Chch medicinal cannabis firm forecasts $10m in revenue

Thursday, 14 December 2023

Medical Kiwi’s chairperson Aldo Miccio says the company has secure financing and expects a “positive” appraisal soon.

An adverse auditor’s report on a fledgling Christchurch medicinal cannabis company previously in trouble with the Financial Markets Authority should not frighten investors, its director says.

Medical Kiwi Ltd, now called Aether Pacific Pharmaceuticals, grows cannabis at a facility in Christchurch for the medicinal cannabis industry and employs about 10 people. Its directors include former Nelson mayor Cataldo Miccio and once featured Christchurch City councillor Jamie Gough who resigned in November due to family and governance commitments.

The company released its annual report for the year to June 2022 in May.

The independent auditors Crowe New Zealand Audit Partnership noted in an “adverse opinion” that the company incurred a loss of about $7.8 million for the 15 months to June 30, 2022, and had negative working capital.

The board’s forecasts to May 2024 assumed revenue would grow to $10.4m in April 2024 and $5.5m capital would be raised.

“If the capital raise and revenue growth targets are not achieved in the short term, the going concern assumption may not be appropriate and therefore the company may be unable to realise its assets and discharge its liabilities in the normal course of business,” the auditors said.

Crowe resigned as the company’s auditors after providing the report.

Miccio said the company had provided Crowe with further information and he was expecting a new opinion before Christmas.

“We expect a positive outcome,” he said.

Aether Pacific Pharmaceuticals growing space (not pictured) was not yet at full capacity.

“We have commitments from [anchor investors] to fund shortfalls when needed so there is no chance of us closing our doors in the foreseeable future.”

The company was not at full growing capacity because it had to show it could produce cannabis flowers to a certain standard (GMP) before utilising all its indoor growing space. Once that was done, the facility’s six growing rooms would go on to produce GMP, which commanded a higher price. Certification for the higher priced material was expected in March.

Two binding contracts for the purchase of the cannabis currently growing or stored were in place and Miccio expected sales early next year between $600,000 to $700,000.

The company had raised $3.5m of the expected $5.5m new capital, he said, and was forecast to raise another $1.5m over the next few months. New investors had been informed about the adverse report, he said.

A US$30m capital commitment from investment group GEM Global Yield LLC could be used once Aether Pacific listed on the stock exchange. The listing on the Australian stock exchange was expected in about August 2024, Miccio said.

He and fellow director Peter Win had sold 2.6m of their shares in the company between May and June 2021 netting $1.08m each, but that money had gone back into the company, he said.

In December 2021 Medical Kiwi admitted to breaching the fair dealing provisions of the Financial Markets Conduct Act (FMCA) when it sought funds on the crowdfunding platform PledgeMe Ltd in August 2020.

The company paid $250,000 in lieu of a pecuniary penalty and offered to refund shareholders who participated in the crowdfunding offer.

The offer made misleading statements including a claim it had a “cannabis licence” when the licence was due to expire. The statements also misled by omitting any explanation that other licences were required, but not yet obtained, in order to lawfully produce medicinal cannabis.

It also claimed to have a contract with a global company for the sale of its entire first two years of production worth $90m. However the contract was only a non-binding letter of intent.

The Financial Markets Authority did not need to take legal proceedings due to Medical Kiwi’s co-operation.