Despite the long-running bear market in the cannabis industry, TerrAscend Corp. (OTCQX: TRSSF) announced a non-brokered private placement for gross proceeds of approximately $30 million. TerrAscend also said that it could supersize the offering to between $35 and $40 million. The company said it plans to use the proceeds for its U.S. expansion and other general purposes.
The company said it has received initial investor commitments totaling $28 million, including a $20 million lead order from JW Asset Management LLC which is expected to close on or about May 21, 2020.
“This planned funding positions TerrAscend with a strong balance sheet that enables us to continue to build depth in the high-quality markets where we operate,” said Jason Ackerman, CEO and Executive Chairman of TerrAscend. “We are now fully funded to complete all of our CAPEX projects, which will fuel the growth of both the cultivation and dispensary sides of our business. We’re fortunate to have developed a strong partnership with JW Asset Management and appreciate their support, and the support of the other investors, as we capitalize on the opportunities ahead.”
In March, TerrAscend Canada Inc. has entered into a loan financing arrangement with Canopy Growth Corporation (NYSE:CGC) in the amount of C$80.5 million in the form of a secured debenture. In connection with the funding of the Loan, TerrAscend has issued 17,808,975 common share purchase warrants to Canopy Growth.
The company though couldn’t use those funds for investment in the U.S. Canopy Growth initially invested in TerrAscend way back in November 2017. TerrAscend has achieved considerable milestones since Canopy Growth initially invested, including becoming the first cannabis company licensed for sales in Canada, the United States, and Europe.
Fourth Quarter Results
Last month, TerrAscend reported that its sales increased by 414% to $25.9 million in the fourth quarter of 2019 versus $5.0 million in the fourth quarter of 2018. Sales in the U.S. were $24 million in the quarter representing 93% of the net revenue, while Canadian sales dropped to $1.9 million a decline of 62% for the same time period in 2018. The said it was due to the ongoing challenges facing the Canadian cannabis markets.
The fourth-quarter net loss was a staggering $171 million. The fourth-quarter adjusted EBITDA loss was $5.7 million versus last year’s fourth-quarter loss of $4.5 million. The company said that the change in adjusted EBITDA compared to the prior-year period was primarily driven by a decline in Canadian cannabis revenues as a result of ongoing demand issues which persisted through December 2019, as well as an increase in G&A expenses and an increase in the cost of goods sold as the company scaled up the organization through investments in additional headcount as it continues its U.S. expansion.