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Administrators have been appointed to medicinal cannabis company Ecofibre (ASX: EOF) following months of financial turmoil, with the group struggling to offload assets or secure enough funding to stay afloat.
The appointment of Scott Langdon and John Mouawad from KordaMentha comes just two days after Ecofibre released its third-quarter results, reporting unaudited revenue of $5.4 million - a 33 per cent year-on-year drop driven by “generally weaker trading results across the business”.
The majority of the revenue came from yarn manufacturer Ecofibre Advanced Technologies (EAT), which generated $3.6 million, followed by Ananda Health ($1.7 million) and Ecofibre Genetics ($100,000) – a segment the group has been attempting to offload for several months.
However, Ecofibre finished the March quarter with cash reserves of $1.3 million, down from $3.9 million at the end of December, as cash outflow from operating activities in the quarter hit $2.8 million.
In its update, the company revealed that a previously agreed term sheet for the sale of Ecofibre Genetics fell through “due to the acquirer’s inability to complete” the deal.
Ecofibre also disclosed $300,000 in litigation and restructuring expenses for the quarter, adding to $1.7 million spent in Q2 FY25.
The company has been grappling with legal troubles in the US, including claims from former chief scientific officer Dr Alex Capano and former EAT president Jeff Bruner. Meanwhile, Elixinol Wellness (ASX: EXL) has signalled a potential claim over Ecofibre’s sale of Ananda Food to the group in early 2024.
In late January, Ecofibre outlined plans to cut overheads and sell off its fibre seed crop division in an effort to reduce $25 million in debt.
The auditor’s report for the first half of FY24 flagged a material uncertainty over Ecofibre’s ability to continue as a going concern. The group reported a net loss of $18 million for the six months ending 31 December 2024, compared to a $45.7 million loss a year earlier. Net cash outflow from operations totalled $7.2 million, slightly down year-on-year from $7.6 million.
“The above factors indicate a material uncertainty exists which may cast doubt as to whether the group will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report,” the auditor’s report said.
Ecofibre’s survival was contingent on multiple factors, including achieving operating cash flow positivity in the first half of FY26, revenue growth in both EAT and Ananda Health from the second half of FY25, and significant reductions in corporate costs. The availability of new equity financing and further asset sales in FY26 was also critical to the group’s ongoing viability.
Today's announcement that the company has been placed into administration follows an announcement in February that Ecofibre had extended the terms of two loans totalling $10.5 million to unsecured lenders - James & Cordelia Thiele Trust Fund and Lambert Superannuation Fund.
The $7 million loan from the Thiele fund was partially due on 1 January 2025 with the balance payable on 15 July 2025.
In January this year, Ecofibre repaid $500,000, reducing the facility to $6.5 million at an interest rate of 14 per cent with the loan to be repaid in three tranches over the next three years.
The $3.5 million loan from Lambert Superannuation Fund, which carries a 10 per cent interest rate, was due to be repaid on 15 July 2025 but was amended to be repaid in full at the rate of $10,000 per month from April to June 2025 inclusive, and then $30,000 per month after that.
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