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ECONOMY

Cannabis industry fears rocky transition as New Mexico prepares to switch tracking system

State is confident new system will bring ‘long-term stability,’ but businesses say loss of revenue, tech issues could deal costly blow

Samantha DeHerrera, laboratory technician, prepares edible cannabis samples for pesticide testing at the Rio Grande Analytics laboratory in Albuquerque on Thursday. The facility is one of many statewide bracing for potential revenue losses as New Mexico migrates to a new cannabis tracking system.
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At High Maintenance, a cannabis farm in Socorro, 200 plants are growing and will soon be harvested and sold to dispensaries and manufacturers across the state.

But that process — one that typically represents the most profitable time of year for growers in the industry — could look a little more complicated this year. High Maintenance and other cannabis businesses, including retailers, are expecting a major shift in the way they do business in the coming months.

That’s because the state is migrating to a new seed-to-sale tracking system starting next week. Some say the launch has not been handled properly and that the state has not adequately planned for the transition or collaborated with the industry.

“They gave us two-week notice, really, that this change was happening,” said Chad Lozano, a cannabis advocate and manufacturer based in Las Cruces. “They’ve been very hush-hush about it, and we’ve been really shocked, to be honest, and confused and concerned.”

But the state is confident that the new system “will ensure long-term stability in New Mexico’s regulated cannabis industry by strengthening compliance, supporting licensees and positioning the industry for future growth,” said Todd Stevens, director of the state’s Cannabis Control Division, which regulates the industry.

A seed-to-sale tracking system is what the state uses to collect statute-mandated reporting from the industry, including growers, manufacturers, laboratories and dispensaries. The system tracks cannabis products from the moment a seed is planted to the moment a customer purchases the final product. It’s “meant to ensure that everything is tracked, traced and legal,” Lozano said.

The state has been using the same system from the same company, BioTrack, since 2015, according to Stevens. The state Department of Health originally secured the contract for the medical cannabis program and pursued extensions after the legalization of adult-use cannabis in 2021.

Following the expiration of the BioTrack contract in October 2024, the state Regulation and Licensing Department, which oversees the Cannabis Control Division, decided to find a new system. The department issued a request for proposals that same year, but continued to use BioTrack as it searched for a successor.

The department issued another RFP a year later after not finding the right fit before ultimately awarding the contract to an Albuquerque-based software development company, Real Time Solutions, in January. The contract is valid for up to four years, Stevens said.

The company will offer a new, modern system — the New Mexico Seed-to-Sale System, or NMS2S — at no additional cost to licensed businesses. Stevens said the new system features a user-friendly interface, improved inventory visibility, streamlined manufacturing labeling, clearer distinction between medical- and adult-use products, and built-in communication channels for licensees to submit requests to the division.

“The system is not an out-of-the-box solution and was custom-built to meet New Mexico’s regulatory requirements,” Stevens said. “It was crafted with input from CCD staff who have decades of combined cannabis industry experience and is designed to be more responsive to the needs of local cannabis operators.”

Nick Passagila, senior microbiologist at Rio Grande Analytics, prepares microbial testing on cannabis samples in a sterile environment at the company’s Albuquerque laboratory.
Cannabis samples at Rio Grande Analytics in Albuquerque.

For Lozano, a new system is welcome. He called BioTrack “a very flawed program” that was not user-friendly and eventually earned a personal nickname of “BioTrash.”

However, Lozano is not a fan of the way the new system is being implemented. He said the state didn’t request feedback from the industry until this summer and that the outreach came in a survey that was not as engaging as he’d hoped.

“We really wished they worked with us more, maybe picked a few of us to test this,” Lozano said. “They were very secretive about it and not transparent, and so we just want to know what’s going on because at the end of the day, we’re the ones that get punished if we don’t do this right.”

Barry Dungan — president of the cannabis-testing laboratory Rio Grande Analytics, which has locations in Albuquerque and Las Cruces — agreed.

“There’s been no industry input,” Dungan said. “I’m 10 years into this, and the state’s told us year after year, ‘When we make a change, you guys will be involved.’ … Here we are less than a week out, and we’ve never been consulted.”

