Posts Tagged ‘Cannabis’
MedBox Inc., which provides automated cannabis vending systems and consulting services to the medical marijuana industry, saw its first-quarter net income fall 56% as increased marketing, commissions and other expenses outpaced revenue growth.
The California-based company reported $ 272,018 in profits for the first three month of the year, down 56% from $ 622,150 during the same period in 2012, according to its latest financial report.
Revenue rose to $ 1.75 million vs. $ 1.46 million in the year-ago period. The 20% sales increase shows growing demand for the company’s products and services, which bodes well for the future of MedBox as the medical marijuana industry continues to expand. But it wasn’t enough to offset a big increase in costs.
Expenses hit $ 1.3 million – nearly triple the level a year earlier. Medbox spent $ 293,595 in marketing and advertising in the first quarter, up significantly from about $ 38,000 in same period of 2012. Commissions totaled $ 50,000 vs. none in the year-ago period, while legal and accounting fees rose nearly 10-fold to hit $ 316,953. Increases in construction/buildouts, outside services and salaries also contributed to the spike in expenses.
“We are pleased with our progress to date, but we recognize that we are still in our early growth stage,” Bruce Bedrick, chief executive officer of Medbox, said in a press release announcing the earnings. “We are moving forward with a sensible growth plan that includes realistic forecasts of equipment sales, strategic acquisitions, consulting fees and our new financing division.”
The company could not be reached for additional comment on its financials but said in the release that it is poised to enter new markets quickly.
Several states could legalize medical marijuana in the next couple weeks. Illinois lawmakers recently approved a bill that would allow up to 60 dispensaries statewide, and the governor will now decide whether to give it the green light. New York is also considering legalizing medical marijuana, while lawmakers in Nevada are weighing a measure that would provide for dispensaries (the state already has medical marijuana laws on the books but doesn’t allow MMJ centers).
“We have a team of consultants ready to be on the ground in Illinois, Nevada and New York to provide education and guidance on how to operate fully compliant, safe and secure medical marijuana facilities that are transparent in operation and provide accurate, unalterable reporting for taxation and auditing,” Bedrick said in the release. “We anticipate providing a leadership role in those states as they unroll their programs, just as we have been in other states that have approved sensible and effective medical marijuana laws.”
Aside from these potential opportunities, MedBox said it has inked $ 1.5 million in contracts that were not recorded in the first quarter because they have not yet commenced. These contracts are the result of the company’s move to offer in-house financing for its technology, which should further boost sales going forward.
From a cash perspective, the company has $ 1.04 million in reserves vs. $ 125,533 a year ago, largely the result of a recent stock offering that raised $ 1.25 million. Its cash balance is also up slightly from $ 1.03 million at the end of last year.
MedBox shares saw a slight bump after earnings were released yesterday, rising 66 cents – or 2.4% – to close at $ 28.65. The stock often experiences bigger fluctuations on a day-to-day basis, in part because of the relatively low number of shares on the market. At one point last fall, for instance, its shares rose from $ 4 to more than $ 200 in less than a week before losing most of those gains the next day.
The relatively modest movement since earnings were released indicates that investors are neither thrilled nor extremely disappointed in the results. Its shares, which trade on the over-the-counter market under the symbol MDBX, are hovering around $ 28.50 today.
MedBox has filed forms – including audited financials for the past two years – to become a fully reporting company with the US Securities and Exchange Commission, which should help boost its credibility with investors by offering more transparency.
MedBox Profits Halved Despite Healthy Increase in Revenues, Growth of Medical Cannabis Industry is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
A measure to regulate the medical marijuana industry in Los Angeles and limit the number of dispensaries to 135 has beat out two competing proposals in a landslide win, ushering in a new era for the nation’s largest MMJ market.
More than 60% of voters cast ballots in favor of Proposition D – a measure crafted by the LA City Council as a way to rein in the industry – according to initial returns. A competing measure (Initiative Ordinance F) calling for tighter regulations but no cap on the number of dispensaries failed to resonate with most locals, with just 41% of voters casting ballots in favor of it. A third proposal fell by an even wider margin, which was expected considering its main supporters abandoned the measure in the weeks leading up to the election (click here for a recap of all three proposals).
