Cannasouth is pleased to announce that its recently closed Share Purchase Plan (SPP) has raised a total of $5,690,014 through the issue of 14,973,721 new ordinary fully paid shares.
The SPP has not been scaled. CBD received excess acceptances of $690,014 under the SPP, and the Board has resolved to place those excess acceptances.
In addition, CBD has also raised a further $334,839 from several wholesale investors.
In aggregate, CBD has raised $6,024,853 from its capital raising initiatives, representing the issue of 15,854,876 million new ordinary fully paid shares at an issue price of $0.38 per share.
CBD Chairman Tony Ho says “Cannasouth is delighted with the overwhelmingly positive support received from CBD shareholders to the capital raising initiatives. To raise in excess of $6 million in the current challenging environment is testament to the belief shareholders have in Cannasouth, and a reflection of the sound progress Cannasouth has made to date in implementing its business strategy”.
CBD expects that the new shares will be allotted, and holder statements sent out to shareholders on or about Thursday, 7 May.
Our Medicinal Cannabis Scheme FAQ’s provide both patients and prescribers with answers to commonly asked questions about the scheme.
What will change on the 1st of April 2020 when the Medicinal Cannabis Scheme is launched in NZ?
As of the 1st April 2020, the newly formed Ministry of Health Medicinal Cannabis Agency (“Agency”) will begin processing commercial license applications from medicinal cannabis companies such as Cannasouth.
Health Care Practitioners (“HCP”), e.g. Doctor, General Practitioner, Nurse Practitioner, will also be able to prescribe medicinal cannabis products, including those which contain THC, which previously could only be prescribed by Specialist consultants.
When will New Zealand-produced Medicinal Cannabis products be available?
New Zealand-manufactured GMP compliant quality medicinal cannabis products (“products”) will become available after they have been granted a commercial Medicinal Cannabis Licence from the Agency. Licence applicants are required to undergo a rigorous product assessment process by the Medicinal Cannabis Agency to assure compliance to the Medicinal Cannabis Scheme (“Scheme”).
Due to the current Covid-19 pandemic and the deployment of MOH resources into priority projects to support these efforts, the time frame for acceptance of applications is unknown. Additionally, across the sector we anticipate a significant number of applications will be submitted to the Agency and as such, we expect there will be delays due to the potential backlog of applications.
When will Cannasouth have products available for patients?
Delivering GMP compliant quality medicinal cannabis products to the market for patients is a key objective for Cannasouth. To ensure the highest quality of our finished products, Cannasouth has adopted a vertical integration business strategy, which entails Cannasouth’s involvement during the entire process, from cultivation through to manufacture of finished products. Cannasouth is researching and developing new drug delivery system technologies to facilitate improved efficacy and ease of use for patients.
Under the new Scheme, Cannasouth will be applying for various licences in order to produce its own, and register new medicinal cannabis products. In order to enable rapid patient access to compliant quality medicinal cannabis products , the company is investigating several parallel pathways, one of which includes importing New Zealand compliant white label medicinal cannabis products and Active Pharmaceutical Ingredients (“APIs”) while local manufacturing operations are being established.
What are ‘white label’ products?
White label products are sold by retailers with their own branding and logo but the products themselves are manufactured by a third party.
What is Cannasouth’s view of product compliance to the NZ minimum product quality standard?
Because patient safety is Cannasouth’s highest priority, we support the Medicinal Cannabis Agency’s approach where all NZ medicinal cannabis products are required to comply with the minimum quality standard set forth under the Medicinal Cannabis Scheme. Compliance to the minimum quality standard provides the highest possible level of assurance that our products are safe.
Additionally, product compliance positions the New Zealand medicinal cannabis sector with a unique competitive advantage in global markets, as the NZ standard is one of the highest quality standards in the world.
How do I find out more about Cannasouth’s products?
Section 29 of the Medicines Act, 1981 (“Act”) permits the sale or supply to medical practitioners of medicines that have not been approved, i.e. unapproved medicines. Given that medicinal cannabis products are subject to the Medicinal Cannabis Scheme and do not undergo approval under the Act, they are categorized as “unapproved” medicines. Additionally, section 29 imposes restrictions around advertising of unapproved products; therefore, Cannasouth is not permitted to advertise or market unapproved medicines. The Company is however permitted to provide information to medical professionals if they directly engage and request product information from us.
