DigiPath Inc. (OTCQB: DIGP), a leading provider of laboratory testing, education programs, and unbiased news coverage to the burgeoning cannabis industry, has become a leading player in Nevada’s medical marijuana market with the opening of its testing laboratory earlier this year. Equipped with state-of-the-art analytical instrumentation and operated under the direction of Cindy Orser, Ph.D., the facility provides growers and manufacturers with reliable testing data.

In May, the company announced a one-year agreement with Euphoria Wellness to conduct comprehensive safety and potency testing on the products it plans on selling in its Las Vegas-based medical marijuana dispensary when regulators open the door. The agreement is the first with a Las Vegas dispensary looking to ensure quality for consumers and meet regulatory guidelines, with many more expected to follow.

The company is one of the few approved cannabis testing facilities in the State of Nevada, which provides a significant competitive advantage, particularly as the state considers legalizing recreational cannabis in the November presidential election cycle. If successful, the move could open the door to substantial opportunities in the Las Vegas area given its tourism.

Billion Dollar Potential

Nevada’s medical marijuana market is expected to be worth approximately $100 million, given the state’s reciprocity rules, which permit out-of-state medical marijuana users to access the drug without a Nevada-specific card. As one of the most popular tourist destinations in the world, Las Vegas is expected to capture the lion’s share of these revenues, although other parts of the state could also benefit from domestic consumption.

In November 2016, Nevadans will have the opportunity to decide whether or not to legalize recreational marijuana. Many experts believe that the state’s illicit market could be worth up to $2.5 billion in Las Vegas County alone, judging by the average price per pound and illegal seizure amounts, while the low estimates still come in at over $50 million. These figures are significant given the county’s total crop production of just $23.2 million in 2013.

The only major roadblock to legalization is the high use of electricity and water in growing operations. While the use of skylights could cut down on energy use by 20% to 30%, the regulations surrounding medical marijuana prohibit plants from being visible from the outside. The increased water usage associated with growing operations creates another challenge given that the state already has to import a lot of its water.

More Testing Needed

Nevada’s medical marijuana program requires independent testing laboratories to verify the concentration of THC and CBD, whether the tested material is organic or inorganic, the presence and identification of molds and fungus, and the presence and concentration of fertilizers and other nutrients, although the exact requirements are established by the division of government established to oversee the program.

As Nevada finalizes these standards, many states have been reporting problems with the quality of testing. The Oregonian’s Noelle Crombie published a scathing critique of the industry’s testing standards in June, finding a half-dozen chemicals that the federal government has classified as having possible or probable links to cancer. The chemicals even included a common household roach killer that was taken off the shelves decades ago.

Johns Hopkins researchers also found that the vast majority of edible cannabis products sold in medical marijuana dispensaries carried labels that overstated or understated the amount of THC and CBD. After collecting 75 different edible products across multiple dispensaries, the researchers found that just 17% of products were accurately labeled, while 23% were under labeled and 60% were over labeled – a potentially dangerous mistake.

Positioned to Profit

DigiPath is well positioned to profit from the $100 million medical marijuana market, potential billion-dollar recreational marijuana market, and increasing testing requirements driven by ongoing issues in other states. With these three factors driving demand for high-quality cannabis testing in Nevada, the company could benefit handsomely as one of the only laboratories with a license and an early mover in the space.

These high quality tests will be essential for companies like Café Serendipity Holdings Inc. (OTC Pink: CAFSD) and others producing edibles or selling products in dispensaries. By earning the trust of both regulators and customers, these companies could realize a significant competitive advantage over time, particularly as consumer awareness of these problems continues to rise following media reports like the one appear in the Oregonian.

Investors in the cannabis industry, ranging from dispensing technologies like Medbox Inc. (OTCQB: MDBX) to vaporizer providers like Vapor Group Inc. (OTC Pink: VPOR), may want to take a closer look at the company given these unique regulatory tailwinds.

For more information, visit the company’s website at www.digipathlabs.com or www.digipath.com.

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