CANN Group will seek an additional $6.25 million from its shareholders this month in an attempt to increase production at its Mildura facility.
The capital-raising offer, announced this week, will be available to eligible shareholders from Tuesday next week and was aimed at allowing Cann to increase production of dried cannabis flowers, and broaden its range of in-house Botanitech products.
Cann Group chief executive Jenni Pilcher said if the offer was successful, it would aid the company’s prospects of becoming operationally profitable this financial year.
“The funds will be primarily put towards increasing production at our Mildura facility, which will allow us to expand our Botanitech product range,” Ms Pilcher said.
“The decision to raise capital is never taken lightly, as it always has the potential to cause dilution to our shareholders.
“In this case, we believe the price offered, and the attaching options, provides a good opportunity for our existing shareholder base to take up the offer, and thus minimising any dilution impact.
“We also believe the capital raised will allow us to generate shareholder value.”
If fully subscribed, the number of new quoted shares would be equal to about a third of the current total.
In a prospectus released to the Australian Securities Exchange this week, Cann Group chair Julian Chick said the funds would assist in meeting a dried flower production target this financial year of five to six tonnes.
Mr Chick said the funds would also go towards broadening the Botanitech product range and as working capital, including for servicing lines of credit.
If the offer was only 50 per cent subscribed, Cann would likely reduce its focus on Botanitech curated and vape products.
“Our focus is on our highest margin products, which are those produced by Cann, locally,” Ms Pilcher said.
“The curated range, and vapes, are all imported and thus have lower margins, carry foreign exchange risk, and consume higher amounts of working capital.
“That said, the use of funds does not mean we will not fund these product lines at all, rather we will do so from cash flows generated from the business as they allow.”
More broadly, Cann aimed to expand and maximise production in cultivation zones 1 and 3 of its Mildura facility, which can produce about 10 tonnes of dried cannabis flower per year.
Cann stated it would be “well positioned to achieve positive cash flows” if zones 1 and 3 were at capacity.
“We operate down one side of the facility only (for efficiency reasons), which incorporates zones 1, 3, 5, 7 and 9 – of which 1 and 3 only are operational,” Ms Pilcher said.
“The other side incorporates zones 2, 4, 6, 8 and 10.”
The entitlement offer opens on Tuesday next week and will close on Thursday, October 24, unless the date is altered, before results are due October 29.