The Supreme Cannabis Company

Producing Craft Quality Cannabis at Commercial Scale

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Overview

The Supreme Cannabis Company Inc (TSXV:FIRE) is a licensed producer uniquely implementing B2B cannabis sales within Canada and producing customer-centric proprietary cannabis plant products for global distribution. Based in Ontario, the company is headed in Toronto and their sole asset, 7ACRES, is situated in Kincardine, on the southern shores of Lake Huron. Supreme’s mission is to lead the cannabis industry, making a positive impact on people and the planet by growing better cannabis companies globally.

The first to adopt a licensed B2B wholesale model in Canada, part of Supreme’s approach is based on producing high-quality cannabis that can be sold at a commercial scale to licensed producers, value-add manufacturers, storefronts, among others. The goal of this approach is to allow for specialization across the industry, allowing partners to develop and succeed while they are supplied with quality cannabis.

To this effect, once they obtained their license to sell from their 7ACRES property in June 2017, Supreme entered into sale partnerships with licensed producers, Aurora Cannabis (TSXV:ACB) and Emerald Health Therapeutics (TSXV:EMH), among others. Supreme has also signed multiple supply agreements with Namaste Technologies Inc. (CSE:N), BlissCo Cannabis Corp., Pure Global Cannabis (TSXV:PURE) and Tilray Inc. (NASDAQ:TLRY), along with six provinces in Canada.

The 7ACRES property is on its way to becoming the country’s leading producer of high-quality commercial cannabis at a scale that has not yet been seen. Currently cultivating on 16,500 square feet, Supreme expects to have the entire 342,000-square-foot hybrid greenhouse facility running at full capacity by 2019 with a projected 50,000 kilograms of cannabis produced per year.

Supreme’s management team is one with vast amounts of experience in the cannabis and financial sectors. The team is benefitted by the experience of John Fowler, a lawyer that has been an advocate for the cannabis industry and thus has a deep knowledge of both the medicinal and recreational spaces.

Company Highlights

  • Innovative wholesale business model for bulk cannabis sales to strategic partners
  • Low operational costs to produce high-quality product
  • License to sell received in June 2017
  • Ranked among top ten Canadian publicly traded LPs in industry for revenue run rate
  • 7ACRES property with 342,000 square-foot hybrid greenhouse facility
  • At full capacity, 7ACRES is expected to produce 50,000 kilograms of cannabis per annum
  • Supply agreements with six provinces
  • Supply agreements with Namaste, BlissCo, Pure Global and Tilray
  • Strategic partners include Dinafem, Aurora, Emerald Health Technologies, Medigrow Lesotho and Segra International
  • Strong management team with notable experience in the cannabis space

Global cannabis market

Cannabis legalization is being taken up by various countries around the globe, creating an estimated legal global cannabis market of $146.4 billion by the end of 2025, according to a report by Grand View Research. Driving factors in the market include the industry’s expansion into the pharmaceutical, alcohol and tobacco industries as the medical uses for cannabis become more pronounced.

Canada’s recreational market

Following the introduction of the Cannabis Act in 2017, the Government of Canada has set October 2018 as the launch date for the legalized and regulated recreational cannabis market. This makes the country the first in the G7 to legalize recreational marijuana as well as the only one to boast wholly-legal licensed cannabis production. As of July 2018, there are over 100 licensed producers in Canada under the ACMPR (Access to Cannabis for Medical Purposes Regulations), which is creating globally recognized benchmarks for cannabis producers.

With legalization on the way, there are further opportunities for cannabis producers to grow in the regulated recreational cannabis market. The Canadian recreational market is domestically protected from imports, highly regulated for health and safety and the government controls wholesale and distribution, which creates a high barrier environment for cannabis companies looking to establishing themselves in Canada. However, for first mover cannabis companies this provides an opportunity to firmly establish their businesses and to create integral relationships across verticals.

The recreational cannabis market in Canada will be working under the regulations set forth for the tobacco industry as opposed to the mass marketing allowed for the alcohol industry. This creates some unique challenges in regards to marketing cannabis as there is a limited window of opportunity for cannabis companies to generate revenue when they have a cultivation license. It also ensures that cannabis companies need to establish relationships with provincial and private retailers in order to be successful.

