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ECS Botanics achieves cash flow positive quarter

ECS Botanics Holdings Ltd provides an update on activities for the quarter ending June 30, 2023 (Q4 FY23).

Financial highlights
According to the company, Q4 FY23 was another period of major growth for ECS, with strong momentum continuing across all aspects of the business. Receipts from customers of $5.19 million, representing a 19% increase on the previous quarter (Q3 FY23: $4.37million) and a 131% increase on pcp (Q4 FY22: $2.25 million), were driven by continued strong demand for ECS' innovative and organically grown medicinal cannabis oils and dried flower. Pleasingly, the company expects this momentum to continue into FY24, with new
major contracts signed late in the financial year.

Unaudited trading revenue for FY23 was $15.63 million, which is up 131% on the prior year, with Q4 FY23 revenue generating $4.97 million, which highlights the momentum heading into the new year.

Importantly, the company achieved positive net operating cash flow for the quarter, reflecting strong demand for ECS' products and cost-effective cultivation methods. The company remains well-funded,
with a cash balance of $2.50 million as of June 30, 2023, and access to a recently expanded National Australia Bank (NAB) loan facility of $2 million, which remains undrawn.

Operational update

Major contract agreements signed
ECS signed two binding offtake agreements with Entoura Pty Ltd and Precision Pharmaceuticals Pty Ltd in June, with the agreements worth a minimum of $11.9 million to supply medicinal cannabis dried flower. ECS will supply Good Manufacturing Practice (GMP) manufactured, medicinal cannabis dried flower worth $10.2 million over a three-year period to Melbourne-based medical cannabis company Entoura, and GMP manufactured, medical cannabis dried flower worth $1.7 million over 12 months to Sydney-based Precision Pharmaceuticals.

These binding offtake agreements demonstrate the scaling benefits of recent capacity upgrades to improve yields, the addition of more outdoor fields, and the increased capacity of the protective cropping enclosures.

New initiatives to build intellectual property for ECS
ECS Botanics has entered an exclusive partnership with Geocann, a global industry leader in drug delivery technologies that optimize the performance of phytocannabinoids. The ten-year deal allows ECS the exclusive use of their VESIsorb patented technology, in medicinal cannabis-based formulation products in Australia, New Zealand, and the United Kingdom. The exclusivity extends to Europe for ECS product formulations. VESIsorb has been clinically proven in peer-reviewed published studies to safely mitigate the extensive first-pass metabolism of cannabinoids and terpenes, thereby delivering higher blood plasma levels with a much lower dose for greater therapeutic benefits.

A scientific evaluation of VESIsorb as a delivery system confirms the:

  • concentration-time profile is improved by almost two times;
  • absorption is over four times better; and
  • time to act is three times faster than current methods on the market.

The partnership with Geocann will allow ECS to utilize the VESIsorb technology in its products to further position the company's products as market-leading. In addition, both ECS and Geocann have agreed to collaborate on further innovative product development.

As part of the process to build out ECS' intellectual property, the company has appointed Jesus Diaz as Technical Director. Mr. Diaz is an Agricultural Engineer with over 10 years' of experience in the field of
medicinal cannabis. He will be responsible for driving increases in cannabis quality, yields, assay, and terpene levels by leveraging his expertise in medicinal cannabis agronomy and plant genetic selection
and development.

A successful 22/23 production season; yield improvement trials underway
Over the past 12 months, ECS produced 4.25 tons of dried cannabis flower, all of which is scheduled to be sold into the medicinal market in Australia or overseas, an increase of 51.5% on the previous year.

The significant increase in production is due to the successful implementation of six additional protective cropping enclosures (PCE), which are now fully operational and bring the total to 17 PCEs.
Additionally, the existing outdoor fields also increased production, even allowing for a prolonged, wet spring which affected outdoor yields.

ECS is conducting a trial within one of its newly established PCEs to extend the growing season and production capacity utilizing a recently installed additional 75kW of solar photovoltaic for light and heat.
The trial aims to assess the commercial and quality implications of incorporating supplemental lighting and heating, thereby enabling the addition of more crop cycles. If successful, this initiative will provide
significant yield advantages.

Outlook: "entering FY24 with major momentum"
Commenting on the outlook, ECS Managing Director Nan-Maree Schoerie said: "ECS continues to make significant strides in the medicinal cannabis industry, with this progress being reflected in the financial results we have reported. Even more pleasing is the fact that we enter FY24 off the back of two major supply agreements and are well positioned to continue to grow revenue and profit."

"While I look forward to continuing to deliver increased production and sales, I am really excited about the potential to further differentiate ECS from its peers through greater innovation and technology.
Innovation has always been at the core of how ECS operates, and the recent partnership with Geocann, which allows ECS to utilize their VESIsorb technology, has the potential to markedly improve the
effectiveness of our cannabis products, providing optimal therapeutic benefits to consumers in Australia and several overseas markets."

"We have built really strong foundations for ECS to be a sustainable growth company, and I look forward to building on those foundations in FY24 and beyond to deliver value to our loyal shareholders."

For more information:
ECS Botanics
[email protected]

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