/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR
DISSEMINATION IN THE UNITED
STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY
CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./
CALGARY, AB, June 15, 2020 /CNW/ - Sugarbud Craft Growers
Corp. (TSXV: SUGR, SUGR.WT) ("Sugarbud" or the
"Company") is pleased to announce that it has filed and
obtained a receipt for a final short form prospectus in each of the
provinces of Canada, except
Québec, in connection with its previously announced offering (the
"Offering") of convertible debenture units of the Company
(the "Debenture Units") at a price of $1,000 per Debenture Unit for gross proceeds of a
minimum of $3.0 million and up to a
maximum of $4.0 million. Mackie
Research Capital Corporation (the "Agent") is acting as
agent in respect of the Offering.
Each Debenture Unit, including those sold pursuant to the
Over-Allotment Option (as defined below), will consist of: (i) one
12.0% secured convertible debenture (each, a "Convertible
Debenture"); and (ii) 20,000 common share purchase warrants
of the Company (the "Warrants"). Each Warrant will entitle
the holder to purchase one common share in the capital of the
Company (each, a "Common Share") at an exercise price of
$0.05, at any time up to 36 months
following the date of issuance.
The Convertible Debentures shall bear interest at a rate of
12.0% per annum from the date of issue, payable semi-annually in
arrears on the last day of June and December in each year,
commencing June 30, 2020, and will
have a maturity 36 months from the date of issuance (the
"Maturity Date"). On the closing of the Offering (the
"Closing Date"), an interest reserve account will be
established and funded from the proceeds of the Offering in an
amount equal to 12 months of interest payments ("Interest
Reserve"). The Interest Reserve shall be used exclusively to
fund the semi-annual interest payments to the holders.
The principal amount of each Convertible Debenture will, at the
option of the holder, be convertible, for no additional
consideration, into Common Shares at a conversion price equal to:
(i) $0.05, at any time prior to the
date that is one year from the Closing Date; and (ii) $0.10, at any time following the date that is one
year and one day from the Closing Date and prior to the earlier of:
(i) the close of business on the Maturity Date; and (ii) the
business day immediately preceding the date specified by the
Company for redemption of the Convertible Debentures upon a change
of control. If the holder elects to convert the Convertible
Debentures, then the holder will also receive an amount equal to
the interest that the holder would have received if the holder had
held the Convertible Debentures until the Maturity Date (the
"Effective Interest"), payable in: (i) Common Shares at a
price equal to the daily volume weighted average trading price of
the Common Shares on the TSX Venture Exchange (the "TSXV")
for the consecutive 20 trading days preceding the date of such
election; (ii) cash; or (iii) a combination of cash and Common
Shares, at the Company's option. Upon the Maturity Date and if the
holder has not elected to convert the Convertible Debentures, the
principal amount of the Convertible Debentures shall be repaid in
cash by the Company.
Each holder of Convertible Debentures may, at their option, any
time following the date that is twelve months from the Closing
Date, elect to exchange the aggregate principal amount of such
holder's Convertible Debentures for an equivalent aggregate
principal amount of 15.0% secured non-convertible notes (each, a
"Secured Note") on a one for one basis (the "Exchange
Option"). The Secured Notes shall bear interest at a rate of
15.0% per annum from the date of issue, payable semi-annually in
arrears on the last day of June and December in each year, and will
mature on the Maturity Date. Any accrued interest from the date of
exchanging the Convertible Debentures for Secured Notes will be
carried forward and be payable on the applicable interest payment
date, together with the interest accruing from the Secured Notes
beginning on the date of exchange.
The Convertible Debentures and Secured Notes may, at the
Company's option, be prepaid in cash for an amount equal to 110% of
the principal amount plus accrued interest at any time following
the date that is twelve months from the Closing Date.
