MEDICINAL cannabis producer Cann Group has been suspended from trading on the ASX amid concerns it may be unable to finance production from its Mildura facility this year.
Accountants and advisors William Buck were tasked with providing an independent audit of the company’s half year report.
It noted that during the first and second quarters of the current financial year, Cann Group incurred a net loss of $14.34 million, its net cash outflows used in operations were $6.07 million and the current asset deficiency was $54.16 million.
Cann Group confirmed to its shareholders that the total debt it faced at the end of 2023 was $64.1 million, and directors said they were of the opinion the company was “a going concern”.
Whether the business has the means to manage its current financial position in the next 12 months was a point of contention in the report.
The auditors noted that the Group’s ability to continue operating was dependent on, but not limited to, “enabling the continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business through an appropriate mix of working capital and longer-term funding of the business”.
“We have been unable to obtain alternative evidence which would provide sufficient appropriate review evidence as to whether the Group may be able to obtain such financing, and hence remove significant doubt of its ability to continue as a going concern within twelve months of the date of this review report,” the auditor wrote.
An attempt by the company in July 2023 to raise $11.7 million from existing shareholders to expand operations yielded $4.46 million dollars.
At the time, the company said when it reached a production target of 12.5 tonnes of dried biomass annually, it had eyeballed profitability by the 2025 financial year.
In the company’s latest report, non-executive chairman Dr Julian Chick noted a sales revenue of $8.5 million in the first half of 2023-24, writing that “Cann Group sales revenue increased by $2.67 million, or 45.8 per cent, compared to the prior comparative period”.
He stated that the Mildura facility continued to make progress, that 1.94 tonnes of dried flower was manufactured in the October to December quarter, and a full capacity harvest in the second week of January 2024 “saw all commissioned glasshouse footprint full for the first time in Cann history”.
The facility had also switched to a hang-drying process for its crops, with the aim of producing greater aroma and appearance of its products.
He noted that products showcasing new strains would be introduced in the second half of 2024 as part of a number of measures “expected to create significant business development opportunities for Cann”.
Other financial avenues include the settlement of a sale of its Southern facility, and the potential future sale of an estimated $1.7 million of unutilised assets at the Mildura facility.
The report revealed that the company had $1.64 million cash on hand at December 31, 2023, and access to $800,000 that it could draw upon from a working capital facility.
An ASX announcement on February 29 confirmed that company directors were engaging in ongoing discussions with various parties regarding funding and/or refinancing options to help the company realise its assets and extinguish its liabilities.
As at June 10 last year, there were 57 staff at the Mildura Cann Group facility, with the promise of more job appointments as production scaled up.
Cann Group has been contacted for comment.
