CEO COMMENTARY Management Commentary by Mr. Paul Rosen, Chairman and CEO of 1933 Industries
Over Q1 2022, the Company continued to make strategic cost reductions across all divisions, with the goal of achieving consistent profitability. The Company successfully extended its convertible debt to mature in September 2022, reduced operating expenses by 45%, improved gross margins by 18%, and reduced net loss by 66% compared to Q1 2021.
Although Nevada's legal cannabis industry surpassed $1 billion in taxable sales in fiscal 2021, sales in the state during the reporting quarter declined. According to BDSA data, in September and October 2021, Nevada sales were down 8.4% from August and down 11% from the year prior. Cannabis flower sales fell 25% from the previous year. The Company believes that softening sales were due to changing employment patterns in Nevada, a resurgence of Covid-19 and corresponding social distancing and mask mandates, and the increase of low-priced flower flooding the market. As a result, AMA sales remained flat during the reporting quarter. To combat and rectify these issues, the Company has readjusted its pricing strategy to meet market demands, continues to increase shelf space with sought-after flower strains and in-demand infused pre-rolls, and recruited and installed an improved leadership team covering sales and cultivation under the direction of Ms. Ester Vigil and Mr. Steve Licon, both leading professionals in the Nevada cannabis market. The Company believes that the changes it has made in both its cultivation and post-harvest processes and procedures will result in increased flower capacity, consistency, and quality and that the Company remains on the right path to improve its growth and reach consistent profitability in fiscal 2022 and beyond.