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Leading ASX-listed cannabis company Cann Group Limited (ASX: CAN) has a well -established world-class business which involves breeding, cultivation, manufacturing as well as supply of medicinal cannabis products to be sold within the country as well as overseas in certain export markets for which approvals are in place.
In addition to its current research and cultivation facilities in Melbourne, Cann Group is now undertaking development of a state-of-the-art cultivation facility near Mildura in Victoria. Through many collaboration agreements executed over the years and advanced work undertaken on plant genetics, techniques of breeding, extraction and analysis, the Cann has successfully created and now offering medicinal cannabis products targeted for treatment of different kinds of diseases and medical conditions.
Institutional Funding Support: Recently on 7 February 2020, Cann Group announced to have successfully closed the issue of Convertible Notes to raise around $ 8 million, while the proceeds of the Offer are expected to be settled on 10 February 2020, and mainly utilised for working capital requirements.
The offer was made to sophisticated, professional and other investors while the Convertible Notes are fully paid, unsecured, subordinated (to any senior debt) and convertible on or before 10 February 2022 at $ 0.70 cents per share; or the volume weighted average price of Cann’s ordinary shares during the five trading days following the most recent capital raise of more than $ 5 million; or the issue price of a capital raise of over $ 5 million, multiplied by 0.85 (Conversion Price). The Notes would not be quoted or tradable on the ASX.
Commenting on this key development, Cann CEO, Peter Crock stated he was very pleased to witness a strong investor support as the company progresses discussions with a Tier 1 Australian bank on a loan facility and finalise details of the funding package for the staged commissioning of the new Mildura production facility.
December Quarterly Update: The Group released its report on 31 January 2020, providing details of the activities undertaken during the three months to 31 December 2019. Some of the key highlights from the quarter include-
- Details of a revised, staged construction approach for the medicinal cannabis production facilities near Mildura were announced. Under Stage 1, the facility is expected to generate an annual production of 25,000 kg dry flower with a planned commissioning of Stage 1A involving production of 12,500 kg of dry flower in late 2020, given all the necessary funding and regulatory approvals, licenses and permits are received in place. The timing for the completion of Stage 1B (the balance of the 12,500kg of dry flower) will depend upon volume demand growth.
- Works had commenced at the Mildura site during 2019, with the acquisition of the land, existing buildings and construction of the glasshouse structure all completed as part of $ 50 million expended on the project to date.
- Stages 2 and Stage 3 timetables would be determined and finalized based on an ongoing assessment of product demand.
- Different imported products commercially launched late in CY2019.
- The decision on this staged basis approach would enable the company to establish capacity as per a timetable that provides more certainty around capacity utilization with less initial capital investment. Meanwhile, a review of the revised construction plan involving consultation with external design and engineering consultants is also advancing well.
- A National distribution agreement was executed with Symbion, engaged in supply of healthcare services & products to more than 1300 hospitals and 4000 retail pharmacies throughout the country.
- Board and management changes see Ms Geraldine Farrell appointed Company Secretary and Ms Reena Dahiya appointed Acting CFO.
The Group also informed that the funding package for Stage 1A is scheduled to be finalized prior to the end of Q1 CY2020 and would possibly include both debt and equity funding. The final funding mix is yet to be determined however, it is estimated that funding required to complete construction of Stage 1A is somewhere between $ 65 million and $ 75 million.
Subsequent to the end of the December quarter, Cann Group and IDT began with GMP extraction activities for the first batches of medicinal cannabis resin, that will see the company produce GMP medicinal cannabis oil products with the planned commercialization from late March 2020.
While all other activities are ongoing, Cann Group is simultaneously trying to lower its operating expenses as it transitions to near-term profitability and positive cash flows. The new business plan will see Cann develop and commercialize value-added GMP grade finished products, to be available starting late Q1 CY2020, targeting to meet Australian domestic demand. This will include utilization of the Company’s distribution agreement with Symbion Health (details following).
At the same time, the Group is identifying and finalizing new export pathways apart from its existing routes under the Aurora offtake agreement.
Stock Information: With a market capitalization of ~ 186.57 million and ~ 142.42 million shares outstanding, the CAN stock settled the day's trade on 7 February 2020 at AUD 1.210, diving 7.63% with ~ 1.501 million shares traded. Regardless, CAN stock has delivered impressive positive returns of 109.60% Year-to-date and 29.70% in the last three months.
