Creso Pharma (ASX:CPH) launches $7m placement, scraps potential $25m Obsidian debt funding deal -Agbelo News

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  • Medicinal cannabis specialist Creso Pharma (CPH) taps private investors for $7 million to support its expansion into the United States
  • CPH will issue 175 million shares at four cents per share, with investors to receive one option for every share purchased, exercisable at eight cents within four years
  • Company directors Bruce Linton, Adam Blumenthal and CEO William Lay commit to investing a combined $1.74 million under the placement
  • Meanwhile, Creso says it has terminated a potential $25 million debt funding agreement with New York-Based Obsidian Global Partners announced earlier this week
  • Shares in Creso Pharma fall 12.2 per cent to 4.3 cents just before market close

Medicinal cannabis specialist Creso Pharma (CPH) has tapped private investors for $7 million to support its expansion into the United States.

The company today announced it would issue roughly 175 million shares to institutional, professional and sophisticated investors at four cents per share to raise the funds. The placement price represents an 18.4 per cent discount to Creso’s last closing price of 4.9 cents.

Under the placement, investors will receive one option for every new share purchased, exercisable at eight cents and expiring in four years.

Creso directors Bruce Linton, Adam Blumenthal and CEO William Lay have committed to invest a combined $1.74 million as part of the placement, subject to shareholder approval.

The company said it planned to complete the placement in two tranches, with EverBlu Capital Corporate to act as Lead Manager for the capital raise and Perth-based CPS Capital as Co-Manager.

Creso’s CEO and Managing Director said the company had received “strong support” for the placement from a range of new and existing investors.

“We continue to focus on value accretive acquisition opportunities, reducing operating expenses and accelerating product uptake through each operating division and are confident that fund commitments from the recent placement will support Creso Pharma’s objective to achieve a group cash flow positive position,” Mr Lay said.

“Creso Pharma anticipates to be well-funded to advance several near-term opportunities and I look forward to providing updates as opportunities continue to materialise.”

The company said in line with its objective to become cashflow-positive within the next year, it was working to reduce cash burn across its entire business.

Today’s capital raise was flagged by Creso earlier this week in its latest quarterly financial report in which the company revealed a decrease in its net cash used in operating activities of 45 per cent, from $3.68 million in the March quarter to $2 million in the June quarter.

This came even as the company’s unaudited first-half revenue grew 42 per cent compared to the same time last year to $4.3 million — not including the revenue from Creso’s target acquisition company, Sierra Sage Herbs (SSH), which posted unaudited half-yearly revenue of US$2.6 million (A$3.7 million).

Alongside the $7 million placement, Creso announced in its quarterly report a potential $25 million debt funding agreement with New York-based Obsidian Global Partners.

Creso today said this deal had been terminated and would no longer proceed. The company did not specify a reason for the termination.

Shares in Creso Pharma fell 12.2 per cent to 4.3 cents just before market close.

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