How do I access medicinal cannabis from the 1st of April?
You will need a prescription from your Health Care Practitioner (“HCP”), e.g. Doctor, General Practitioner, Nurse Practitioner, in order to access medicinal cannabis products. The launch of the Medicinal Cannabis Scheme means that HCPs will be able prescribe medicinal cannabis products which contain THC, which was previously only prescribed by Specialist consultants. Medicinal cannabis products will be available from pharmacies like all other prescription medicines.
What do the Ministry of Health minimum quality standards mean for medicinal cannabis products currently available?
Products that are currently available as of the 1st of April 2020 will remain available for the next 6 months. After that point all products will be required to meet the New Zealand GMP minimum quality standards.
More information:
Click here for MoH regulatory information
Click here for more patient-based frequently asked questions
Click here for our Clinical Fact Finder
New Zealand’s only NZX listed medicinal cannabis company Cannasouth has appointed Colin Foster as the company’s new Chief Financial Officer.
Mr Foster will succeed Rob Braithwaite, who has been working with the Cannasouth team since its inception and played an important role in preparing the company for its public listing in June 2019.
Cannasouth CEO Mark Lucas says the transition is a logical progression as Cannasouth grows from a purely research-based organisation into a fully commercial enterprise.
“Rob played an integral role in the formation of Cannasouth and helped us navigate our way through the complex process of becoming a listed NZX company.
“Rob has built a solid financial foundation from which we can now grow into the next phase of our business.
“Colin is a chartered accountant with strong corporate and financial management skills gained over 33 years of senior financial leadership at Tatua Dairy Co-Operative Limited and Anchor Products Limited.
“His wide general management experience will add significantly to the Senior Leadership Team of Cannasouth.”
In October 2019, Cannasouth expanded with the acquisition of a 60 percent strategic stake in Midwest Pharmaceutics NZ Limited. Since then, the Government has released its new medicinal cannabis regulations and Cannasouth Cultivation Limited has received resource consent to begin construction of its medicinal cannabis cultivation facility in the Waikato.
In announcing Mr Foster’s appointment, Mr Lucas says the company is now well placed to move to full commercial production as soon as the appropriate licences can be obtained once the Government’s scheme comes into force on April 1st, 2020.
More recently, Mr Foster was the General Manager Finance and Administration for Waikato-based Tatua Dairy Cooperative, where he was instrumental in developing off-shore subsidiary businesses in Asia and the United States.
He also held a senior financial management role at Anchor Products Limited, which subsequently became part of Fonterra. Mr Foster holds a Bachelor of Management Studies and a Diploma in Treasury Management from The University of Waikato and is a member of the Institute of Chartered Accountants in Australia and New Zealand.
“I am excited to join Cannasouth at this early stage of its corporate development,” says Mr Foster. “The focus of Cannasouth will be on delivering value-added, top quality, high-end medicinal cannabis products and I am looking forward to playing a part in making that happen.”
Click on the link below to view the misuse of drugs (medicinal cannabis) regulations, which were released in December 2019 by the Ministry of Health.
Misuse of Drugs Regulations 2019
Cannasouth’s joint venture partner Cannasouth Cultivation Limited has received resource consent for construction of its world-class medicinal cannabis cultivation facility in the Waikato.
In August this year, Cannasouth announced a long-term strategic joint venture with Aaron Craig and his family (Craig Family Interests) to construct and operate a medicinal cannabis and hemp cultivation and production facility – Cannasouth Cultivation Limited (CCL).
Cannasouth and Craig Family Interests each hold a 50% interest in CCL and have initially contributed $1 million of paid up capital to the joint venture company for the first phase of the operation’s development.
CCL will service and supply Cannasouth’s medicinal cannabis flower production requirements.
Construction of the cultivation and processing facilities is expected to start in February and be fully operational by mid-2020.
