/NOT FOR DISTRIBUTION OR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH
THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES
LAW./
CALGARY, Nov. 15, 2019
/CNW/ - Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT)
("Sugarbud") is pleased to announce a non-brokered
private placement (the "Private Placement") for gross
proceeds of $925,000 and the
execution of an agreement in respect of non-dilutive equipment
financing arrangements (the "Capital Equipment Financing").
Sugarbud is also pleased to announce a rights offering (the
"Rights Offering") to holders of common shares ("Common
Shares") of Sugarbud as of November 25,
2019 (the "Record Date") for proceeds of up to
approximately $5.2 million.
"Despite very challenging market conditions, we continue to make
good progress with our overall capital financing efforts to fuel
our expansion and strengthen our balance sheet, stated Sugarbud
CEO, John Kondrosky. We remain
mindful of overall shareholder value and continue to approach our
capital funding requirements in a measured and balanced
manner. Combined with a strong insider lead Private Placement,
significant non-dilutive Capital Equipment Financing and the
planned Rights Offering, Sugarbud is well positioned to drive
meaningful progress and sustainable growth heading into 2020",
added Mr. Kondrosky.
Pursuant to the Private Placement, Sugarbud will issue
18,500,000 units ("Units") of Sugarbud at a price of $0.05 per Unit, for total proceeds of
$925,000. Each Unit will be comprised
of one Common Share and one Common Share purchase warrant (each, a
"Warrant"). Each Warrant will entitle the holder to purchase
one Common Share at a price of $0.10
for a period of two years from the date of issuance, subject to
early expiry in the event that the 5-day volume weighted average
trading price of the Common Shares ("VWAP") equals or
exceeds $0.125.
The Common Shares and Warrants will be subject to a four month
hold period under applicable securities laws in Canada. The Private Placement is fully
subscribed and committed and is expected to close on or before
November 18, 2019, subject to
customary closing conditions, including the approval of the TSX
Venture Exchange (the "TSXV").
Due to the participation of directors, officers and other
insiders of Sugarbud, who are related parties of Sugarbud pursuant
to Multilateral Instrument 61-101 Protection of Minority
Security Holders in Special Transactions ("MI 61-101"),
the Private Placement will constitute a "related party transaction"
within the meaning of MI 61-101. In its consideration and approval
of the Private Placement, the board of directors of Sugarbud
determined that the Private Placement was exempt from the formal
valuation and minority approval requirements of MI 61-101 on the
basis that the fair market value of the Private Placement to
related parties did not exceed 25% of the market capitalization of
Sugarbud, in accordance with Sections 5.5 and 5.7 of MI 61-101.
Pursuant to the Capital Equipment Financing, Sugarbud has the
opportunity to utilize equipment financing to advance the final
build out and full scale-up of two existing cultivation rooms and
one new room. Under the terms of the agreement, Grand HVAC
will provide Sugarbud with $0.4
million in immediate vendor lease back funds for capital
equipment already deployed at the Company's cultivation facility in
Stavely, Alberta (the "Stavely
Facility"). The agreement has a six-year term and
includes the option to buyout the equipment. The Capital
Equipment Financing allows the Company to better utilize the
collateral value associated with its Stavely Facility.
The Company is pursuing similar financing terms for the
acquisition of additional HVAC, lighting and racking equipment
associated with the final scale-up of the two licensed cultivation
rooms Phase 1a and the first new cultivation room within Phase
1b. Such lease financing
would allow the Company to fund approximately 75% ($2.2 million) of the $3.0 million estimated costs associated with the
buildout.
Upon completion of this near-term capital expansion plan,
Sugarbud estimates that it will have a dried cannabis production
design capacity of approximately 4,150,550 – 5,836,800 grams
annually. Sugarbud expects the final scale up of Phase 1a to be
complete prior to starting their second harvest cycle in early Q1
2020 and the additional cultivation room in Phase 1b to be complete and fully licensed by Q3 of
2020.
Please click here to access and view an updated version of
the Company's corporate presentation.
