On September 26, 2018 Supreme Cannabis (FIRE.V) – through its subsidiary 7 Acres -agreed to supply dried cannabis to Tilray (TLRY.NASDAQ), in a deal worth about $12 million.
Tilray is a global cannabis researcher, cultivator, processor and distributor – serving “tens of thousands of patients in 12 countries spanning 5 continents.”
Tilray announced Q2, 2018 revenue of $9.7 million, a 95% year-over-year increase. Tilray posted a net loss in the second quarter of $12.8 million, compared to a net loss of $2.4 million in Q2, 2017.
Replacing that cut supply line, on September 26, 2018 Namaste agreed to purchase medical cannabis from Rocky Mountain for its “online medical-cannabis marketplace”. No dollar value was provided in the press release. By mid-morning trading, Namaste had shed $70 million market cap.
Like the recently announced $2 million deal between Tilray and Supreme, the dried cannabis is aimed at medical cannabis patients in Canada.
“Tilray has built an industry-leading global medical distribution platform,” stated John Fowler, Supreme President, “which has resulted in robust demand for high quality cannabis products.”
Supreme’s 7ACRES is a federally licensed cannabis producer operating a 342,000-square-foot facility in Kincardine, Ontario.
The FIRE portfolio also includes an equity and distribution partnership with Lesotho-based Medigrow, to export medical-grade cannabis oil.
On September 5, 2018 Supreme announced that it has Health Canada approval to begin growing weed in 20,000 square feet of additional flowering rooms at its 7ACRES facility.
The additional flowering rooms will increase total potential flowering capacity to 90,000 square feet and, assuming a current yield, will bring 7ACRES’ annual production potential from 10,000kg to 13,330kg.
7ACRES’ combines the best practices in indoor cannabis cultivation with the power of the sun, resulting in “indoor-quality buds with sun-grown characteristics.”
On September 24, 2018 Supreme published fiscal year-end and Q4, 2018 financial and operating results.
“Supreme Cannabis executed on its plan to build proprietary value around regulated cultivation at scale, establish coast to coast distribution in recreational markets and make inroads into the international medical cannabis market,” stated Navdeep Dhaliwal, CEO of Supreme Cannabis.
Fiscal year highlights:
- Received sales license in July 2017
- $8.85 million in revenue
- Among the highest revenue for any Canadian cannabis producer in its first four quarters of sales.
- Net loss of $7.35 million, 49% lower than the previous year ($14.42M).
- Wholesale supply agreements including with Aurora Cannabis
- Secured strong wholesale pricing.
- Completed a $40 million bought deal private placement.
- Executed a $10 million strategic equity investment with Lesotho-based Medigrow.
“I’m not going to tell you to buy Supreme stock,” stated Equity Guru’s Chris Parry, “because that’s not my job.”
‘What’s important to me right now is not who is buying the stock, but buying the product,” continued Parry, “The list of companies currently buying off Supreme is sick.”
According to a recent Financial Management Discussion & Analysis (MD&A), “Supreme’s B2B model is designed to allow 7ACRES to grow its revenue through high value bulk sales while maintaining its focus on cultivation, without the expense of patient acquisition and retention or retail order fulfillment and logistics.”
As we wrote on August 28, 2018 Supreme has agreed to supply recreational cannabis to the Nova Scotia Liquor Corporation and the PEI Cannabis Management Corporation beginning October 17, 2018 – adding to supply agreements with the provinces of Ontario, British Columbia, Alberta and Manitoba.
Other companies with five or more provinces locked down, include: Canopy Growth (WEED.T), Aphria (APH.T), Aurora (ACB.T) and Organigram (OGI.V).
Combined, these companies have a market value of $32 billion.
Supreme currently has a market cap of $580 million – about 26 times smaller than WEED.
Tilray’s agreement with Supreme is “a guaranteed commitment to purchase” – covering the twelve-month period starting October 1, 2018.
The deal is estimated to have a value of $12 million.
Full Disclosure: Supreme Cannabis is an Equity Guru marketing client, and we own stock.