The Notes, which mature in July 2019, are convertible into shares of the Company’s common stock at $0.35 cents per share. The Notes are secured by certain assets of the Company’s wholly owned subsidiary, CLR Roasters, LLC, personally guaranteed by the Company’s Chairman and CEO, Stephan Wallach, and bear interest at a rate of 8% per year. The Warrants are exercisable for five years after the closing date of the Purchase Agreement. For each $100,000 of principal amount of Notes, the holder received a warrant to purchase up to 257,143 shares of the Company’s common stock at $0.23 cents per share.
As part of the use of proceeds, CLR Roasters will purchase K-Cup manufacturing equipment to capitalize on the growing single-serve K-Cup market. CLR Roasters has contracted with OPEM to deliver K-Cup manufacturing equipment that is capable of producing 200 K-Cups per minute.
In May 2014, CLR Roasters acquired a coffee plantation and processing facility located in Matagalpa, Nicaragua – an ideal coffee growing region that is historically known for high quality coffee production. As a result of this financing, the Company plans to execute its option to acquire a second plantation under contract that would double the size of its land holdings in Nicaragua.
Each plantation is roughly 450-acres and produces 100 percent Arabica coffee beans that are shade grown, Rainforest Alliance Certified(TM) and Fair Trade Certified(TM). The two plantations are located on adjacent plots of land and when coupled with the Company’s recently acquired dry-processing facility and existing U.S. based coffee roaster facilities allows CLR Roasters to control the coffee production process from field to cup.
The financing will also allow management to fund various capital improvements at both plantations and the dry processing facilities.
“We are pleased to have entered into this financing transaction and we intend to use the proceeds to fund the purchase of a K-Cup coffee machine, to execute our option to acquire a second coffee plantation, to fund capital improvements on our recently acquired Nicaragua coffee plantation and processing plant, and for the purchase of green coffee for our newly formed green coffee division,” said Steve Wallach, Youngevity’s Chief Executive Officer. “This capital raise is another milestone for our company and we believe the acquisition of the additional coffee plantation coupled with additional capital investments will allow the continued accelerated growth of our CLR Roasters coffee operation.”
“Our company has strong demand from its private label coffee customer base and from its Youngevity direct selling division to deliver various coffees in the K-Cup brewing format,” said Dave Briskie, Youngevity’s Chief Financial Officer and President of Commercial Development. “Our ability to go field to cup will create a unique value proposition that does not presently exist to any scale within the direct selling space. Based on the current growth rates of single-cup brewing and initial customer demand estimates, we expect to have 50% of the overall K-Cup production capacity pre-booked by the time the equipment is projected to be fully operational in the first quarter of 2015. We believe that this new K-Cup production can produce as much as $15 million of revenue annually. We are excited about entering the rapidly growing single-serve K-Cup coffee market and are expecting a record year for CLR Roasters.”
The Company has filed a Current Report on Form 8-K with the Securities and Exchange Commission describing in more detail the terms of the financing and viewers should read such Report in its entirety. The foregoing information should not be construed, and is not intended, as an offer to sell or the solicitation of an offer to buy any of the Company’s securities.
This release includes forward-looking statements on our current expectations and projections about future events. In some cases forward-looking statements can be identified by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “excited,” “believes,” “estimates,” and similar expressions. The forward-looking statements contained in this press release include statements regarding the Company’s intended use of proceeds, the annual revenue to be derived from the K-Cup production, the timing and size of the K-Cup production pre-bookings, the planned option exercise to acquire a second plantation and the continued accelerated growth of CLR Roasters and its recently launched green coffee sales division. These statements are based upon current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict, including our ability to produce the anticipated revenue from the K-Cup production, commence and continue the shipment of the orders from our new green coffee processing plant in Matagalpa, Nicaragua as scheduled and continue the growth of that division, and the other factors described in our annual report on Form 10-K for the year ended December 31, 2013 and our other filings with the SEC. The information in this release is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this release based on new information, future events, or otherwise, except as required by law.