Farmmi Files to Register Shares from Private Placement

Assuming outstanding warrants were exercised, Farmmi would receive approximately $6 million in fresh funding.

Peter H. Frank
    Feb 05, 2019 2:16 PM  PT
Farmmi Files to Register Shares from Private Placement
author: Peter H. Frank   

Farmmi Inc. (Nasdaq: FAMI) has filed to register nearly 3.5 million shares that, assuming conversion, would be available for sale by the company's second-largest shareholder, allowing it to exit the company. 

Farmmi, which grows and sells mushrooms through exports and online, said 95 percent of the underlying convertible notes and warrants were held by CVI Investments Inc., which currently owns 15.2 percent of Farmmi's shares. CVI, which is represented by Heights Capital Management Inc. in San Francisco, would retain no stake in the company after this offering, according to a filing with the Securities and Exchange Commission. 

The offering would have no impact on Yefang Zhang, the company's chairwoman and chief executive officer, who would retain her existing 69.5 percent stake. 

Under the existing terms, noteholders have the right to convert their securities to roughly 1.2 million Farmmi shares at $6.26 per share. The company would receive no proceeds from those conversions or sale, the filling said. 

However, the company is also registering the underlying shares to two sets of warrants, including those that allow the holders to purchase 800,000 shares at $6.53 per share, and 119,808 shares at $7.183 per share. Assuming those outstanding warrants were exercised, Farmmi would receive approximately $6 million in fresh funding. 


Farmmi shares since IPO a year ago. 

The prospective timing of the underlying share sales remains uncertain. CVI Farmmi closed today at $3.84 per share, up 1 cent on the day. 

After going public a year ago at $4 per share, the company enjoyed a significant run-up in share price, reaching $10.32 per share in May. Last summer, however, the stock stumbled badly. 

And in November, Farmmi completed the private placement of securities that are now being registered for sale, raising roughly $7.5 million at the time. 

In its most recent earnings statement, the company announced in January that its revenue jumped nearly 12 percent to $29.8 million in its fiscal year ended September, driven by an increase in income from sales of Shiitake and Mu Er.

Driven in part by three new sales contracts signed between March and June in 2018, sales volume of Shiitake climbed up to 1,299 tons for the 12 months ended Sept. 30 from 1,277 tons for the same period a year earlier. 

Farmmi's net income, however, declined slightly more than than 1 percent to $3.23 million, or 29 cents per fully diluted share, for the year, compared with $3.27 million from a year ago, or 33 cents per fully diluted share.