As cannabis use and legalization continues to be a heated mainstream debate, it’s becoming more important to understand the physical process of creating, transporting, testing and selling usable cannabis products. To get a better idea of what a national cannabis industry would actually look like, one should take a closer look into the processes that allow cannabis businesses to operate in the states where recreational and medical cannabis businesses are legally allowed to operate. In line with that thinking, today we speak with Daniel Sparks, J.D. and Steve Flaks of BioTrackTHC, a cannabis seed-to-sale tracking solution that includes a dispensary specific point-of-sale (POS) system. BioTrackTHC is used by a growing number of dispensaries and includes a comprehensive inventory management and all-in-one business solution for cultivation facilities, manufacturing/processing facilities, and dispensaries, in states with either (or both) legal recreational and medical cannabis industries. To better understand how cannabis is sold, let’s take a look at the software that allows it to be sold from a dispensary to the general public.
Written by Maxwell Davis, Daniel Sparks & Steve Flaks
Edited by Maxwell Davis & Jon Russell
Maxwell Davis, GreenSea Distribution: Welcome, Daniel and Steve! Thank you for taking time out of your schedule to speak with me today. For those who may be unfamiliar with you or your company, would you briefly introduce yourself?
Daniel Sparks, BioTrackTHC: Thank you Maxwell. I have been working with BioTrackTHC for two years as the Director of Government Affairs. My focus is on executing our strategy in the government sector of the business. BioTrackTHC focuses on providing seed to sale tracking systems to government regulatory bodies, as well as commercial software solutions for inventory management and dispensary POS to cultivators, processors, and dispensaries/retailers.
BioTrackTHC has developed, deployed, and supported, cannabis-specific inventory tracking and management software solutions over the last seven (7) years for private sector cannabis businesses, and over the last four (4) years for government agencies, and is therefore one of the oldest and most experienced companies in this unique space. We provide two (2) actively utilized cannabis seed-to-sale tracking and business management solutions; one for government agencies and one for licensed cannabis businesses.
I wanted to also introduce you to my colleague, Steve Flaks, who has been with BioTrackTHC for 2 years and is our VP of Sales. He focuses on commercial software sales and is more heavily involved with the dispensary point of sale offering. I’m bringing him in on this conversation because of his expertise relating to the commercial business software.
Steve Flaks: Nice to meet you, Maxwell, and thank you for having us.
Maxwell Davis: Thank you and nice to meet you as well. So, tell me a little bit more about BioTrackTHC. Why create a point-of-sale (POS) system specifically for the cannabis industry?
Daniel Sparks: BioTrackTHC formed from Bio-Tech Medical Software, which originated as a prescription drug and methamphetamine precursor tracking system to assist state governments and law enforcement in preventing drug diversion and promoting public safety. The company even went so far as to submit its technology to a SAS No. 70 audit (now SSAE 16) to certify the system’s compliance with the stringent standards for the electronic prescribing of all legal classes of medication—including Schedule II drugs—as required by the DEA (Drug Enforcement Administration).
Around 2010, the company began receiving interest in the technology from cannabis producers, processors, and dispensary owners in Colorado who desired an end-to-end cannabis inventory management and patient record-keeping system for both compliance and business optimization purposes. They had been utilizing a variety of disparate tools— from nursery management for producer operations and spreadsheets for inventory, to generic web-based point-of-sale systems for retail transactions and paper charts for patient record-keeping.
Steve Flaks: The process of tracking the cannabis plant and cannabis-related inventory is intricate, and it’s completely unique from other retail inventory products. Creating a system that is specifically designed for the workflows of cannabis businesses required us to work hand-in-hand with licensed cannabis operators, obtaining direct input from those who have helped define the cannabis production, processing, and retail dispensing lifecycle as we currently know it. BioTrackTHC took its thoroughly vetted medical system as a foundation and custom developed it for cannabis workflows. As would be the case throughout its history, BioTrackTHC worked closely with these new customers and smoothly transitioned them from their disparate systems into a unified architecture that facilitated a continuity of business logic and unbroken audit trails for your entire inventory; through cultivation, processing, testing, transportation and retail dispensing, or in other words, seed to sale. These medical cannabis businesses became the first known facilities across the country to digitally track the cannabis plant from seed-to-sale.