“Getting resource consent brings us one step closer to being able to cultivate commercial quantities of pharmaceutical quality medicinal cannabis,” says Cannasouth CEO Mark Lucas. “We will incorporate this cannabis into our initial products, explore export opportunities, and further develop next-generation cannabinoid formulations ready for human efficacy and drug delivery-controlled trials.
“With the Government’s medicinal cannabis regulations now released, we have the certainty required to move to full commercial production as soon as the appropriate licences can be obtained once the scheme comes into force on April 1st 2020.
“The setting of GMP (Good Manufacturing Practice) quality standards in the new regulations will ensure patients receive medicines that are consistent every time.”
With Cannasouth’s strategic 60% stake in the GMP manufacturing facility Midwest Pharmaceutics NZ Limited, which is operational and revenue generating, and Cannasouth’s joint venture with CCL, the company is perfectly positioned to produce medicines that meet the new GMP quality standards, while also enabling it to get product to market as quickly as possible.
“Achieving GMP is very difficult and not all companies entering this sector will be able to operate to this standard,” says Mr Lucas.
CCL will now commence stage one of its operations by constructing a state-of-the-art hybrid greenhouse cultivation facility utilising only a part of the 111-acre site.
Mr Lucas says the design of the facility means the company will be able to expand when necessary, taking a phased approach in order to avoid over-capitalising in cultivation activities.
“Further expansion at the site will enable us to explore multiple cultivation strategies depending on the end product and export demand and quality requirements.
“Our phased expansion strategy will ensure capital is only deployed when market demand exists for the end product. This flexibility will enable Cannasouth to adapt to pricing pressures as the market matures to ensure end products remain competitively priced, ultimately reducing the cost to patients.”
The first stage of the build will involve construction of the processing headhouse and the first two growing modules, which will be capable of producing circa 2,000kg per annum of export quality medicinal cannabis flower. This modular approach means further growing modules can be seamlessly and quickly added to expand production to circa 10,000kg per annum.
“Strategically, it is important Cannasouth can produce flower that meets the highest export standards. CCL’s facility is designed to produce flower that will meet these quality standards, which opens up export options while the New Zealand market develops,” says Mr Lucas. “It will be important to have a consistent supply of raw materials for CBD’s own products, while also being able to leverage export opportunities.”
Situated on a rural site in the Waikato heartland, CCL will grow high quality, pharmaceutical grade cannabis at the lowest possible production price by utilising the power of the sun and incorporating the most advanced energy saving technologies available in the industry.
The proposed state of the art hi-tech, hybrid greenhouse will ensure CCL minimises the impact on the environment and produces top quality pharmaceutical quality product.
“We don’t believe the future of medicinal cannabis cultivation is in warehouses in cities,” says Mr Lucas. “We believe in using the power of the sun, while investing in energy saving materials and technologies, and water saving systems.
“Traditionally, high-quality pharmaceutical grade cannabis is grown indoors in large warehouses and production can come with a high environmental price, especially in terms of energy consumption.
“By growing in a rural area with lower land costs, utilising the sun for most of our lighting, investing in energy saving greenhouse building materials and incorporating solar energy production, we will be able to produce the highest quality flower at a much lower production price point than indoor growers. This is important as the market matures and pricing pressures increase.”
The Cannasouth Group – with Cannasouth Cultivation Limited for raw production, Midwest Pharmaceutics NZ Limited for medicines production, and Cannasouth Plant Research New Zealand Limited for research and product development – will be able to deliver on its strategy of “seed to sale”, while operating at lowest possible production prices, highest quality, and the smallest environmental footprint possible.
The release of the Government’s medicinal cannabis regulations today has given the industry, doctors and patients clarity, confidence and certainty.
“Until now, there has been uncertainty in terms of getting our business prepared for this exciting new industry,” says Cannasouth CEO Mark Lucas.
“There will still be challenges around prescriber education and navigating our way through the regulations, but the Government has given us the certainty to progress investment for commercialising products and developing the industry here.”
Mr Lucas is confident the scheme will be successful and says the next step will be establishing a comprehensive education programme for doctors. “While the new rules set important standards for the manufacture of medicinal cannabis products, educating the professionals prescribing these medicines is crucial,” he says.
