/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 24, 2020 /CNW/ - Sugarbud Craft Growers
Corp. (TSXV: SUGR, SUGR.WT) ("Sugarbud" or the
"Company") is pleased to announce the closing of its
previously announced public offering (the "Offering") of
secured convertible debenture units of the Company (each, a
"Debenture Unit"), for aggregate gross proceeds of
$4,000,000 (the "Offering").
The Offering was led by Mackie Research Capital Corporation as sole
bookrunner and lead agent (the "Agent").
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 4,000 sq. ft. of bloom
canopy across four new layers of vertical cultivation space 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
additional HVAC equipment, vertical racking systems, environmental
controls and LED lighting. The Company expects to complete these
capacity upgrades to Phase 1a by the end of 2020, supporting the
growth of its Craft Cannabis Collection which is comprised of
superior high potency, terpene-rich dried flower and pre-roll
cannabis products.
"We are very pleased with the result of our public offering of
secured convertible debentures and warrants, and view the outcome
as yet another strong vote of confidence in the combined leadership
of our management team, a very disciplined and focused business
model and most importantly our ability to deliver strong
operational and financial results," stated Sugarbud's Chief
Executive Officer, John
Kondrosky.
"Together with the recently announced Credit Facility with First
Calgary, the successful conclusion of our public offering further
strengthens our balance sheet and provides the Company with a
strong foundation and the additional working capital necessary to
continue to successfully execute against our primary growth
objectives and priorities," concluded Mr. Kondrosky.
Each Debenture Unit, including those sold pursuant to the
Over-Allotment Option (as defined below), consists 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 entitles 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 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 are 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 Offering is subject to the final approval of the TSXV. The
TSXV has conditionally approved the listing of the Convertible
Debentures and Warrants. It is expected that the Convertible
Debentures and Warrants will commence trading on the TSXV within
two trading days under the trading symbols "SUGR.DB" and "SUGR.WS",
respectively.
In consideration for the services provided by the Agent, the
Company issued an aggregate of 12,800,000 non-transferable broker
warrants (the "Broker Warrants") to the Agent. The Broker
Warrants are exercisable into Common Shares at a price $0.05 per Common Share at any time up to 36
months following the date of issuance.
The Offering was 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.
Corporate Update
The Company also announces Bill
Macdonald has resigned as a director of the Company
effective immediately. The Company wishes to thank Mr. Macdonald
for his many valuable contributions over the years.
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.
http://www.sugarbud.ca/
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; the Offering, including the
receipt, in a timely manner, of regulatory and other required
approvals and clearances, including the final 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, 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 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,
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.