CannabisFN Weekly: Banking Access Opens Up New Opportunities

February 24, 2014

Cannabis stocks moved significantly higher last week alongside the broader markets, after the U.S. Department of Justice and Treasury Department issued joint memos providing the banking sector with guidelines for dealing with cannabis companies. Top movers last week included companies like CannaVEST Corp. (CANV) that jumped more than 180% to more than $170.00 per share.

Several cannabis companies surpassed key milestones last week. Hemp Inc. (HEMP) announced a new consulting agreement with Webxu Inc. (OTCBB:WBXU) adding to a growing number of such agreements. Resources Ventures Inc. (REVI) posted record revenues of $2.3 million and net income of $166,559 for the year ended December 31, 2013 as it focuses on launching The Hemp National Magazine.

Cannabis investors are also eyeing the ongoing stream of changes from Washington D.C. After Attorney General Eric Holder pushed for changes earlier this month, the U.S. Department of Justice and Treasury Department issued new guidelines designed to encourage formal banking for the cannabis sector. The move is expected to drive at least some large banks to test the waters, although smaller regional banks may wait for further guidance from Congress before making an entry into the market.

What's New?

- U.S. Offers Cannabis Guidance to Banks – The U.S. Department of Justice and Treasury Department issued joint memos last week that provided some guidance to banks when it comes to dealing with cannabis customers, including due diligence and fraud/red flag reporting requirements.

- Abattis Bioceuticals Acquires New Product Rights – Abattis Bioceuticals Corp. (OTCBB:ATTBF) signed an exclusive worldwide distribution agreement for magnesium oxide technologies used in any building or facility designed to cultivate botanicals from Jiangsu Jiahui New Material Co. Ltd.

- Colorado Pot Tax Revenues Exceed Expectations – The tax revenue from the sale of legalized cannabis in Colorado has exceeded initial expectations judging by a new budget proposal projecting some $610 million in sales and $98 million in tax revenue, assuming a 12.9% tax rate.

- CEN Biotech Displays Facilities in Open House – Creative Edge Nutrition Inc.’s (FITX) held an open house for shareholders at its Lakeshore, Ontario facility; the company plans to produce 1.3 million pounds of cannabis per year over the long-run at an 80-87% profit margin.

- IRS Rules Cripple Dispensary Profit Margins – Dispensaries are forbidden from writing off labor, rent, health insurance, advertising or other operating expenses related to the distribution of their product which has resulted in some dispensary tax rates topping 80% in the U.S.

What to Watch This Week

The cannabis sector moved significantly higher last week, as new banking guidelines helped ease concerns for banks. Investors will be closely watching just how willing commercial banks are to lend to cannabis companies over the coming months. In the meantime, many cannabis companies continue to roll out new products and services while new entrants to the market present new opportunities to investors.

About CannabisFN

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