“We need to make sure our doctors have access to clinical data so they can make informed decisions. It is going to take time for GPs to feel confident about writing prescriptions for their patients. Cannasouth will be working with Government and industry partners to ensure doctors have the information and support they need.”
Mr Lucas is pleased to see that GMP (Good Manufacturing Practice) will be the quality standard adopted for the sale of medicinal cannabis in the New Zealand market. “Setting high standards for quality eliminates the risk of sub-standard medicinal products in the New Zealand market. This gives patients and prescribers confidence that the medicines are consistent every time.”
With the recent acquisition of 60% of GMP-accredited Midwest Pharmaceutics NZ Limited, Cannasouth is well placed to deliver on its strategy of “from seed to sale” for medicinal cannabis medicines in New Zealand. The new regulations also allow for the export of medicinal cannabis products from New Zealand, providing they meet stringent quality standards.“The new rules will enable the New Zealand medicinal cannabis industry to leverage off export markets using the globally respected New Zealand cache of clean, green traceability and sustainability, allowing it to compete, innovate and produce lower cost local medicines,” says Mr Lucas.
“This also opens up a real economic opportunity for New Zealand, especially for medicines that have been produced here.” Mr Lucas acknowledges the efforts of the Ministry of Health and says its authentic consultative approach has been refreshing. “In finalising the regulations, the Ministry of Health has genuinely listened to feedback from a diverse range of stakeholders,” he says. “The result is a world class medicinal cannabis scheme with one set of rules for the entire country. I commend them on their efforts.
“The Government is motivated to see this scheme work as much as we are. Patients suffering from a wide range of debilitating medical conditions have been waiting for this moment since the passing of the Misuse of Drugs (Medicinal Cannabis) Amendment Act 2018 in December last year. “They will now have increased access to safe, more affordable, effective medicinal cannabis products. It really is a significant milestone in our country’s history.”
The Government’s new medicinal cannabis regulations will come into effect on 1 April 2020.
Inhaled cannabis reduces self-reported headache severity by 47.3% and migraine severity by 49.6%, according to a recent study led by Carrie Cuttler, a Washington State University assistant professor of psychology.
The study, published online on November 9, 2019, in the Journal of Pain, is the first to use big data from headache and migraine patients using cannabis in real-time. Previous studies have asked patients to recall the effect of cannabis use in the past. There has been one clinical trial indicating that cannabis was better than ibuprofen in alleviating headaches, but it used nabilone, a synthetic cannabinoid drug.
“We were motivated to do this study because a substantial number of people say they use cannabis for headache and migraine, but surprisingly few studies had addressed the topic,” said Cuttler, the lead author on the paper.
In the WSU study, researchers analyzed archival data from the Strainprint app, which allows patients to track symptoms before and after using medical cannabis purchased from Canadian producers and distributors. The information was submitted by more than 1,300 patients who used the app over 12,200 times to track changes in headache from before to after cannabis use, and another 653 who used the app more than 7,400 times to track changes in migraine severity.
“We wanted to approach this in an ecologically valid way, which is to look at actual patients using whole-plant cannabis to medicate in their own homes and environments,” Cuttler said. “These are also very big data, so we can more appropriately and accurately generalize to the greater population of patients using cannabis to manage these conditions.”
Cuttler and her colleagues saw no evidence that cannabis caused “overuse headache,” a pitfall of more conventional treatments which can make patients’ headaches worse over time. However, they did see patients using larger doses of cannabis over time, indicating they may be developing tolerance to the drug.
The study found a small gender difference with significantly more sessions involving headache reduction reported by men (90.0%) than by women (89.1%). The researchers also noted that cannabis concentrates, such as cannabis oil, produced a larger reduction in headache severity ratings than cannabis flower.
There was, however, no significant difference in pain reduction among cannabis strains that were higher or lower in levels of tetrahydrocannabinol (THC) and cannabidiol (CBD), two of the most commonly studied chemical constituents in cannabis, also known as cannabinoids. Since cannabis is made up of over 100 cannabinoids, this finding suggests that different cannabinoids or other constituents like terpenes may play the central role in headache and migraine relief.