Daniel Sparks: In 2013, then-Deputy Attorney General James M. Cole released what became known as the “Cole Memo.” The Cole Memo is a 9 page memo sent to all US attorneys general basically stating; if states enlist strict tracking and regulatory frameworks to monitor cannabis product and keep it out of the wrong hands, the federal government should feel no need to interfere and will let states have their voter-approved cannabis. This initiated the development of BioTrackTHC’s government tracking systems; the first of which being the state of Washington, officially deployed in July of 2014. With that, it was no longer a “desire” for licensed operators to have a tracking and inventory management system, but a requirement to avoid fines and potential federal intervention on your licensed grow, processing facility or retail dispensary.
Maxwell Davis: From the standpoint of a dispensary, what is the difference between using a cannabis POS system as opposed to a “normal” POS system found in typical retail outlets? Why should they chose BioTrack over, say, what they used when they worked at JC Penny?
Daniel Sparks: There are many reasons that operators should choose a cannabis-specific inventory management solution; if you’re in a medical state, you require patient information to be kept and submitted to the state. If you’re in an adult-use state; compliance is your absolute biggest priority. There are 3 key, functional reasons for picking a cannabis-specific dispensary point of sale: compliance, workflows and safety features. However, a 4th reason that may be equally important is experience.
Compliance is the obvious one. Most states require that you feed specific data into a centralized system for compliance purposes. So aside from having to regularly pull and format that data for compliance reporting, you face the risk of surprise inspections by the state, for which you need to have data on-hand in the event that they ask for it. Without a dispensary point-of-sale, that data is likely difficult to pull together quickly, whereas an actual dispensary point-of-sale will have it already together in a uniform report.
Steve Flaks: The next few are more specific to business operators. First is workflows. The process of operating a cannabis business is unique to every single operator. They all have their own way of doing things and deferring from their tried-and-true process can hurt their business and cash flow. We provide highly customizable workflows that are specific to how cannabis business operators actually operate.
Last one mentioned was safety features. This is kind of a broad term, but that’s intentional to encompass a wide-array of different functions that are specific to cannabis. Here are some examples:
-Sales limits: As mentioned previously, customers/patients in some states are limited to purchasing a certain amount of usable product in a given calendar day. BioTrackTHC enforces these sales limits in real time. So if a customer comes in and buys 2oz (daily limit in many states) then goes to another dispensary to purchase again, they will be unable to sell product to that customer since they’ve already reached their daily limit.
-Employee Restrictions/Permissions: Unfortunately, business owners aren’t the only ones capable of breaking compliance. In fact, most compliance infractions are a result of careless or unaware employees. Our system enables managers and operators to set up specific permissions and restrictions per employee. This allows managers to keep close tabs on who exactly is performing which actions through action logs as well as prevent employees from making common mistakes that could cause them to be non-compliant.
All of these effectively lead up to one thing: diversion protection. We keep dispensaries and communities safe by functionally restricting actions that would allow dispensaries to divert product into the black market. That level of granularity simply cannot be achieved with a POS you use at a retail clothing store.
I also made sure to note experience. Operating a cannabis business is not like operating a normal business. You have constantly shifting rules and regulations and simple mistakes in your business management system could mean thousands of dollars in fines. Having an experienced partner that knows this industry and the intricacies that come along with it is an essential piece to providing licensees with peace of mind. For example, we offer our customers the opportunity to receive on-site assistance. This is where we visit them at their cultivation, processing, or dispensary facility, take the time to fully understand their workflows and how they operate, and setup the system to adhere to that process. We know exactly what you’re dealing with and we can optimize the system in a way that makes their lives much easier.
Maxwell Davis: What are some of the hurdles you, as the software developers, have to face when creating a cannabis specific POS system that a “normal” POS software developer wouldn’t have to worry about?
