As you are most likely aware there has been broad concern with the company's performance, slower than expected growth and complete reversal of the SP. Granted the sector wide down trend has played a part but a general negative investor sentiment has been created here with the lack of transparency, multiple timelines that have been repeatedly missed which have many questioning mgmts ability to achieve and execute the companies ongoing and future growth plans. Can you address this and explain how you intend to repair the damage and increase shareholder value
We made it clear that mgmt needs to aware of this growing negative view of 1933 as a company to outsiders and retail investors looking at the surface. Chris didn’t seem to agree that this past year has caused “damage” to TGIFs image but we persisted and ensured the point was made and taken seriously. They are planning to improve investor communication, ensure that future guidance on timelines are met and continue to move forward with all growth plans and projects. They are keen on not making the same mistakes made in the past and want to make sure that ALL information is in hand and up to date PRIOR releasing guidance or timelines to the market. They remain steadfast and committed to achieving the set out goals and game plan and are confident that all will come to fruition this year and most importantly are fully funded. There is no short term requirement to go to market for cash. Among professionals and vendors in the space 1933s reputation and popularity remain strong. AT MJBIZ CON in vegas, Alexia indicated that 1933 was one of the busiest booths by far (I heard the same from some in attendance) and was received with nothing but positivity.
2. Path to profitability? In October 2019 you stated that we were on "the verge of being profitable" Are you anticipating we achieve it this year?
Chris indicated that “we were close” but did not give specific guidance on when. Yongecity feels that Q3, Q4 2020 have the best chances at being profitable quarters .
3. Dwindling cash position? Should there be a concern here
Chris maintains that the company is fully funded and will NOT run out of cash. Current burn rate is irrelevant as costs/expenses are continuing to decline and revenues will only rise from here. We brought up the 3.8 million dollar loss on the past Quarterly and the revenue decline and expressed our concern of the cash position with that burn rate. Chris was not concerned as he indicated that losses and expenses will definitely not be that high next quarter but did not go into any detail. They have cut costs across the board, improved efficiency, the cost of hemp biomass has reduced by 5x (the sale price for CBD has also come down by about50%). Also as they become less dependant on purchasing third party biomass with the expansions coming on line expenses go down further and margins improve. Marketing costs have been cut by 50% ( will most likely see a lot less $$ going to the paid pumpers)
4. Green spectrum California facility. How is this Progressing. When can we expect it to operational? first sales out the door?
Pleased to announce that this facility is ahead of schedule and nearing completion, I believe Alexia and chris said we should expect a NR within a week or so regarding this facility coming online and producing product for sale. Chris seemed very optimistic about operations in California and stated that one of the major paths for the future success of the company runs through California. It is a major part of the company’s future growth plan. He did not give expected revenues out of this facility but would have to assume that they should provide a decent amount to top line revs
5. Hemp Extraction Lab delays. What is happening?
This issue has obviously been the elephant in the room. The regulations, restrictions, and requirements for the CBD lab have changed from when they first started, its that simple. And it is something that could not have been planned for or avoided . In fact, the governing body to which testing and regulation are reported to is changing as well. All plans had to be resubmitted. I know its not what some of us want to hear but the delays were totally out of their hands and if they did not discover these changes and stay up to date, the cost and delays would have been far worse if they went ahead with the original plan. The regulations are very rigid and constantly evolving. I asked if we were the only ones currently building a lab in Nevada. Chris said he was aware of one other and they are having the same issues with the state regulators. Also ours is larger and one of a kind. They are actually ahead of the game with some of the new regulatory changes coming down the pipe that will significantly impact the CBD industry in the near term and cause a lot of hardship and retooling for many companies.
MGMT wants us to know that this project, like the AMA cultivation facility, will get completed, is already fully paid for, and most importantly will be done right and fully compliant to the latest and upcoming standards . They understand the frustration and anticipation of shareholders and they join us in both. The latest update I received from an inquiry regarding the CBD lab I sent to Chris was on Dec 30th and it read “We received all final documents on the 23rd to move forward with guidance. We are still working with engineering and building to confirm a few things before that guidance can be given. Due to the holidays we won’t be able to reconvene with them on it till the 6th. Once crafted, guidance will be released to the market. “
Chris was very clear that he no longer wants to give updates (even with Alexia constant requesting something to put out) or guidance without ALL INFORMATION in hand so as to not provide inaccurate timelines again. Obviously he understands the issues and optics this has created and we were sure to highlight that point.
6. How are Sales from new brands? Acquisitions? Mergers? Partnerships?
Flower related brands take approx 6mos seed to sale so they have yet to be reflected A big takeaway was how hard the vape crisis affected the market. It was far worse than I expected. All vape brands took a big hit from new regulations, bad press and the publics aversion of all things vape related. They have seen the affect across the board and indicated that 100% of the drop in revenue in the last Q was due to a decrease in vape sales, the vape scare killed the market. On the THC side, they have shifted to a focus on premium flower and prerolls, and with the new Cultivation facility ramping up to full capacity output by April its perfect timing. Ester is seeing a slow return of the vape market and anticipates it will continue to improve but a lot of the damage has been done and could not predict what will happen. They will adjust and move forward. I inquired about the potential impact for sales/products from the upcoming CBD lab. No concern. Vaping only represents a small portion (10-15%) of their line of CBD products. I.E. best sellers have always been ingestibles (elixirs, capsules, tinctures) and topicals (lotions,oitnments)
7. Are you Entertaining any buyout/merger/strategic partnerships opportunities to increase shareholder value. Have we been approached as a buyout target by any other MSO.
Chris is always open to potential mergers and acquisition and they have looked at a lot but have not felt any have been the right match and I feel they are not in a position at this point to do one. Have enough on the go. I inquired about a buyout and Chris said that it is not even an option at this point as todays value is not representative of what the company will be worth. He went on to say that even in 6 months we will be worth a lot more than today and his main objective is to ensure that if a buyout does happen it is for maximum shareholder value.
We closed with some back and forth conversation and the other shareholder we asked join the call followed up with Alexia after the call with a few more questions and concerns which we hope to receive soon and will share. I once again pressed for a timeline to completion for the CBD lab and it was not given. Alexia has always said they will not give specific timelines to individual shareholders until they are ready to release them to the market in keeping with investor guidelines which is understandable. An interesting note was that we were under the impression that edible products from the newly signed deal with Pantry would have to wait until the hemp processing facility was completed as a new GMP kitchen was part of the design plans. Chris reported that they have a kitchen available to use for this product line and hope to start producing product soon.
It appears that ongoing patience is going to be required to allow mgmt. to navigate the current market and regulatory landscape, adapt to sector wide changes and downturns and bring all ongoing expansion projects online. They all seemed positive and remain focused on achieving all goals set out for the company. Alexia said that she is planning on ramping up investor relations and working with the CFO to get projections back up on the website to help current and potential investors see the potential we all know this company has and will hopefully achieve very soon.
Disclaimer: I am not recommending the purchase or sale of this or any other stock as I am not a professional financial advisor. I do hold a position in 1933
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