I swore to myself I would not post here anymore on the EVIO board, but thought I would weigh in on why I think the stock has risen in some part, over the past two days. This article was emailed yesterday afternoon. These guys have a lot of shares invested between them, and their subscribers.
Last time I posted here I was trying to show the board other stock boards who not only shared valued opinions but other stocks inner twined with the cannabis sector as a whole. I was giving my two cents to better the board but I got blasted by somebody cannot remember who, and decided I have more important things in my life to do besides having to explain myself to a stock board. Against my better judgement, I decided to share this email. I know from the past that most every time these guys sent out an update on EVIO the stock moved higher. At the same time, they also pulled out some months ago and let their viewers know, and soon after the stock plunged to the .20s. I am not saying this is the reason why either occurred, but it might play a small part. Anyway here it the email. Take it for whats it's worth.
One last thought. As a past executive in Biotech, management is CRITICAL to the success of a company. From my experience managing people, and managing communications with not only my employees, but the public, I find EVIIO management to be very underwhelming to say the least. However that being said, I am not at EVIO, I do not know what goes on day to day, month to month and so its only my opinion re EVIO management based on my dd. I almost never invest in any company with what I consider to be bad management. That being said, none of us really know the day to day operations within the company so really our opinions are like rear ends, everyone has one. I do not know the management at EVIO. It is wrong for me therefore to criticize them personally. I just cannot fathom being so late with critical paperwork that is so key for investors who invest in EVIO. I can state many other reasons as to why I think EVIO management has been less than transparent but again, what do I know? Anyway this is a good read. Enjoy.
Written Sep. 30, 2019
EVIO Investor Relations Makes a Comeback
Over the past few years, we’ve had to rely directly on SEC filings for updates on our cannabis testing investment, EVIO, Inc.
And let me tell you, while I don’t mind reading SEC filings, it’s not something I look forward to. Digging through earnings reports and reading management discussion and analysis isn’t as fun as it sounds.
And while it was getting its accounting department in order, the company was responding to all investor questions through comments on SEC documents. Let me tell you, that added a lot of new filings to the pile.
But last week, the company made my life a lot easier and added some much-needed value for shareholders. It released an update on financials, operations, and future plans. And it did it through a press release.
Investor relations is back, baby! And not only does that make my job easier, but it also makes the company more visible to other investors.
So let’s talk a little about the updates today. And I’ll also tell you why they make me even more bullish on our long-term profit potential.
Show Me the Money
First off, the newly revitalized investor relations department gave us an update on the financial reports we’ve been patiently waiting for.
The update pretty much said the same thing I’ve been hearing from my contact and relating back to you.
Earlier this year, the company severed its relationship with its former auditor. The company had grown too fast for that small company to handle audits in a reasonable amount of time.
The new auditor has been working closely with executives and board members to get everything in order and submitted to the SEC. We got the missing 2018 annual report last month. And EVIO says the quarterly reports for 2019 should be ready to submit soon as well.
I’m happy the company finally got its audits in order. But what’s more exciting about this announcement is the details about the new auditor.
The company, BF Borgers (BFB), is a U.S.-based accounting firm. And it’s got extensive experience working with cannabis and CBD-focused companies here in the States. Plus, its background is working with U.S cannabis companies that trade over the counter.
That means we just got another expert on our team. And it's one that specializes in helping small firms like EVIO as they grow from OTC listings to major exchanges.
That’s a value-add for shareholders.
Future Fund Raising
Another worry the company addressed in the update revolved around fund raising and future share dilution. And that was definitely something more than a few of you asked about after 2018 earnings showed a decent increase in share count.
The company had been executing a growth-at-all-costs type of strategy. It started off with a couple of partially accredited labs in one state. And it ended up with about a dozen spanning the most profitable legal cannabis markets in the U.S. and Canada.
That kind of growth was fueled by loans to the company and additional shares issued from the treasury. But every loan demands interest payments. And every new share dilutes existing ones.
As 2018 drew to a close, market conditions just weren’t good for raising more money that way. So the company decided a shift in strategy was in order. Instead of focusing on further rapid expansion, EVIO is working on squeezing every last cent out of its current labs.
The company has already started undertaking initiatives to optimize operations and boost recurring revenue.
It’s restructuring its lab development, growth, and operations. It’s focused on expanding and increasing the testing capabilities and accreditations at all its labs. And it’s shifting focus to initiatives that will give immediate returns.
Management is convinced that focusing on profitability and maximizing the efficiency and capabilities in existing revenue-generating labs is the best way to keep the company growing while the cannabis market awaits U.S. legalization.