Supreme’s Business Model

Supreme’s B2B business model is centered on the production of premium-quality cannabis brands and products with coast-to-coast distribution. Focusing on the high quality of their products has made Supreme a leader in mass cultivation. Their business model lets them focus on best-in-class cultivation practices and plants without having to invest in packaging, retail, physician education or clinics to get their branding and products to the market.

Supreme is targeting the recreational cannabis market in Canada once legalized. More than four million Canadians consume cannabis monthly. Of these monthly consumers, most are between 20 and 30 years old and are looking for quality cannabis brands that pass scent, flavor and visual inspections.

Under Supreme’s 7ACRES brand, consumers will find the scent, flavor and visual high-quality product that they are looking for. Supreme will provide the Canadian recreational market with high-quality products through industry recognized suppliers at a commercial scale and subsequently establishing a premium brand under the 7ACRES name with competitive pricing.Supreme Pharmaceticals Cannabis

 

7ACRES

Supreme’s business model is centered around the company’s wholly-owned subsidiary 7ACRES, which boasts a 342,000-square-foot production facility in Kincardine, Ontario. The facility was purchased in 2014 and was opened for production in March 2016. Following a long licensing process, the facility finally received its sales permit in June 2017.

The state-of-the-art facility is tasked with consistently growing high-quality plants by combining leading indoor cultivation practices with the power of the sun. The facility optimizes its performance by using advanced HVAC and CO2 enrichment using the full-spectrum from the sun. Supreme is currently cultivating on 90,000 square feet of the property while they work on retrofitting the rest of the facility. Once the facility is operating at full capacity all 342,000 square feet will be used for production and the company expects to be able to produce 50,000 kilograms of cannabis annually.

As the Canadian government has yet to outline which cannabis products will be legally distributable under the upcoming regulations, Supreme’s business model ensures its continuity by focusing solely on the production of high-quality cannabis that will be capable of supplying the market regardless of restrictions.

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Strategic Partnerships

Dinafem Partnership

In April 2016, Supreme announced a strategic partnership with Dinafem, a cannabis seed developer based in Spain that has a large-scale phenotyping project. With 15 years of experience in the field, the company has granted Supreme access to cannabis genetics as well as exclusive rights to consultation regarding the selection of phenotypes for the production of high-quality products.

“I have always admired Dinafem as a leader in the international cannabis market,” stated John Fowler, CEO of Supreme. “Dinafem’s commitment to quality and innovation is a perfect match for Supreme. It is critical to start from seed to ensure our plants are ideally suited to our hybrid greenhouse and our business objectives. This creates long-term proprietary value, as genetics selected this year can be produced for decades. Working with Dinafem we ensure we start with the best seeds. In addition, the consulting services will drastically shorten our learning curve. I’m eager to see what Dinafem and Supreme will produce together.”

Supreme is currently cultivating on 16,500 square feet of the property while they work on retrofitting the rest of the facility. Between the end of 2017 and 2019, the company will be increasing their square footage until they can run at full capacity, using all 342,000 square feet for production. At full capacity, Supreme expects to be producing 50,000 kilograms a year at an expected revenue of $200 million to $400 million per year.

Aurora Cannabis

In September 2017, Supreme completed their first sale of cannabis to Aurora Cannabis Inc., one of Canada’s leading licensed producers. Aurora will sell quality cannabis to its registered patients.

“We chose Aurora as our primary retail partner due to Aurora’s strong brand and commitment to quality,” said Fowler. “The 7ACRES producer’s mark aligns with the Aurora Certified Program, which provides patients a transparent curated experience. We look forward to developing a long-term relationship with Aurora and consider this just the first step.”

Emerald Health Technologies Partnership

In September 2017, Supreme formed a strategic partnership with Emerald Health Botanicals, a subsidiary of Emerald Health Technologies, that focuses on advancing the science of medical cannabis through a strong commitment to research.

Medigrow Lesotho Partnership

In March 2018, Supreme entered into a definitive agreement to complete a $10 million strategic equity investment in Medigrow Lesotho, a licensed cannabis producer in the Kingdom of Lesotho in Africa. The investment gives Supreme a 10 percent interest in the company and a first-mover advantage in Lesotho.

In addition to the investment, Supreme and Medigrow have established a global distribution partnership for medical cannabis oil. The cannabis oil will be produced by Medigrow in their facility in Lesotho. Currently, Medigrow’s facility can potentially produce 40,000 liters of cannabis oil per year.

