RMMI Corp Financing is a Harbinger for Cannabis Sector Funding

The difficulty of raising funds in the cannabis sector is becoming extremely evident. This morning, RMMI Corp (CSE: RMMI), parent company of Rocky Mountain Marijuana Inc, announced that it had obtained a secured note financing. The terms of which are not overly rosy.

The kicker, however, is that the secured note is only to the tune of $1,000,000. While many may indicate that the firm didn’t want to obtain a larger financing than needed – a fair argument by any standard – the tell in this particular situation is that the promissory note is secured against the firms facility. The funding will be utilizing for short term working capital and general corporate purposes as the late stage applicant works towards obtaining its Health Canada license to cultivate cannabis, which the firm estimates is roughly 30 days from issuance.

RMMI anticipates on becoming an aeroponic-based organic producer of cannabis which will also focused on CO2 extraction for high purity products. The firm intends to use technology to lower its cost of production while maintaining product quality.

The note itself is for C$1.0 million, of which $425,000 was provided by management and directors. The remainder was sourced through managements contacts within the investment community. The note expires on December 31, 2019, and bears 12% interest. Worst yet, is that the small loan is secured by the firms Newell facility.

The result, is that the firm needs to rely on Health Canada for the issuance of its cultivation license in the short term. Following the issuance, the firm needs to get plants grown in a hurry so that it can generate enough revenues in a short amount of time to be able to cover the short term financing. The alternative, is to secure additional funding which will likely result in a downward spiral for the young firm.

RMMI Corp is currently trading at $0.59, down 9.23% on today’s announcement.

Information for this analysis was found via Sedar and RMMI Corp. 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.