Shares of 1933 Industries Inc (OTCMKTS: TGIFF) have been disappointing, to say the least. While other cannabis players have embarked on a bull run, TGIFF has been mired in a lackluster trading range for the past year. The stock is in need of a catalyst to get the momentum going and get cannabis traders excited in the company again. Taking a closer look, we see what’s behind the curtain of TGIFF.
First up, a little background info for those that aren’t familiar with TGIFF. 1933 Industries Inc. is a vertically integrated cannabis company with operations in the United States and Canada. Operating through three subsidiary companies, 1933 Industries owns licensed medical and adult-use cannabis cultivation and production assets, proprietary hemp-based, CBD infused products, CBD extraction services and a specialized cannabis advisory firm supporting clients in security, intelligence and due diligence. The Company owns 91% of Alternative Medicine Association and 100% of both Infused MFG and Spire Global Strategy.
This week, TGIFF issued its quarterly financial report for the three months ended January 31, 2019. Among the highlights were expressed in Canadian dollars:
- Consolidated revenues of $3,720,993
- Gross margin of $2,088,740
- Cash balance of $8,811,807 at the end of the period
- Net loss of $2,926,981
- Negative adjusted EBITDA of $1,267,916
- Total assets $54,237,227
Mr. Chris Rebentisch, USA COO and Founder of Infused, said:
“Year to date, the Company has experienced a steady 54% growth in sales revenues over the same period last year. Sales in Q2 were lower than in the previous quarter due to the performance of our AMA subsidiary, which experienced slower than expected sales due to challenges with yield and access to supply. We are seeing dramatic increases in yield and quality since appointing an experienced master grower. AMA will benefit from moving into our new sophisticated cultivation facility. With the additional cultivation capacity in the new building, AMA will not have to rely on third-party input material, which is expected to result in increased yields, increased quality, and higher margins. Infused continued to deliver exceptional results as it expanded sales of its wellness line of Canna Hemp™ branded products across the United States.”
The weak results from AMA in Q2 were the reason the stock sold off on the news.
In February, TGIFF said that construction on its new cultivation facility in Las Vegas is nearing completion and awaiting electrical meter installation. The new facility will house the Company’s subsidiary, Alternative Medicine Association’s indoor cannabis cultivation. AMA is one of Nevada’s largest wholesalers of cannabis products, including branded flower, wholesale distillate for vape products, and a broad range of concentrates with distribution channels in place throughout Nevada.
The purpose-built 67,750 sq. ft. cultivation facility has been developed as a two-story building on 1.39 acres and zoned M-1 by the Clark County Zoning Department. The structure includes a sophisticated, fully automated irrigation and fertigation system (delivering precise concentrations and ratios of nutrients to each plant), a system of small vegetation/cultivation rooms for better crop management, packaging areas, supporting offices, vault, climate controlled rooms to cater to each phase of plant production, and other work areas. In addition, a benching system will maximize growing space and an advanced data tracking system will allow for ‘steering’ the crop scientifically, reducing crop time while increasing yield and quality. Once up and running, the newly constructed facility will deliver a substantial 10-fold infrastructure expansion and significantly increase AMA’s flower cultivation output.
The Company is waiting on the state’s power provider for its meter installation, which may take up to several weeks. Once power is installed in the facility, final construction will conclude and state and city fire and health inspections will take place for the issuance of an occupancy permit. The occupancy permit is the final step in the process, allowing cultivation to begin in the new facility.
Currently trading with a market cap of $90 million, TGIFF is one of the few solid cannabis plays that has yet to see a defined breakout. If one is looking for an undervalued pot stock with big potential, TGIFF is one of the best bets right now.
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Disclosure: We have no position in TGIFF and have not been compensated for this article.
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