The Flowr Corporation (CVE:FLWR) (OTCMKTS:FLWPF) is planning to raise C$20 million via a private placement supported by management and insiders.
The medical cannabis company’s chairman Steve Klein and CEO Vinay Tolia are leading the offering with commitments of more than C$10 million and management and insiders will continue to own around 58% of shares after the financing closes.
The company said it may upsize the placement, which will be used for working capital, to raise C$25 million.
READ: The Flowr Corp reaches major milestone with EU GMP licence for Portugal facility
Management and insiders have agreed to voluntary 12-month share lockup arrangements, the company said in a statement.
“Despite the challenging capital markets environment, we are extremely fortunate to announce this financing and to have continued support from management and insiders who have been instrumental in Flowr’s founding, strategic direction and financing since inception,” said Flowr’s CEO Tolia.
“This capital is expected to enable Flowr to become cash flow positive in H2 2020 as we build on our focus of delivering premium dry flower to the Canadian marketplace driven by our flagship product BC Pink Kush and other high THC strains we will be launching imminently as all of our 20 grow rooms in our Kelowna 1 facility will soon be in harvest cycles,” he added.
Tolia said the company expects to continue to achieve premium price points in the market with its optimized library of high THC strains, with future revenue growth enhanced with contributions from Holigen after it received its EU GMP license in Portugal.
Financing terms
The placing is comprised of one unit priced at C$1,000 per unit consisting of one subordinated secured debenture of the company and one share purchase warrant. Each convertible debenture bears an annual interest rate of 10% calculated in semi-annual arrears, with interest to be paid annually in company shares for four years.
The conversion price of shares issued as payment in kind on account of interest will be the market price of the shares on the business day immediately prior to the conversion date of the interest payment, subject to TSX Venture Exchange approval.
Debentures are convertible into shares at any time, with the conversion price set at C$0.58. Debt holders will be entitled to receive interest for the period from the date of the latest payment up to the date of conversion. Any outstanding principal amount of debentures will be repaid by the company in cash or shares if the holder elects not to convert before the maturity date.
Each warrant is convertible to one share of the company at an exercise price of $0.76 for a 36-month period. The offer is expected to close on April 23.
Revised credit arrangement
Flowr also revealed that AltaCorp Capital Inc has agreed to amend the terms of its prior credit agreement with the company. The amended deal sees a C$3.5 million cash collateral used to permanently pay down the credit facilities and includes certain cash flow reporting requirements and additional certification measures.
The revised deal also includes the reduction of certain baskets under the credit agreement, such as financial assistance and investment baskets, which are reduced from C$15 million to C$9.5 million, and a subordination agreement between the senior lenders and debenture holders under the offering.
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