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Supreme Cannabis Announces Q1 2020 Financial Results and $90 million Credit Facility led by Bank of Montreal

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The Supreme Cannabis Company, Inc. (“Supreme Cannabis” or the “Company”) (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) announced the release of its financial and operating results for the first quarter ended September 30, 2019.

The Company also announced that it has entered into a credit agreement with Bank of Montreal (“BMO”) as Lead Arranger and Agent on behalf of a group of lenders (collectively, the “Lenders”) for $90 million of senior secured credit facilities consisting of a term loan of $70 million and a revolving credit facility of $20 million (the “Credit Facility”).

“In the first quarter of fiscal 2020, we operated through challenging market conditions while integrating new businesses and product planning for the second half of the year.  Overall, our financial results reflect the inherent difficulties of operating in a new regulated industry and the transitionary period we are in as we evolve from a predominantly wholesale business to a leading cannabis CPG company in Canada. Despite these challenges, in the quarter we improved production operations to generate industry-leading margins of 62% and made the strategic decisions necessary to position our businesses for meaningful revenue generation from flower, flower convenience products and select derivative products in the remainder of fiscal 2020,” said Navdeep Dhaliwal, CEO of Supreme Cannabis. “The closing of up to $90 million in credit facilities from tier one lenders is a significant achievement that positions the Company to execute on our strategy and prudently grow the business in fiscal 2020 and beyond.”

“In connection with the Credit Facility, the Company underwent a rigorous due diligence process to secure this favourable, non-dilutive financing from leading financial institutions,” continued Mr. Dhaliwal. “There is only a select group of Canadian federal license holders who have obtained such financing over the past year. In the current challenging operating environment, our ability to secure credit facilities with tier one lenders speaks to the strength of our management, business and operations, and our ability to deliver strong financial results.”

Q1 2020 Select Financial and Operational Results.

($ thousands)

Three Months Ended
September 30, 2019

 Three Months Ended
 September 30, 2018

Net Revenue

11,433

5,140

Operating expenses

18,491

5,938

Net Loss after taxes

(16,525)

(5,385)

Basic and Diluted Loss per common share

(0.05)

(0.02)

Adjusted EBITDA

(4,932)

(849)

Cash

36,420

31,197

Supreme Cannabis’ wholly-owned subsidiary, 7ACRES, accounted for the Company’s year-over-year increase in net revenue, growing 122% from $5.1 million in Q1 2019 to $11.4 million in Q1 2020. The net revenue achieved during Q1 2020 was comprised of $10.5 million from 7ACRES and $0.9 million from Blissco. Quarter-over-quarter, net revenue decreased 40% from $19 million in Q4 2019. The quarter-over-quarter decrease in net revenue is predominately attributable to the combination of a rapid deterioration of pricing and demand in the wholesale market and the previously announced 7ACRES mechanical failure in grow rooms 1, 2 and 3, which was an isolated one-time event with all three grow rooms recommissioned and replanted in September 2019.

In Q1 2020, in response to wholesale market conditions, the Company prioritized its annual performance objectives by product planning for future quarters and holding back product from wholesale channels. In the second half of fiscal 2020, the Company expects this inventory of high-quality products to serve as inputs for flower convenience products and select cannabis derivative products, including pre-rolled joints, CBD oils and vaporizer oils. The Company continues to reduce its reliance on the wholesale market as it increases packaging capacity at its 7ACRES facility and transitions 7ACRES to solely recreational sales. In Q1 2020, wholesale sales accounted for 57% of cannabis flower sales, as compared to 65% in Q4 2019 and 100% in Q1 2019.  As Supreme Cannabis transitions into a CPG company, sales from recreational markets continue to increase. In Q1 2020, the company saw strong demand for its consumer-facing brands, with net revenue from recreational sales increasing 68% quarter-over-quarter.

Credit Facility.

