Although cannabis growers and distributors have attracted billions worth of capital from investors, there is significant opportunity on the ancillary side of the industry.
One of the industries poised to benefit from the increased demand for legal marijuana are the companies that are testing the product to make sure that it is safe for consumption. As new markets open and existing markets expand, demand for testing services will only increase and we are favorable on this opportunity.
One company positioned to capitalize on the cannabis lab testing market is EVIO, Inc. (EVIO), a life sciences company that provides accredited analytical testing services and scientific research to the regulated cannabis industry. We have been monitoring EVIO since inception and are favorable on the company’s position within the cannabis lab testing market.
Increasing Market Share in California via Acquisitions
Earlier this year, EVIO expanded its reach and acquired 60% of C3 Labs (has the option to purchase the remaining 40%), which was granted its temporary testing license from California. We are favorable on this move as C3 will operate under the brand EVIO Labs Berkeley and view it as a transformational acquisition as EVIO continues to focus on increasing market share in California.
C3 Labs will serve licensed California cannabis businesses in accordance with the rules set forth by the Bureau of Cannabis Control. EVIO plans for this 8,000 square foot facility to serve as the Northern California hub laboratory and expects to start serving the California market by first quarter 2018.
Located in Berkeley, CA, C3 Labs has been serving the cannabis industry since 2015. C3 Labs has been issued a Cannabis Research and Development business license by the city of Berkeley that allows them to provide cannabis scientific research, product design, development and testing.
We are favorable on this development and expect to see this become a significant asset for EVIO. Demand for testing services has seen sharp growth following the legalization of recreational marijuana in California.
Executing on a U.S. Expansion
Over the last few months, EVIO has been nothing short of an execution story and it has been following through on its announcements. During this time, EVIO has expanded its reach and entered the California, Colorado, Florida, and Massachusetts market.
In late December, EVIO, announced that its Colorado licensee, PhytaTech CO, has attained ISO 17025 accreditation, the highest recognized quality standard in the world for calibration and testing laboratories. For an organization to be accredited in ISO 17025, its laboratory must be able to consistently produce precise and accurate tests and have implemented a rigorous quality management system.
In late July, EVIO Labs licensed its first lab in Florida and Kaycha Holdings, LLC will operate under the EVIO Labs brand and will be managed by a lab director with over 18 years of experience in the development of Nutraceutical and Pharmaceutical Products. This development took place a few weeks after EVIO announced that will start providing analytical testing services to the southern California cannabis market.
EVIO plans to enter new markets throughout the United States in states where medical marijuana is legal. We are favorable on the entrance into the California market and this development came less than a month after EVIO signed a letter of intent to acquire Massachusetts-based cannabis testing lab, Viridis Analytics MA.
We are favorable on these developments and they are in-line with their growth strategy. The California, Colorado, Florida, and Massachusetts marijuana markets are attractive due to their growth potential and diverse geographic location.
A Company to Watch
We are favorable on EVIO’s U.S. expansion strategy and continue to monitor the shares as the company continues to execute on their strategy. The lab testing industry is expected to see incremental growth over the next few years and EVIO plans to capitalize on this growth by creating a coast-to-coast footprint in the United States.
EVIO has come well off its recent highs and we remain bullish on the company’s long-term outlook. With a market cap that is less than $20 million, we continue to see significant upside to current levels. Cannabis lab testing is becoming big business and we are favorable on EVIO’s position within this market.