisting growers, collectives and/or patients -- for a price. Although many patients may grow their own supply, a large number will acquire medical marijuana from another source. For example; most of us could easily grow our own vegetables, but choose to buy them in a store for various reasons. Many patients already choose some form of convenience, discretion, outsourcing of services, and/or security. There can be room for all -- the "grow your own" patients, mom and pop collectives, Coop's, corporate entities and the ancillary businesses.

[img_assist|nid=183|title=|desc=|link=none|align=left|width=118|height=117]Although the signal to noise ratio will likely be high, this year offers an opportunity for industry leaders. We expect several new publicly traded companies to hang out their new medical marijuana corporate shingle. As in any niche, some will have what it takes to build a successful business, some will not, and others will unfortunately attempt to ride a wave of unsuspecting investors. In the realm of penny stocks, we can expect forward looking press releases based on nothing more than pump and dump schemes. Please understand, there is no one looking out for your investment decisions. Do not make the mistake of believing the SEC is monitoring all activity in penny stocks and has your back. It's not that way.

We do expect an organic "raising of the bar" in 2010 as potential investors vote their support with their money. 2010 should prove to be a results and credibility oriented year. Public companies who focus on compassionately serving patients, developing fair, legal, credible and in-demand revenue streams, and instilling investor confidence on a wide scale will advance. A large pool of new investors who also recognize opportunity in recent and coming changes to marijuana prohibition will have learned to evaluate companies more quickly and diversify their risk. Traders will always trade the ebbs and flows but investors will become hungry for credibility and results as this sector matures.

Transparency, credibility and results will prove key to investor confidence. Support will migrate naturally to those companies who (where appropriate and in no particular order):

- Provide compassionate service to medical marijuana patients or caregivers

- Demonstrate real revenue and profitability

- Offer a safe and secure environment to those they serve

- Understand and adhere to the laws wherein they operate

- Proactivly address questions of credibility regarding their company and its operations in the eyes of their shareholders

- Commit to transparency, current reporting of company fundamentals and demonstrate flexibility in an ever changing business environment

- Respect the position of those who choose to grow their own medicine or care-give to others without profit

- Understand the differences between medical and recreational use. Market and operate accordingly

- A respect for those individuals and organizations who have given of their time and resources to truly advance changes in marijuana policy over the years will also be a noteworthy trait.

These things are possible and in 2010 could be viewed as a theoretical minimum cost of sustainability for a publicly traded company who truly wants to succeed.

On the Internet, wholesale bashing will be tempered by the best companies with real facts, transparency, credibility and results. The same applies for pumping and promotion in relation to investor support. Investors/traders certainly need to enter this area with caution. Only those at the helm of these companies can effectively address these issues, and we feel some will.

The urgency to raise the bar will intensify this year. Big-board companies have had eyes on this sector for years and their internal machines are planning the perfect entry timing, strategy and roll-out. A popular opinion exists that Big Pharma, Big Tobacco, and Big Alcohol will wait for Federal changes in the laws before entering this arena. Some may eventually buy their way in while others will have the resources and infrastructure to close more deals, grow market share, promote and distribute more effectively in a week than a small understaffed and underfunded company can accomplish in months. They will move swiftly, and replicate their efforts. They will be aggressive and productive to a high degree. They will recognize the potential revenue opportunity in and surrounding medical marijuana and will also have predicted a flood of new investors who want their own positions in this sector.

That's not to say smaller companies are doomed. To the contrary, small nimble companies who take aggressive steps now to meet certain criteria will find themselves in a highly desirable position from several perspectives. As witnessed in the Internet boom and subsequent shake-out, being the best at what you do will often prove more valuable than simply having been first.

Bear in mind, there are major legal, philosophical, financial and political concerns regarding the notion of corporate (typically viewed as behemoth corporations) involvement in this sector. In fact, many within the black market community want cannabis to remain illegal to insure their continued profitability. Many in the existing caregiving community believe this not an area for corporate involvement or franchises at all. And many in the political realm fear fallout from opening the door too far and suffering a backlash from their constituents. But the Reefer Madness era is apparently on the ropes. The truth is coming out about cannabis and public support is at an all time high. Things are changing, but there remain significant pressures from many directions. It's our opinion that publicly traded companies operating in this area are inevitable and not (themselves) to be feared, based on their public status alone. The concerns are in HOW they choose to operate and whether or not they are a good citizen in a community. That's a broad swath -- but knowing the laws, doing things right, and simply replicating them, can be good progress for this sector. Ultimately, the market will determine a companies success or failure.

Franchising and corporate involvement are an organic progression in business. Not always for better and not always for worse -- but inevitable, really. The coming months in this area of business should prove interesting at the very least. There's a lot of interest in the growth possibilities at its core.