FinancialBuzz.com’s latest Buzz on the Street Show: Featuring Our Corporate News Recap on “TruTrace Technologies and Canadian laboratory services company Molecular Science Corp enter into Strategic Working Relationship.”
TruTrace Technologies Inc. (TSX-V: TTT) (OTC: BKKSF) (“TruTrace” or the “Company”) today announced that it has entered into a letter of intent dated April 30, 2019 (the “LOI”) with Molecular Science Corp. (“MSC”). Under the terms of the LOI, the parties will work together to explore opportunities to combine the blockchain-secured technology of TruTrace with the analytical expertise of MSC in order to deliver greater transparency and visibility around the quality of products being offered in the legal cannabis industry.
TruTrace Technologies has developed the first integrated blockchain platform to register and track intellectual property in the cannabis industry. TruTrace’s technology allows cannabis growers and breeders to identify and secure rights to their intellectual property. It also streamlines the administrative process and reduces the costs of genetic and mandatory quality-control testing for legal cannabis. TruTrace’s technology is proprietary, immutable and cryptographically secure, thereby establishing a single-source, accurate, validated and permanent account for cannabis strains from ownership to market.
Over a dozen countries have already legalized cannabis for medicinal purposes while others have also decriminalized it, allowing for moderate personal consumption. Notably, Canada had moved to legalize cannabis entirely in late 2018. However, despite the widespread international expansion, the U.S. still dominates the overall cannabis industry. The U.S. has not moved to federally legalize cannabis, but the government has granted states the ability to choose cannabis’ legal status for themselves. As a result, over 30 states have legalized cannabis for medical use while 10 states including the District of Columbia have legalized its recreational use. Primarily, states such as California, Colorado, Nevada, and Washington are the primary market drivers. However, emerging states such as Massachusetts, Michigan, and Oregon are also expected to become large marketplaces as states that had legalized recreational use collectively delivered billions of dollars in revenue back in 2017. The opportunities so prevalent in the U.S. have also attracted many international companies. In particular, several cannabis companies have moved to establish operations within the U.S. because of the massive addressable market. On the other hand, Canadian companies are currently facing barriers from the government following its legalization as the Canadian government curtailed retail hours and limited licensing distributions. Nonetheless, the Canadian market is still expected to witness substantial growth as it continues to mature. According to BCC Research, the North American cannabis market was valued at USD 10.7 Billion in 2018. By 2023, the market is expected to reach USD 25.5 Billion while witnessing a CAGR of 18.9% from 2018 to 2023.
Despite the U.S. representing vast growth opportunities, cannabis companies are still expanding their operations in Canada. According to Arcview Market Research and BDS Analytics, Canada reported legal cannabis sales in the range of USD 755 Million to USD 1.6 Billion. Furthermore, the research suggests that the Canadian legal market is expected to reach USD 7.8 Billion by 2022. On the other hand, U.S. based cannabis companies generated higher gross margins than their Canadian counterparts. Due to the opportunities present in both Canada and the U.S., many companies have established joint operations in both regions. For instance, some companies cultivate cannabis in Canada and distribute within the U.S. or vice versa. However, small-to-mid cap companies are limited in their expansion activities due to their lack of the necessary funds. Therefore, analysts have speculated that the large companies are will acquire or merge with smaller ones. “Companies with unique assets or business models are likely to be more appealing to potential buyers. Different geographies or modes of production are often cited by the buying companies,” said Alan Brochstein, Founding Partner of New Cannabis Ventures, “Consolidation is picking up in the cannabis space, and investors are rewarding the companies that are buying by pushing their stocks up after the deals are announced. This will likely encourage other companies to be me more aggressive in their M&A strategies.”
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