SANTA MONICA, CA, Nov. 3, 2016 /PRNewswire/ – The historic California election results are less than a week away, and while about half of Americans will surely be despondent over the presidential outcome, there is one demographic that will universally rejoice: Companies looking to capitalize on what will be the largest single cannabis market on Earth.

As of November 9, if current polls are an indication of the outcome, recreational marijuana will be legal in California. Signal Bay, Inc., a Life Sciences company focused on the exploding cannabis testing market, stands to benefit significantly from the likely passing of Proposition 64, legalization of marijuana for recreational use in California. This would result in an overnight tripling of the California cannabis testing market to $300 million annually. In addition, the $100 million current market is widely unmet, with only 5% of cannabis in California currently tested according legislative standards.

“It’s a real game changer,” commented William Waldrop, CEO of Signal Bay, Inc. “With a solid footprint established in the state with our acquisition in Yuba City, California announced this week we are moving to aggressively capitalize on this truly extraordinary market opportunity. The minute the last ballot is counted, the value of our company and its potential will increase substantially.”

California’s legal cannabis sales are expected to climb to $1.6 billion within a year, according to a recent Arcview and New Frontier cannabis market report. This would put the state’s medical and recreational cannabis industry on course to reach $6.5 billion in revenue by 2020, up from $2.8 billion in 2015.

In the cannabis testing space, California already boasts at $100 million market potential. With only 5% of the cannabis in California currently tested, there is $95 million in testing revenue up for grabs, representing a wide-open market for Signal Bay to deliver quality control and cannabis product safety lab testing services. A “YES” vote on Proposition 64 would effectively triple this target cannbis testing market overnight to $300 million annually. Signal Bay just announced its first acquisition of a cannabis testing facility in California. The Company plans to add 17 additional cannabis testing laboratories to its portfolio of EVIO Labs in the state by the end of 2018.

Investors Look to Cannabis Testing

Of all the subsets in the cannabis space, cannabis testing might be the most attractive one to investors. The expected growth of the industry is significant, while the risks are arguably lower than other sectors of the cannabis industry. With marijuana use still illegal at the federal level, increased state regulations and mandates on testing are to be expected. The more testing required, the more revenue testing leaders like Signal Bay and their EVIO Labs division can generate.

There are three main reasons that make many investors and industry experts bullish on cannabis testing.

“First, there are high barriers to entry,” explained Waldrop. “It’s a tight knit, relationship based industry, and the scientific expertise required to test cannabis in accordance with regulatory standards is significant. Second, increasing regulations mandated by the state for cannabis consumption are only going to grow as cannabis becomes a legal product like any other. Third, cannabis consumers themselves are increasingly demanding that their cannabis product—whether it is traditionally smoked or ingested as an edible—is tested for safety, purity, and quality.”

Cannabis testing also offers a high profit margin, which is evidenced by Signal Bay’s projections to grow revenue to $45 million annually by 2020 from an anticipated 30 cannabis testing laboratories nationwide. The Company is  on an aggressive pace to open more “EVIO Labs” cannabis testing facilities which are top shelf in terms of operational efficiency.

There are a host of tests involved in the testing of cannabis including testing for pesticides, mold, e-coli, moisture content, and potency. If the cannabis product will reach the shelf in the form of an oil or an edible, additional tests are required. The market is expected to balloon to $850 million a year in size by 2020.

Signal Bay: A Unique and Undervalued Company

There are only a handful of companies trying to capture the growing cannabis compliance testing market. However, these companies are mostly in the business of owning and operating independent labs, each of which provides core testing services. In simpler terms, each lab is its own centralized entity, operating as basically its own business. But the experienced management team at Signal Bay has developed a business model they liken to Quest Diagnostics (NYSE:DGX), an industry leader in clinical laboratory services.

A ‘spoke and hub” model is what the company is actively developing in each state that Signal Bay operates in. A centralized testing laboratory with ancillary testing facilities in nearby local markets statewide. The core centralized lab handles the bigger, high dollar testing functions while the smaller localized labs handle collection, sampling, and other testing services. Couriers move back and forth between “spoke” locations and the hub daily to maximize efficiency, enabling the Company to develop networks of testing laboratories that operate effectively and to their full potential within each state.

Despite recent acquisitions and increased market share, Signal Bay trades with a market capitalization far below many of its industry peers. However, in light of recent acquisitions and this game changing news in California, where Signal Bay plans to acquire 18 of its cannabis testing EVIO Labs by the end of 2018, investors looking to the growing cannabis testing market should take a very close look at Signal Bay.

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SOURCE Financial Press Media Group Inc.