​Legal Cannabis Hits Its Stride

Mark Collins |

Cannabis legalization is sweeping the nation, and seemingly nothing can stem the tide. Currently, cannabis is fully legal in seven states, legal by prescription in five states, and decriminalized in 18 states. At the time of this writing, even more states are considering legalizing the world's most famous recreational drug.

On the international stage, legal cannabis is already a major industry. It generated $7.2 billion in sales in 2016, and this figure is expected to grow at a rate of 17% a year.

The legalization of cannabis has given rise to a cottage industry of vendors, dispensaries, and clinics. To service and regulate this new industry, a whole new network of marketplaces, supply chains, grow operations and review systems will be needed. One of the most urgently needed elements in this new legal cannabis marketplace is technology. On both the consumer and producer sides, technology and web services can play a transformative role, providing access to information, sales data, and more.

MassRoots Inc. (MSRT) is one company that is attempting to fill that role. MassRoots is a U.S.-based developer of cannabis strains and technologies for medical use. Its medical products include food products, drinks, tinctures and oils. It also develops a mobile application that lets users interact with other cannabis aficionados while rating strains and products, a kind of "social media platform for tokers." The app and the reviews contained within it help users make educated purchasing decisions at their local dispensary.

The Cannabis Industry Grows Up

Apps are just one part of maturation of the legal cannabis industry. Over the years, cannabis has grown from a black market operation, to a semi-legal industry, to a full-fledged corporate industry built on e-commerce technology and professional-grade production facilities.

The new, legal cannabis industry has two main sectors:

1. Medical Cannabis

The medical cannabis industry consists of medical-grade cannabis products, suppliers, clinics and dispensaries. All products are given by prescription. Medical cannabis is permitted in many states but not all. In states where medical cannabis may be used, it is often prescribed for pain management, nausea and epilepsy.

2. Legal, Recreational Cannabis

The legal recreational industry consists of cannabis strains, hashish and other products sold to consumers for recreational use. Not all states that allow medical cannabis also allow recreational sales. In most states where sales of cannabis for recreational purposes are permitted, they are highly regulated and subject to controls.

Both the medical and legal recreational sectors of the cannabis industry are experiencing massive growth. Driven by increased demand, online sales and broad acceptance of cannabis in the medical community, the iconic herb is climbing to new and never-before-seen heights.

MassRoots hopes to take the industry to a whole new level. It plans to give the industry a new level of professionalism, and is bolstering its plan with a new acquisition that will streamline operations at cannabis operations like stores, clinics, dispensaries and head shops.



MassRoots Acquires Odava

A major step in MassRoots' plan to expand its presence in the cannabis industry was its recent acquisition of Odava, Inc. Odava is a software company that develops a number of apps for cannabis dispensaries. The company bills itself as "software solutions for the entire cannabis industry."

Its two main products are RETAIL, an app that streamlines ordering, transactions, and cash mitigation; and GROW, an inventory tracking system for producers. Both applications offer modern features needed by the growing cannabis enterprise.

The acquisition dramatically expands MassRoots' presence in the cannabis industry. Instead of just being an ecommerce vendor and social app developer, the company is now a provider of complete backend solutions to vendors and grow operations.

The RETAIL app comes complete with registration, menu displays, compliance workflows and offline support. The GROW app comes with a complete set of solutions for grow operations. These include inventory, product listings, bank integration, product data integration, and compliance features.

MassRoots is hoping to expand its client base with the acquisition of Odava's products and services. The company currently offers its products direct to consumers through its online sales and mobile app. With the Odava acquisition, the company is entering the B2B market, which has the potential to expand its presence considerably. Currently, there are few back-end business process services catering specifically to the cannabis industry. By becoming the leading provider of such services, MassRoots stands to gain a major slice of the ever-growing legal cannabis market.

A Fast-Growing, Nationwide Market

The legal cannabis industry has been growing rapidly nationwide. As mentioned, it did $7.2 billion in sales in 2016, a figure that's expected to grow at a rate of 17% a year. Medical cannabis sales are expected to increase from $4.7 billion in 2016 to $13.3 billion in 2020.

A major reason for this growth is that more and more states are opting to allow the sale of cannabis for medical or recreational use. Many of these states opted to legalize only recently, which gives cannabis vendors and service providers significant room to grow in these areas.

Risk Factors

Cannabis laws are a contentious issue, and the market may grow or contract with legislative action. There have been proposals tabled, at both state and federal levels, and although few of them have led to any bans being re-instated, there is a persistent risk of lost revenue from recriminalization in key states. The international nature of the cannabis market and the relative stability of the laws in Europe provides a buffer against legislative changes, but the U.S. remains MassRoots' major market.

There is some uncertainty regarding adoption, as many dispensaries function adequately using conventional retail systems used by ordinary brick and mortar businesses. There is also a risk stemming from the price of acquisition and the company's ability to recoup the funds spent on acquiring Odava.

All in all, MassRoots is an exciting enterprise in one of the world's fastest growing industries. As more and more states legalize cannabis, its target market may grow considerably, aided by the new verticals brought on by the acquisition of Odava. Legal cannabis is set to grow at a rate of 17% per year. MassRoots' management believes it is perfectly positioned to profit from this.

Only time will tell if the company will become the company to be "everything to everyone" in the medical cannabis space. In the meantime, its existing business is already poised to grow with increasing legalization and decriminalization, as well as the continued need for technologically sophisticated solutions in the cannabis market.

DISCLOSURE: Disclosure: The author has no positions in any of the stocks mentioned in this piece.

Companies

Symbol Name Price Change % Volume
MSRT MassRoots Inc 0.43 0.00 0.35 275,201

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