Even with all of the doors opened by cannabis law reform, the industry’s financial growth and its newly found public acceptance still has a long way to go before it reaches its full potential. To give the industry its due, the cannabis sector and all of its ancillary companies are some of the fastest growing business sectors in the United States currently. The fact that the industry is still in a developmental stage is also why there is such a strong financial opportunity for experienced and clever business people.
They call it a green rush. But, if we delve deeper into the inner workings of this newly state regulated agricultural commodity, we see many business owners stumbling due to licensing issues, advertising restrictions, Tax Code 280E challenges and a lack of knowledge on traditional best practices in business. The legitimate cannabis space was birthed by a passion for the plant, social injustice frustrations and its medicinal potential. While marijuana law reform advocacy may be the reason for the existence of this industry, advocacy does not necessarily translate into smart business.
As a cannabis lab testing company based in Las Vegas, Digipath Labs is a member of the Digipath family of companies and is the source of our large inventory of data concerning the cannabis plant. What we have learned at Digipath Labs has enabled us to create an easily replicable system for expansion efforts within the U.S. and abroad. We have also collected a tremendous amount of data from the over 24,000 cannabis samples we have tested making GroSciences, another member of our family, a reality.
The incredible growth of both the adult-use and medical cannabis markets in Nevada provided us a path to network with the most influential players in the industry, along with the novice less established companies. We have witnessed the mistakes and achievements of many other companies in the cannabis space, which holds a tremendous value even if it is challenging to measure. When we combine our knowledge of traditional business practices with what we have learned from the cannabis industry for nearly a decade, we clearly see the path of how to stay one step ahead in this exciting new business space.
As an example, Digipath Labs sought and received ISO/IEC 17025:2017 certification for lab testing. Such stringent certifications are not easily achieved or mandated by many states that have legalized cannabis. ISO certification would be mandated for lab testing facilities in nearly any other industry by federal or state regulators. The state of Nevada mandated that cannabis lab testing companies meet the standards of the International Organization for Standardization and Digipath Inc. stood ready to comply.
Another one of our profound realizations, years before the passage of the 2018 Farm Bill, was the potential growth of the CBD and hemp industry. Digipath began collecting data for both CBD and hemp a long time ago. Taking the merits of lab testing for CBD and hemp further, we developed a relationship with Hemp Inc. and its CEO Bruce Perlowin. The future of cannabis lab testing will likely involve cannabis producers implementing all lab testing in-house. It will be more cost effective for hemp and marijuana producers to establish long-term contracts with cannabis lab testing facilities to simply conduct the testing within their own facilities rather than paying for expensive short-term contracts and regular transportation costs. Working with Hemp Inc. will allow Digipath Inc. to expand to other states like Oregon, Arizona and North Carolina. Our relationship with Hemp Inc. also permits us to test hemp products from third party producers at the Hemp Inc. facilities.
We must also consider the inevitable involvement of the FDA at some point in time in the future of the marijuana space. There are quite a few pieces of federal legislation circulating Congress that would either reschedule or deschedule marijuana. If passed, any one of these bills would bring FDA regulation into the space quickly. The FDA is still working on rules for the national hemp-derived CBD industry now that the passage of the Hemp Farming Act as a part of the 2018 Farm Bill made hemp legal and by proxy hemp-derived CBD for the first time in roughly 80 years. However, it is only logical to assume that regulations will continue to be much more restrictive for THC, the psychoactive component of cannabis, although Nevada has passed legislation to make hemp testing exactly the same as THC cannabis but have not implemented the legislation yet.
The genomics associated with the cannabis plant is another important opportunity to bear in mind. CBD products became prevalent throughout the country with the end of hemp prohibition. Even before the legalization of hemp, Epidiolex became the first FDA approved CBD based drug. It may be one of the best anticonvulsants available via prescription. However the cannabis plant is still poorly understood by the scientific community. Cannabis is complex with well over 100 potentially medicinal compounds including cannabinoids and terpenes. The potential of those biological compounds to the medical industry seem overwhelmingly vast. The potential of cannabis based sleep aids, analgesics and anti-depressants is tremendous. The entourage effect is frequently mentioned and only the scientific study of cannabis phenotypes and genomics will ever give us an idea of the full medical potential of the plant.
Digipath Labs has applied for a number of patents with what we have learned from the data we have collected on terpenes. Not only can the terpene industry stand alone for aroma and flavoring, but as we have discovered it can work as a natural non-toxic pesticide for not only cannabis farmers but other agricultural producers as well. We have provisional patents out for terpene augmentation of beer and other beverages as well to provide functionality. We also have filed a provisional patent for the application of terpenes as organic pesticides.
We must also acknowledge the non-standardized naming convention of marijuana strains. In reality there is no true naming convention of marijuana plants. The strain names in use today for cannabis came from decades of amateur plant breeders working in the covert illegal market. The interbreeding of the plants had no organization and was based almost solely on plant physical characteristics, predominantly high THC levels. Our Chief Science Officer, Dr. Cindy Orser, has published several peer-reviewed scientific articles showing that terpene chemoprofiles provide a high level of discriminatory power across cannabis varieties while cannabinoid chemoprofiles are uniformly similar. The potential of creating a naming convention for cannabis varieties falls into the lap of cannabis lab testing companies that have the opportunity to collect and analyze data on both marijuana and hemp plants. Once a naming convention is settled upon, it will likely transform the cannabis industry. Digipath Inc. is proud to be a leader in promoting the need for a more meaningful naming convention that is scientifically based.
Seeing the logical future path of the cannabis industry is something not easily achieved in other established sectors. It is an opportunity not lost on Digipath Inc. By staying steps ahead of both state and federal regulators, along with competitors, Digipath feels confident that our business model is one that will continue to flourish with the future growth of the industry as a whole. It is not often our country or investors see a new agricultural commodity come along. We may never see another market in our lifetime with as many outgrowths as cannabis come along again. It is an exciting time and Digipath Inc. is poised to stay a leader in the cannabis lab testing space for many years to come.