The Credit Facility is secured by the assets of the Company including the 7ACRES facility. Pricing is based on a set margin over the BMO CAD Prime Rate or Bankers’ Acceptance and a pricing grid linked to certain financial ratios. It is expected to be at the outset between 5-6% per annum. The Credit Facility has a three-year term and contains customary financial and restrictive covenants. Supreme Cannabis may repay any portion drawn under the Credit Facility at any time without penalty. Supreme Cannabis has the option to increase the revolving credit facility by $10 million subject to agreement by the Lenders and satisfaction of certain legal and business conditions. In connection with the closing of the Credit Agreement, the Company has initially drawn $55 million of the term loan under the Credit Facility.

Cultivation.

In Q1 2020, the final phase of construction at 7ACRES’ premium cultivation facility accounted for the majority of capital expenditure in the quarter. Subsequent to quarter end, the 7ACRES facility reached a pivotal point in its construction process. In October, the Company completed construction on the facility’s two-story central processing, administrative and laboratory spaces (the “Center Core”), adding approximately 48,900 square feet of operational space to the facility. As production scales, the additional space will be licensed to accommodate the facility’s growing processing needs.

In addition to completing construction on the Center Core, 7ACRES has commissioned an automated bottling line capable of filling up to 12,000 3.5-gram containers per day with best-in-class auto-filling features, which meet 7ACRES’ high standards for its final packaged product. The Company expects that 7ACRES will commission a second and third automated bottling line in fiscal 2020. The additional in-house packaging capabilities will complete 7ACRES’ transition from a wholesale business to a premium consumer brand by Q3 2020.

The Company expects the 7ACRES facility, including all administrative infrastructure, to be complete by the end of calendar year 2019. With 7ACRES’ major infrastructure completed, the Company expects construction on the facility to have a lower impact on capital expenditure in Q2 2020.

Processing.

Additional licensed space in the Center Core will be dedicated to the production of 7ACRES pre-rolls. 7ACRES branded pre-rolls will be produced in-house with whole flower inputs from 7ACRES’ premium strains. 7ACRES expects this format to appeal to both its existing consumers and new consumers. Approximately 15% of frequent cannabis consumers report using a pre-rolled joint as their last consumption format and approximately 23% of all cannabis consumption in Canada is made up of pre-rolled joints.1 7ACRES expects to launch this new high-margin and in-demand product in Q3 2020.

In addition to in-house pre-roll capacity, the Company aims to bring this high-margin product form to market under different Supreme Cannabis brands through contract manufacturing agreements. Subsequent to quarter end, the Company signed a definitive agreement with Indiva Inc. (“Indiva”), pursuant to which Indiva will manufacture and distribute pre-rolls for select Supreme Cannabis brands.

In Q1 2020, the Company closed the acquisitions of Blissco and Truverra, expanding its focused operating assets. Subsequent to quarter end, Blissco’s 12,000 square foot extraction facility in Langley, British Columbia received its Cannabis Oil Sales License from Health Canada. In November, Blissco completed construction on its large-scale ethanol-based extraction lab, expanding upon Blissco’s existing CO2-based extraction capability. By the end of calendar year 2019, Supreme Cannabis expects that the Blissco facility will have the capacity to produce over 7,000,000 tincture bottles annually and meaningfully contribute to net revenue in second half of fiscal 2020. Blissco expects to ship its first full spectrum CBD oil product to the Canadian market in Q2 2020 to satisfy unmet demand for CBD oils nationally.

In the quarter, Supreme Cannabis gained an additional operating asset with the closing of its acquisition of Truverra. Truverra’s subsidiary, Canadian Clinical Cannabinoids Inc. (“CCC”), operates a 5,000 square foot licensed facility in Scarborough, Ontario. In the near-term, the CCC facility will be equipped to process high-quality inputs for cannabis 2.0 products, including concentrates.

Brands.  

In the quarter, 7ACRES continued to establish itself as the leading premium flower brand nationally with the launch of its new premium strain, Jack Haze. Jack Haze is 7ACRES’ first sativa-dominant strain with rare sensory characteristics. With the successful launch of Jack Haze, 7ACRES achieved premium pricing across all provinces the strain entered. Based on sales data from the Ontario Cannabis Store, in its first two months of sales, the Jack Haze strain achieved the highest sales velocity of any 7ACRES strain. To date, Jack Haze is 7ACRES’ highest-priced and most successful launch into the market.

