SUPREME CANNABIS (OTCMKTS:SPRWF) has been enjoying a price surge since the close of December. During this period, the price has risen from below $1.5 to close yesterday at $2.44. The period has also seen the number of shares traded increase to nearly 4 million, a first for the company.
The chart below exemplifies this information:
With that in mind, let us take a look at what is driving the price of SPRWF and assess its sustainability.
Overview of SPRWF
Supreme pharmaceutical com is a Canadian company operating in the regulated cannabis/Marianas industry. The company operates under a wholly owned subsidiary called 7 ACRES, which is a federally licensed producer of medical cannabis under Canada Access to Cannabis for Medical Purposes Regulations (ACMPR).
The 7 ACRES Affair
Through 7ACRES, SPRWF is aiming to be a leading cultivator and distributor of sun-grown cannabis. The company owns 342,000 square feet. Hybrid Greenhouse Facility that it says provides the best technology of indoor production combined with the efficiencies and sustainability of a greenhouse to support massive format production.
7 ACRES received sales approval in late June last year, and since then it has continued to win supply contracts from some of the more prominent medical cannabis producers and vendors in Canada.
On 3rd of October last year, SPRWF announced a first-month sales milestone as its 7ACRES subsidiary in its first month of sales generated revenue over $1,500,000.
This is a strong start for the business and in the words of the CEO John Fowler, who alluded to the fact that the sales figure demonstrates the ability of the company to cultivate premium cannabis, navigate the regulatory process, and deliver commercial quantities of a high-quality product to retail partners. The first sales offer additional validation of the company’s ability to execute on it’s unique, scalable and focused business model.
The SunGrown model of 7ACRES features indoor cultivation and the sun to produce terperine-rich cannabis. Also, the SunGrown model provides for low-cost production implying 7ACRES can produce high-quality marijuana at a reasonable cost hence run a profitable business.
Worth noting also is that SPRWF’s 7ACRES subsidiary serves the business-business market, which is another way of saying that the company has limited exposure to the risks in the consumer market.
On 28th of September SPRWF announced that it had hired Bayfield Strategy inc.to to provide public relations and investor communication services. Bayfield will work with SPRWF to achieve its communications goals aimed at supporting growth. Those goals include expanding capital markets awareness and enhancing shareholder engagement. The act of SPRWF stepping up its investor communications has a potential for boosting the stock price because awareness will create more demand. Bayfield is a company whose success story in expanding capital market awareness cannot be gainsaid. The firm has worked on communication strategies of a variety of entities ranging from public companies to private-equity firms to hedge funds.
Since receiving sales approval in June 2017, 7ACRES has won contracts from many prominent cannabis companies serving the Canadian market and beyond.
Aurora Inc Sales
On 5th September the company announced that it had completed its first sale of dried cannabis to Aurora Cannabis Inc. Aurora is a leading cannabis company in the Canadian medical Marianas market. Aurora has a base of 19,000 registered patients, and it has made a name for itself due to its strong commitment to product quality, premium user experience, and a transparent quality assurance program.Before Aurora placed an order with 7ACRES, a detailed quality inspection was carried out for dried cannabis, and the good news is -7ACRES passed the test.
Such rigorous due diligence as done by Aurora should help raise the profile of SPRWF and its 7ACRES subsidiary in the cannabis supply chain. In what is likely to boost SPRWF’s brand recognition, Aurora will sell cannabis sourced from 7ACRES with a producer’s labels “SunGrown by 7ACRES.” SPRWF’s other customer called Emerald Health Botanical is also doing the same.
The battle for legalization of Marijuana took shape in eight out of nine states in 2016 in the USA which supported the legal use of the product. Cannabis sales hit $1 billion in the state of Colorado. An IPO of the first medical marijuana properties-focused REIT innovative industrial properties Inc in the New York Stock Exchange. In Toronto Canada Supreme Pharmaceuticals Inc, in June last year, announced that it had received final approval from TSX Venture Exchange to list the company’s common shares on the TSX. The shares started trading on 6th of June 2017 under the symbol “FIRE.”
Another significant trade boost for Supreme Pharmaceuticals is a recent announcement on 18th December 2017 by Namaste Technologies Inc. A signed Letter of Intent (LOI) between Namaste and Supreme provides that Supreme will supply Cannmart (a wholly owned subsidiary of Namaste) with a premium range of high quality dried cannabis flower which will be offered in the company’s medical marketplace. Supremes’ focus is to produce high-quality cannabis through a commitment to carefully curated genetics; quality focused cultivation practices and a post-harvest process that includes a 14-day whole plant drying process and hand finishing of each flower. Under the terms of the LOI Namaste has committed to working with Supreme as a preferred vendor as related to possible branded partnerships, also, to supplying for Namaste’s in-house branded medical cannabis. Namaste believes that Supremes’ business to business (B2B) distribution model fits well with Namaste focus on becoming Canada’s leading online retailer of medical cannabis. The LOI represents further progress for Namaste in securing this supply agreement with one of Canada’s leading producers of premium quality cannabis.
The feeling of the management of Namaste is that their relationship with SPRWF will offer the company great value with Supremes’ focus on cultivation while the former intends to become Canada’s largest online retailer for medical cannabis by implementing its.
On 18th December 2017 supreme company bought approximately a six-acre property adjacent to the 7ACRES facility in Kincardine Ontario. The company expects to build an indoor cultivation facility to produce high quality “California style” cannabis for the premium product segment. SPRWF is currently in the design phase of the project and intends to break ground in 2018 and will be up and running in 2019.The new project is expected to produce 10,000 kg of premium indoor cannabis. It is anticipated that with favorable pricing economics and current and future retail partners the ultra-premium dried flower will fetch good prices boosting the company’s revenues. The land was acquired for $1,927,200.
Finally, the company further announced that it would be giving notice to holders of its 10% unsecured convertible debentures due in the year 2019 that they will be converted into common shares of the company. Due to this conversion, SPRWF will lower its debt load and related interest expenses.
SPRWF has continued to make great strides in its field, most which are bound to lead them to success. Their trajectory is set, and it all points to the top. As such, we remain bullish about the company.
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Disclosure: We have no position in SPRWF and have not been compensated for this article.