Love Hemp Group PLC (AQSE:LIFE, OTCQB:WRHLF) said it has agreed a £1.5mln secured loan with a group of shareholders to eliminate a debt to its invoice discount lender that led to strong sales in the first quarter slowing in the second.
Following the completion of the loan, chairman Graham Mullis and interim chief financial officer Anthony Dyer have given notice of their resignation, staying on until replacements are appointed, while non-executive director Andrew Male has resigned with immediate effect.
Chief executive Tony Calamita will remain in his current role. CBD Extract India
The CBD health and wellness products group secured the five-year loan after working capital difficulties arose after its facility provider Windfall Logistics stopped providing cash-flow due to Love Hemp’s largest retail customer issuing what was said to be unexpected invoices for past product promotions, including an overdue loan amounting to £450,000.
While the first quarter to end-September saw revenue growth reported at 42%, lower sales followed in the current quarter, which the company said was expected to result in slower growth despite the festive quarter typically being the best trading period of the year.THC Oil Buy India.
“This slower trading, coupled with the cessation of cash-flow from Windfall Logistics has put additional pressure on the company’s already difficult cash flow and the directors have determined the need to immediately inject capital or refinance the business particularly as the current market conditions show no sign of improving and may even deteriorate further in the short-term,” it said in a statement.
Love Hemp said it will make an initial payment of £700,000 to Windfall to eliminate the debt and release the security held over the company’s assets, with the remainder used to complete the manufacturing facility in Croydon, marketing, product development and for general working capital purposes.
Up to £150,000 of the payment to Windfall may be returned to Love Hemp over the coming months as the invoice discounter completes the collection of cash from Love Hemp customers against the remaining outstanding amounts, offset by future retrospective charges for promotions, it added.
A new debenture over the Love Hemp assets has been entered into with the lender as security for their loan, the Aquis-listed company said, adding that the facility with Windfall has now been terminated.
With the board changes, the company said it will not be able to file its financial accounts for the 2021/22 financial year by the end of the year, while its annual general meeting will also be delayed.
“A date for the AGM will be announced shortly and will be coordinated with the filing of the financial statements as early as possible in 2023,” it said.
With its shares having been suspended since May due to the resignation of its corporate advisor, the company said it has agreed with the Aquis Stock Exchange that it will not apply to lift the suspension until after the financial statements have been filed and will continue to work closely with its potential AQSE Growth Market Adviser to complete its take-on process. The planned timing and progress of these critical activities will be communicated in due course.
The new loan, which is interest-free for the first year but will incur total aggregate transaction costs of £310,000 over its term and accrue interest at 20%, has been agreed with a group of strategic investors, which include existing shareholders, who have also been issued with 13.5mln warrants exercisable at £0.01 per share with a 12-month term.
A redemption premium is payable of 20% of the total capital if the loan is repaid within the first year, 50% if paid within two years, and 300% is payable if the loan is repaid after the second anniversary.
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