The successful launch of Jack Haze demonstrates the Company’s proven ability to bring winning consumer-centric products to market. Supreme Cannabis’ product development team identified and anticipated consumer demand for a high-THC, sativa dominant strain with rare sensory characteristics. The Cambium Plant Sciences’ genetics team was responsible for selecting Jack Haze’s proprietary genetics and based such selection on consumer demand. 7ACRES cultivated this leading strain and the Company’s marketing team ran a targeted campaign to support its launch into the Canadian market. 7ACRES’ ability to forsee consumer taste, create custom flower products and market to consumers is what positions it as a leading Canadian flower brand and “Brand of the Year” for the second year in a row at Lift & Co’s Canadian Cannabis Awards in November 2019.

Outlook.

Supreme Cannabis confirms its financial outlook for fiscal 2020, which was previously announced on September 17, 2019:

  • Expected net revenue of between $150 million and $180 million.

  • Expected positive Adjusted EBITDA on aggregate over the course of the year.

  • 7ACRES’ to complete its transition from a wholesale business to premium consumer brand by Q3 2020, with complete in-house packaging capabilities for all flower products under the 7ACRES’ brand.

  • Fully funded to execute on all planned initiatives.

In addition to the above outlook, the Company will host its Annual and Special Meeting of Shareholders (the “Meeting”) on Monday, December 9, 2019 at 10:00AM EST. All registered shareholders are welcome to attend the Meeting, which will be held at 22 Adelaide St. West, Toronto Ontario, Floor 34, Room 302. In conjunction with the Meeting, the Company has filed its Information Circular and related proxy materials under its profile on SEDAR.

Supreme Cannabis’ MD&A and consolidated financial statements for the first quarter ended September 30, 2019, along with all previous public filings of The Supreme Cannabis Company, Inc., may be found on SEDAR at www.SEDAR.com 

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Cannabis

Core One Labs’ Subsidiary, Core Isogenics Inc., Teams up with Reiziger Pty. Ltd. to Showcase High Yielding Nutritional Cultivation Technology

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Core One Labs Inc. (CSE: COOL), (OTCQX: CLABF), (Frankfurt: LD6, WKN: A14XHT) (“COOL” or the “Company”) announces that its wholly-owned subsidiary, Core Isogenics Inc., has begun a highly complex nutritional regimen to accelerate the growth of cannabis plants and increase flower yield and quality.

The Core Isogenics’ nursery and breeding rooms are now operational. Approximately 25% of the breeding rooms are now actively involved in a project with Reiziger® Holland to improve harvest yields. This is a significant milestone in the Company’s journey to seed-to-sale with increased profitability. The initial project focus will be a twelve-month study matching genetics to nutrients and creating feeding regimens specifically designed for maximum absorption and conversion of nutrients into cannabinoids. The Company has high expectations for this technology and the possible benefits for the CannaStrips™ brand.

The nursery facility is uniquely suited for this type of project with its ability to track the growing conditions in isolated rooms, as well as documenting the feeding schedule and soil condition in order to gather information to accurately assess the cultivation process. This documentation will allow the Company to consistently produce high quality products in every harvest.  This consistency is vital to the Company’s cultivation model where the goal is a predictable outcome in every harvest.

CEO of Core One Labs Inc., Brad Eckenweiler, stated, “The introduction of Reiziger® and their cultivation technology into our operation is a major step in the growth of Core One Labs. The ability to have Shaun Reid and his team of master Dutch breeders and growers share their decades of experience is extremely valuable and will result in accelerating the Core Isogenics nursery years ahead of what would have been a long learning curve. Most certainly our indoor growing ability will be the primary beneficiary with higher yields and stronger cannabinoid profiles.” The Company will continue to update the market on the development of this exciting project.

 

SOURCE Core One Labs Inc.

