CANNAINVESTOR Magazine December / January 2016 - Page 17

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Licensing Opportunity Evolves – Monetizing Market Leadership

As additional states and countries vote on and implement legalized cannabis programs, many will look to develop lab testing policies and procedures similar to Nevada’s stringent requirements. As such, Digipath is in position to act as a consultant to these states, countries, and lab testing companies by leveraging its operational, technical, and business know-how, including:

Through these arrangements, Digipath will seek to collect upfront and ongoing licensing and consulting fees as compensation.

Opportunities in Organic and Acquisitive Growth

Realizing the highly-fragmented nature of the cannabis testing industry has created substantial consolidation opportunities, Digipath is focused on replicating the Digipath Labs model in other cannabis-legal states, both through organic growth and acquisition. As Digipath is a public company, the Company has the added advantage of having the ability to use publicly-traded equity as consideration for these transactions. In addition to pursuing acquisition opportunities in the cannabis lab testing market, Digipath is also evaluating acquisition opportunities of private companies in the clinical laboratory testing industry.

The lab testing industry in the U.S. is extremely fragmented. The Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services (HHS) estimated that in 2015 there were approximately 9,000 hospital-based laboratories, more than 122,000 physician-office laboratories, and more than 6,000 independent clinical laboratories in the U.S. For those companies domiciled in states where cannabis is legal or is expected to become so, cannabis lab testing will become an additional service that can be provided. By offering services, solutions, and insights based on a full range of tests and information assets, Digipath would be able to strengthen its market offering, position, and reputation.

•Lab facility build out

•Patient manuals

•Data and analytics

•Testing protocols

•Standard operating procedures (SOPs)

•Educational materials

•Laboratory Information Management Systems (LIMS)

•Marketing materials