Today, CEO of Cannabis Medical Solutions, B. Michael Friedman, released the following letter to stockholders. The letter provides the shareholders with details concerning the companies achievements and progress.
Dear Fellow Stockholders:
Thank you for your continuing support of Cannabis Medical Solutions (CMSI) throughout 2010 and into the new year. Today, I would like to highlight a few of the Company’s achievements over the last several months and update you on our current activities and growth opportunities as it appears that 2011 will be a pivotal year for your Company. Over the last year or so, our accomplishments, which included developing an infrastructure, systems and new products, did take time, but we believe the potential return and future rewards will be dramatically positive over the near term.
In April 2010, we achieved the distinction of being certified as a third party processing company by several leading banking institutions for merchant processing of medical dispensary transactions. We spent much of the year leading the medicinal marijuana sector in providing much needed financial services to medical marijuana dispensaries within Colorado, California and Montana including merchant processing, cash advance, and launching our MediPaymentâ„¢ System. MediPay is the first closed loop patient card for the medical marijuana industry. With our MediPayment â„¢ banking platform solidly in place, we expect it to be the cornerstone of our growth in 2011 and beyond.
In June 2010, our dramatic increase in price of our common stock to over $1.00 per share allowed us to issue a 9-1 stock dividend to all shareholders of record, rewarding our loyal shareholders for believing in our vision to further regulate this industry. Although in November 2010 California’s attempt to pass Proposition 19 did not achieve the necessary votes for legalization, this did not raise any material problems which would cause us to question our confidence in our business model. In fact, throughout the final months of 2010, we witnessed several additional states propose the issue of medical use of marijuana on state ballots as well as Arizona passing the initiative within the state. These achievements allowed us to develop our infrastructure, pursue strategic alliances, further establish our customer service operations and develop the local-markets required for functionality of our system.
Toward the end of the year, our distributors and corporate clients encountered logistical and procedural delays in distributing the MediPayment cards to patients. We found the initial process significantly slower than expected. This impacted the speed and rate of card activation. As a result, the Company has refocused staff on supporting and assisting distributors and corporate clients in meeting this challenge. We are now focusing our corporate resources in supporting new customers and distributors in carrying out this task. We expect that the majority of distributed MediPayment cards will be activated throughout the second quarter of 2011.
Our customer base has steadily increased. In August 2010, we announced that we had executed agreements to partner and install the MediPayment system in up to 200 dispensaries within Colorado alone. We are diligently working to achieve that goal. As of today, our sponsor bank has approved card programs for over 20 corporate customers and we are in the process of submitting corporate customer applications each month.
REVENUE AND MARGINS
In the last fiscal quarter of 2010, we realized modest revenues. However, this was an important milestone in the development of our Company. Revenue is only generated through merchant processing fees and when MediPayment cards are activated. Hence, the speed and rate of the activation of our MediPayment cards is our most critical corporate priority in the evolution of our business. In addition to our corporate clients, our distributors have experienced a significant learning curve in the support required for the activation process. Our future revenue growth depends on card activation and we have identified additional resources to resolve this issue expeditiously. The Company has refocused staff on supporting and assisting distributors and corporate clients in meeting this challenge.
Revenue expected to be generated per MediPayment card is currently estimated at $5 per card per month for each patient. There are over 80,000 registered patients in Colorado alone, with several hundred thousand in California, with an additional 14 states presently developing legislation. Costs are broadly in line with expectation. Margins per card, being the difference between revenue and cost, were not initially forecasted specifically. However, at this early stage of customer card utilization, we believe margin trends are encouraging. A definitive margin ratio will emerge from the specific mix of actual future card profiles as more cards are activated.
The marketplace for our MediPayment card program remains as attractive today as it was at the inception of the Company. Though at an early stage, we are pleased with the customer reaction to the functions and benefits of our card. We continue to identify further opportunities for growth; for example, we have signed distribution agreements and licensing for our new cashless ATM product. Additionally, we are in the final beta testing stage of the first online medical marijuana patient registry system in which verified patients within a specific approved geographic region will have the ability to join medical collectives within their state through an online registration process. Collectives, Dispensaries and Vendors to the sector will have access to the online registry paying a monthly or annual fee. We expect this revolutionary medical exchange to be launched within the first quarter of 2011. Still further, we have reached an agreement in December of 2010 to distribute internationally, the first medicinal marijuana vending machine as featured on CNN and Fox News within legal jurisdictions and states.
Management cannot be specific on its aspirations at this early stage, but given the experiences so far we feel there is a solid opportunity for growth within the medicinal marijuana sector. We expect to add a significant number of MediPay cards as we begin 2011, install cashless ATM devices and grow our online patient registry with monthly fees to participating collectives over the next several months, and we will continue to report as new milestones are achieved.
To date, the Company has not raised any significant funds from institutional investors to sustain operations and has relied primarily on accredited investors close to the company and management for bridge loans to meet capital needs for operations. While the challenges and changes in legislation from state to state and delay in deploying the MediPayment card have negatively affected our cash flow in our early stages of development, the enhancements to our system and vertical product offerings have undoubtedly strengthened our position within the sector. There is a need to secure additional funds to cover operational expenses due to delays in launching the production roll-out in the latter half of 2011, as noted above, as we work towards positive cash flow. We are confident that recent inquiries from accredited investors and investment banking institutions will solve our long term cash needs for expansion.
Finally, let me address what management and many shareholders perceive as a currently weak share price. Given what the Company knows is currently underway and what will be transpiring as we move into 2011, it is management’s belief the current price stock has powerful potential for growth. The interest being shown and the steps forward currently underway, with both government and private industry interests, make it increasingly clear that increased revenues from our financial business models and shareholder appreciation will likely come in the near term as we move into an exciting and productive 2011.
We have continued in our efforts to promote public and investor awareness of CMSI through media outreach and other activities; Cannabis Medical Solutions was recently featured in an article by the Arizona Business Journal as well as featured on a Fox News Special in Denver Colorado for our MediPayment card as a viable alternative to cash only operations to eliminate theft and fraud in the special “Pot On Plastic”. I am regularly interviewed by the press, including both radio and print media, and these interviews provide ample opportunity to underscore CMSI’s important role and activities in the medicinal marijuana sector.
In closing, I want to thank you for both your patience and ongoing support of Cannabis Medical Solutions and assure you that the entire management team is dedicated to making our Company a great success. I believe that we will finally achieve the revenue goals and generate earnings that will positively impact shareholder value.
B. Michael Friedman, CEO
This press release may contain certain forward-looking statements and information, as defined within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the Safe Harbor created by those sections. This material contains statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Such forward-looking statements by definition involve risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Cannabis Medical Solutions Inc. to be materially different from the statements made herein.