Nevada Suspends Cannabis Testing License of Publicly-Traded Digipath Labs

Publicly-traded Digipath Labs (OTC: DIGP), which reported sales in excess of $600,000 from its Nevada-based cannabis testing lab for the quarter ending 9/30/17, has been suspended from operations. The company issued an 8-K filing with the SEC followed later by a press release on Monday:

On January 19, 2018, following the close of business, Digipath was notified by the State of Nevada Department of Taxation, Marijuana Enforcement Division (the “Department”) that the Medical Marijuana Registration Certificate and Marijuana Testing Facility License (the “Licenses”) held by the Company’s wholly-owned subsidiary, Digipath Labs, had been suspended due to certain regulatory violations the Department found in the course of its review of Digipath Labs’ operations and procedures.

 In accordance with the Department’s notice, Digipath Labs is submitting a Plan of Correction to the Department on January 22, 2018. The Department’s notice provides for a hearing before an administrative law judge on February 15, 2018, at which Digipath Labs will seek to have its Licenses reinstated, although Digipath is working with the Department to request expedited review and reinstatement.

Clark County, where the lab is located, will hold a hearing on March 22nd as well, though the company is working on expediting the process there as well. While suspended, the company is not able to perform any tests and will be referring its clients to competitors. The state has suspended three labs since Nevada legalized last July, though it has never revealed publicly the details on any of the suspensions, including the Digipath suspension. Digipath previously faced suspension for promoting an event in violation of state rules.

Digipath’s stock plunged on the news in its second highest day of volume ever, with the stock losing 43% as it closed at $0.1999 in trading on Monday.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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