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Tuesday, November 24, 2020

New Progress on the Top Line for Supreme Cannabis Company Inc (OTCMKTS:SPRWF)

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Supreme Cannabis Company Inc (OTCMKTS:SPRWF) has been one of the big winners in the Canadian cannabis patch over the past 18 months. While it is often overlooked in the face of the big three (Aphria, Canopy, and Aurora), shares have been performing extremely well and the company trades at a market cap above $400 million. That said, where we see this story trailing in the space is in sales data, with under $2M in TTM revs and no recent growth on the top-line. Even still, the company is sitting on a mountain of cash and likely has many new deals in the works.

As a case in point, Supreme just announced that its wholly-owned subsidiary has entered into a Definitive Supply Agreement with Cannmart, Inc. a wholly-owned subsidiary of Namaste Technologies Inc. (CSE: N) (FRA: M5BQ) (OTCMKTS: NXTTF), whereby Cannmart has committed to purchase 1000 kilograms of premium quality medical cannabis from 7ACRES in 2018, on a take or pay basis.

Supreme Cannabis Company Inc (OTCMKTS: SPRWF) trumpets itself as a company that focuses on the production and sale of medical marijuana in Canada.

The company was formerly known as Supreme Resources Ltd. and changed its name to Supreme Pharmaceuticals Inc. in February 2014.

Supreme Pharmaceuticals Inc. was incorporated in 1979 and is headquartered in Vancouver, Canada.

According to company materials, “Supreme is a Canadian publicly traded company committed to becoming a leading cultivator and distributor of sun-grown cannabis through its wholly-owned subsidiary 7ACRES. 7ACRES is a federally licensed producer of medical cannabis pursuant to the Access to Cannabis for Medical Purposes Regulations operating inside a 342,000 sq. ft. Hybrid Greenhouse facility. The Hybrid Greenhouse combines the best technology of indoor production with the efficiencies and sustainability of a greenhouse, in a single large-format production footprint.”

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As noted above, Supreme recently inked a deal through a subsidiary to supply a thousand kilos of MMJ for Namaste’s Cannmart operation in Canada.

According to the release, “the aggregate value of the Agreement is $6,000,000.00, representing validation of Supreme’s premium strategy. The Agreement shall commence on the date Cannmart becomes a “Licensed Producer” under the Access to Cannabis for Medical Purposes Regulations. The Agreement represents a significant milestone for both parties and their respective support and commitment to the purchase and sale of premium dried cannabis flower.”

“We are proud to announce this deal with Namaste and our continued commitment to the cultivation and supply of premium dried cannabis flower,” Said John Fowler, CEO of Supreme. “As a cultivation focused Licensed Producer we rely on strong retail partners to provide access to consumers and favorable brand positioning. We are impressed by the platform being built by Namaste to date, and its innovative strategy to position Cannmart as a “sales-only” entity which is a natural fit with 7ACRES’s business model.”

Sean Dollinger, President and CEO of Namaste commented, “We are very excited to announce this Agreement with Supreme and to make a purchase commitment, which we feel brings significant value in securing supply for premium quality medical cannabis for Cannmart. We look forward to working with Supreme and their management team and anticipate a long-term relationship that will be beneficial for both companies over the next several years.”

As we discussed above, one of the holes in this story is the lack of revenue growth. But deals like this represent a clear path to remedy that factor over time.

Earning a current market cap value of $406M, SPRWF has a significant war chest ($51.9M) of cash on the books, which must be weighed relative to virtually no total current liabilities. SPRWF is pulling in trailing 12-month revenues of $1.6M. However, the company is seeing a recent lack of movement on the top-line on a sequential quarterly basis, with revenues flat as of its latest reporting period. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $SPRWF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $SPRWF, either long or short, and we have not been compensated for this article.

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