More research is needed, and Cuttler acknowledges the limitations of the Strainprint study since it relies on a self-selected group of people who may already anticipate that cannabis will work to alleviate their symptoms, and it was not possible to employ a placebo control group.
“I suspect there are some slight overestimates of effectiveness,” said Cuttler. “My hope is that this research will motivate researchers to take on the difficult work of conducting placebo-controlled trials. In the meantime, this at least gives medical cannabis patients and their doctors a little more information about what they might expect from using cannabis to manage these conditions.”
Reference: “Short- and Long-Term Effects of Cannabis on Headache and Migraine” by Carrie Cuttler, PhD; Alexander Spradlin, PhD; Michael J. Cleveland, PhD and Rebecca M. Craft, PhD, 9 November 2019, Journal of Pain.
DOI: 10.1016/j.jpain.2019.11.001
Up to 20,000 patients in the UK are to be given medical cannabis over a two-year period in an initiative that aims to create the largest body of evidence on the drug in Europe.
The move, to be unveiled on Thursday, is backed by one of the UK’s leading medical bodies and it is hoped it will persuade the NHS to prescribe the drug for a range of conditions.
Although medical cannabis was legalised in the UK a year ago, it remains unobtainable for many patients, according to campaigners.
“Medical cannabis is still out of reach for far too many,” said Professor David Nutt from the independent scientific body Drug Science, the organisation behind the launch of Project Twenty21, which will see 20,000 patients supplied with subsidised cannabis products by the end of 2021.
“Patients are left untreated, in significant debt from the cost of private prescriptions, or criminalised as they are forced to turn to the black market. They don’t deserve any of this, and the situation with prescribing desperately needs to change.”
The project – which will be launched at, and is backed by, the Royal College of Psychiatrists (RCP) – aims to create the largest body of evidence on medical cannabis in Europe, to convince policymakers that the drug should be made as widely available, and affordable, as other approved prescription medications.
Since legalisation, doctors have been wary about prescribing the drug to a lack of evidence about its efficacy. There are also fears it is being over-hyped by a nascent industry focused on maximising profit.
Project Twenty21 will study the drug’s effects on patients who have either chronic pain, epilepsy, multiple sclerosis, post-traumatic stress disorder, Tourette’s syndrome, anxiety disorder or who have had a history of substance misuse.
“The RCP hopes this project will address the paucity of evidence for the use of cannabis-based medicinal products in all health settings, including mental health,” said Professor Wendy Burn, the RCP president.
“We hope that this project, along with other research such as more much-needed randomised control trials, will continue to build the evidence on CBMPs”.
It is estimated that there as many as 28 million people in the UK will at some stage, suffer from chronic pain.
“Data from several countries reveal that medical cannabis have benefited several thousands of patients,” said Dr Arun Bhaskar, president of the British Pain Society. “There are more than eight million people with disabling chronic pain in the UK and medical cannabis is still out of reach for them. Trials like Project Twenty21 could provide evidence for safely and effectively prescribing these medicines that has the potential to provide pain relief and other life-changing benefits for some of these patients.”
There is growing public interest in cannabis as a useful medicine for a number of physiological conditions. It should be no surprise that more doctors are asking if the noble weed may hold some answer for those with traumatic brain injury that currently need better therapeutic solutions. One study shines a brighter light on this possibility.
Traumatic brain injury, or TBI, is just that: damage to the brain caused by an external force. Although much of the mention of this condition has been recently related to football players and veterans of war zones, it affects people of ages, from all walks of life. Although the brain is housed in our hard, protective skull, even one sudden blow can mean profound changes for an individual.
More than two million visits to the ER each year are related to TBI events like concussion, from auto accidents, falls and assaults. Falls account for 50 percent of TBI in children under 14 years old and more than 60 percent of seniors. It is the leading cause of disability and premature death in the world. The economic impact in the United States alone has been estimated at $75 billion a year. The impact on people’s lives cannot be measured in dollars.
