Brayden Sutton, CEO and President of Friday Night Inc, sat down to answer some questions on the cannabis space. Friday Night is a CSE listed company trading under the ticker TGIF. The Company owns and controls cannabis and hemp assets in Las Vegas Nevada. The Company recently provided an update on their 91% owned asset, Alternative Medicine Association, LC (AMA), a licensed medical and adult-use cannabis cultivation & production facility. AMA continues on a strong revenue trajectory of record sales in Las Vegas, earning $902,000 CDN in gross revenues for the month of June 2017 alone. This is a $611,000 increase over the previous months sales and represents a monthly revenue growth of 210%. Here is what Brayden had to say about yields, IT infrastructure and what to watch for in the Cannabis Industry:
- What is the most exciting advancement or trend in the marijuana industry right now?
I think the merger of technology and cannabis cultivation is very exciting. For example, in years past a typical yield from a thousand watt bulb was about 1 dried pound of cannabis. After only a few short years of advancement, many cultivators are now getting over 3 pounds with that same thousand watt bulb. Also regarding the technology around the extraction process, the things we are doing today versus 10 years ago are light years ahead. We are creating more potent and cleaner products quicker and more efficiently.
Genetics is also an exciting component as we tailor-make certain strains and varieties to assist specific issues or to meet certain needs. We are just scratching the surface right now on modifying strains, creating new genetics and even things like tissue culture- this is a very exciting new field as it relates to cannabis.
And lastly, brands. It’s always interesting to see which brands stick and appeal to consumers and how quickly they become widely adopted, spreading like wildfire. Like any other industry I think it’s safe to say that it will be the big brands at the end of the day that will be the winners.
- In North America, where do you anticipate the most explosive growth to come from in the near term?
Again, branding. If you take a look at the history of industries like alcohol or even pharmaceuticals, or any other consumer products, branding is key. Cannabis is just the starting point of products like branded pre-rolls and extracted products as well as drinks etc. At the end of the day, it is particular brands that will prevail as they’re the ones that resonate and are remembered by the consumer.
Also, pointing to technology, I think IT infrastructure will be a major growth category, as well as security.
- What should investors watch for when it comes to picking the best marijuana stocks?
Considering that there has almost been a brand new cannabis pubco every week in Canada for the last three years I would just say to make sure you are picking the right team and sticking to best-of-breed companies. There are a lot of companies out there that did not exist just months before going public which I find quite disturbing in terms of ambulance-chasing. Again, you see this influx of new companies in all new industries as they start to spike. Where there is history there is no mystery. Make sure you are betting on a CEO who has either done this in a parallel sector before, or who understands cannabis from a practical perspective. Watch out for the pivots, the companies that tried to do A and then B and now they’re working on C.
Also watch out for any company that claims they are the only one doing anything specific, when it is far too early in the game to make those claims. We are still on “the cutting edge” and I think it’s unfair and unethical to tell an investor that you are doing something that no one else is doing, particularly when you are brand new to the space.
- What should investors know about the seed to sale process?
Understand that it is a very difficult process from seed to sale whether you’re selling flower or some form of derivative. Growing is a very expensive process that takes a lot of trial and error. Only work with growers who have a decade or more of proven history. Extraction is even more difficult to get it right. Again ensure that the individual creating the standard operating procedures has been doing it for a long time and that he is plugged in so to speak in the industry. Both our growers and our extractors all have at least a decade of experience and this is their life, their passion.
We continue to attract some of the best brands in the world who want to get into the Las Vegas market and they chose our Vegas asset as their exclusive provider for extracted products which gives me a lot of faith in our team and our products.We also put a big emphasis on quality genetics, not just looking at yields but concentrating on high quality over just quantity.
- When do you anticipate investors might start to see some M&A activity in the sector?
I do believe we are still in the first inning, and in the years to come we will have a lot of M&A activity. There will need to be some federal rescheduling before we will see the big players come in but at that time there will be less opportunity for the small players so the opportunity to grow businesses and brands, I believe, is now and over the next three or four years.
Once big Pharma and big Alcohol and big Tobacco are able to play, that will be the ‘exit’ so to speak for many of the small players as the best-of-breed will get bought up.
Right now the market is very fragmented but there have been a few signs of activity like Scotts Miracle-Gro buying General Hydroponics. I think we will see more activity like that as the larger companies gain more confidence in this sector.
- What are some of the challenges or stumbling blocks that microcap companies might meet along the way?
Access to capital is always the big one. Investors and bankers have so many options now, they’re inundated with choices. I think consistent earnings is the key here, any company that is showing real growth. Key indicators in other sectors are now being applied to this sector. It is time for the Cannabis sector to start to behave like other sectors in terms of focusing on margins and increasing revenues.
- What will happen to the industry over the next 5-10 years?
I believe that big Tobacco, as well as big Alcohol and big Pharma will start to step in and really start to dominate once the drug is moved to schedule 2. The big players will eat the small good ones and there will be a lot of amalgamation over the next decade as this new space finds its way.
- Excluding Friday Night, what are some of the publicly listed cannabis-focused companies operating right now that are setting the bar high for the industry?
Companies like CannaRoyalty Corp ($CRZ.C) have always impressed me in terms of their professionalism, management and assets. And then there are companies like Invictus which I believe are sleepers. There are a few gems out there that are making a lot of money but are going under the radar because they are not promotional like some of the fledgling companies. Any company that is making money and increasing revenues without just talking about doing it- ones that are actually turning a profit. Look for the companies that are walking the walk.
- Give us the elevator pitch for Friday Night? Why are you excited about the future of the Company?
I am most excited because of the city of Las Vegas. Traditionally Amsterdam has been the epicenter. Las Vegas has almost 50 million visitors a year, in a very small space, with a much higher per capita use, and they spend more money. Even tourism in Las Vegas as it relates to cannabis will become a huge piece of the potential market share. Being in such a dense area with such a high usage rate is a very exciting long-term prospect for us.
- Is the cannabis market heading towards a bubble similar to the dot com bubble?
There are a lot of similarities to the .com era. Although one thing I like to point out is that things like Amazon, Yahoo, Google all came out of that era. So despite 9 out of 10 blowing up, some went on to become multibillion-dollar International conglomerates.
I don’t think it’s a bubble at all but I think the majority of the players are very overpriced. One has to apply traditional fundamental principles to ensure you are not paying “.com” valuations.
- Tell us more about your products.
Alternative Medicine Association LC (AMA), our 91% owned subsidiary, has a very extensive list of items from their flower to their pre-rolls to dozens of various extracted products.
Infused MFG is our CBD asset and makes all sorts of topical creams, lotions, CBD vapes, etc. Those SKUs are quite exciting because we are able to sell them online and outside of the dispensary model in Las Vegas because they do not contain any THC.
- Where will the company be at the end of 2018?
If the company can meet its objective of increasing its production capacity I would like to hope we will be approaching the neighborhood of at least 20 million a year by the end of 2018. We are already beating our projections and I expect that to continue.
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