Supreme Cannabis Takes Big Write-Down As Sales Sputter

The Supreme Cannabis Company, Inc. (OTCQX: SPRWF) reported only a slight increase in revenue for the third quarter ending March 31, 2020, of $11 million. Last year’s third-quarter revenue was $10.3 million. The net revenue decreased from $10 million in 2019 to $9.1 million for the 2020 third quarter. 

Supreme said that its net revenue was impacted by actual and expected sales discounts and return provisions of $1.3 million versus $0.5 million in Q2 2020. “The year-over-year decrease in net revenue was partially offset by an approximately 245% increase in revenues from recreational cannabis sales.” However, the company also said it had to supplement those recreational sales.

Due to the slow Canadian retail rollout, Supreme said it had to supplement its recreational sales with domestic wholesale and international medical transactions. Despite market-wide wholesale price compression, Supreme Cannabis said it continued to get wholesale average pricing of $3.36 per gram in the third quarter of 2020, versus $3.26 in the second quarter. 

Huge Write-Down

The company delivered a whopping net loss of $72 million versus last year’s net loss of $7 million for the same time period. Supreme recognized a total non-cash impairment of assets of $57.5 million, which mostly consisted of impairment to goodwill and intangible assets that were recognized as part of the BlissCo and Truverra acquisitions on July 11, 2019, and August 13, 2019, respectively. The impairment was primarily driven by slower than expected development of the recreational cannabis market in Canada that resulted in slower than anticipated growth in sales of the company. The company did say that the 7ACRES Site continues to hold its value and did not change the valuation of that property.

“In our third quarter, we made significant progress towards our goal of improving the Company’s cost structure while creating opportunities for near-term revenue growth. Although much of this progress is not reflected in our Q3 financial results, we did begin to see the early impacts of our rightsizing and revenue generation efforts,” said Colin Moore who recently served as interim President and CEO of Supreme Cannabis. “Excluding restructuring charges, we reduced our operating expenses by 23% quarter-over-quarter and improved our speed to market introducing 10 new SKUs since the beginning of calendar year 2020. ”


The company’s operating expenses for the third quarter were $17 million.  Operating expenses for the third quarter, excluding restructuring charges, decreased to $15.3 million from $19.8 million in Q2 2020. Cash outflows for capital expenditures in the quarter were $2.3 million versus $11.9 million in the second quarter. The company’s cash has dropped down to $23 million.

Supreme said it has $35 million of the undrawn capacity of its $90 million of senior secured credit facilities. The company can also issue shares to bring in an additional $9.7 million.

Looking Ahead

The company said it was fully funded for all of its planned initiatives. The company also said that its capital needs would be less going forward.

“In my short time with the Company, I have quickly come to appreciate our distinct advantages and near-term opportunities; we have completed infrastructure at the cusp of being optimized, a curated portfolio of brands that are gaining traction through an advanced distribution strategy and a high-quality offering of products that is growing every day,” said Beena Goldenberg, President, and CEO of Supreme Cannabis. “In the remainder of fiscal 2020 and in fiscal 2021, I will implement and quickly action changes that capitalize on these existing advantages and create opportunities to showcase our strengths. I see a clear path to increased revenue generation and profitable growth that will benefit our investors, consumers, and employees.”




Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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