There have been more than 30 failed clinical trials searching for better treatments for TBI, resulting in no significant effect worthy of becoming a pharmaceutical therapy. This has had a chilling effect on similar research.
These failed trials did all have one in thing in common: They didn’t involve cannabis. This is surprising considering that it has been shown that activating the innate cannabinoid receptors (CB1 and CB2) reduces brain swelling and neurological impairment.
Cannabinoid 2-AG is released in the brains of mice following brain injury, though not enough to protect the damaged brain. The fact that 2-AG is released naturally following a brain injury made the team question whether more would be better.
A single dose of plant-derived 2-AG was administered to brain-damaged mice. The mice who received treatment improved in cognitive function, motor function and every parameter examined, even months later. The study was a fantastic success. Of course, in a lab setting the scientists had the advantage of being able to administer the dose of 2-AG shortly after brain injury, a key element in the success that could be harder to implement in a real-life setting.
This study has serious clout. It was led by a top team from Hebrew University in Israel including the godfather of cannabis research, Raphael Mechoulam, who first identified THC.
Pharmaceutical companies may not be enthused that outcomes showed that a single dose of the cannabinoid can have profound positive effects, but they cannot ignore this high profile and exceedingly successful outcome considering the years of other failed efforts.
Research like this means it is not fantastic to predict a world where paramedics and even athletic trainers on the sidelines of contact sports have access to cannabinoids. If doctors one day agree that a single dose applied right after a concussion or more serious accident can have a profound effect, it would be criminal to deny access
Psychosis is the loss of contact with external reality, meaning that those afflicted with this condition, unaware of their circumstances, can potentially experience delusions, hallucinations, and more.
CBD has already been shown to have an antipsychotic effect in humans, but how and why has remained unclear. But if results of a new study on the therapeutic effects of cannabidiol on psychosis is able to be replicated, it could have extremely important implications in the area of psychiatric treatments.
The study abstract’s conclusion was this: “Cannabidiol may partially normalize alterations in parahippocampal, striatal, and midbrain function… As these regions are critical to the pathophysiology of psychosis, the influence of CBD at these sites could underlie its therapeutic effects on psychotic symptoms.
Psychosis is the loss of contact with external reality, meaning that those afflicted with this condition, unaware of their circumstances, can potentially experience delusions, hallucinations, and agitation; hostility and aggression are also in the psychosis realm, making these results all the more potent.
Interestingly, in more participants in the CBD versus the placebo group who were patients, activation of CBD effects had higher potency, whereas the control group had lower. It was also found that:
In patients with psychosis, the effects of CBD on psychotic symptoms have been associated with its influence on levels of the endogenous cannabinoid anandamide. Therefore, future studies need to investigate the neurochemical and receptor-level mechanisms that may underlie the antipsychotic effects of CBD.
CBD is known for a number of therapeutic usages, from anti-inflammatory properties to the quelling of seizures, but this new study shines light on CBD’s effects on the brain and the regions in which its benefits are most effective, especially in the area of psychosis.
Often associated with schizophrenia, psychosis actually encompasses a much broader portion of the population. During the study and fMRI scans, to test the study’s hypothesis they, “identified regions where there was a linear pattern of activation across the 3 groups such that the level of activation in participants…receiving CBD was intermediate to that of participants…receiving placebo and control participants.”
For the general population, though CBD has gained in popularity a hundred fold in recent years, “feeling” its effects is a toss up, as it is non-psychoactive. CBD could be doing a lot of good and even some repair work inside our bodies via our endocannabinoid systems, but unless you’re experiencing inflammation, high anxiety or sleeplessness, it can be difficult to gauge its effects. Studies like these further legitimize CBD and its place in our society.
NZ will miss out on billions of dollars of exports in the fast-growing global legal cannabis industry, BiotechNZ executive director Dr Zahra Champion says.
The global legal marijuana market size is expected to reach $US 66.3 billion within six years, according to a new report by Grand View Research.
Dr Champion says there is a huge opportunity for New Zealand with exports, leveraging off the country’s plant genetic natural varieties, research expertise, New Zealand’s brand and linked to highly regarded Kiwi clinical research expertise.
