CANNAINVESTOR Magazine September / October 2016 - Page 40

Although many states have enacted laws that permit the medical use of cannabis, a number of these states have not implemented regulations in regards to dispensaries and cultivation operations. Digipath can provide comprehensive cannabis industry lab testing solutions to clients living in states and localities that have legalized cannabis. With officials realizing the need for regulatory structure to ensure success of their legal marijuana programs, many states started to institute comprehensive regulations for their programs toward the end of 2013.

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 using 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. This 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 will strengthen its market offering, market position, and reputation.

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