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On July 1st, Nevada became the fifth state in the United States to implement a legal recreational marijuana program and the state is current facing a shortage of product.
Demand for legal marijuana continues to increase and this has created countless opportunities for ancillary businesses. From security solutions to cultivation technology, there are a lot of needs in the marijuana industry that businesses can satisfy.
Legal marijuana has become a reality in many states and consumers have benefited from this. The cost to consumers has decreased as competition has increased and the number of cannabis strains and products has significantly expanded.
One of the most significant benefits of the legal marijuana industry has been the better access to regulated products. Prior to the opening of legal state markets, consumers purchased marijuana from the black market which possibly contained harmful pesticides, fungicides, mold, heavy metals, and even additives to make it feel like it was getting us higher
To protect the consumers, most state governments have mandated independent testing facilities to ensure all products are tested for potency as well as potential harmful ingredients before being made available in local dispensaries.
Know What You Smoke
Due diligence is required in every industry; however, it is especially true in the cannabis industry. Whether you are buying a product or investing in a company, thorough due diligence must be conducted.
Vice News recently highlighted a troubling trend where some laboratories have been providing false information. A manager at lab testing agency said that he has been pressured by clients to increase the potency percentage. The manager tested products from a dispensary claiming that the product was 30% THC and found that the sample was under 19% THC.
Unfortunately, most state oversight on labs is not stringent enough and relies on the honor system. This is an issue for the industry and it will only become more of an issue as it continues to expand.
Providing a Necessary Service
One company focused on the emerging lab testing opportunity in the legal cannabis industry is Signal Bay (SGBY). Through its subsidiaries, the company operates testing facilities that are compliant with regulations and offers accredited testing methodologies that verify the safety and potency of cannabis. Signal Bay applies a more stringent methodology when it comes to the services provided which can provides the user with much more comfort.
The lab testing industry is expected to see incremental growth over the next few years and Signal Bay currently has operations in Oregon and California (5 operational laboratories) and is comprised of three divisions that help create value for the entire business.
- Signal Bay’s subsidiary, EVIO Labs is focused on becoming an emerging leader in the life sciences and natural products testing sectors. Through its network of cannabis testing laboratories, the company provides testing services to legal marijuana industry. The accredited testing solutions include cannabinoid profiling, terpene identification, residual solvent and pesticide detection, and microbiological testing.
- Signal Bay’s research and development divisions provides services in areas of product formulation, product R&D, technical process improvement, and other custom projects for its clients. It also offers educational courses to help operators learn about cannabis science and optimize their operations
- Signal Bay Services offers advanced management advisory services and provides a range of business consulting services for the life sciences and natural products industry including business planning reviews and application support. The division is currently supporting application licenses in Oregon, California, Ohio, and Arkansas
Enters Agreement to Acquire Massachusetts Lab Testing Firm
In late June, Signal Bay announced a significant development and entered a letter of intent to acquire Viridis Analytics MA, LLC., a cannabis testing laboratory located in Southborough, Massachusetts.
We are favorable on the Massachusetts marijuana market due to its growth potential and strategic location. While the cannabis industry on the west coast of the United States is growing at remarkable rates, the east coast has been slower.
Over the next year, we expect to see the east coast show significant growth as states like Massachusetts, New York, and Pennsylvania continue to grow. By positioning itself in Massachusetts, Signal Bay will be able to gain more brand awareness and enter new markets.
According to the Massachusetts Executive Office of Health and Human Services’ report on May 31st, there are currently 11 registered dispensaries and 100 with provisional certificates awaiting approval to open.
An Industry of Opportunity
The emerging legal cannabis industry has created countless ancillary opportunities and we do not expect this trend to end anytime soon.
While we are favorable on several sub industries of the cannabis sector, investors and business owners must conduct thorough due diligence before investing. We recommend you contact the company, research its management team, and call some of the company’s clients. While this may seem excessive, it pays to be thorough.
Important Investor Disclosures
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