The passage of Proposition D will alter the Los Angeles MMJ landscape in many ways. Here are several possible business implications (keeping in mind that the exact impact is still hard to gauge at this point because there are many unknowns):
Dispensaries: Some will get hammered, and some will benefit immensely. Proposition D essentially outlaws all dispensaries that cropped up after a 2007 moratorium took effect, meaning an estimated 600 or more dispensaries will have to close, at least on paper.
But it might not play out this way in the real world.
It will all depend on how well LA can enforce its new law. The city doesn’t even know how many dispensaries currently exist (estimates range from 700 to more than a 1,000), meaning it also doesn’t know where many of them are located. At the same time, it’s unclear how the city will ensure the law is being followed. Other cities and states have struggled to enforce medical cannabis laws – in part because of a lack of time and money – and in some cases just look the other way. Los Angeles will no doubt attempt to close down dispensaries, but it could be a long, drawn-out process. Some (and perhaps many) centers could sneak through the cracks by laying low, while others will most certainly try to stave off closure by filing lawsuits.
On the other side of the token, roughly 135 dispensaries that were open before the 2007 moratorium are allowed to continue operating if they meet the new regulations. Most of these dispensaries will be able to capture a much bigger piece of the MMJ market, and therefore increase sales, if many of their competitors go out of business.
Additionally, they can breathe a little easier now that the city actually has a plan in place. The last few years have been extraordinarily turbulent for the LA cannabis industry, reaching a climax last year when the city council passed a ban on all dispensaries but then rescinded it. The passage of Prop D will create a more predictable climate. Most dispensaries in Los Angeles have remained fairly small given the lack of regulations. That could change going forward, and some dispensaries will no doubt look to expand now that they can start planning for the future.
“This offers some of the earliest dispensaries in LA some form of protection, as long as we follow certain guidelines,” said Aaron Justis, president of Buds and Roses, a long-standing medical cannabis dispensary in Los Angeles that will be allowed to stay open if it meets the regulations. “It does not mean that all the dispensaries in LA that do not qualify will close voluntarily or successfully be shut down by the city. It does mean, however, that the qualifying dispensaries can run their businesses with less fear and with more respect in the community.”
MMJ Growers: With fewer dispensaries, wholesale growers that sell cannabis to dispensaries will have to compete aggressively. Many of the smaller players with sub-par medicine that served the more questionable dispensaries will go out of business quickly. The more professional, established cultivation operations with quality medicine should still be fine and could even grow if the qualifying dispensaries allowed to continue operating are able to expand.
Edibles manufacturers: Companies and individuals that make edibles and other infused products will see a big part of their market evaporate. Those making edibles out of their home kitchen and wrapping their goods in plastic wrap will have the hardest time competing going forward, while the bigger players with streamlined production and professional packaging/labeling will have an opportunity to consolidate the market.
Ancillary businesses: Companies that provide equipment, products and services to LA dispensaries – from legal and accounting firms to packaging and software providers – will take a hit. Additionally, any business that run ads from dispensaries, such as the MMJ industry portal WeedMaps, could see revenues decline in that market. Other companies focused more on patients and end-users won’t see as big of an impact. Edibles firms
Local MMJ market: While there will still be plenty of dispensaries to choose from, some patients will no doubt turn to caregivers, go to the black market or grow their own – particularly card-holders in locations without a nearby center and those who can’t travel very far. That means the overall patient market will decline to some degree, though how much is anyone’s guess. Still, overall dispensary sales will likely remain strong, as many patients in general are willing to drive 15 minutes or more to visit a dispensary, according to the Marijuana Business Factbook, which should put them in reach of a dispensary.
Local MMJ business climate: Many industry watchers feel that the new rules will help create a more stable business climate for dispensaries over the long-term. As mentioned above, dispensaries now have some form of local protection, and that could help prevent the types of crackdowns common in other parts of California and the country.
