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Supreme Cannabis Announces Q3 2019 Financial Results

  • Q3 2019 net revenue was $10 million, a 382% increase from Q3 2018 ($2.1 million) and a 29% increase from Q2 2019 ($7.7 million).
  • Sales revenue from adult-use recreational markets increased 63% quarter over quarter.
  • During the quarter, 7ACRES' facility was approved for 90,000 sqft of additional production capacity, increasing annual capacity from 13,300kg to 26,250kg.


TORONTO, May 13, 2019 /PRNewswire/ - The Supreme Cannabis Company, Inc. ("Supreme Cannabis" or the "Company") (FIRE.TO) (SPRWF) (53S1.F), announced today the release of its financial and operating results for the three and nine months ended March 31, 2019.

"Our Company is pleased with the results of our third quarter financials and with the progress made thus far on our strategic priorities for the 2019 calendar year. This quarter saw a marked increase in revenue on both an annual and quarter-over-quarter basis. This revenue growth was driven by an increase in our capacity at the 7ACRES facility, a ramping up of our product packaging capabilities and, we believe, consumer preference for high-quality cannabis," said Navdeep Dhaliwal, CEO of The Supreme Cannabis Company, Inc. "As we report the Company's third quarter of fiscal 2019, we reflect on our first six months of legal cannabis sales in Canada. While Supreme Cannabis was originally viewed as a contrarian for taking a consumer-oriented approach to the cannabis market, 7ACRES' strong consumer feedback, status as a top-ten revenue producer in the industry and recognition as a coast-to-coast award-winning premium brand affirms that our approach to the Canadian cannabis market is winning with the people who will drive revenue: consumers."

"Our strong foundation built on cultivation IP, genetics and an excellent reputation among consumers leaves us well positioned to enter new and exciting product segments where we have a proprietary advantage over our competition. We approach our year end with the senior leadership team, strategic agreements and brands in place to drive growth into fiscal 2020," Mr. Dhaliwal added.

Q3 2019 Select Financial and Operational Results.


Three Months Ended

Nine Months Ended


March 31, 2019

March 31, 2018

March 31, 2019

March 31, 2018

Net Revenue

9,969,810

2,069,032

22,828,073

5,309,671

Operating expenses

10,321,909

4,611,729

27,150,715

10,752,186

Net Loss

(7,139,499)

(3,367,730)

(14,075,596)

(7,581,491)

Basic and Diluted Loss per
common share

(0.02)

(0.01)

(0.05)

(0.04)

Cash



75,024,882

78,496,912

 

Adult-Use Market.

In Q3 2019, Supreme Cannabis' wholly-owned subsidiary, 7ACRES, began supplying high-end cannabis flower to the province of New Brunswick and retailers in Saskatchewan, increasing distribution to eight provinces. Across Canada, sales revenue from recreational markets increased 63% between FYQ22019 and FYQ32019.

Six months of legal cannabis sales supports 7ACRES' strategy to introduce more premium strains to Canada's adult-use market. To meet increased consumer and provincial distributors' demand for premium products, 7ACRES will be commercializing new cultivars over the remainder of the calendar year.

Wholesale Market.  

During the quarter, 7ACRES offset industry-wide consumer packaging challenges through its wholesale supply agreements. When selling dried flower to wholesale buyers, 7ACRES benefited from low-cost, bulk-packaging and industry demand for additional supply. The largest of its wholesale agreements is with Tilray Canada Ltd. (TLRY) ("Tilray"). In the quarter, 7ACRES continued to fulfill its supply agreement with Tilray at prices and volumes consistent with the original announcement.

Strategic Investments & Agreements.

Over the quarter, the Company worked with MediPharm Labs Inc. (LABS.V) ("MediPharm"), a leading cannabis extractor, to produce its premium oil products line. As announced in November 2018, under MediPharm and Supreme Cannabis' three-year contract, 7ACRES will supply a minimum of approximately 1,000 kg of high-quality cannabis trim per year as input to MediPharm for the extraction and production of premium, high-terpene cannabis oil products.

Under the terms of this agreement, all cannabis oil products processed by MediPharm will be sold under Supreme Cannabis' brands. The Company will initially launch oil products to be in British Columbia, Alberta and Ontario before expanding distribution coast-to-coast.

Facilities and Expansion.

On January 28 and March 21, 2019, 7ACRES' facility in Kincardine, Ontario received Health Canada approval for approximately 30,000 sqft and 60,000 sqft of additional cultivation space, increasing target annual production capacity to 26,250kg from 13,300kg. The Company believes that 7ACRES' standardized cultivation rooms contributed to 7ACRES receiving Health Canada approvals ahead of internal expectation.

Subsequent to quarter end, 7ACRES received Health Canada approval for an additional 50,000 sqft of production space, bringing total licensed production space at 7ACRES to 230,000 sqft. With further production efficiencies and the completion and licensing of all 25 flowering rooms, the potential capacity of the 7ACRES' facility is estimated to reach approximately 50,000kg per year.

International Developments.

