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HIGHLIGHTS
  1. Supreme Cannabis’ Q4 revenue exceeds $19-million amid $421,000 net loss
  2. Mechanical failure caused destruction of plants in three rooms in fiscal 2019
  3. Supreme aims to fully transition to its premium consumer brand from wholesale by Q3 2020

The maker of 7ACRES cannabis said its fourth-quarter 2019 revenue exceeded $19-million - up 90 per cent from the prior reporting period - in part due to sales of its core recreational flower brand, and amid a “mechanical failure” that caused to the loss of plants in three rooms for an undisclosed time.

Looking ahead to its fiscal 2020, Supreme Cannabis Company, Inc. forecast its net revenue will quadruple to anywhere from $150-million to $180-million as the licensed producer aims to complete its transition to premium consumer brand from wholesale business by the third quarter. Additionally, the Toronto-based grower said it is “pursuing non-dilutive financing with tier-one banks and other lenders to provide financial flexibility for future growth initiatives.”

Supreme reported a net loss of $421,000 in the three-month period ended June 30 while net revenue reached just over $19-million. This is up sharply from third-quarter 2019 revenue at $9.97-million and a net loss of $7.14-million.

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For its fiscal year 2019, which ended in June and includes the first 8-1/2 months of Canada’s legalization of recreational cannabis, net revenue reached $41.8-million with a net loss of $14.5-million, Supreme said.

These results follow an “isolated mechanical failure affecting three grow rooms” at its 7ACRES facility in Ontario that led to the plants there to be discarded while the rooms were temporarily de-commissioned. Re-planting in these three rooms is planned for this month. The modular rooms are each 10,000 square feet and “contained the impact of this one-time mechanical deviation,” Supreme said.

“We end fiscal 2019 as one of the few Canadian cannabis businesses building sustainable operations and valuable brands, reporting $3.2-million in Adjusted EBITDA for the fourth quarter,” said Supreme chief executive Navdeep Dhaliwal.

"Our positive Adjusted EBITDA and significant revenue growth in the fourth quarter reflects the rapid scale of our 7ACRES business and continued strong sales pricing for our brands from the provinces as we transition our premium supply to recreational sales channels."

In the fourth quarter, sales of Supreme’s 7ACRES brand continued to transition to the recreational market from its legacy wholesale contracts, which boosted revenue from adult-use markets by 51 per cent between the third and fourth quarters, the company said.

Through its partnership with Khalifa Kush Canada ULC, Supreme said it will create more “ultra premium” derivative products, pre-rolls, products and flower for the recreational market under its KKE brand.

Looking ahead to the legalization of derivative cannabis products, Supreme is ready to enter the extracts category through its partnership with Pax Labs, Inc.

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The licensed producer, which had additional production capacity approved in the fourth quarter for a total of 230,000 square feet of licensed cultivation space, did not provide a breakdown of its per-gram production costs, something that is closely watched by investors.

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