“While I certainly would have preferred to see the passage of an initiative that didn’t include an artificial cap on the number of collectives, I still consider this victory a step forward for Los Angeles and for California, where regulations and legal recognition have been desperately needed,” said Aaron Smith, executive director of the National Cannabis Industry Association, adding that the local industry should now help push through statewide regulations to further stabilize the market.
But others say the measure could have a detrimental effect on the industry. An attorney representing the competing ballot measure even said that Prop D will invite federal raids and could lead to a ban on every dispensary in the future.
From a statewide perspective, this further erodes California’s position in the medical marijuana industry. While it still has the biggest overall MMJ market in the country, it could fall into second behind Colorado in another area: number of dispensaries. More than 200 cities across the state have banned dispensaries, leading to hundreds of closures in recent years. Several hundred more dispensaries are expected to close in the coming weeks in the wake of a key Supreme Court ruling upholding the bans. That, coupled with the expected closure of most centers in Los Angeles, could leave California with just a few hundred remaining dispensaries vs. the roughly 520 currently operating in Colorado.
National medical cannabis industry: On one hand, the loss of so many dispensaries will hurt ancillary companies across the country with business in LA, and the overall market base for MMJ businesses could shrink if many patients end up bypassing dispensaries for the black market. On the other hand, this is a big win for the industry in general, as regulations specifically covering dispensaries helps reduce volatility and further legitimize the medical marijuana business.
Prop D Prevails: New LA Cannabis Regs Will Have Many Business Implications, Positive and Negative is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
First Colorado, then Washington.
The two states that legalized marijuana for recreational use in November are both moving forward quickly on the regulatory side, with Colorado approving final rules on the industry earlier this month and Washington State releasing proposed regulations on the cannabis business last week.
It’s a gargantuan task given the tight deadlines – retail marijuana stores are slated to open in both states by early next year – and the fact that this hasn’t been done before. The states are approaching the issue in much the same way (heavy regulations and strict oversight), though there are some key differences as well that will have real-world business implications.
So which one will be better for cannabis entrepreneurs?
Some might find it easier to get involved in Washington’s marijuana industry, at least at the outset. Should the proposed rules stick, individuals who want to open a retail marijuana shop, grow site or infused-products company in Washington must live in the state for three months before applying for a license – a much shorter period than the two-year requirement in Colorado. Additionally, Colorado will only allow existing medical marijuana dispensary owners to apply for retail cannabis store licenses until the fall of 2014, while Washington State’s proposed rules don’t have the same stipulation.
So if you don’t live in either state right now – or you live in Colorado but don’t run a dispensary – Washington could very well give you the best shot at getting in on the ground floor of the recreational cannabis industry.
Washington might win out in another area as well: Costs. In Colorado, application fees for marijuana business licenses will run $ 500 for those who currently run a licensed medical marijuana business and $ 5,000 for those who don’t. In Washington, it would cost just $ 250 to apply for a license – regardless of whether one runs a dispensary or related medical marijuana operation – to start a retail shop, infused products company or grow operation under the proposed rules.
Dispensary owners in Colorado, however, will likely have a much better go of it than their counterparts in Washington. For one, they will have a big head start on the competition, given that only individuals with MMJ business licenses – or those that are in the process of obtaining one – can apply for recreational licenses at first. They also are already intimately familiar with many of the rules and restrictions present in Colorado’s recreational marijuana regulations, as they currently operate under a very strict regulatory framework.
In the long-term, it remains to be seen which state has created a better cannabis business climate. Each state’s regulations have benefits and drawbacks in this regard. Washington’s proposed rules would put a cap on the number of retail stores in each county, for example, which will limit competition but will also limit opportunities. What’s clear is that each state has set relatively high barriers to entry, meaning we won’t see nearly as many of the types of fly-by-night businesses common in the medical marijuana industry in some areas of the country.
