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Cannasouth opens $6 million capital raising to fund revenue-generating growth phase

Medicinal cannabis company, Cannasouth Limited (NZX:CBD), announced this morning that it has opened a $6 million offer to consolidate its operations to take full advantage of the revenue opportunities ahead of it.

Earlier this month, Cannasouth announced it had entered into two conditional agreements to acquire the balance of the stakes that it does not already own in its cultivation and manufacturing joint venture businesses, Cannasouth Cultivation Ltd and Midwest Pharmaceutics NZ Ltd.  A portion of the capital raised will fund these acquisitions with the balance being used to accelerate other opportunities within the Company.

CEO Mark Lucas said, “This is a really good time for Cannasouth to consolidate our operations as we move into the revenue generating phase of our journey.  By acquiring 100% of these two businesses, we immediately benefit from the revenues currently being generated in Midwest which is around $2 million per year, plus first revenues from the export of cannabis biomass from the cultivation facility”. 

Lucas said there were real commercial benefits which will arise from consolidating the Group. The move also gives the company complete control over all operations from seed to sale.

There are three ways investors can participate in Cannsouth’s share offer including through a share purchase plan, general retail offer and a priority offer through CM Partners, the lead manager of the capital raising.  For every three shares applied for, subscribers will be granted one option that gives them the right, at any stage over the next 24 months, to buy one additional share at 40 cents a share.  The offer closes at 5pm on 30 July 2021.

Lucas said Cannasouth has more than $4.2 million of cash on hand, no debt and a monthly cash burn rate of $350,000.  

“Funds raised from this share offer will not only allow us to consolidate the Group, it also allows us to increase our marketing spend for export flower sales while accelerating research and development and new product development.”

Cannasouth has confirmed its first harvest is scheduled for December 2021.  The first stage of the facility has been designed to generate circa $8 million revenues per year based on conservative current global pricing.  First export sales of cannabis biomass are expected to begin in 2022, subject to securing suitable offtake agreements and completing quality certification.  Cannasouth has designed the facility to scale-up its cultivation operations by up to four-fold.

“Testament to the quality of our cultivation facility, we’ve attracted the top talent of Tony Clark who will join us in September as Operations Manager.  He is currently General Manager of Douglas Manufacturing and brings 20 years of engineering, manufacturing, and pharmaceutical industry experience to the role,” said Lucas.

Lucas said the honeymoon period is over for the medicinal cannabis industry in New Zealand.  “The rubber hits the road now as we enter a new revenue generating phase in the business.  We are focused on firming up a sustainable business model that will capture our fair share of the burgeoning international demand for premium quality, pharmaceutical grade medical cannabis.

“Cannasouth’s entire focus is on improving access to medicinal grade cannabis products that contribute to better patient health outcomes, while returning maximum value back to our shareholders. 

“The next few months are going to be an exciting time as all the foundations we’ve laid for our business over the past two years become reality and we’re able to bring our products to the patients who need them most.”

Investors wishing to learn more about the offer can access further details at www.cannasouthshareoffer.com

Cannasouth cultivation facility