Steep Hill to Close Canadian Marijuana Testing Lab

The laboratory testing company is exiting the challenging Canadian market to focus on U.S. operations.

California-based Steep Hill (CSE: STPH) announced on Friday that one of its affiliate companies in Canada is shuttering, effective Sept. 1., due to increased costs and declining profits.

According to a news release, the Ontario testing lab – founded as Molecular Science Corp. – was acquired by Steep Hill just last year, but in the past six months, the Canadian cannabis market has taken a serious downturn.

“Changes in the market including price compression and increased costs have made ongoing operations unsustainable from profitability standpoint,” Steep Hill CEO Sameet Kanade said in the announcement.

Despite investments in the lab and the addition of in-house microtesting, Steep Hill found that the market for testing services “has suffered from significant price discounting and lab-shopping for desired results,” the company said.

The testing company also implemented several “right-sizing” measures, including headcount reduction, in an effort to offset the increasingly challenging market.

Steep Hill also cited “excess capacity and lack of profitability” for the licensed marijuana producers in Canada more broadly as a factor in its decision to exit the national market.

The closure leaves Steep Hill with 11 operational labs, in Arkansas, California, Illinois, Massachusetts, Michigan, Mississippi, New Jersey, Oklahoma, Pennsylvania, Vermont, and one lab in Mexico City, according to its website. The company will focus primarily on the U.S. market going forward, according to the release.

Financial Details

Steep Hill recorded revenue of about C$1.16 million (US$920,000) for the second quarter ended June 30. Of that, C$662,895 (57%) came from Steep Hill US’ operations.

The company reported a net loss before other income/expense of C$1.04 million for the same period. Steep Hill noted in its regulatory filings that most of the loss was attributable to operations in Canada.

John Schroyer

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