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1933 Industries: THE INVESTMENT CASE
INVESTMENT OVERVIEW

1933 Industries stokes Las Vegas capacity expansion in anticipation of medical and recreational cannabis product demand

The company is bullish with 10 US states and Canada having legalized recreational marijuana
A marijuana plant
INVESTMENT OVERVIEW: TGIF The Big Picture
Construction of a 67,750-square-foot cannabis cultivation facility in Las Vegas is on track for occupancy in February 2019

Las Vegas is the North American mecca for gambling, and 1933 Industries Inc (CSE:TGIF) (OTCQX:TGIFF) is doubling down on the Entertainment Capital of the World as a place to expand the sale and cultivation of medical and recreational cannabis products.

The company is active as a fully integrated medical, adult-use licensee in Nevada, with exposure to Las Vegas’s emerging recreational-use cannabis market. With more than 42 million visitors each year, Las Vegas is poised to become one of the world’s largest adult-use cannabis markets, according to 1933 Industries’ website.

The executive team led by CEO Brayden Sutton changed the company’s name in September to 1933 Industries, from Friday Night Inc. The change was made to reflect a diversified business model as well as a strategy aiming for growth in the United States and Canada.

READ: Cannabis company 1933 Industries uplists to the OTCQX in the US

The “1933” in the name is a nod to the year when the prohibition of alcohol ended in the US. While “Friday Night” was jettisoned from the name, the company held on to its ticker, TGIF.

Chilliwack, British Columbia-based 1933 is a three-pronged conglomerate.

It owns 91% of Alternative Medicine Association LC, a licensed medical and adult-use cannabis cultivation and production facility in Las Vegas that produces its own line of products and manufactures other company’s brands. In 2013, AMA became the first licensed cultivator to sell cannabis in the Las Vegas area.

Concentrates and vape pen

AMA’s products include concentrates such as Cake Batter, Crumble and Sugar; a vape pen sold with distillate oil; and several flower strains. AMA also manufactures and sells products from companies that are not licensed in Nevada, including The Real Kurupt’s Moon Rocks.

The company holds a 91% stake in Infused MFG, a Las Vegas-based manufacturer of hemp- and cannabidiol-based medicinal and skin care products. Entering Colorado for the first time, Infused recently signed a one-year licensing agreement with Denver Dab Co, a producer of high-quality concentrates and pure cannabis oils for medical and recreational use.

In March, 1933 Industries acquired Spire Global Strategy, an advisory firm in Vancouver that helps client businesses stay secure, compliant and competitive. The company focuses on four areas of concern for cannabis companies: international production, sales and import-export licensing agreements; domestic licensing; public policy development; and design of large-scale hemp, cannabis and cannabidiol projects for clients.

Now that recreational adult use of cannabis is legal in 10 US states, the District of Columbia and Canada, expansion of capacity is a priority for 1933 Industries. 

Construction of a 67,750-square-foot cannabis cultivation facility in Las Vegas is on track for occupancy in February 2019. In addition, the company recently took possession of a 12,160-square-foot building to add to its hemp processing and cannabidiol extraction capabilities.

READ: 1933 Industries bolsters business development team

“1933 has invested significant capital in building out our new cultivation and production facilities in Las Vegas, which will be operational in the new year,” Sutton said in a statement. “The company is actively expanding its footprint in Nevada, California and Colorado.”

The company has logged significant growth. Total annual revenue for the year ended July 31 was 12 times higher compared with the prior year, rising to C$12.6 million.

The company is forgoing profit as it expands its Las Vegas capacity. For the prior fiscal year, the comprehensive loss was C$4.8 million, or C$0.02 per share, compared with C$3.8 million, or C$0.06 per share. Total cash slipped to C$9.6 million during the fourth quarter, from C$13 million in the third quarter. The company’s loss was primarily driven by investment in future growth initiatives, according to the company.

“We are very pleased with the results,” Sutton said.

A highlight for the company was the announcement in September of a convertible debenture offering that raised C$17.25 million. In early December, the company celebrated the promotion of its stock to OTCQX, the top tier of the US OTC Markets, from OTCQB.

Bullish prospects for cannabis industry

The cannabis company is bullish as more areas legalize recreational marijuana. The US cannabis industry is projected to exceed US$50 billion in revenue by 2026, according to 1933 Industries, citing figures from Cowen & Co. The marijuana business in Canada is seen reaching C$4.2 billion in 2019 and C$6.2 billion by 2024. The cannabinoid market is expected to grow to C$21 billion in 2020, according to Hemp Business Journal.

Sutton has been involved in the legal cannabis sector since 2012, having held executive positions at public and private companies. In December, the company named Ryan Maarschalk as chief financial officer, replacing Michael Hopkinson. Before going into finance, Maarschalk played tennis professionally and coached junior teams. Another recent arrival is Josh Taylor, a member of the business development division and a two-time High Times Cannabis Cut award winner for work with cannabis strains.

Back in May, the company entered a one-year licensing agreement with five-time World Series of Poker winner Scott Nguyen. The appointment seems appropriate for a company betting big on the cannabis industry from its hub in Las Vegas.


Contact Dennis Fitzgerald at [email protected]

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