Friday Night Builds Cultivation Presence, Narrows Focus
January 31st, 2018
Exclusive, News, Top News
The U.S. cannabis industry is projected to reach $50 billion by 2026, according to Cowen & Co., driven by the legalization of adult-use marijuana. While California may be the most widely known opportunity, investors shouldn’t ignore states like Nevada that have a large tourism industry and may be further along the path towards commercialization. These states may also be less competitive, which creates an opportunity for investors to profit.
Friday Night Inc. (CSE: TGIF) (OTCQB: TGIFF) has doubled down on its cultivation footprint in Nevada through two possible acquisitions in its pipeline while divesting its CBD assets in a move that could unlock shareholder value over the long-term.
Friday Night announced that it would acquire Body & Mind Inc. in an all-stock acquisition last December. With approximately 130,000 sq. ft. of facility projects under development, the acquisition will make the combined company one of the largest cultivation and production companies in Nevada. The per-unit costs will also be among the lowest with diverse product lines designed to serve a wide range of clientele.
The company also announced a letter of intent to acquire Harvest Foundation LLC, a 10,000 sq. ft. cannabis cultivation facility located adjacent to its Alternative Medicine Association (AMA) property, for $1 million in cash, ten million shares, and warrants. The company’s AMA already manages the Harvest Foundation’s cultivation facility under a contract, but the outright acquisition will provide direct access to cannabis product and effectively double its current cultivation capacity.
Taken together, the two moves show Friday Night’s focus on expanding an already impressive cultivation footprint. AMA was the very first cannabis cultivator licensed in Las Vegas and has developed a leading brand in the city and throughout Nevada. Increased production capacity could allow the company to expand sales of its established brands. The company’s products include Vegas J’s pre-rolls and strains with the highest THC percentages in the state. It also is the official Nevada producer of products like Vader Extracts, Spectrum Concentrates, and The Real Kurupt’s Moonrocks.
Narrowing Its Focus
Friday Night plans to divest its Infused MFG. business to focus on its cultivation efforts. On January 15, the company announced that it plans to spin out its Infused MFG into a separate publicly-traded company prior to the close of the BAM transaction. Management believes that Infused MFG and its Canna Hemp brand would benefit from a dedicated management team to focus on its success.
Under the terms of the spin out, Friday Night shareholders will receive one share of Infused MFG for every four shares of the company. The transaction also contemplates the exchange of the minority interest in AMA, currently owned by third-parties, for an interest in Infused MFG. Friday Night would also backstop an initial private placement to provide the new company with cash reserves to make acquisitions and expand organically.
Infused MFG will also be able to focus on the cannabidiol – or CBD – business, which is less affected by the volatility associated with cannabis-based businesses in the United States. Investors may find it much easier to assign a premium value to the business given this reduced volatility, compared to the implied valuation that it has as a part of Friday Night. In other words, there is a lot of potential value that could be unlocked.
Friday Night Inc. (CSE: TGIF) (OTCQB: TGIFF) represents a unique opportunity within the burgeoning cannabis industry. After acquiring new cultivation space in Nevada, the company is positioned to more than double its existing production capacity in the near-term. Management’s plans to spin out the Infused MFG business could also help unlock value by enabling new management to focus squarely on CBD and investors to better value each component.
For more information, visit the company’s website at www.fridaynightinc.com.
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