RE:RE:Hexo Financing?Well, as I posted earlier - quinlash will raise the KAOS backstop financing.
And again - per the actual agreement, the backstop financing is capped at a maximum of $5 million per month for 36 months ($180 million). If needed, it will used to service the $200 million debt owed to Tilray, not day to day operations.
Hexo has not had to draw on that for the simple reason - as I explained - is that they released the $30 million they had in 'Restricted Funds' that was designated to cover 'Board of Directors Liability' - previously and since acquired through a regular insurance broker.
Can you imagine - the Hexo management put $30 million of investors money into a fund that would pay any award granted by a court for incompetence for example. Any group of investors who successfully sued Hexo would be paid with the investors own funds - not a dime would come out of the Boards or managments pockets. Hilarious.
The external auditors had commented that Hexo's $83 million of Cash on Hand at the year end financials was enough cash for Hexo's future 12 month needs ONLY IF Hexo could get an extension on the $40 million debenture due on December 5.
The lender would not grant the extension - and Hexo was required to pay $40 million of the $83 million, leaving them with insufficent cash for the following 12 months.
This forced the Board;s hand - and they 'cashed' the previously restricted $30 million. mainly because they are unable to obtain other financing.
So - yes, $73 million would cover most of the next year - but with Hexo's continued and crippling Net Losses ($52 million last quarter) and cash burn - DESPITE THE COST REDUCTIONS which were mainly employee lay offs - Hexo will need to find some additonal financing.
To quinalshes point of a 3 year supply agreement - that was with Entourage, a .025 cent company - and gross revnue from that bulk wholesale supply agreement (very low margin) last quarter was $1.5 million - or $6 million annually. Net Profit - which is what Hexo needs - from that deal will amount to virtually zero.
Quinlash also raises the 'new way' to utliize excess production capacity - which is not new, it's been in practice for decades from all sorts of manufacturers and processors.
What this is - is conceding that Hexo doesn't have enough sales of their own keep their production out of sitting idle. Better the CEO find new supply agrrement like the blockbuster Entourage deal than start growing for the craft producers that Hexo is unable to compete with head to head.
OR maybe they should grow vegetables liek Tilray says they're considering for THEIR idle space.