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IMCC Appoints Yaron Berger as CEO of IMC Holdings

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Photo source: deutschlandfunkkultur.de

 

IM Cannabis Corp. (the “Company” or “IMCC”) (CSE: IMCC), one of the world’s pioneering medical cannabis companies with operations across Europe, is pleased to announce the appointment of Yaron Berger as Chief Executive Officer of I.M.C. Holdings Ltd. (“IMC“), the Company’s wholly-owned operating subsidiary in IsraelOren Shuster will remain the Chief Executive Officer of IM Cannabis Corp.

Mr. Berger brings more than 10 years of experience in various senior roles both in public and private sectors, leading large-scale operations. Most recently, Mr. Berger was the Chief Executive Officer of Telepharma Ltd. (“Telepharma,” doing business as epharma), a leading wholesaler, direct marketer of prescription drugs and chain of pharmacies in Israel. At Telepharma, among other accomplishments, Mr. Berger re-branded its digital platform and transformed the customer experience. As an early entrant into the medical cannabis sector, Mr. Berger also established Greenpharma under Telepharma, a full-service distributor, patient counselling service provider and online resource for medical cannabis patients in Israel. Prior to his experience in the pharmaceutical sector, Mr. Berger served as the Chief Operating Officer of the National Police Academy and spent over 20 years in the Israeli Air Force, most recently as a Lieutenant Colonel.

Oren Shuster, Chief Executive Officer of IMCC said “Yaron is uniquely qualified to lead our Israeli operations under the new medical cannabis regulatory regime, which requires a high level of engagement and education for the country’s pharmacists on the benefits of medical cannabis. Yaron was an early mover in identifying the opportunity in medical cannabis and we are very excited to benefit from his expertise in the pharmacy channel to maintain IMC’s status as a leading medical cannabis brand in Israel.”

“I am thrilled to be joining the IMC team, who I have known as a leader in the medical cannabis market in Israel over the past ten years,” said Mr. Berger. “The IMC brand is synonymous with quality and innovation. The new medical cannabis reform in Israel presents a significant opportunity for the Company and the IMC brand to further elevate its market position as the preferred medical cannabis brand for physicians, pharmacists and patients.”

 

SOURCE IM Cannabis Corp.

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Cannabis

LCBO’s bottom line proves privatized alcohol sales a bad idea: OPSEU’s Thomas

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Photo source: LCBO.com

The LCBO’s latest profits show the Crown corporation’s value to the people of Ontario, OPSEU President Warren (Smokey) Thomas said Friday.

In its 2018/2019 annual report released Thursday, the LCBO is reporting earnings of $2.37 billion on total revenue of $6.39 billion.

Thomas said those profits go to the provincial government and pay for vital public services like health, education and highways.

“This is why the Ford government should rethink allowing corner stores and grocery stores to sell more alcohol,” said Thomas.  “Is saving folks a 10 minute drive in some cases worth jeopardizing their health care?”

OPSEU represents LCBO workers and Thomas says these frontline professionals deserve the credit for the corporation’s continued success.

“The reason the LCBO is the gold standard in selling alcohol responsibly is because of OPSEU members who make sure alcohol isn’t sold to minors or intoxicated people,” said Thomas.

“They also provide customer service that is second to none and they’re the ones who have made the LCBO a success story.”

As he read the LCBO report, OPSEU First Vice-President/Treasurer Eduardo (Eddy) Almeida reflected on the Ford government’s decision to take the sale of legalized cannabis away from the Crown Corporation.

“Think of what the LCBO’s profits would have been if Premier Ford hadn’t scrapped the plan of the former Liberal government?” said Almeida.   “I’ve put together a lot of budgets and I know how tough an exercise it is.”

“It still makes me shake my head that a government that claimed it had catastrophic financial problems would turn down massive amounts of revenue and go on the misguided course that the Conservatives took. Really? Wow.”

Almeida says municipalities who voted to opt out of Doug Ford’s foolish cannabis privatization plan should stand firm and demand a responsible plan.

“The LCBO continues to prove it’s the best option to keep controlled substances out of the hands of minors,” said Almeida.  “Municipalities and Ontarians in general should continue to demand a responsible plan and just say no to Doug’s. After all, a little competition wouldn’t be a bad thing would it?”

SOURCE Ontario Public Service Employees Union (OPSEU)

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