Also last week, Illinois took a major step toward becoming the 20th state to adopt medical marijuana laws. A bill to legalize the cultivation, sale and use of marijuana for medical reasons has cleared the legislature and will now go to the governor’s desk. If the measure gets the final green light, it will be a huge day for the medical marijuana industry given the business possibilities. Illinois would quickly usurp Massachusetts as the hottest medical cannabis market, as the bill calls for up to 60 dispensaries statewide and nearly two dozen cultivation sites.
Getting Illinois on board with MMJ is extremely important for the medical cannabis movement, as it would further the cause immensely given the state’s size and further erode the government’s arguments against the industry.
Other top stories in MMJ Business Daily:
Dispensary Owners Blacklisted by Credit Card Companies
Maine Medical Marijuana Climate Heating Up
GrowLife’s Acquisition Strategy Leads to Mixed Results
Weekly Wrapup: WA or CO Better for Cannabis Entrepreneurs? + Another State Leans Toward MMJ is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
The Illinois Senate has passed a bill legalizing the cultivation, sale and use of marijuana for medical reasons, a watershed development that puts the state on the cusp of joining the MMJ club.
The fate of medical cannabis in Illinois now rests in the hands of Gov. Pat Quinn, who has not indicated whether he will sign the measure but previously said that he is “open-minded” on the issue. Promisingly, the state’s lieutenant governor recently came out in support of the bill, which could help tip the scales in favor of the bill for Quinn.
The measure – House Bill 1 -cleared the Senate by a 35-21 margin, an impressive victory for a controversial issue. The House, which had previously snubbed out cannabis-related bills, passed the current version of the bill last month.
If the governor signs off on the measure, Illinois would become the 20th state in the nation with medical marijuana laws, coming on the heels of Maryland’s move last month to approve a very strict and limited MMJ measure
Illinois would also become one of the most promising new medical cannabis markets in terms of business opportunities. The bill calls for a four-year pilot program that would allow as many as 60 dispensaries to open up across Illinois – nearly double the allowable number in Massachusetts, which recently passed a medical marijuana law and has attracted a ton of attention from entrepreneurs. The Illinois medical marijuana law also paves the way for up to 22 licensed cultivation centers to launch.
Patients with one of several dozen qualifying medical conditions – including cancer, glaucoma, HIV/AIDs, multiple sclerosis and spinal cord injuries – could receive an MMJ card with the recommendation of their doctor. Once approved and registered with the program, they could buy up to 2.5 ounces of usable cannabis every 14 days.
With a population of around 13 million, the state would likely have tens of thousands of registered patients – or possibly much more if additional medical conditions are added to the list.
Under the bill, the state would essentially regulate and oversee the entire MMJ program. As part of these responsibilities, it would conduct a background check on patients, caregivers and those who apply for cultivation and dispensary licenses.
“We applaud the Illinois Legislature for taking action and adopting this widely supported and much-needed legislation,” Dan Riffle – deputy director of government relations for the Washington DC-based Marijuana Policy Project, which lobbies for the reform of cannabis laws – said in a statement. “The final product is a comprehensive and tightly controlled system that will allow individuals with serious illnesses to safely and legally access medical marijuana with their doctors’ supervision.”
Breaking: Illinois Poised to Become 20th MMJ State as Legislature Passes Medical Cannabis Bill is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
The future of the marijuana industry is extremely bright, at least if you ask those who have hitched their wagon to it.
Roughly 80% of executives at ancillary cannabis companies said they expect to grow this year, according to exclusive survey results in the Marijuana Business Factbook 2013. Nearly 50% of respondents said they hope for moderate growth, while 31% are projecting “big” growth in revenues. Just 3% of owners think they might go under or see their business contract significantly, while 18% said sales will probably stay the same.
Ancillary firms don’t cultivate or sell marijuana but help the companies that do or provide related services geared towards patients and cannabis users. Examples include MMJ-focused law firms, accountants, cannabis testing labs, insurance providers, real estate professionals, tech and security companies, consultants, dispensary listing services and advertising agencies, among others.
