The Supreme Cannabis Company (TSX: FIRE) filed its first quarter 2020 financials after the bell tonight, indicating the firm generated net revenues of $11.4 million during the three months ended September 30, 2019. On a quarter over quarter basis revenues were down 39.8% for the firm. The firm also concurrently announced a $90 million secured credit facility,
Supreme highlighted previously announced mechanical failures in grow rooms 1, 2 and 3 as the reason for the decreased revenue, combined with weakening wholesale markets. Wholesale sales accounted for 57% of sales during the quarter, compared to 65% in the prior quarter.
Total gross margin for the period amounted to $7.0 million before biological adjustments were taken into account. Total expenses during the quarter came to $18.4 million, with wages and benefits accounts for $4.9 million. Share based compensation was the second largest expense at $4.4 million, followed by sales and marketing at $2.0 million. Net loss for the period came in at $16.52 million.
In terms of cash flow, operating cash flow came in at ($7.6 million) while investing activities, including construction costs ccounted for negative cash flow of ($17.5 million). The exercise of certain warrants and stock options partially offset negative cash flow during the quarter, with total financial cash flow being $6.7 million. Total cash decreased from $54.8 million to $36.4 million during the quarter.
Looking towards the balance sheet, a rare event in the cannabis sector was observed with Supreme Cannabis’ receivables, which actually decreased in the quarter from $21.9 million to $12.6 million. While still being larger than current net revenues, its a marked improvement from the previous quarter. Inventory climbed by several million during the quarter however, to $27.5 million from $19.0 million.
Current liabilities decreased slightly during the quarter, from $30.6 million to $26.2 million. All other current items changed only marginally, leaving Supreme Cannabis with a working capital of $62.3 million, down from last quarters figure of $76.8 million.
In terms of cannabis, 5,778 kilograms of product were harvested during the quarter. Supreme Cannabis has yet to file a corresponding news release for this quarters financials, making it unclear how much product was sold during the three month period.
With respect to the credit facility, Supreme has entered a credit agreement for $90 million with the Bank of Montreal and a group of lenders. The financing consists of of a $70.0 million term loan, and a revolving $20.0 million credit facility. The credit facility is secured by the assets of Supreme Cannabis, including 7Acres. The borrow rate is anticipated to be between 5-6% per annum. Supreme has drawn $55 million from the term loan as of the time of filing.
Supreme Cannabis last traded at $0.75 on the TSX.
Information for this analysis was found via Sedar, and Supreme Cannabis. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.