Pursuant to the Rights Offering, each holder ("Eligible
Holder") of Common Shares as of the Record Date that is a
resident in any province of territory of Canada (other than Québec) (the "Eligible
Jurisdictions") will receive one transferable right (each, a
"Right") for every Common Share held. Every four
Rights will entitle the holder to purchase one Unit at a price of
$0.0550 until 4:00 p.m. (Calgary time) on the expiry date of
December 20, 2019 (the "Expiry
Date"), after which all outstanding Rights will terminate. Each
Unit will be comprised of one Common Share and one Warrant. The
Warrants issued pursuant to the Rights Offering will be on the same
terms as those issued pursuant to the Private Placement, including
early expiry upon the VWAP equaling or exceeding $0.125. Subscribers of Units under the Private
Placement will have a right to participate in the Rights Offering
with respect to any Common Shares acquired pursuant to the Private
Placement.
There will be no additional subscription privilege and no
standby commitment in respect of the Rights Offering. The
completion of the Rights Offering will not be subject to Sugarbud
receiving any minimum amount of subscriptions from Eligible
Holders.
The Rights Offering will be made in the Eligible Jurisdictions
and in such other jurisdictions where Sugarbud is eligible to make
such offering. Details of the Rights Offering will be described in
the rights offering circular (the "Rights Offering
Circular"), which will be filed on Sugarbud's profile on the
SEDAR website on the Record Date.
Subject to the receipt of final approval from the TSXV, the
Common Shares are expected to commence trading on the TSXV on an
ex-Rights basis at the opening of business on November 22, 2019. This means that Common Shares
purchased on or following November 22,
2019 will not be entitled to receive Rights under the Rights
Offering. At that time, the Rights are expected to be posted for
trading on a "when issued" basis on the TSXV under the symbol
"SUGR.RT". Trading of the Rights is expected to continue until
10:00 a.m. (Calgary time) on the Expiry
Date.
All shareholders of Sugarbud as of the Record Date will be
offered Rights. Accordingly, up to 94,349,114 Common Shares and up
to 94,349,114 Warrants will be subscribed for under the Rights
Offering. Only Eligible Holders will be issued and forwarded
certificates representing the number of Rights they are entitled to
("Rights Certificates").
Registered shareholders wishing to exercise their Rights must
forward the completed Rights Certificates along with the applicable
funds to the depositary for the Rights Offering, Computershare
Trust Company of Canada, by
4:00 p.m. on the Expiry Date.
Shareholders who own their Common Shares through an intermediary,
such as a bank, trust company, securities dealer or broker, will
receive materials and instructions from their intermediary.
The Rights Offering notice will be delivered to all shareholders
of Sugarbud as of the Record Date. Rights Certificates will not be
issued and forwarded to holders of Common Shares not resident in
the Eligible Jurisdictions.
Completion of the Rights Offering is subject to receiving all
necessary regulatory approvals, including, but not limited to,
final approval from the TSXV.
Sugarbud will raise gross proceeds of up to approximately
$5.2 million pursuant to the sale of
Common Shares and Warrants under the Rights Offering, assuming 100%
participation. Sugarbud will use the proceeds of the Private
Placement, Capital Equipment Financing and Rights Offering to
further develop its high capacity state-of-the-art vertical
cannabis cultivation facility in Stavely,
Alberta and for general working capital purposes.
About Sugarbud
Sugarbud is a federally licensed Alberta-based publicly traded cannabis company
focused on the cultivation and production of high-quality premium
cannabis, and product leadership through the development,
production and distribution of exceptional value-added cannabis
products in Canada.
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: the Private Placement, the Capital Equipment
Financing and the Rights Offering, including the terms, timing and
completion thereof, the use of proceeds therefrom and the number of
securities issued pursuant thereto; other proposed capital lease
arrangements; cannabis cultivation in the Stavely Facility,
including estimates regarding cannabis crop capacity; and
construction of additional cultivation rooms. 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, the receipt of required
regulatory and TSXV approvals, and the timing thereof, and other
factors more fully described from time to time in the reports and
filings made by Sugarbud with securities regulatory authorities.
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.
This press release is not an offer of the securities for sale in
the United States. The securities
may not be offered or sold in the United
States absent registration or an available exemption from
the registration requirements of the U.S. Securities Act of 1933,
as amended (the "U.S. Securities Act") and applicable U.S. state
securities laws. Sugarbud will not make any public offering of the
securities in the United States.
The securities have not been and will not be registered under the
U.S. Securities Act.
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
these securities, in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
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.