Segra International Partnership

In September 2018, Supreme entered into an agreement with Segra International Corp. to provide cannabis micropropagation service to Supreme’s 7ACRES facility in Ontario. Segra will oversee the micropropagation laboratory at the 7ACRES facility, which will give Supreme the option to execute production testing at its facility.

Plant micropropagation is an advanced scientific technique used in many commercial agriculture operations to mass produce plants with desirable traits. Micropropagation allows companies to rapidly produce large volumes of sterile, healthy, disease-free and genetically identical plantlets.

“7ACRES’ innovative processes and facility, together with its proprietary genetics, has led to rapid scaling at an industry-leading quality. In fact, 7ACRES’ line of products is listed by provincial distributors across the country in premium brand categories,” said Fowler. “Adding micropropagation is the next step in the evolution of our production platform as we seek to bring additional agricultural sciences to quality cannabis production. Once implemented, micropropagation will allow us to produce a higher volume of genetically-identical plants with the most desirable traits, reduce plant-to-plant variation and pathogen risk, and ensure that our carefully selected cultivars are protected for future use.”

Provincial Supply Agreements

In July and August 2018, Supreme entered into a number of supply agreements with Canadian provinces. Supreme will be providing cannabis to Manitoba, Alberta, BC, Ontario, Nova Scotia and PEI. Under the terms of the agreements, Supreme will be supplying premium quality cannabis for the recreational market and generally for up to 12-month terms for both provincially and privately-run stores. All of the cannabis supplied by Supreme will be under the 7ACRES brand and has been listed as top-tier cannabis.

Having succeeded in entering into these agreements, Supreme entered an exclusive group of just seven licensed producers that have supply deals with five or more provinces. Supreme sees these agreements as an early indicator of success, and the distribution across all six regions will serve to drive the company’s revenue.

B2B Supply Agreements

Namaste

In January 2018, Supreme entered into a supply agreement Cannmart Inc., a wholly-owned subsidiary of Namaste. Cannmart will be purchasing 1,000 kilograms of premium quality medical cannabis on a take or pay basis. The agreement will be in effect as soon as Cannmart becomes a licensed producer under the ACMPR.

BlissCo

In February 2018, Supreme completed a strategic investment in BlissCo, a cannabis distribution and extraction company, where Supreme will have a 10 percent interest in the company. In addition to the strategic investment, Supreme has also entered into a definitive supply agreement with BlissCo. Supreme will supply 1,000 kilograms of dried cannabis on a take or pay basis for a period of 12-months.

Pure Global Cannabis

In August 2018, Supreme announced that Pure Global’s subsidiary PureSinse Inc., has agreed to purchase an additional 210 kilograms of medical cannabis for resale. PureSinse will be focused on creating unique cannabinoid-based delivery systems and formulations. The company will initially sell dried flower and cannabis oils, but will be expanding their product line to include capsules, sublingual sprays, edibles, vape pens to create a full range of medical and recreational cannabis goods.

Tilray

In September 2018, Supreme entered into a supply agreement with Tilray Canada Ltd., a subsidiary of Tilray, a global leader in cannabis research, cultivation, processing and distribution serving patients in 11 countries on five continents. Supreme will be providing dried cannabis to Tilray to primarily support medical cannabis patients in Canada.

“We are pleased to enter into this agreement with Tilray. As one of Canada’s first licensed producers, Tilray has been an industry leader in patient services and quality assurance. We believe this agreement demonstrates the quality of the 7ACRES dried flower, and the infrastructure, management and systems that support our brand positioning,” said Fowler.

Moving Forward

Once Supreme’s 7ACRES facility is fully-operational, the company expects to produce 50,000 kilograms of cannabis per year that they plan on distributing globally under the 7ACRES brand. Supreme also intends to establish medical and wellness cannabis brands as they prepare a line of cannabis concentrate products, among other recreational products.  Lastly, the company will focus on advancing their alliance with Medigrow and its GMP accreditation.

Management

John Fowler—President and Director

Navdeep Dhaliwal—CEO and Director

Michael LaBrier—Chairman and Director

Dimitre Naoumov, CPA, CA—Chief Financial Officer

Chander Batra—Chief Information Officer

Omer Azeez—VP Marketing and Regulatory Affairs

Steve Chan – VP Investor Relations and Corporate Communications

Craig Young – VP Sales Canada

Barinder Bhullar – VP Government Relations and International Affairs

Ron Factor—Director

Scott Walters—Director

Colin Moore—Director


 

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