“Australia is moving so quickly compared to New Zealand. The Australian federal government has announced full support for the cannabis industry and has already issued 69 licences to cultivate, produce and manufacture cannabis for the market,” she says.
“Illinois has just become the 11th US state to legalise recreational cannabis. Businesses already licensed under Illinois’s medical cannabis pilot programme have a head start.
“In New Zealand the Ministry of Health has opened public consultation on the proposals for the medicinal cannabis regulations. Public consultation ran until August 7 with the regulations to be finalised by December 18.
“Ministry officials expect the scheme to be operational by the end of March 2020, meanwhile, the global demand for cannabis, medical and recreational, is predicted to grow consistently at a growth rate of at least 17 to 23 percent a year.
“These are only estimates, as pharmaceutical cannabis production is an entirely new market in nearly every country embracing the lucrative industry.
“Medical cannabis growth rates will also be influenced by heavily regulated production processes, which are subject to changes and potentially long processing times for farming, manufacturing, selling licences,” Dr Champion says.
Once an illegal and somewhat niche product, legal cannabis is now a fast-growing market in many countries in the world. And it’s proving to be disruptive, impacting everything from beverage production to home construction.
The future of medicinal cannabis in New Zealand is a huge opportunity to create a potential new exciting sector and it can bring in investment and create new skills, she says.
“We need to cultivate and produce high quality pharmaceutical grade cannabis. However, we need to ensure that the products are not over regulated as they are botanicals and have a different safety profile to a synthetic compound. Over regulation will unnecessarily increase costs for patients in need.
“Consumers are demanding natural safe products. People want to know that their product has what it says in it, that the dose is accurate, that it is backed by science and that they can take it in different forms as smoking cannabis is not really an acceptable method of consumption for a health product.”
Cannasouth Announces Significant Cultivation Joint Venture The Board of Cannasouth Limited (NZX:CBD) is pleased to announce that it has entered into a long-term strategic joint venture (“JV”) with Aaron Craig and his family interests(“Craig Family Interests”) to construct and develop a world class cannabis cultivation facility in the Waikato area.
Mr Craig is a successful business owner, developer and entrepreneur who has developed a number of substantial private companies.
The JV will construct and operate a medicinal cannabis and hemp cultivation and production facility to service and supply CBD’s production requirements.
The JV is structured as a joint venture company, “Cannasouth Cultivation Limited” (“JV Co”), which will be owned equally by each of CBD and the Craig Family Interests.
JV Co will commence its operations by constructing a state-of-the-art hybrid greenhouse cultivation facility and will grow medicinal cannabis and complementary product, primarily for CBD, but potentially for other medicinal cannabis companies in New Zealand and internationally.
JV Co will also investigate expanding into broadacre operations (outdoor growing), and/or in conjunction with developing a network of New Zealand-based contract growers.
The principal terms of the joint venture arrangement are as follows:
• The joint venture will be structured as a joint venture Company – “Cannasouth Cultivation Limited” (“Cannasouth Cultivation”);
• Each of CBD and the Craig Family Interests will hold a 50% interest in Cannasouth Cultivation and will initially contribute $1 million of paid up capital into the JV company for the first phase of the operations development;
• CBD and the Craig Family Interests have identified a suitable site for the construction of the facility in the Waikato (“Land”). The Land comprises 111 acres of land. The land is ideally suited for the construction of the initial facility and further expansion, and the potential development of a broadacre cultivation operation;
• The Craig Family Interests have agreed to purchase 100% of the Land at their own cost and to lease such portion of the Land as required, to Cannasouth Cultivation. The maximum term of the lease is 20 years;
• Cannasouth Cultivation will pay a commercial market rental for that part of the Land that it utilizes;
• Cannasouth Cultivation will have an option to expand its footprint across the balance of the Land as and when it may require more land for its commercial cultivation operations. This enables Cannasouth Cultivation to expand its growing operations from hybrid greenhouse growing to outdoor broadacre growing from the one location;
• The Craig Family Interests have also agreed to grant CBD an option to purchase a one-half share interest in the Land (“Land Option”) for the duration of the JV. The price payable to exercise the Land Option will be determined based on the market value of the Land at the time of the exercise of the Land Option;
• Cannasouth Cultivation will fund the construction of the facility on the land, and will ultimately own the facility structure and all internal fit outs;
• Each of CBD and the Craig Family Interests will be responsible for funding a one-half share of the ongoing working capital requirements of the JV facility;
• CBD will purchase all of its cannabis requirements from the JV Co through entry into an Off-Take Agreement, subject to Cannasouth Cultivation’s ability to deliver on volume, specification and delivery date etc;
• CBD will have a first right of refusal to acquire all other production from Cannasouth Cultivation in addition to that product ordered by CBD.
