Business Context and Reporting Period
This Form 6-K filing by Naked Brand Group Limited (the "Company") covers the month of April 2020, with the report dated April 16, 2020. The filing discloses the entry into a material definitive agreement involving a private placement of debt and equity instruments to St. George Investments LLC. The Company is a foreign private issuer headquartered in Australia.
Key Financial Metrics and Transaction Details
The filing details a specific financing transaction rather than providing comprehensive period-over-period financial statements (revenue, profit, or cash flow). Key metrics related to the transaction include:
- Total Purchase Price: $1,500,000 for a Convertible Promissory Note and Warrant.
- Payment Structure: $750,000 in cash (expected April 16, 2020) and $750,000 via an Investor Note (maturing April 30, 2020).
- Note Principal Balance: $1,595,000 (includes $75,000 original issue discount and $20,000 expense reimbursement).
- Interest Rate: 20% per annum, compounded daily (increases to 22% upon default).
- Conversion Price: $4.00 per share (subject to adjustments).
- Warrant Exercise Price: $5.00 per share.
- Existing Debt: As of April 8, 2020, the aggregate outstanding balance of previously issued Amended Notes was $6,684,370.
Material Changes and Agreements
The primary material change is the execution of a Securities Purchase Agreement (SPA) on April 15, 2020. Additionally, on April 9, 2020, the Company entered into a Global Amendment with an affiliate of the new investor regarding notes issued in late 2019 and early 2020. This amendment allows the holder to convert outstanding balances at a price based on 75% of the lowest 20-day volume-weighted average price, subject to a floor price, in addition to existing fixed conversion prices of $5.00 and $4.00.
Guidance, Covenants, and Risks
The SPA imposes significant covenants and risks on the Company:
- Financing Covenant: The Company must complete an additional equity financing of $5,000,000 by May 30, 2020. Failure to comply triggers a 10% premium on the Note.
- Registration Requirements: The Company must file a registration statement by July 14, 2020, and have it declared effective by August 13, 2020.
- Sales Restrictions: The Company is restricted from selling equity securities in excess of $1.5 million per month for April and May 2020, and $3 million per month thereafter, with a cumulative cap of $15 million.
- Default Risks: Events of default include failure to pay, failure to deliver shares upon conversion, bankruptcy, or failure to meet covenants. Default allows the holder to accelerate the Note (plus up to 25% penalty) and increase interest to 22%.
- Ownership Caps: Conversion and exercise are limited to prevent the holder from beneficially owning more than 4.99% of outstanding shares (increasing to 9.99% if market cap is under $10 million).
Investor Verification Checklist
- Verify the receipt of the $750,000 cash portion of the purchase price as expected on April 16, 2020.
- Confirm the status of the $5,000,000 equity financing covenant required by May 30, 2020.
- Monitor the filing and effectiveness of the registration statement for shares issuable upon conversion (deadlines: July 14 and August 13, 2020).
- Review the total outstanding debt load, including the new $1.595 million Note and the existing $6.68 million in Amended Notes.
- Assess the impact of the 20% interest rate and potential 25% prepayment or default premiums on future liquidity.