EVIO Inc (EVIO)

[Sunrae]

So here is a theory behind the EVIO’s recent increase in the number of authorized shares that will take effect in January 2021. A couple of tenets first

1. By all measures, EVIO’s management team is terrible. They attempted to grow by acquisition using debt as their currency and then were unable to integrate the labs effectively in order to obtain the synergies needed to make the acquisitions payoff.

2. What labs they didn’t shut down due to poor financial results (Palm Springs, Humboldt etc) they’ve lost to regulators due to a lack of compliance with state testing regulations (three labs permanently shut down in Oregon).

3. They announced the sale of their Massachusetts lab twice (once in Nov of 2019) and again this year to Green Analytics – a licensee of Steep Hill. This transaction hasn’t been completed – perhaps due to Green Analytics being embroiled in three lawsuits (one in Maryland, one in California, and one in Delaware) as well being sanctioned by the Maryland cannabis commission in June 2020 for breaking that State’s lab testing regulations (see https://mmcc.maryland.gov/Documents/2020_Consent-Sanction/Green_Analytics_Redacted%202020-06-11_R.pdf)

4. EVIO closed their Berkeley lab in order to pursue a “joint-venture” with Steep Hill – announced back in July. The lab is still not licensed / operational yet – forgoing at least six months of revenue.

5. EVIO is in desperate need of capital – if you believe the other folks on this message board, they don’t have enough cash to pay their auditors in order to release their financial statements on time.

6. Their JV partner, Steep Hill, is also having operating issues. If you read the Maryland Consent order above, Green Analytics was ordered to cancel their license with Steep Hill last June due to conflicts of interest.

7. Steep Hill’s primary source of Revenue, the California lab, has been shut down since May 2020 (when they partnered with EVIO) thereby missing the seasonal harvest of outdoor grown cannabis that is coming to market right now that needs to be tested.

8. Steep Hill has had to sell off assets to stay alive – they sold off their research team to Front Range last year.

9. If you read the lawsuits that Steep Hill is involved in (both in California and Delaware), the investor led management team (led by the guy that owns Green Analytics) that took over two years ago drove it into the ground. They’ve dropped from 80 employees to 8 (per linkedin) and given they can’t get a license in California, things don’t look great for them.

Given that Steep Hill is apparently failing, and EVIO is apparently failing, I can see a scenario that the only thing both companies can do is combine and try to “sell” the story of the two leading national cannabis laboratories coming together – just in time for federal deregulation of cannabis. For EVIO, this gives them a much needed “story” to raise capital (and likely some capital infusion from Steep Hill’s investors as wads done in the JV in Berkeley) and for Steep Hill, it gives their investors a way out of the shit show they created in California and elsewhere.

The increase in shares that EVIO authorized last month will enable them to issue shares to Steep Hill’s investors in what will likely be a merger of all operations into a single operating entity. And based on the terms of the Berkeley JV, likely operated under the name of Steep Hill – rather than EVIO.

Thoughts?