Benefits of the joint venture
The capital costs associated with the construction of a state-of-the-art cannabis cultivation facility are significant. This joint venture arrangement has enabled CBD to maximise the allocation of capital raised during its recent IPO to achieve an important objective of the Company’s vertical integration strategy. CBD considers the benefits of the JV to be significant, including:
• An important step towards implementing the company’s vertical integration strategy “from seed to sale”;
• Sharing the considerable capital costs of developing a cultivation facility with a third party;
• Entering into a strategic relationship with a trusted and experienced partner who can add considerable value with the skill set they bring to the venture;
• Providing a commercial footprint and model from which the JV can expand to other locations throughout New Zealand as the medicinal cannabis market matures;
• Providing a foundation from which further strategic initiatives, involving growing and cultivating other complementary products, can be leveraged.
Cannasouth CEO Mark Lucas said, “the establishment of Cannasouth Cultivation is an exciting development in the evolution of Cannasouth and represents another strategic milestone as CBD positions itself as a leader in the emerging medicinal cannabis industry in New Zealand.
“We are delighted to have partnered with someone of the calibre of Aaron Craig and his family interests in this exciting project. We are looking forward to implementing our business plan for the construction of the new facility and leveraging off that facility strategically in the future.”
The land and proposed facility will give the JV the opportunity to produce and CBD to source highquality medicinal cannabis flower similar to that produced with expensive indoor cultivation methods. Utilising the power of sun through the hybrid greenhouse option significantly reduces the overall energy costs of production and is consistent with Cannasouth’s desire to utilise environmentally sustainable cultivation methods.
The rural site in the Waikato heartland also allows CBD to leverage New Zealand’s reputation for high quality horticultural produce. Further expansion at the 100-acre plus site allows CBD to explore multiple cultivation strategies depending on the end product and export requirements.
“A phased expansion strategy will ensure capital is only deployed when market demand exists for the end product,” says Mr Lucas. “This flexibility will enable CBD to adapt to pricing pressures as the market matures to ensure end products remain competitively priced, ultimately reducing the cost to patients.”
Mr Craig said he was delighted to be part of the Cannasouth story and the development of New Zealand as a major player in the exciting global medicinal cannabis industry.
Subscription for new shares
Collateral to the entry into the joint venture arrangement, CBD has agreed to issue 2,777,778 new ordinary fully paid shares to the Craig Family Interests at an issue price of 36 cents per share (“New Shares”). This placement will generate $1,000,000 of new capital for CBD, which CBD will in turn apply towards the payment of its capital commitment to the JV. The New Shares will be issued during the course of the next five trading days. A notice of issue in respect of the New Shares will be released to the market on the day that the New Shares are issued and allotted.
The Craig Family Interests have agreed that the New Shares shall be escrowed for a period of 12 months from the date of their issue.
Founders enter into escrow arrangements
In consideration of the Craig family Interests agreeing to the escrow of the New Shares, CBD’s founders, Mark Lucas and Nic Foreman (who each hold 28,161,290 shares in CBD representing 55.2% of the total number of shares on issue in aggregate) have also agreed to enter into a similar escrow agreement for a period of 12 months from the date of this announcement.
Mr Lucas said that even though Mr Foreman and himself are both long term holders of an investment in CBD, they are comfortable entering into the escrow restrictions on similar terms to Mr Craig.
Financial Advisor
Auckland-based specialist corporate and capital markets advisory firm, CM Partners, has advised Cannasouth on this transaction.