The high level of confidence in the industry’s prospects – in a sluggish economy, no less – is an encouraging sign for current business owners and those looking to start a cannabis-related company. It’s a significant turnaround from a year ago, when pessimism ruled the day amid a federal crackdown on MMJ.
The survey was conducted earlier this year, when entrepreneurs were still buzzing from the legalization of cannabis in Colorado and Washington State, the apparent end of the federal crackdown, the continued expansion of the MMJ industry into new states and several other positive developments.
The landscape is similar today, though recent signs that the federal government and local officials in some areas are resuming a crackdown – coupled with a damaging Supreme Court ruling in California – have dampened optimism among some professionals.
Still, the industry is riding solid momentum, and more states could go green this year. Colorado and Washington also remain on track to launch retail marijuana operations by early next year, which will create substantial ancillary business opportunities.
MMJ Business Daily estimates that marijuana sales via dispensaries will hit as much as $ 1.5 billion this year, up from $ 1.2 billion to $ 1.3 billion in 2012. The figure is expected to at least double to as much as $ 3 billion next year when factoring in adult-use cannabis sales in Colorado and Washington.
Of course, entrepreneurs – by nature – are optimistic folk. Projections of growth are one thing; actual growth is another. But the outlook of business owners (like consumer confidence readings) is often a bellwether for business conditions and the investment climate. So strong optimism among ancillary businesses bodes well for the entire industry.
Click here to get your copy of the entire 180-page Marijuana Business Factbook 2013, which includes exclusive financial, legal and market research data for cannabis professionals.
Bright Marijuana Business Outlook: 80% of Ancillary Cannabis Firms Expect ‘Big’ or Moderate Growth is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
Raids. Civil forfeiture notices. Warning letters.
The headlines coming out of California and Washington State over the past few weeks conjure up memories of last spring, when the medical marijuana industry was under assault on many fronts amid a widespread crackdown on cannabis businesses. The pressure subsided later in the year and seemed to fizzle out completely as 2012 came to a close.
But several recent developments are stoking fears of a renewed crackdown on the federal, state and local levels in some areas of the country, particularly California and – to a lesser extent – Washington State:
- Last month, the Drug Enforcement Administration raided a handful of dispensaries and sent threatening letters to dozens of others in several California towns, including Santa Ana. As in the past, some dispensaries were targeted while others were left alone – without any explanation why that was the case.
- US Attorney Melinda Haag has stepped up the pressure on the industry after a brief lull, sending out dozens of warning letters in recent weeks to landlords of dispensaries in several cities – including San Jose, San Francisco and San Bernadino. All the dispensaries are located within 1,000 feet of schools or parks. Haag and other US attorneys had substantial success using the same tactic last year to shut down hundreds of dispensaries.
- Last week, federal agents raided one of the last remaining dispensaries in San Diego as well as nine indoor marijuana cultivation sites. The move comes despite efforts by the mayor to stop enforcement actions against local MMJ centers and pass new dispensary-friendly legislation. The feds also filed a lawsuit against the landlord of noted dispensary Berkeley Patients Group, which has been operating for nearly 15 years in the city of Berkeley. The government says the dispensary is operating too close to schools – even though it recently moved locations to ensure it was at least 1,000 feet away from one – and violating federal drug laws, even though the roughly 2,000 other dispensaries across the country are technically doing the same.
- The DEA sent cease-and-desist letters to nearly a dozen dispensaries in the Seattle area last week, saying they are located too close to schools, parks or other areas where children congregate. The letters – similar to ones sent to about 24 centers a year ago – give the dispensaries 30 days to close. As in California, some dispensaries near schools were left alone. Some observers think the government is trying to send a message as Washington State implements its recreational marijuana law. One dispensary owner told the Seattle Times that the federal government “sees too much money and the whole looming specter of recreational cannabis going down,” adding that the crackdown “has more to do with keeping investors’ enthusiasm under control than any proximity.”
