EVIO Labs Is Ready To Meet The Increased Demand For Lab Testing In California
On July 1st, California put new regulations into place that require dispensaries to only sell product that has been tested by a licensed third-party.
Although this change will most likely lead to lower revenues from dispensaries, we expect the slowdown to be transitory. This is a significant development and is a catalyst for companies that provide lab testing services.
EVIO Inc. (EVIO) is highly levered to this opportunity and we are bullish on the North American cannabis lab testing company. Over the last year, EVIO has been laser focused on execution and has expanded into several burgeoning markets. Currently, the company has operations in Oregon, Colorado, California, Massachusetts and Florida.
Earlier this month, EVIO completed its previously announced acquisition of Oregon-based MRX Labs. EVIO Labs Portland will relocate its personnel and license to the former MRX Labs Tigard location, and the new lab will operate as EVIO Labs Portland. We are favorable on the continued execution and will monitor this division of the business.
Earlier this week, EVIO received a mixed response from the market after announcing that it has expanded its footprint in California by signing a 5-year lease agreement for a 7,370 square foot facility in Palm Desert, California. This is a significant development following the recent regulation change and will monitor how this asset drives value for the entire business.
California: A Major Growth Driver for EVIO
We are most excited by the leverage to California and view this as a major growth driver going forward. In late June, EVIO’s Northern California laboratory in Berkeley announced a major milestone after attaining the ISO 17025 accreditation, the highest recognized quality standard in the world for calibration and testing laboratories.
Following the change in regulations, EVIO Labs Berkeley is well-positioned to meet the increase demand for analytical testing services for regulated cannabis and is prepared for these heightened regulations.
In May, EVIO released second quarter financial results and the shares traded lower following this. Although the numbers came in light, we expect this to change as the company sees an increase in demand for its services in California.
Executing on All Cylinders
EVIO has been focused on growth and has been executing on all cylinders. Last month, the cannabis lab testing company retired all of its outstanding convertible debt and this was a significant development for the company. In 2018, EVIO has raised capital and has been putting this money to work in ways that will prove to be accretive to the business.
Last month, EVIO expanded its reach in Oregon after entering an asset purchase agreement with MRX Labs, LLC, an award-winning testing lab. The company also formed a strategic alliance with MRX Xtractors, leveraging the two leading companies' respective strengths, to develop and expand growth in existing and new markets.
In late May, the company launched its Biosciences Division which will be led by EVIO's Chief Science Officer, Dr. Anthony Smith. This was an important development as it allows EVIO to leverage its scientific and human capital expertise to focus on development of intellectual property and research.
An Undervalued and Underappreciated Opportunity
Last week, EVIO announced the filing of a preliminary non-offering prospectus in Canada and plans to list on the Canadian Stock Exchange. This is just another way EVIO is focused on growth and we believe the shares are significant undervalued by the street.
Over the last month, EVIO has traded mixed and come well off its highs. The shares have been under pressure since early May and has a market cap that is below $19 million. With the attractive leverage to states like California and Florida, we consider EVIO to be undervalued and are closely monitoring the shares from here.