Daniel Sparks: Every state, city and country has unique rules and regulations surrounding their cannabis program. Some are medical, some recreational, and some have both, making for very little consistency in trying to sell a software solution that keeps business operators compliant across multiple states. Our system is 100% customized to meet the regulatory requirements in each respective state. If you operate in Colorado, you have different features than a BioTrackTHC user in Oregon. Regardless of what state you operate in, our system has checks and balances in place to make sure you maintain compliance-focused reporting data. Considering these programs are developing and changing on a weekly basis, staying ahead of the regulatory requirements for over 26 states is a challenge, to say the least.
Maxwell Davis: That makes a lot of sense. So, what inspired you, and the others working in your company, to join the cannabis industry in the first place? Sure, BioTrack would be more of an ancillary company, but you get what I’m saying.
Daniel Sparks: Being a part of this industry is a blessing. We consider ourselves incredibly lucky to be a part of this historic shift in public opinion.
As for the company, it had originated to combat the opioid epidemic that has plagued our country for decades, so it was a natural shift when a product came onto the market that also required that it be highly-regulated and closely monitored. The industry and stakeholders approached us, and we were delighted to get involved and help bring transparency and legitimacy to it.
Maxwell Davis: Given the obvious volatility of the cannabis industry, what would you say some of the benefits are working as an ancillary company to cannabis? And tell me about the inverse too; what are some of the cons working for such a fast-paced, ever-evolving industry?
Daniel Sparks: As software providers, we don’t physically “touch the plant,” so we don’t have to worry about our business being raided out of the blue, as many operators deal with in other states. In addition to potential federal intervention, licensed operators can’t utilize common tax write-offs that many businesses rely on to offset expensive operating costs due to IRC 280-e. We don’t have to worry about that.
Steve Flaks: The cons are the lacking consistency. It feels like we’re running an international business across several countries with the amount of differentiating rules and regulations you have to stay on top of. Even states that have “similar” programs are completely unique from one another and have different regulatory frameworks for reporting and business requirements. Every single customer we give a software demo to, we have to be privy to their state’s local rules and regulations and how BioTrackTHC is customized to address them. Consider that, coupled with the fact that we now operate in 26 states that literally update their program rules on a monthly basis, and you have a very intricate system to stay adept to.
Image Courtesy: BioTrackTHC
Maxwell Davis: How many states, and dispensaries, is BioTrack currently operating within?
Steve Flaks: Our commercial solution, which includes our dispensary point of sale, operates in over 2,000 medical and recreational cannabis production, processing, and retail dispensary facilities across 26+ U.S. states, including the District of Columbia and in other countries including Canada, Jamaica, Australia, Puerto Rico and South America.
Daniel Sparks: On the government side, we currently have 7 government contracts for seed-to-sale traceability; Washington, New Mexico, Illinois, New York, Hawaii, Delaware, and the city of Arcata, CA.
Maxwell Davis: Let’s say someone, maybe a legislator, is debating on whether or not they think cannabis would be appropriate for adult-use in their home state. What are some of the benefits BioTrack provides as a software that may ease his or her worries in regards to the product physically being sold from a dispensary to a patient?
Daniel Sparks: As mentioned previously, the only guidance states have been given on recreational and medicinal cannabis from the federal government is the Cole Memo of 2013. Adhering to the policies outlined in the memo is the only way states can operate with peace of mind.
Those policies specifically include;
- Preventing diversion of legal product to another state
- Preventing distribution to minors
- Preventing revenue from the sale of marijuana going to criminal enterprise
- Preventing state-authorized marijuana activity from being used as a pretext for organized crime.
BioTrackTHC was recently evaluated by several former Attorneys General for our system’s compliance with the Cole Memo. They determined that BioTrackTHC is the “Gold-standard” of cannabis tracking systems for state governments and is fully compliant with the Cole Memo.
Our government tracking systems enforce a system of controls that have restrictive functionality to keep licensees safe from breaking minor compliance codes. There are many restrictions related to compliance that can be broken by mistake such as entering incorrect data or accidentally clicking a button when you’re not ready to. BioTrackTHC will not allow licensees to perform certain actions that would cause them to break compliance. So what this means is that in some states, patients/customers are limited to purchasing 2oz of product in a given day, but with some competitor systems, a patient can just go around to 5 different dispensaries that day and buy their 2oz limit at each of them. Since we offer real-time patient limit tracking, that patient’s anonymous ID number follows them store to store, so once they’ve purchased their daily limit, they cannot purchase in that calendar day from anywhere within a BioTrackTHC state.
