Business Context and Reporting Period
This Form 6-K filing by Naked Brand Group Limited (the "Company") covers the month of October 2019. The report details a private placement transaction completed on October 4, 2019, with Iliad Research and Trading, L.P. (the "Holder"). The filing discloses the creation of a direct financial obligation through a Convertible Promissory Note and a Warrant to Purchase Ordinary Shares.
Key Financial Metrics and Debt Obligations
- Transaction Value: The Company raised $2,000,000 in purchase price.
- Initial Principal Balance: $2,120,000 (includes $100,000 original issue discount and $20,000 in reimbursed expenses).
- Adjusted Principal Balance: Approximately $2,226,100 following the exercise of a warrant on October 9, 2019, which increased the balance by approximately $106,100.
- Interest Rate: 20% per annum, compounded daily.
- Maturity Date: October 4, 2021.
- Conversion Price: $0.05 per share (subject to adjustment), exercisable commencing April 7, 2020.
- Subordination: The Note is subordinated to the Company's existing senior secured credit facility with the Bank of New Zealand.
Material Changes and Covenants
The filing discloses a material change in the Company's capital structure due to the issuance of the Note. Key covenants and conditions include:
- Additional Financing Requirement: The Company must complete an additional financing of $5,000,000 via equity or debt by November 18, 2019. Failure to do so triggers a 10% premium on the Note.
- Registration Statement: The Company agreed to file a registration statement with the SEC by January 5, 2020, with efforts to have it declared effective by April 4, 2020.
- Prepayment Penalty: The Company may prepay the Note subject to a 25% premium.
- Redemption Right: Beginning April 7, 2020, the Holder may cause the Company to redeem up to $400,000 of the Note per month.
- Ownership Cap: Conversion is limited to prevent the Holder from beneficially owning more than 4.99% of outstanding shares (increasing to 9.99% if market capitalization is under $10,000,000).
Risks, Contingencies, and Unusual Items
The Note contains significant risks and unusual terms that could materially impact the Company's financial position:
- Default Consequences: Upon an event of default (including failure to pay, bankruptcy, or failure to deliver shares), the Holder may accelerate the Note, making all amounts plus up to an additional 25% immediately due. The interest rate may also increase to 22%.
- Lock-up Penalty: If the Company cannot issue conversion shares after April 7, 2020, due to a lock-up agreement, the Note balance increases by 3% every 30 days at the Holder's option.
- Liquidity Pressure: The requirement to raise an additional $5,000,000 by November 18, 2019, represents a significant near-term liquidity contingency.
The filing text does not provide specific revenue, profit, or cash flow figures for the period; it focuses exclusively on the terms of the debt instrument.
Investor Verification Checklist
- Verify the Company's ability to secure the required $5,000,000 additional financing by November 18, 2019, to avoid the 10% premium.
- Confirm the status of the SEC registration statement filing deadline (January 5, 2020) and its expected effectiveness date.
- Assess the Company's current liquidity position against the 20% interest accrual and potential redemption obligations starting April 2020.
- Review the terms of the existing senior secured credit facility with the Bank of New Zealand to understand the subordination hierarchy.
- Monitor the Company's share count and market capitalization to determine the applicable beneficial ownership cap (4.99% vs. 9.99%) for conversions.