And I agree. We’ve got coverage in states with large populations and big cannabis industries. Now, it’s time to streamline operations and make the company as efficient as possible. Then, when it’s time to go into expansion mode again, we’ll have a blueprint to follow for optimal profitability.
That also makes me happy because we’re not likely to see any major fund raises leading to share dilution. The company is focused on making every dollar of sales count and keeping those purse strings closed.
Marijuana Milestones
EVIO is already making the moves to streamline its labs. In fact, it’s already hit several key milestones along the way.
The company consolidated its Oregon locations into two labs — Medford and Portland — that can now serve the entire state cannabis industry. It also purchased a building in Tigard, where it consolidated four lab operations into one. That had a major effect on overhead in Oregon by eliminating the lease expenses while still allowing the company to serve the whole state.
It also expanded accreditations at its two remaining Oregon labs. It can now test for residual solvents in its Medford location. And it’s days away from receiving pesticide testing accreditation in Portland. Now, all those tests go through Medford, and the new accreditation in Portland will help streamline operations.
The company is also expanding in the oldest legal cannabis market in the U.S. EVIO increased sales efforts in the state by converting its Humboldt facility into a field sales office. All testing in that area will move through the Berkeley lab — one of only 27 licensed labs that serve over 1,000 licensed growers in the state.
The company is also close to having its new Costa Mesa location operational. It should be up and running in time for harvest season. And that’s going to help EVIO get some of that immediate revenue discussed earlier.
Also, in California, EVIO has a conditional-use permit to open a new facility in Palm Desert. But it’ll be spending some time assessing the market conditions before it moves forward with any lab build-out.
Moving to the other coast, we should see the new location in Massachusetts licensed and operational within the year. The Framingham location got its occupancy permit in June. And once the company finishes the final stages of licensing, EVIO Massachusetts will be one of only four labs serving the entire state.
And just a little to the north, Keystone Labs got its accreditation to test Canadian cannabis for heavy metals. That puts it in a position to be one of very few labs able to perform all Health Canada required testing. That’s a very well-timed expansion of capabilities, too. A wave of new products from edibles to concentrates and topicals is about to hit shelves in mid-October. And they’ll all need to be tested thoroughly.
The company has already taken major strides to increase efficiency and profitability. And it looks like they’re working. As long as management keeps on this path, we’re going to see EVIO go from an unknown microcap to a household name.
The New Green Rush
We also got an update on some of the efforts the company is making to ensure its future growth is still robust. The main bullet point of that part of the presentation is hemp.
The CBD market has been exploding since the U.S. government legalized industrial hemp through the 2018 Farm Bill. And EVIO has seen some of the profits coming from this entirely new market. But it’s not sitting back and just letting the hemp tests come in. It’s actively recruiting new customers through its latest marketing efforts.
EVIO recently launched a comprehensive hemp/CBD marketing campaign and set up a new website to make the process of setting up testing easier. The new website has already received orders from around the world. And it’s helped the company greatly expand reach and presence in the global cannabis and hemp markets.
Management expects revenue from hemp and CBD products to rapidly overtake cannabis testing revenues as the newly legal industry continues to grow.
All the Cool Kids Are Doing It
In case you’ve missed the news the past few weeks, vaping is under attack. Recent reports that teen vaping is on the rise have prompted everyone from helicopter parents to politicians to call for vaping to be banned. Never mind the fact that teen smoking is falling faster than teen vaping is rising.
There have also been several stories about vaping-related lung disease and deaths. Now, all of those cases turned out to be people vaping bootleg products that used vitamin E acetate and not legally manufactured ones that use other liquids that haven't made people sick. But it’s still been enough to cause a scare.
And it’s also been enough to give EVIO another potentially massive revenue stream. The company has gotten lots of requests from all over the U.S. And investor relations gave us one final note on potential future growth opportunities last week.
The company is working with its regulatory authorities to see how it can help. And that could become a massive source of revenue as EVIO addresses the real need for reliable and accurate testing of all e-liquids.
Coming Soon
That’s the long and short of the most recent news from EVIO. The company is making solid progress on its delinquent earnings reports. It’s focusing on optimizing operations and driving revenue growth at its existing locations. It’s cutting down on spending to make sure it doesn’t have to overextend its funding options. And it’s already hitting key milestones in its cost-cutting and revenue-driving initiatives.
And the fact that the update came in a press release and not an SEC filing makes all that even better. We’re going to see more investors turning up now that the company has a bigger presence.
And that should lead shares up. They’ve been stuck between $0.40 and $0.50 for a bit now. But that $0.40 level seems to be the floor. So I don’t have a problem continuing to recommend the stock.
To your wealth,
Jason Williams
Assistant Editor, The Wealth Advisory
