A recent public player in the cannabis space offered investors a closer look into the development of its business during the most recent quarter and the 2017 fiscal year.

Sunniva (CSE:SNN,OTCQX:SNNVF), a cannabis company with operations in the Canadian and US markets, released its financial and operational results for 2017, highlighting construction progress on its facilities and the supply contracts it has secured.


According to Tony Holler, CEO of Sunniva, the company aims to become a low-cost producer with large-scale greenhouse production and advanced distribution channels.

“Our focus moving forward is to execute and de-risk our business model by forward selling a large portion of our production in both markets,” Holler said in a statement.

One of Sunniva’s most critical acquisitions last year was Natural Health Services (NHS), a network of seven clinics in Canada that connects patients with medical products from licensed producers (LPs).

According to the report, NHS, which has 95,000 active patients, was acquired through a combination of cash, common shares and promissory notes totaling C$22,500.

Operational results for Sunniva

Sunniva’s Canadian operations are based on its medical division, SMI, a late-stage applicant currently working on the construction of a 700,000-square-foot facility in BC. The company expects to be able to produce 100,000 kilograms of cannabis per year.

However, this facility is still not under construction, according to the report, and the company said it expects to break ground on the facility “in the next two weeks.”

As part of its update to investors, Sunniva held a conference call in which CFO David Negus explained that the company earned C$5.9 million in net revenue thanks in part to NHS and Full Scale Distributors (FSD), a vaporization device company.

Respectively, NHS and FSD brought in C$3.9 million and C$2 million in net revenue for Sunniva during the fourth quarter.

Negus said the company secured revenue of C$16.1 million for the full year, while gross profits for the fourth quarter amounted to C$2.5 million.

During the fiscal year, NHS opened four new clinics in Canada, bringing its total to seven, with four in Alberta, one in Saskatchewan, one in Manitoba and one in Ontario.

Supply deal with Canopy Growth in Canada

Sunniva shareholders can count on a supply deal the company signed with Canopy Growth (TSX:WEED) this year, whereby the cannabis giant will purchase up to 45,000 kilograms of dried product to be sold on Tweed Main Street and via provincial distribution channels.

The two companies will share the revenue, according to Sunniva, based on the strain, sales channel and “other relevant factors.”

Responding to Beacon Securities cannabis analyst Vahan Ajamian, who asked for an update on Sunniva’s relationship with Canopy, Holler said that since Sunniva’s facility isn’t built yet it is difficult to provide a full update.

The company’s extraction division is able to load cannabis cartridges with cannabis product from other LPs that Sunniva may be in partnership with, Holler revealed during the conference call. Holler said the market can expect that side of the company’s business to start before Sunniva can begin production.

Sunniva also holds assets in the volatile US cannabis market, specifically in California. Its CP Logistics division has begun construction of a greenhouse facility in Cathedral City.

The facility will be able to produce 100,000 kilograms of cannabis once both of its planned phases of construction are completed. Sunniva’s focus on California relates to the temporary licenses it has acquired for its proposed cultivation facility.

Investor takeaway

On market research aggregator site TipRanks, Sunniva currently has a projected one-year price target of C$16.50 based on one review from Ajamian. “We recommend investors acquire shares aggressively at current levels,” Ajamian wrote as part of a research note in April, according to Cantech Letter.

Since the company launched on the CSE, its public value has dipped 15.45 percent. Currently, Sunniva is priced at C$9.04 per share due to a 3.73-percent reduction during Tuesday’s trading session.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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