Indiva Limited (TSXV: NDVA) announced this morning that it has acquired financing of up to $11 million through an institutional lender. The funding comes in the form of a $6.5 million secured demand loan facility, and a $7.5 million secured bridge loan facility, with a cap being placed at a total of $11 million in loans.
The bridge loan facility, with an undisclosed rate, allows the firm to effectively finance certain outstanding invoices much in the same way The Deep Dive guest writer Michael Miller highlighted in “How Invoice Financing and Invoice Factoring Can Alleviate Cannabis Cultivators’ Cash Crunch.” The short of it is that Indiva will get a chunk of cash upfront for the outstanding invoice, while the financier works on collecting the whole sum.
The inherent problem with this, is that Indiva’s sales have been low – last quarter the firm posted $173,500 in net revenues, with the six month period only showing $414,869 in net revenues. As a result, little is owed to the firm in the form of accounts receivable. Although a large portion of revenues, $231,502 in outstanding receivables does not allow for much leverage for Indiva, and certain not enough to pay off even its accounts payable, which came in at $1.56 million – especially when the financiers cut is taken into consideration.
Thus, Indiva was also effectively forced to enter a $6.5 million secured demand loan facility. The demand loan facility bears interest at prime plus 9%, and is secured by the assets of Indiva, while also posing undisclosed restrictive covenants. As disclosed in its name, the debt is due upon demand, but may be paid off at any time without penalty. A 2% finders fee was also paid in connection with acquiring the facility.
The secured loans will effectively be used to pay off Indiva’s unsecured convertible debenture which comes due December 13, 2019. $5.65 million of those debentures remain outstanding as of the latest financial reports.
Whatever funds remain following the payment of debt in December will be used towards a facility expansion, capital purchases of equipment, biomass purchases, and general working capital.
Indiva Limited is closed Friday’s session at $0.23 on the TSX Venture Exchange.
Information for this briefing was found via Sedar and Indiva Limited. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
