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HEXO Corp. (“HEXO”) acquired all of the common shares of Newstrike Brands Ltd. (“HIP”) in May 2019 on the basis of 0.06332 common shares of HEXO for every HIP common share. We did not acquire warrants of HIP and those warrants remained outstanding. However, following the acquisition, under the adjustment provisions for the warrants, each warrant became exercisable for 0.06332 common shares of HEXO rather than one HIP common share.
There is currently one class of HIP warrants that is trading on the TSX Venture Exchange, under the symbol “HIP.WT.A”. These HIP warrants have an exercise price of $1.00 each and an expiry date of June 19, 2023. Note the other class of HIP warrants that previously traded on the TSX Venture Exchange under the symbol “HIP.WT” which had an exercise price of $1.75 and an expiry date of February 16, 2020 has expired and was de-listed from the TSX Venture Exchange.
Effective December 17, 2020, HEXO consolidated its issued and outstanding common shares on the basis of one (1) post-consolidation share for every four (4) pre-consolidation shares. As a result of the consolidation, the acquisition rights under the HIP warrants have been adjusted.
In particular, the number of HEXO common shares subject to the right of purchase under each HIP warrant has been adjusted from 0.06332 of a HEXO share to 0.01583 of a HEXO share, and each HIP warrant is now exercisable at the exercise price of $1.00 to acquire 0.01583 of a HEXO share, rather than 0.06332 of a HEXO Share for which it was previously exercisable. No fractional HEXO shares will be issued and a fractional HEXO share would result, then the number of HEXO shares to be issued will be rounded down to the closest whole number of HEXO shares without any additional compensation or cost.
As a result of such adjustment, 63.17 HIP warrants would have to be exercised to acquire one HEXO share, at an exercise price of $1.00 each and an aggregate exercise price of $63.17 (as opposed to 15.79 HIP warrants having to be exercised to acquire one HEXO share, at an exercise price of $1.00 each and an aggregate exercise price o