- On Monday, the California Supreme Court ruled that cities and towns do indeed have the authority to ban medical marijuana dispensaries, dashing the hopes of MMJ advocates. The decision ensures that the 200 or so city bans across the state will remain in place and paves the way for other cities to bar dispensaries. In total, dozens – and potentially hundreds – of additional dispensaries could close across California over the next few months. Some municipalities are expected to enact new bans soon, while other cities that have bans in place but were not enforcing them are already moving to crack down.
In Garden Grove, for instance, city officials reportedly hand-delivered letters to the roughly 80 dispensaries in town telling the owners to close down. “Please be advised that failure to cease operations of the marijuana dispensary on or before May 14, 2013 will result in enforcement action, which may include criminal charges being filed against any person found to be operating the dispensary, administrative penalties in the amount of $ 1,000 for each day that the marijuana dispensary continues to operate, the filing of a civil action, or any combination thereof,” the letters read. The warnings also mention the possibility of jail time for owners who do not comply.
Once again, the MMJ industry – particularly in California – is operating in an extreme state of uncertainty. The big fear now is that the crackdown will spread to other states. That seems unlikely, given increasing support for MMJ among the general US population, pending medical cannabis legislation in several states and the recent moves by Colorado and Washington to legalize marijuana for adult use, which ostensibly is a bigger concern for the feds than medical cannabis.
However, as we’ve seen time and time again, predicting what will happen in this industry from one day to the next is impossible. It’s also difficult to determine the government’s line of thinking, as there often seems to be no rhyme or reason to its actions when it comes to medical cannabis.
Dispensary Raids, Warning Letters Stoke Fears of Renewed Crackdown on Cannabis Businesses is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News
The medical marijuana industry may have finally turned a corner on the financing front, as evidenced by two important developments last week:
#1. Five ancillary cannabis companies received a combined $ 1 million in funding commitments – a number that could swell to more than $ 2 million when the deals are finalized – from angel investors via an event hosted by The ArcView Group. Sure, the overall investment total is relatively small in the financing world. But the development shows that angel investors are starting to get serious about investing in cannabis, and that could bode well for the industry going forward.
The companies that received funding commitments run the gamut (from a business selling vaporizers to one providing security services and products) and are in various stages of business development, from those at the concept level to those that have been making products for years. What’s more, the companies are based in various parts of the country, from states with MMJ laws (California, Colorado and Oregon) to those where medical cannabis is still illegal (Ohio and Florida). This diversity highlights the potential for entrepreneurs going forward and proves that you don’t have to be located in the epicenters of MMJ to attract investor interest.
#2. A new private equity firm has launched a $ 250 million fund that will offer several financing options for marijuana businesses, including lines of credit and cash advances. The interest rates are high compared to other industries, coming in at between 14.9% and 28%. But they reflect the huge risks involved of investing in the MMJ business and are reasonable for the cannabis sector – especially given the lack of other options, as banks typically won’t lend money to dispensaries, grow operations or ancillary cannabis businesses.
These developments come on the heels of several other recent signs that the investment climate is improving:
- A new site set to launch this summer will provide crowdfunding options for the cannabis industry. The site (called WeCanna) will allow individuals – marijuana advocates, consumers, small-time investors, etc.- to make relatively small investments in startup cannabis businesses and related projects such as films, political campaigns, etc. in return for rewards and/or recognition.
- KannaLife Sciences – which provides standardized packaging for cannabis-based products and specializes in the research and development of pharmacological products derived from botanical sources – recently announced that it has landed a $ 1.5 million investment from Medical Marijuana Inc. and CannaVest Corp.
Combined, these developments are extremely welcome news for an industry with limited investment and financing options. An increasing number of investors seem ready to take the plunge into the cannabis industry, so expect more activity in the months to come.
Other top stories in MMJ Business Daily:
Medical Marijuana Inc. Responds to Critics
Massachusetts Advocates Decry ‘Nasty’ MMJ Bill
Weekly Wrapup: Medical Cannabis Funding Climate Improving Amid New Deals, Developments is a post from: Medical Marijuana Business Daily - Legal, Financial and Dispensary News