Cannabis Edibles and Extracts Require Additional Quality Control Testing. Great News for The Company's Market Leading EVIO Labs division.
SANTA MONICA, CA, Oct. 27, 2016 /PRNewswire/ - Investors are aware of the trend towards the legalization and regulation of marijuana across a multitude of states. They've heard the staggering numbers of the fastest growing industry in the United States. And some are aware that within this burgeoning market the most attractive and low risk subset is the cannabis testing space, a market that continues to boom as a direct result of the increasing regulations requiring the mandatory testing of cannabis.
Naturally, companies that are leaders in the space, like Signal Bay, Inc., a Life Science company whose EVIO Labs are setting the standard in the industry, continue to benefit from this trend. But there is another trend that investors might not be aware of: the absolute explosion of edible cannabis products.
Bet on Edible Testing, Not on Edible Products
Everyone knows that smoking is down nationwide. Yet marijuana use continues to increase. Millennials never started smoking, and even older Americans continue to turn away from smoking and increasingly prefer to ingest cannabis in the form of oils, vapes, and edibles.
In fact, the edible and extract market (including oils used for vapes), account for almost 40% of all legal retail marijuana sales in the US and are on pace to exceed 60% market share in the coming years. The more states legalize cannabis, the more these products become available and the more the market grows.
Investors can either research for cannabis companies producing delicious edible cannabis products (good luck with that), or savvy investors can look to cannabis testing leaders like Signal Bay, a company that double its revenue every time it performs the additional testing that oils, edibles and extracts require.
Why Edibles Mean Double Revenue
There are two series of tests that Signal Bay's EVIO Labs performs on the Cannabis they receive from growers. In Oregon, where the Company is headquartered and where four EVIO Labs testing facilities currently serve 95% of the state's cannabis testing market, fresh cannabis is harvested and divided into random 10 pound "batches" pursuant to state regulations. A small sample is taken from each batch of raw cannabis flower or "bud" for testing.
These samples then undergo two series of tests depending on what form the final cannabis product will take. If it's just going to be sold as good old fashioned marijuana ready to smoke then only the "cannabis flower" will be tested for pesticides, mold, e-coli, moisture content, and potency. If the finished cannabis product will reach the shelf in the form of a lollipop, cupcake, vape pen or soothing muscle balm, additional tests are required.
"Extracts and Concentrates need to be tested for pesticides and solvents, and once again in the edible form for potency," we reached CEO of Signal Bay, Inc. William Waldrop, and he explained,
"For the first test, the cannabis flower test, Signal Bay's EVIO labs bring in around $370 per ten pound batch tested. The additional tests for extracts and concentrates can typically generate around $300 per batch with an additional $145 for potency testing on edibles and in some circumstances can run as high as $25,000 for high volume manufacturers of edible products. This second round of tests translates into a doubling of revenues for Signal Bay, first the flower, then the finished product."
Double the tests, double the revenue. Simple batch math.
And with more and more mandatory tests being required as cannabis use becomes universal, the math gets even better. Waldrop provided an example:
"For instance, let's say you are a company that sells cannabis lollipops that come in ten different flavors. You used to only be required to send out a sample of your lollipops to test and that would cover you for the nine other flavors. But now, regulations require testing for each individual flavor. The more testing, the more revenue our EVIO Labs generate."
Waldrop added that this makes perfect sense from a consumer safety standpoint and that it's no different than a soft drink company having to test cola, root beer and cream soda products independent of each other.
Signal Bay: Eating Up Market Share with Aggressive Acquisition Strategy
Signal Bay recently announced the acquisition GreenHaus Analytical Labs. The Portland, Oregon based lab brings the total number of laboratories now operating as part of the EVIO Labs division to four and positioned EVIO Labs as the dominant player in the cannabis testing space in the state.
Aggressively moving forward, Signal Bay recently signed a Letter of Intent to acquire a lab in California with the announcement of the official purchase imminent and with the recreational use of cannabis on the ballot and expected to pass with flying colors on November 9th, the California cannabis testing market is expected to explode overnight from a $100 million to $300 million annual revenue stream to fish from; with only 5% of cannabis now tested in the state, the fishing should be very sweet.
A plan is in place to expand to 18 EVIO Labs in the Golden State by the end of 2018 and that means Signal Bay looks to become the major player in what is the single largest legal cannabis marketplace in the world. A lot of that revenue will no doubt find its way to Signal Bays' bottom line and the double dip revenue the Company's EVIO Labs will generate from the fast growing cannabis oil, edibles and extracts sector. And that, like Signal Bay is a safe bet. For anyone who has ever visited the Golden State knows that Californians love cannabis, but loathe smoke.
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