Supreme Cannabis Company Inc (OTCMKTS:SPRWF) is going through a bit of crisis in the market. However, this crisis does not fully reflect the present state of its operations.
Investors and Analysts are of the opinion that the market may be wary of buying the stock just based on potential and expect to see real results before making additional investments in the company. Take a look at the stock’s price action below:
Supreme Cannabis Company, Inc. was established in 1979 and its head office is located in Toronto, Canada.
It is a Canadian publically traded company with the reputation for its dedication towards becoming a major medical cannabis supplier at affordable prices. This is to be attained the application of commercial agriculture techniques in the production of medical cannabis. Supreme’s main facility is a hybrid greenhouse situated at Kincardine, Ontario, which is over 340,000 square feet and was developed in order to optimize production efficiencies and allowing the firm to pass its savings along to its future patients. The firm was previously known as Supreme Pharmaceuticals Inc. but recently underwent a name change to the Supreme Cannabis Company, Inc. in December last year.
For more information on the company, take a look at our previous post here.
In the last year and a half, the firm has enjoyed the benefits of a lucrative Canadian cannabis market, although its market share could be seen as small relative to that of major players such as Canopy and Aurora Cannabis. This has seen its stock go on a steady rise and with a market cap above $400 million. This makes for interesting analysis, and it is safe to say the company has been trading on its enormous potential, as it was unable to record up to $2 million in revenues over the last year and has not experienced any growth in sales within the last few years.
Recently, the firm reported that its fully owned subsidiary has signed an agreement with Canmart Inc, a fully owned subsidiary of Namaste Technologies Inc., a major player in the cannabis industry, popularly known for its production of ‘Guru’ a product used for vaporizing numerous dry herbs, liquids and concentrates.
Based on the deal, Canmart has agreed to buy a thousand kilograms of premium level medical cannabis in 2018, on a take or pay basis.
As stated by Supreme Cannabis Company Inc., the firm is fully dedicated to attaining the status of major distributor and cultivator of cannabis (sun-grown) by working with another of its fully owned subsidiaries 7ACRES. This subsidiary is federally licensed to produce medical cannabis in alignment with the Access to Cannabis for Medical Regulation (ACMPR) which operates within a 340,000 square feet facility. The facility is a means to combine the sustainability and efficiency of a greenhouse with some of the best indoor production and manufacturing technology within a single production system.
According to the announcement, the total proceeds from the deal could be as much as $6 million, proving that Supreme’s premium strategy has begun yielding results. The agreement is tagged to be in effect as soon as Canmart is qualified as a licensed producer according to the ACMPR. This deal signifies a major landmark for both firms and demonstrated their dedication and commitment to the premium dried cannabis flower business.
For 2017, there no revenues reported, a trend which has been in place as far back as 2014. It is expected that in years to come, the firm will move out of this growth phase and generate revenues from the sale of its dried flower cannabis.
However, the firm recorded negative cost of sales in the year, a pointer that some of its inventory may have been revalued or returned by customers.
In the same period, operating expenses jumped by a massive 331%, an indicator that the firm may have increased its investment in business operations. With no operating income, operating loss for the year was recorded at $18.2 million. It should be noted that it is a regular trend for developing companies to be unable to generate revenues while still incurring costs in the growth years.
Net loss for the year was $15.27 million, the only additions being interest and income tax expenses. The net loss recorded for the year was a major increase from the prior year loss of $4.39 million.
The statement of financial position reveals that the firm is not too highly geared. On its books, its total debt is worth an estimated $36.8 million, resulting in a stable debt-to-equity ratio of 0.52. It also has a very high liquidity ratio of 11.7
SPRWF still has every reason to succeed. The recent dip in its value may just be the best opportunity to buy.
Disclosure: We have no position in SPRWF and have not been compensated for this article.