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A Closer Look At Signal Bay Inc (OTCMKTS:SGBY)

A Closer Look At Signal Bay Inc (OTCMKTS:SGBY)
Written by
Alex Carlson
Published on
September 19, 2016
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Signal Bay Inc (OTCMKTS:SGBY) corrected more than 50% last week. Part of this was technical selling after shares hit a double top at the $.03 level. This was to be expected considering the epic run SGBY has had the past few months. The move to the downside was also accelerated by the filing of the company's quarterly report with the SEC. While we understand the concerns that some nervous shareholders may have, we believe that the recent selloff is a discount entry opportunity on a company primed for tremendous growth.First up, a little background on Signal Bay. Signal Bay Inc, through its subsidiaries Signal Bay Research, Signal Bay Services and EVIO Labs, provides advisory services, operational management and analytical testing services to the legal cannabis industry. Signal Bay operates state-of-the-art testing facilities and offers reliable testing methodologies that ensure the safety and potency of the nation’s cannabis supply. The company is lead by CEO William Waldrop and President Lori Glauser. Waldrop is an expert in state marijuana regulations and has worked with Electrum Partners in the management and preparation of state license applications for Nevada Medical Marijuana Establishments. Glauser previously consulted for Electrum Partners as well.Reading the 10-Q/A was quite an interesting read. First, we appreciate the company's transparency. While other cannabis stocks focus on delay after delay with their filings, SGBY put it all out there for all to see. As of September 6, there are 780,048,869 common shares outstanding with 454,947,868 common shares in the float. The company said that it is authorized to issue 3,000,000,000 shares. No doubt some were taken aback by this number and are worried about dilution. This is necessary because CEO William Waldrop has been on an acquisition binge acquiring other testing labs. He can use SGBY stock to acquire other labs and judging by the pace he has been on, we believe that he's close to making a major acquisition. SGBY has said that it's identified 18 markets in California where they plan to either build out or acquire an existing cannabis testing laboratory to operate under the EVIO Labs brand.There's also concern over dilution from convertible notes. The company currently owes $251,687 on its convertible notes, which takes into account debt discount and financing fees. SGBY had to engage in this type of financing to get the company off the ground. But when you consider where the company is today and the direction it's heading, SGBY won't have to engage in toxic debt any longer. The company has three current locations in Oregon with over 700 accounts and on track for 1000 accounts. SGBY also has a fourth pending acquisition in Portland and a fifth acquisition pending in Northern California. SGBY claims that each account will generate $1,731 in annual revenue. If we say just 1,000 accounts on the conservative side, that's $1,731,000 in annual revenues. This will allow the company to repay its debts and cover overhead.The 10-Q/A also showed that William Waldrop and Lori Glauser individually each own 127,500,000 shares of common stock and 2,500,000 shares of Series B Preferred stock in the Company. During the nine months ended June 30, 2016, the Company borrowed $20,500 and paid $8,795 from Lori Glauser for working capital. The total amount owed is $91,705 and $80,000 as of June 30, 2016 and September 30, 2015, respectively. The loan is at 0% interest and is to be repaid by September 30, 2016. This shows that the two principals of the company are heavily invested in SBGY and are investing their own money to keep the company operational. They have "skin" in the game and this is something we all want to see in an emerging growth company.Currently trading with a market cap of $8.6 million, SGBY is one of the few cannabis companies with real revenues and assets. Cannabis testing is one of the fastest growing sub-sectors in the marijuana space, and no company is better position than Signal Bay. Its EVIO Labs subsidiary is building a brand and one that will be well-positioned first in Oregon (covering 95% of the market once pending acquisitions close), then California, and eventually, wherever else marijuana is legally sold. But the real potential in the short term in California. As CEO William Waldrop said:

"The state has at least ten times the revenue potential of Oregon and based on our most recent review of the state, we believe that 18 cannabis testing labs operating under the EVIO Labs brand is a conservative projection. As we discussed in a recent press release, we are in the process of making our first acquisition in the state and will quickly begin to grow the market beyond that single location. California is generally following Oregon’s lead as it pertains to cannabis regulations, so it’s very familiar to us. Currently only around 5% of cannabis products sold in California are tested, in September 2015, Governor Brown signed Assembly Bill 266, “Medical Cannabis Regulation Safety Act” which mandates 100% of all cannabis products sold in California to be tested by an independent accredited testing laboratory by 2018. With that in mind, we want to be actively engaged in the market to take advantage of as much of that new business as possible. Our current preferred share structure will allow us to secure a significant percentage if not all of the targeted 18 facilities in the state of California.”

We will be updating our subscribers as soon as we know more. For the latest updates on SGBY, sign up below!Disclosure: We have no position in SGBY and have not been compensated for this article.

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