We also functionally restrict users from completing actions that would cause them to break compliance. For example, in some states when product is labeled in the system as “waste,” you’re required to keep it on premises for XX hours in case of a surprise inspection, usually 24-72 hours. The system has an option to “destroy” that waste, which is done after the waiting period is up and allows the operator to fully dispose of the wasted product. BioTrackTHC will not allow users to “destroy” their waste until after the required timeframe set forth by the state. Some systems will allow users to complete these actions, even if it’s a simple slip of a finger and clicked by accident. With us, that isn’t even an option.
Aside from helping the state monitor and regulate the program, we help safeguard licensees and keep them safe from accidents and unintentional compliance slips. For these operators, it’s not easy to monitor the state level rules and regulations and thoroughly understand how they affect your business. Even a store level employee could perform an action not knowing that it jeopardizes your business. With us, you don’t have to worry about it because our system has you covered and will keep licensees safe from breaking key compliance codes.
Image Courtesy: Cannabis Integration
Maxwell Davis: Does BioTrack help provide state governments with seed-to-sale tracking systems like Oregon’s adopted seed-to-sale tracking software METRC?
Daniel Sparks: Yes, our government tracking solutions are very similar to METRC, however, as stated previously, ours is a system of controls that keeps operators safe by functionally restricting actions that could cause noncompliance. METRC simply feeds data into the state-side system, allowing governments to monitor the data and react when something is awry.
Maxwell Davis: As far as the future of cannabis goes, how do you see POS systems improving and developing with the industry?
Daniel Sparks: The development of interstate and international trade of cannabis will rely on seed-to-sale tracking technology. That’s my prediction. Recently, many countries have surpassed the US in legalization and decriminalization of cannabis and medical cannabis. If we don’t get on board soon, other countries will grab up the lion’s share of the market and we’ll be playing catch up. In addition, as with all software programs, they need to be continually updated with changes in the law and tailored to what the market needs. With more states coming online and different needs per each, it will be imperative to stay atop these changes to protect licensees and the industry as a whole.
Steve Flaks: In addition to the government side of things, dispensaries and business owners are starting to seek out more all-inclusive software solutions. They want the ERP that includes Quickbooks, Salesforce CRM tools, full vertical seed to sale tracking AND dispensary point of sale. The trouble is, so few business operators in this industry could afford a product offering of that size. Some companies offer ERP’s that cost as much as $50,000/month, and that’s on the low end. There are thousands of licensed cannabis businesses, and only a small percentage of them are making enough profit to afford a system like that. We’re in the process of moving in that direction, but right now, very few of our customers would be able to even afford it.
Maxwell Davis: Where do you think the future of cannabis retail is headed? What is BioTrack’s role in that evolution?
Steve Flaks: I believe that cannabis as a retail product will evolve similar to the organic food market. Although we will likely see “big-chain” cannabis brands and products, I would hope that craft cannabis brands, (small-batch, locally sourced, sustainably grown, etc) can co-exist with them in a competitive marketplace. Washington just began the process of creating a “certified organic” program for cannabis products and several other states are exploring the idea.
Daniel Sparks: BioTrackTHC’s role in that process will be facilitating compliance for businesses, while also arming regulators with the tools needed to verify that compliance and maintain a safe program in their communities. How cannabis is bought, sold, transported, and consumed is continuing to evolve. BioTrackTHC’s systems are constantly being updated to reflect changes in the law and regulations in each state and country. Thus, as the industry evolves, as do we, along with it.
Maxwell Davis: That’s fascinating. Well, thank you for taking the time to speak with me, Daniel and Steve. I truly appreciate your insights here today. Please let me know if you ever do a drop-by in Oregon! GreenSea would love to show you both around!
Daniel Sparks: Thank you for having me Maxwell. I will definitely take you up on your offer!
Steve Flaks: Likewise, it’s been a pleasure.
Maxwell Davis: Thanks again, guys. Have a wonderful day.
Daniel Sparks: Same to you.
Steve Flaks: Thanks, Maxwell.