The obligations of the Company under the Convertible Debentures
and Secured Notes will be secured by way of a security interest in
the purpose built 29,800 sq. ft. facility in Stavely, Alberta (the "Stavely
Facility") and shall be subordinate in priority and ranking to:
(1) current senior indebtedness ("Existing Indebtedness") of
the Company for amounts up to $5.0
million, including any additional credit extended pursuant
to Existing Indebtedness, or the assignment, assumption, transfer
or replacement of such Existing Indebtedness with any other form of
credit arrangement ("Alternative Indebtedness") provided
that: (A) the lender(s) in respect of such Alternative Indebtedness
is a chartered Canadian or U.S. bank or a credit union formed under
the Credit Union Act (Alberta) or similar legislation in any other
province of Canada; and (B)
Existing Indebtedness is paid out in full concurrent with the
execution of a definitive credit agreement in respect of
Alternative Indebtedness under which funds can be unconditionally
drawn by the Company; and (2) any capital equipment financing in
respect of the HVAC, lighting and other equipment at the Stavely
Facility.
The Company has granted the Agent an option (the
"Over-Allotment Option"), exercisable from time to time in
whole or in part, in the sole discretion of the Agent, up to 30
days from the Closing Date, to purchase up to an additional 15% of
the number of Debenture Units (or the components thereof) sold
pursuant to the Offering to cover over-allotments, if any, and for
market stabilization purposes.
The net proceeds received by Sugarbud from the Offering are
intended to be used to expand its cultivation capabilities in Phase
1a of the Stavely Facility by an additional four (4) growing layers
and for working capital and general corporate purposes. To
accommodate the completion of Phase 1a, Sugarbud intends to use a
portion of the proceeds of the Offering to: complete final
installation of vertical racking equipment, HVAC, environmental
control and lighting systems. The Company expects to complete
construction of Phase 1a of the Stavely Facility by the end of 2020
which will have an estimated maximum annual production design
capacity of between 3,308 and 3,891 kilograms.
Upon a change of control of the Company, holders of the
Convertible Debentures and Secured Notes will have the right to
require the Company to repurchase their Convertible Debentures and
Secured Notes, in whole or in part, on the date that is 30 days
following the giving of notice of the change of control, at a price
equal to 104% of the principal amount of the Convertible Debentures
and Secured Notes then outstanding plus accrued and unpaid interest
thereon (the "Offer Price"). If 90% or more of the principal
amount of the Convertible Debentures and Secured Notes outstanding
on the date of notice of the change of control have been tendered
for redemption, the Company will have the right to redeem all of
the remaining Convertible Debentures and Secured Notes at the Offer
Price.
Sugarbud will use commercially reasonable efforts to obtain the
necessary approvals to list the Convertible Debentures, the Secured
Notes, the Warrants and the Common Shares issuable upon conversion
of the Convertible Debentures and the exercise of the Warrants and
the non-transferrable compensation warrants to be issued to the
Agent as additional consideration for the services rendered in
connection with the Offering ("Compensation Warrants") on
the TSXV.
The Offering is being made pursuant to a short-form prospectus
filed in each of the provinces of Canada (except Québec), and otherwise by
private placement exemption in those jurisdictions where the
Offering can lawfully be made, including the United States. The Debenture Units, the
Convertible Debentures and Warrants forming part of the Debenture
Units, the Common Shares issuable upon conversion of the
Convertible Debentures or the exercise of the Warrants, the Secured
Notes issuable upon exercise of the Exchange Option, the
Compensation Warrants and the Common Shares issuable upon the
exercise of the Compensation Warrants at a price of $0.05 for a period of 36 months from the date of
issuance have not been and will not be registered under the United
States Securities Act of 1933, as amended (the "U.S. Securities
Act"), or any state securities laws, and may not be offered or
sold in the United States, to or
for the account or benefit of, persons in the United States or U.S. Persons (as defined
in Regulation S under the U.S. Securities Act) absent registration
or an applicable exemption from the registration requirements of
the U.S. Securities Act and in accordance with applicable state
securities laws. This press release shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be
any sale of the Debenture Units in any jurisdiction in which such
offer, solicitation or sale would be unlawful.
