NZX-listed Cannasouth has announced plans to raise capital, cut jobs and delay a dual listing on the ASX while it waits for verification of its products by New Zealand’s Medicinal Cannabis Agency (MCA).
The firm said it is waiting for products intended for both the NZ and export markets to be verified and expects delays “because the MCA has been slow” in turning around applications.
Cannasouth recently exported its first commercial shipment of cannabis-based active pharmaceutical ingredients (API) to Australia, but it said revenue from further products is dependent on them being verified by the MCA.
In order to conserve funds, a restructure is underway which the company said will “retain key business intellectual property and functionality to meet immediate revenue goals” while reducing cash spend by around NZ$400,000 per month.
CEO Mark Lucas acknowledged that will mean job losses.
He said: “We believe that our new products, which are manufactured under GMP quality standards, will be verified.
“But given the ongoing delays around approval timelines, we are restructuring our business to factor in delays to products reaching the market. Unfortunately, this means regional jobs will be lost in the medium term.”
Cannasouth told shareholders it will also look to raise capital to boost its “constrained cash position”.
“With the delays in availability of verified medicinal cannabis products, the company’s business plan for revenue generation has been delayed,” it said.
“There is a need for the company to raise additional capital to continue with [its] growth strategy. The board is currently actively considering capital raising options to support the constrained cash position of the company in the short term.”
Lucas insisted: “We are seeing exponential growth in demand for medicinal cannabis products in New Zealand and Australia, with no signs of slowing down. We remain confident that our strategy will meet the needs of patients and investors.”
Cannasouth announced plans to dual list on the ASX as a foreign-exempt listing in August, with expectations that the process would be completed by the end of the year.
However, it does not now expect to progress the move until 2024, pending completion of a financial audit of Eqalis Group, with whom it merged in June.