Dear JAY Management,
The term sheet looks terrible, this is a really dumb transaction, upon reading it I felt like I was in a dark alley in a red light district somewhere looking to borrow funds so I could be drugs.
For each $100 you will pay $53 in interest, you will pay $20 in the form of a discount at conversion and you are giving the subscriber $20 in option value.
That's $93 for every $100 you borrow. Unusually there is no 6% fee or 2% documentation fee, this is probably an oversight so beware, your transaction costs increase to $101 for every $100 you borrow.
You are putting in 12% of funds. You would be better off finding a few friendly shareholders and subscribing for say $400k of shares at par, put it in as director loan, and then treading water for 2 or 3 months and going back to market when things are a little better. You will be better off and JAY's shareholders will be better off. Don't pay 6% on your money.
Cancel the transaction, go to market with a cornerstone of say $300-400k, if you get more great, but if not, who cares, you are cum raise anyway, how much worse can it get.
The transaction being offered is utter crap - the provider should be embarrassed, where else on earth does anyone charge this much for a loan.
I hope you read this. Good luck.
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