Following a record September quarter, medicinal cannabis and hemp company ECS Botanics (ASX: ECS) has received firm commitments to raise $6.6 million to accelerate its growth.
ECS Botanics says the $6.6 million placement was heavily supported, with investors scooping up 200 million new shares at $0.033 each.
The issue price of $0.033 was a 15.38% discount to the previous closing price of $0.039 and a 12.39% discount to ECS Botanics’ 15-day volume weighted average price of $0.03767.
As part of the placement, investors received a one-for-two free attaching option with an exercise price of $0.08 and a two-year expiry period.
Melbourne boutique broker Peak Asset Management led the raising.
Accelerated growth to meet surging demand
ECS Botanics says placement proceeds will be used to “rapidly accelerate” its growth in order to meet the “surging demand” for its medicinal cannabis and hemp products.
Managing director Alex Keach said the company had “witnessed a significant increase in demand for its products” in Australia as well as from “large international groups”.
“This capital will allow the company to significantly scale up operations to meet the growing sales pipeline.”
The capital will be used to expand production capacity from 1,500kg of medicinal cannabis to 4,000kg in FY2022, while incorporating automated processes.
Mr Keach said he anticipates it will provide a “significant return” to the company’s revenue profile.
“A number of potential supply contracts are well progressed and ECS Botanics expects to continue to grow its revenue profile over the coming months.”
While accelerating its growth, Mr Keach noted the company would remain focused on its environmental, social and governance (ESG) principles, along with its regenerative farming and net zero emission target.
The company is fast-tracking its regenerative farming ESG strategy with the goal of transitioning to a carbon-neutral company that uses 100% renewable energy.
“Additional funds will be used to invest in automating both trimming and packaging, providing a large saving in staff costs and increase profit margin,” Mr Keach said.
“This will allow the company to further increase revenue and track closer towards a cash flow positive position.”
ECS Botanics has farms and facilities in Tasmania and Victoria that are dedicated to cultivating, processing and manufacturing medicinal cannabis and hemp.
The company’s cannabis and hemp products are manufactured to EU GMP standards. It also has the required licences to cultivate and manufacture for wholesale extract, final dose and premium dry flower markets.
Hemp is cultivated for ECS Botanics retail food and wellness brand. Its Extra Virgin Tasmanian Hemp Seed Oil product is now available throughout Coles stores across Australia.
Record September quarter
Mr Keach said the company made “exceptional progress” in the September quarter (Q1 FY2022).
This was driven by a “significant increase” in medicinal cannabis sales and securing new contracts that will lay a “very strong” foundation for the coming months and beyond.
The period heralded record revenue of $905,000, which was 124% higher than Q4 FY2021’s figure of $403,000.
Compared to the previous corresponding period, it was a whopping 520% increase.
In addition to the record revenue, ECS Botanics received $793,000 in medicinal cannabis purchase orders in Q1 FY2022.
To meet mounting demand, ECS scaled up production of its medicinal cannabis oil products from 3,000 units to more than 15,000, with sales of these additional units anticipated to be realised in the current quarter.
“We anticipate that revenue will continue to grow strongly throughout the remainder of FY2022 and into FY2023 as our production increases,” Mr Keach said.