About Sugarbud
Sugarbud is a federally licensed, Alberta-based, craft cannabis company; focused
on the cultivation and production of superior, select-batch, craft
cannabis products. Our mission is to become a trusted and
well-respected brand - renowned for providing exceptionally
high-quality craft cannabis products, delighting the most
discerning of cannabis consumers and evolving the way people think
about incorporating cannabis into their daily lives.
Forward Looking and Cautionary Statements
This news release contains forward-looking statements. More
particularly, and without limitation, this news release contains
statements concerning: Sugarbud's assessment of future plans,
operations and cannabis cultivation, including with respect to the
Craft Cannabis Collection; the Offering, including the receipt, in
a timely manner, of regulatory and other required approvals and
clearances, including the approval of the TSXV; the number of
Debenture Units to be sold; the maximum gross proceeds of the
Offering; the number of Convertible Debentures, Warrants and
Compensation Warrants to be issued by the Company; the payment of
interest and the principal amount, and the conversion or exercise
of other rights attached to the Convertible Debentures, the
Warrants and the Compensation Warrants; the listing of the
Convertible Debentures, Secured Notes, Warrants and the Common
Shares issuable upon conversion of the Convertible Debentures or
the exercise of the Warrants and Compensation Warrants on the TSXV;
the exercise of the Over-Allotment Option; and the use of the net
proceeds of the Offering. When used in this document, the words
"will," "anticipate," "believe," "estimate," "expect," "intent,"
"may," "project," "should," and similar expressions are intended to
be among the statements that identify forward-looking
statements.
The forward-looking statements are founded on the basis of
expectations and assumptions made by Sugarbud. Forward-looking
statements are subject to a wide range of risks and uncertainties,
and although Sugarbud believes that the expectations represented by
such forward-looking statements are reasonable, there can be no
assurance that such expectations will be realized. Any number of
important factors could cause actual results to differ materially
from those in the forward-looking statements including, but not
limited to: establishing a trading market for the Convertible
Debenture, Secured Notes and Warrants; fluctuations in the market
price of the Common Shares, Convertible Debentures, Secured Notes
and Warrants; risks relating to the dilution of the Common Shares,
Convertible Debentures and Warrants; risks and uncertainties
relating to the actual use of the net proceeds of the Offering;
changes in market conditions; stock price volatility; Sugarbud may
not obtain the necessary regulatory approvals to list the
Convertible Debentures, Secured Notes, the Warrants and the Common
Shares issuable upon conversion of the Convertible Debentures and
the exercise of the Warrants and the Compensation Warrants on the
TSXV; currently contemplated expansion and development plans may
cease or otherwise change; production of cannabis may be lower than
expected, Sugarbud may not obtain the required approvals from
Health Canada, the size of the medical marijuana market and the
recreational marijuana market; government regulations, including
future legislative and regulatory developments involving medical
and recreational marijuana; construction delays; risks inherent in
the agricultural business, such as insects, plant diseases and
similar agricultural risks which can have a significant impact on
the size and quality of the harvest of cannabis crops; competition
from other industry participants; and other factors more fully
described from time to time in the reports and filings made by
Sugarbud with securities regulatory authorities. In addition, the
Company cautions that current global uncertainty with respect to
the spread of the COVID-19 virus and its effect on the broader
global economy may have a significant negative effect on the
Company. While the precise impact of the COVID-19 virus on the
Company remain unknown, rapid spread of the COVID-19 virus may have
a material adverse effect on global economic activity, and can
result in volatility and disruption to global supply chains,
operations, mobility of people and the financial markets, which
could affect interest rates, credit ratings, credit risk,
inflation, business, financial conditions, results of operations
and other factors relevant to the Company. Please refer to
Sugarbud's most recent annual information form and management's
discussion and analysis for additional risk factors relating to
Sugarbud, which can be accessed under Sugarbud's profile
on www.sedar.com.
Except as required by applicable laws, Sugarbud does not
undertake any obligation to publicly update or revise any
forward-looking statements.
Neither the TSXV nor its regulation services provider (as
that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this
release.
SOURCE SugarBud Craft Growers Corp.