$50 BILLION MARKET –  – 3% PENETRATION

Only 3% of the illegal marijuana market has, at the beginning of 2014, been shifted into the legal sector. This implies a 30x potential increase in the size of the cannabis market upon the eventual realization of a federal lifting of the prohibition on cannabis, if lifted for both medical and adult social use. The 30x implied illegal to legal potential market shift may be one factor in why the market capitalizations of some public cannabis companies are in the 30x revenue (i.e. sales) range. The $1.4 Billion legal cannabis market is forecast to grow by 63% during 2014. It is important to note that this 63% annual increase in sales or even the entire 30x potential increase requires no true growth in the overall cannabis market or other growth in cannabis usage. The modeled growth is satisfied, in our understanding, by the shifting of cannabis buyers to legal sellers rather than them risking buying through any remaining illegal channels. The $50 Billion market already exists and does not need to be developed, just shifted over. Anecdotal evidence in Denver indicates that illegal channels are already expressing resentment toward the decline in street sales because of the shift to legal, controlled cannabis sales.

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