The state released implementation guidelines and materials for the new system this month and is currently working to create additional video tutorials, Stevens said. But Lozano and others said the materials released thus far are incomplete — leaving the industry with more questions and concerns than answers.

One of the biggest concerns for businesses is that BioTrack’s system will cease for everyone except retailers on Tuesday. The new system is expected to launch Aug. 31 for nonretailers and Sept. 2 for dispensaries.

With no tracking system in place during that period, Matt Kennicott — executive director of the Cannabis Association of New Mexico — said “there’s going to be a lot of black-market activity happening during this downtime.”

The delayed launch also halts business for nonretailers in the industry, who can’t process compliant transactions during the blackout, Kennicott said. The rollout comes during a crucial time, as harvesting season for outdoor growers begins in September.

“That’s the busiest time of year in the industry. We actually finally get a chance to make more money that’ll carry us through the next year,” Kennicott said.

While the state is expecting a blackout of “no more than six days,” Stevens said, some are not convinced that the launch will go without a hitch and could bring months of issues.

“I’ve been around in this industry for enough years to tell you that most states (that) have failed to put in sufficient time in planning the conversion have resulted in a colossal conversion failure,” said Duke Rodriguez, owner of one of New Mexico’s largest cannabis companies, Ultra Health.

He cited a Nevada case in which the state lost at least $500,000 in tax revenue because of poor record-keeping after adopting a new seed-to-sale system.

Rodriguez said he thinks a rocky transition is also likely to occur in New Mexico. But Stevens, the CCD director, disagrees, saying the division does not “anticipate any loss of revenue related to the temporary migration period since retailers can still conduct sales during that time.”

“Transfers of legal cannabis products from business to business will be the only activity that is temporarily paused during migration to help ensure our licensees’ inventory is migrated as quickly and accurately as possible,” Stevens said.

But for Dungan’s Rio Grande Analytics, which tests products before they can be sold to dispensaries, the blackout could cost the business between $50,000 and $100,000, he said. For some of the state’s smaller cannabis operations, Kennicott said this transition could be the tipping point in an already competitive market that forces them to close their doors.

The anticipation of the transition is also already impacting some businesses, Lozano added.

“There’s stories of farmers telling me that (they) can’t find any buyers because no one wants to buy anything right now while we’re in this transitional phase,” Lozano said. “People can’t make money and that’s already before (Tuesday), so we’re going to see a lot of people probably struggle.”

Barry Dungan, president of the cannabis-testing laboratory Rio Grande Analytics, holds cannabis samples at the laboratory on Thursday. Dungan says the state’s upcoming transition to a new tracking system could cost his business up to $100,000 due to operational downtime.

Industry experts are also skeptical about the new system’s provider, as Real Time Solutions does not list any experience with cannabis or creating tracking systems on its website.

“I do hope they did a good job; I don’t hope that the rollout is terrible, but as someone (who) comes from a technology background, that’s almost impossible and we’re going to run into issues,” Lozano said, saying he believes it won’t be a case of if data is missing but when, potentially creating inventory issues.

Because of the widespread concern, the Cannabis Association of New Mexico has sent a letter to the CCD asking the division to pause the rollout of the new system and push the BioTrack system’s exit to March of next year so that the industry has more time to test the new system.

Kennicott said the state has not responded, but Stevens told the Journal that those options “unfortunately are not possible under applicable state procurement rules.”

“We appreciate the concerns shared by our licensees and industry partners. … After several years on one platform, it’s completely understandable that a change of this scale brings questions, and we are committed to making the process as smooth as possible,” Stevens said.

The director said the division will be available to answer calls, troubleshoot issues and guide businesses through the transition, and that a dedicated help line is also in the works.

While unhappy with how the rollout debacle has unfolded, Lozano said he thinks communication and two-way conversations will be key to the industry getting through the next several months.

“I just really want the industry to realize that regardless of what happens, we’re going to have to move to the system eventually,” Lozano said. “So let’s at least read the rules and do what we can.”

Kylie Garcia covers retail and real estate for the Journal. You can reach her at kgarcia@abqjournal.com.