Launch of rights issue and revenue guidance

Cannasouth Limited (NZX:CBD), New Zealand’s first and largest listed medicinal cannabis company is pleased to announce its intention to launch a 1 for 8 pro-rata renounceable rights issue to raise up to circa $5.6 million ("Rights Offer”).

Chairman Tony Ho says: “With the recent verification of our CBD oral solutions and dried cannabis flower products by the Medicinal Cannabis Agency, we are thrilled to announce that Cannasouth has commenced commercial sales of our own manufactured medicinal cannabis products for New Zealand patients.

“Our journey to date has been marked by achieving significant milestones. We have launched our own products and positioned the business to become the largest supplier of medicinal cannabis products to the New Zealand market, but cash is required to fund the business while sales ramp up.”

• In FY2024, Cannasouth expects to achieve $6 to $10 million of revenues, primarily from the New Zealand and Australian markets. The board believes it can achieve the revenues stated based on the size of the New Zealand and Australian markets, expected market growth, and achievable market share. Directors have used market information from various sources, including research reports and data from prescribers and pharmacies. However, because this is a developing market there is risk inherent in these assumptions.

• Importantly, Cannasouth expects to be operating cashflow positive by the end of 2024 or early 2025.

However, as we stand at this pivotal juncture shareholder participation in this Rights Issue is crucial to achieve these revenue and cashflow targets.


Details of the Rights Offer are as follows:

Rights Offer size and structure:
$5.6 million pro rata renounceable rights offer to eligible shareholders at a ratio of 1 for 8 (Rights Offer) Rights Offer price $0.14 per New Share (Offer Price)

No quotation of Rights, but sale of Rights is permitted:
The Rights will not be quoted on the NZX Main Board, and accordingly there will be no established market for Rights. You are entitled to sell your Rights privately to a buyer you identify.

Eligibility:
Only shareholders with registered addresses in New Zealand or Australia on the Record Date will be entitled to participate in the Rights Offer

Oversubscriptions:
Eligible shareholders who elect to take up all their Rights in full, will have an opportunity to apply for additional shares at the issue price of $0.14.

Ordinary Shares:
The New Shares to be issued under the Rights Offer will rank equally in all respects with the Existing Shares on issue in CBD.

Use of proceeds:
The funds raised from the Rights Offer will be applied towards the costs associated with;
• Driving sales momentum of recently verified oral solutions and dried flower products in New Zealand and Australia
• Meeting market demands with new plant genetics
• Commercialisation of first gen-2 products
• Delivery of expanded range of APIs to include THC based ingredients and products
• Growing online RestoreMe Clinic
• General working capital
• ASX dual listing in 2024


The key dates for the Rights Offer are as follows:

Announcement of the Offer:
13 November 2023

Record Date for determining Rights:
5pm 21 November 2023

Opening Date for the Offer:
22 November 2023

Dispatch of Offer Documents and Entitlement and Acceptance Forms:
23 November 2023

Closing Date for the Offer:
5pm 7 December 2023

Announcement of results of the Offer:
12 December 2023

Allotment of New Shares, dispatch of holder statements and commencement of trading of New Shares:
15 December 2023


The above dates are subject to change at the discretion of CBD, subject to compliance with NZX Listing Rules requirements. CBD reserves the right to withdraw the Rights Offer at any time prior to the issue of New Shares under the Rights Offer at its absolute discretion.

A copy of the Corporate Action Notice accompanies this announcement.


-ENDS-

For further information visit www.cannasouth.co.nz or contact:

Mark Lucas
CEO / Executive Director
Email: [email protected]
Mobile: 021 484 649

Colin Foster
CFO / Company Secretary
Email: [email protected]
Mobile: 027 577 1498

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Announcement PDF