In the quarter, the Company furthered its global growth strategy, becoming one of  the few Licensed Producers to secure a letter of intent ("LOI") with Malta Enterprises. The LOI is the first step of Supreme Cannabis' application for a Cannabis Production License in Malta. Such License would allow the Company to produce and process cannabis for medical use within Malta, one of Europe's principal commercial entry points, and to export cannabis for medical use to certain international markets.

Progress was also made during the quarter at Medigrow, a Lesotho-based cannabis producer, with which Supreme Cannabis has a 10% equity interest and preferential global distribution agreement. Medigrow's operations scaled significantly, facilitating their growth to more than 250 employees. An industrial-grade extractor capable of producing fractioned, higher-margin cannabis oil was installed on-site and has begun producing oil. That oil successfully achieved a positive Certificate of Analysis from a U.S.-based laboratory. Medigrow is also continuing to advance the build out of their cultivation facility which is being constructed in accordance with EU GMP standards. With additional scaling, Supreme Cannabis estimates that Medigrow will have an annual production capacity run rate of 40,000 litres (50% active). With these items in place, Supreme Cannabis and Medigrow are now exploring export opportunities in various international jurisdictions.

Marketing and Branding.

Subsequent to quarter end, the Company's 7ACRES brand continued to receive recognition for its marketing activities. On April 28, 2019, 7ACRES won the best marketing campaign at the O'Cannabiz Awards for its "Respect the Plant" campaign.

Intellectual Property Development.

Subsequent to quarter end, Supreme announced the launch of its cannabis genetics company, Cambium Plant Sciences ("Cambium"). Cambium will focus on developing the next generation of premium cannabis genetics for recreational, medical and wellness applications. Cambium's innovative mission is to supply agriculturally-focused, disease resistant, premium seed stock to the rapidly growing global cannabis market. Cambium will operate from a 34,000 sqft facility located in Goderich, Ontario. Cambium has commenced the Health Canada licensing process.

Leadership and Corporate Governance.

Towards the end of Q3 2019, Supreme Cannabis announced the appointment of Mr. Nikhil Handa to Chief Financial Officer. Mr. Handa will help lead the Company through its next stage of growth with a focus on capital allocation planning, M&A, and transactional execution. Mr. Handa joined the Company with a wealth cross-sector capital markets experience. In particular, Mr. Handa was the VP of Finance at Well.ca and held a variety of senior finance and operational roles at Restaurant Brands International, the fast food holding company majority owned by 3G Capital.

In the quarter, Supreme Cannabis strengthened its board of directors with the appointment of a new independent director, Kenneth R. McKinnon, Q.C. As an experienced corporate executive and director, Mr. McKinnon brings substantial financial oversight and business advisory experience to the Company's Board. Since his appointment, Mr. McKinnon has been appointed as the Chair of the Audit Committee.

Supreme Cannabis' 2019 third quarter MD&A and consolidated financial statements for the quarter ended March 31, 2019, along with all previous public filings of The Supreme Cannabis Company, Inc. may be found on SEDAR at www.SEDAR.com.

About Supreme Cannabis.

The Supreme Cannabis Company, Inc., is a global diversified portfolio of distinct cannabis companies, products and brands. Since 2014, the Company has emerged as one of the world's fastest-growing, premium plant driven-lifestyle companies by effectively deploying capital, with an emphasis on disciplined growth and high-quality products.

Supreme Cannabis' portfolio includes 7ACRES, its wholly-owned subsidiary and multi-award-winning brand; Cambium Plant Sciences, a plant genetics and cultivation IP company; Medigrow Lesotho, a cannabis oil producer located in southern Africa; and a brand partnership and licensing deal with Khalifa Kush Enterprises Canada.

Supreme trades as FIRE on the Toronto Stock Exchange (FIRE.TO), SPRWF on the OTC Exchange in the United States (SPRWF) and 53S1 on the Frankfurt Stock Exchange (53S1.F). Follow us on InstagramTwitter, Facebook and YouTube.

We simply grow better.

Forward-Looking Information.

Certain statements made in this press release may constitute forward-looking information under applicable securities laws. These statements may relate to anticipated events or results and include, but are not limited to, our entry into new and exciting product segments,  our ability to drive growth into fiscal 2020, commercializing new cultivars over the remainder of the calendar year, our ability to supply a minimum of approximately 1,000 kg of high-quality cannabis trim, the launch of our oil products line in British Columbia, Alberta and Ontario before expanding distribution coast-to-coast, Medigrow's estimated production capacity run rate of 40,000 litres and other statements that are not historical facts. Particularly, information regarding our expectations of future results, targets, performance achievements, prospects or opportunities is forward-looking information. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology. Forward-looking statements are current as of the date they are made and are based on applicable estimates and assumptions made by us at the relevant time in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances. However, we do not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. There can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the factors discussed in the "Risk Factors" section of the Company's Annual Information Form dated October 2, 2018 ("AIF"). A copy of the AIF and the Company's other publicly filed documents can be accessed under the Company's profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com. The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information.

Cision

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