In addition, the company has agreed to a non-brokered private placement of 6,666,666 shares at C$0.15 per share for gross proceeds of C$1 million -- for a total financing of C$6.3 million.
"A financing collateralizing US cannabis assets is extremely rare,” said CEO Michael Jennings in a statement. “The fact that we were able to accomplish an asset-backed financing at our relatively early stage of existence is very encouraging and speaks to the lender's high confidence in the potential of our company."
Jennings noted that the company expects to achieve both positive cash flow and profitability in the first half of 2020.
“NGW's world class indoor cultivation facility has been in a perpetual harvest (with a harvest approximately every second week) for several weeks now and the loan will allow us to accelerate our distribution, branding and marketing initiatives across the State of California,” he said. “We now have almost $1 million of premium inventory that we are readying for sale - our goal is to turn all our flower and trim into premium cannabis products yielding a much higher return than selling in bulk.”
The loan from Landrace Financial is for a two-year term, with interest paid monthly in cash at a rate of 10.5% per annum plus the greater of 2.5% and the LIBOR rate -- plus any default rate.
The outstanding principal and all outstanding interest will be payable in full on the maturity date. In addition, the lender will receive a total of 6.5 million common share purchase warrants having a term of 36 months from the date the loan is disbursed and exercisable into common shares of Next Green Wave at C$0.20 per share.
The parties to the financing are all at arm's-length and there are no finder's fees payable. Closing is subject to a number of conditions, including regulatory approval. All securities will be held for a period of 4-months from the closing of the financing.
The proceeds from the financing plus C$500,000 will be used to reduce outstanding unsecured convertible notes from C$3 million to C$1.5 million. Concurrent with the closing of the financing, the company will amend the terms of the remaining C$1.5 million of convertible debentures from a conversion rate of C$0.388 per share to a price of C$0.15.
In addition, Next Green Wave will reprice the 7,732,357 share purchase warrants previously issued with the notes (C$0.48) to a price of C$0.20 per warrant, or a period of 24 months from the date of issue. This repricing is also subject to a number of conditions, including regulatory approval.
The company also has granted 3,530,000 stock options exercisable at a price of $0.15 per share to a director, employees and HR consultants. The options are exercisable until November 19, 2024. The grant has a vesting period of 25%, every 6 months, for a period of 24 months.
Next Green Wave also said it has released 16,167,092 SDC shares from escrow.
Shares of Next Green Wave moved up 3.7% at C$0.14 on Friday morning.
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