Net Loss Widens at DigiPath as Company Positions for Expanded Operations in Marijuana Industry in 2015
Early in 2014, the Justice Department decided to take a less aggressive approach to drug enforcement related to marijuana in Colorado and Washington, the first two states in the Union to legalize recreational use of pot. Under the assumption that more states will continue to decriminalize marijuana in one fashion or another, the Marijuana Business Daily, a publication of CannaBusiness Media, lifted its projections for retail cannabis sales in the U.S., saying it now sees sales climbing from an estimated $2.2 – $2.6 billion in 2014 to as much as $8.2 billion in 2018.
Within those figures, medicinal cannabis sales are forecast at $4 billion and recreational sales are expected at up to $4.2 billion.
Any investor that hasn’t been in a cave for the last year or so is well aware of companies to and fro hopping into the marijuana business in a bid to establish a position and capitalize on the projected robust growth. Some companies completed changed business models, a developmental miner aiming to become a pot grower for example, and others set their sights on expanding operations into the cannabis space, such as DigiPath, Inc. (OTCQB: DIGP).
DigiPath has its roots in the digital pathology business, expanding into Ethiopia and Chile this year in fact, and during fiscal 2014 (ended September 30, 2014) augmented its legacy operations by creating three new business units to serve the cannabis industry: DigiPath Labs, DigiPath U™, and TNMNews.
Leveraging the company’s lab and FDA-compliance experience, DigiPath Labs is expected to test all forms of cannabis-based products for safety, as well as separating and quantitating the cannabinoid and terpenoid content of pot products.
One of the things the nascent cannabis industry lacks is a clear set of standards, a shortcoming that DigiPath seems to be aligning to address. The state-of-the-art lab is slated to open early in 2015, according to DigiPath. Earlier this month, DigiPath Labs received one of four provisional licenses from the State of Nevada to operate a cannabis-testing laboratory in Las Vegas.
The other two new units are on the information and educational end of the marijuana spectrum. DigiPath U is developing a two-day seminar and “modularized” six-week online course to teach people about the cannabis business and provide guidance to those looking to enter the space. Targeted launch is mid-2015.
Launched in May, TNMNews (short for The National Marijuana News) is a cannabis news website and talk radio show covering all aspects of the marijuana industry.
The expansion in the cannabis space resulted in a growing net loss for DigiPath in fiscal 2014 as shown in a 10-K filing with the SEC on Tuesday and discussed in a corporate press release Wednesday. Revenue, which is derived exclusively from the microscopy business, slipped from $567,192 in fiscal 2013 to $485,870 in the recent year. Net loss in the microscopy segment widened to $508,303 from $329,647. Net loss in the cannabis business totaled $2.32 million.
On the bright side, DigiPath raised $8.2 million from accredited investors during its third fiscal quarter 2014, with $1 million of that dedicated to the digital pathology unit. Another $1 million was invested in content and curriculum development for DigiPath U. The company ended the fiscal year with $5.1 million in cash and total liabilities beneath $200,000, according to the news today.
“As the cannabis industry expands, demand for qualified laboratories, comprehensive education, and reliable news is growing,” said DigiPath chief executive Todd Denkin in a statement. “We believe we are in the right place at the right time.”
Over the past four months, Wall Street hasn’t necessarily seemed to agree, with the share price plunging from over $1.00 to a low of 2.5 cents on Monday. A rebound is in the making in early Wednesday trading, though, with the stock price bouncing 40.4% to four cents.