WHITEFISH, MT / ACCESSWIRE / November 12, 2014 / Cannabis has been legalized in 23 U.S. states and the District of Columbia, after voters approved sweeping pro-marijuana legalization in Oregon, Alaska, and Washington D.C. during the mid-term elections. Alaska and Oregon will be following Colorado and Washington's lead with adult-use legalization, while Washington D.C.'s adult-use laws will be subject to Congressional review before implementation.
Despite the growing tide of reform on a state level, cannabis remains a Schedule I Controlled Substance on a federal level, sharing the same classification as drugs like heroin and worse than drugs like cocaine. The status has caused a host of problems for legitimate companies operating in the cannabis industry by blocking access to the formal banking sector and leaving the door open to prosecution.
In this article, we'll take a look at a micro-cap company that aims to help cannabis businesses solve some issues arising from these dynamics.
Banking Remain Off-Limits
Cannabis' status as a Schedule I Controlled Substance on a federal level means that commercial banks have been hesitant to touch the industry. Since these banks all rely on federal insurance through the FDIC, they are accountable to the federal government in all of their activities. A commercial bank financing cannabis in any way could be considered at risk for federal drug racketeering charges.
The lack of access to commercial banks means that most cannabis companies must purchase inventory, pay employees, and conduct sales entirely in cash, which requires elaborate and expensive security measures, and puts them at a higher risk of robbery. Perhaps more pertinent to the government's case, it also makes accounting for state sales tax collections more difficult.
In January of 2014, U.S. Attorney General Eric Holder announced new rules promising to address these problems faced by newly licensed adult-use marijuana retailers and medical marijuana dispensaries. The Department of Justice also announced the prior August that the administration would give states leeway with regards to the taxation and regulation of marijuana.
The problem is that commercial banks continue to refuse service to cannabis-related businesses for the time being. In many cases, commercial banks are awaiting congressional action and regulatory restraint in order to open the doors, since Eric Holder's and the DOJ's comments made no promises. Even the Colorado Bankers Association warned, "serve these customers at your own risk".
Significant Cash Levels
The U.S. cannabis industry could reach $21 billion to $35 billion in size by 2020, according to GreenWave Advisors. Without access to the formal banking sector, these are significant levels of cash to be paying out to suppliers and employees, as well as storing on-premise in vaults. The combination of a high-value product like cannabis and high levels of cash have led to obvious security risks.
Some companies have attempted to address the problem by introducing payment solutions for marijuana retailers. For instance, Medical Cannabis Payment Solutions Inc. (OTC: REFG) and Med-Cannabis Pharma Inc. (OTC: MCPI) both aim to launch payment solutions designed to help dispensaries process payments electronically and avoid holding large amounts of cash.
The best solution addressing both problems might be DirectView Holdings Inc. (OTC: DIRV), which provides security solutions geared toward the cannabis industry via their wholly owned subsidiary DirectView Security Solutions. With up-to-date, cost-effective, and easily managed solutions available,the company has leveraged its work with mainstream clients like Coca-Cola and AT&T to build a presence in cannabis.
During the second quarter, the company reported revenue that jumped 49% year over year to $112,000 and consolidated net income of $0.06 per share. Management attributed the increase in revenue to new business and customers in its security and surveillance operations, including deals struck through partnerships with cannabis consultancies like Cannamor and Legacy Construction Company of Colorado.
Looking Ahead
DirectView Holdings offers investors a unique opportunity to capitalize on the growing demand for security in the cannabis industry. With a market capitalization of around $1 million, the company could appreciate over the coming quarters as it leverages its strategic partnerships within the cannabis industry to generate significant revenue growth and ultimately bottom line improvements.
CannabisFN Executive Interview | DirectView Holdings, Inc. (OTC: DIRV) / Roger Ralston, CEO from TDM Financial on Vimeo.
Investors in the cannabis industry may also appreciate that the company generates revenue based on the industry's growth without being directly involved in handling cannabis itself. Meanwhile, potential competitors like ADT Corp. (NYSE: ADT) continue to avoid the sector due to potential legal complications on a federal level, since they also serve government clients.
Investors interested in learning more should visit CannabisFN's Market Defining Companies page at http://www.cannabisfn.com/mdcs/dirv or the company's website at http://www.directview.com
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SOURCE: Emerging Growth LLC