Entourage Health Corp. (formerly WeedMD Inc.), a Canadian producer and distributor of award-winning cannabis products and brands, amended its existing credit facility with an affiliate of the LiUNA Pension Fund of Central and Eastern Canada (“LPF”) to add an additional $20 million in non-dilutive funding. The Credit Facility will be used by Entourage for general working capital purposes as the Company continues to focus on sustainable profitable growth, part of which will be driven by upgrading and standardizing its cultivation practices with recently acquired tissue culture business, and by introducing new genetics for high-margin products expected to drive commercial growth in 2022.
The Credit Facility continues to bear an interest rate of 15% with the option, at the Company’s discretion, to capitalize interest in lieu of cash payments of interest and is set to mature in August, 2022. The Credit Facility is secured by the assets of the Company and its subsidiaries, including the Company’s production facilities, and contains customary financial and other covenants, as well as typical conditions precedent for a transaction of this nature. LPF’s security under the Credit Facility is in second position to the Company’s senior creditor.
In addition to the new funding provided under the Credit Facility, the Company and LPF agreed to defer certain of its financial covenants to the end of 2021, under the amended Credit Agreement announced on November 1, 2021, which is now further extended until March 28, 2022.
“With the recent integration of our renowned tissue culture business and addition of new genetics, our cultivation team is enhancing our Strathroy facility using the latest science-based plant performance data, and executing on our promise to meet evolving consumer and patient preferences with premium products,” said George Scorsis, Interim CEO and Executive Chairman, Entourage. “With our enhanced propagation techniques and upgraded suite of products, we are setting a clear path to reaching our profitability goals in late 2022. This added support from our trusted partner and strategic investor, LiUNA Pension Fund, provides us with significant non-dilutive financing which will enhance our liquidity position and provide additional working capital to drive sales and pursue targeted growth initiatives.”
Entourage recently outlined its cultivation and commercial plans for expansion into the premium product market and also announced new products to its direct-to-patient medical marketplace, Starseed Medicinal, which now has over 40 SKUs including cannabis-infused soft chews.
The Company also confirmed it has signed an additional amendment to its senior secured credit facility entered into on March 29, 2019 (the “Senior Credit Facility”) between the Company and Bank of Montreal. The latest amendments to the Senior Credit Facility modify the terms under which Entourage secured up to $39 million of debt financing over a three-year term ending in 2022.
Under the terms of the amendment, the Company secured a temporary bulge facility of $0.5 million available for a limited period of time and only to be used for working capital purposes. Additionally, the Company secured deferral of certain of its financial covenants to March 28, 2022.