Melodiol Global Health may be compelled to sell off its core assets to secure fresh capital after the company suspended operations across three business units it had been trying to offload.
The company announced it has "temporarily paused" the activities of wellness brand Sierra Sage Herbs, psychedelics division Halucenex and CBD sports business impACTIVE following the breakdown of negotiations with prospective buyer Panacea Life Sciences.
No explanation was provided for why the talks fell apart, which Melodiol had announced in August.
In an ASX statement, Melodiol said it would press ahead with efforts to sell each of the non-core businesses while stepping up its push toward becoming cashflow positive.
"The company notes that several business units – Mernova Medicinal, Health House International (HHI) and Creso Pharma Switzerland – have demonstrated the ability to deliver cashflow positive results during FY23," Melodiol said. "With these encouraging results, the company has taken active steps to refocus its efforts and resources into these higher performing business units which, in aggregate, represent 93% of group revenue based on Q1 FY23."
Yet despite pointing to Mernova, HHI and Creso Pharma as bright spots, Melodiol disclosed that a sale of its "core assets" was among the options being weighed as it seeks to raise capital.
With additional funding likely required in the short term, the company said it is evaluating "additional sources of capital" including "further capital raising activities, divestment of non-core assets and possibly divestment of core assets."
Although no specific brands were named, Australian distribution firm HHI and Canadian operation Mernova are regularly cited as central to the company's revenue growth.
Melodiol only completed the acquisition of Health House in May.
Melodiol chief executive William Lay was approached for further comment.
The company, which changed its name from Creso Pharma earlier this year, has faced a turbulent financial stretch, with the ASX questioning whether it could maintain its listed status back in May.
The ASX had raised those concerns at the end of March after an auditor flagged that the business had accumulated combined losses of A$63m across the prior two years.
In the six months ending June 30, Melodiol recorded revenue growth of 62% compared to the same period the year before, though it still posted a loss of $28.2m.
HHI and Mernova extended their revenue growth into Q3 FY23, with the Australian business generating a net profit exceeding $300,000.
UPDATE (December 13, 2023): Melodiol has reported unaudited revenue of around A$5.94m in Q4 to date, a 131% increase on the prior corresponding period's $2.57m. The figures bring total unaudited revenue for FY23 to approximately $20m, up from $8.69m in FY22.
The company attributed the Q4 result to sales from Mernova and HHI.
