CALGARY, Alberta, March 30, 2022 (GLOBE NEWSWIRE) -- Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT, SUGR.WS, SUGR.WR, SUGR.DB) (OTCQB: SBUDF) ("Sugarbud" or the "Company") announces that it has agreed to amend the terms of its previously announced marketed public offering (the “Offering”) of convertible debenture units (each a "Debenture Unit") to: (i) lower the conversion price at which the convertible debentures of the Company (each a “Convertible Debenture”) are convertible into common shares of the Company (“Common Shares”) from $1.39 to $1.29 per Common Share, representing the closing market price of the Common Shares on March 30, 2022; (ii) lower the exercise price at which the Common Share purchase warrants of the Company (each a “Warrant”) will be exercisable from $1.39 to $1.29 per Warrant, (iii) revise the number of warrants per Debenture Unit from 719 Warrants to 775 Warrants, (iv) provide the Company an option, at their sole discretion, to pay the interest of the Convertible Debentures in Common Shares or cash, and (v) increase the size of the Offering to up to $3,000,000 in gross proceeds to the Company (which is expected to include management and/or insider participation) and also grant the Agent (as defined herein) the option to increase the size of the Offering by an additional 15%. The Company has also agreed to use commercially reasonable efforts to obtain the necessary approvals to list the Convertible Debentures and the Warrants on the TSX Venture Exchange (the "TSXV"). The remainder of the terms of the Offering continue without further amendment. The Offering is being led by Research Capital Corporation as the sole agent and sole bookrunner (the “Agent”).
Each Debenture Unit will consist of: (i) one 12.0% secured Convertible Debenture; and (ii) 775 Warrants. Each Warrant will entitle the holder to purchase one Common Share at an exercise price of $1.29, for a period of 5 years following the closing of the Offering.
The Debentures will bear interest at a rate of 12.0% per annum from the date of issue, payable on a quarterly basis, and will be: (i) paid in-kind in Common Shares based on the daily volume weighted average trading price for the 20 trading days preceding the date of interest payment or (ii) in cash, at the Company’s option. The Convertible Debentures will mature 5 years from the closing of the Offering (the "Maturity Date") and the principal amount of the Debenture will be repaid in cash only.
The principal amount of each Convertible Debenture will be convertible into Common Shares at the option of the holder at a conversion price equal to $1.29. 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, payable in: (i) Common Shares based on the daily volume weighted average trading price for the 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 (the “Make-Whole Provision”).
Each holder of Convertible Debentures may, at their option, elect to exchange the aggregate principal amount of such holder's Convertible Debentures for an equivalent aggregate principal amount of 15.0% non-convertible secured notes expiring on the Maturity Date (each, a "Secured Note") on a one for one basis at any time prior to the Maturity Date (the "Exchange Option"). Any accrued interest from the date of exchanging the Convertible Debentures into 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 shall be secured by a security interest in the Company’s Stavely facility (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 70% Loan to Value against the Company’s Stavely facility, 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 Convertible Debentures and Secured Notes shall rank equally with the outstanding convertible debentures of the Company issued in June 2020.
The Company has granted to the Agent an option (the “Over-Allotment Option”) to increase the size of the Offering by up to an additional number of Debenture Units, and/or the components thereof, that in aggregate would be equal to 15% of the total number of Debenture Units (or the securities underlying the Debenture Units) to be issued under the Offering, to cover over-allotments, if any, and for market stabilization purposes, exercisable at any time and from time to time up to 30 days following the closing of the Offering.
The net proceeds from the Offering are intended to be used for additional processing and production equipment purchases, facility upgrades and working capital and other corporate purposes.
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.
The Company will use commercially reasonable efforts to obtain the necessary 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 to be issued to the Agent as additional consideration for the services rendered in connection with the Offering ("Compensation Warrants") on the TSXV.
The closing of the Offering is expected to occur on or about the week of April 11, 2022 and is subject to certain conditions including, but not limited to, the execution of an agency agreement and the receipt of all necessary regulatory approvals, including the approval of the TSXV.
In connection with the Offering, the Company intends to file a prospectus supplement (the "Supplement") to the Company's short form base shelf prospectus dated February 26, 2021 (the "Shelf Prospectus"), with the securities regulatory authorities in each of the provinces of Canada, except Quebec. Copies of the Shelf Prospectus and, the Supplement to be filed in connection with the Offering, can be found on SEDAR at www.sedar.com. The Shelf Prospectus contains, and the Supplement will contain, important detailed information about the Company and the Offering. Prospective investors should read the Supplement and accompanying Shelf Prospectus and the other documents the Company has filed on SEDAR at www.sedar.com before making an investment decision.
This press release is not an offer to sell or the solicitation of an offer to buy the securities in the United States or in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification or registration under the securities laws of such jurisdiction. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from U.S. registration requirements and applicable U.S. state securities laws.
CORPORATE UPDATE
The Company has entered a 6-month marketing and consulting contract with Toronto based marketing firm, North Equities Corp. (the "Contract"). North Equities Corp. specializes in various social media platforms and will be able to facilitate greater awareness and widespread dissemination of the Company's news.
In connection with the Contract, the Company will pay North Equities $100,000 CAD. North Equities currently owns 0 shares of the Company.
About Sugarbud
Sugarbud is a leading consumer-driven craft cannabis company focused on the cultivation and production of superior, select-batch, craft cannabis products. The Sugarbud Craft Cannabis Collection offers consumers "Hand-Crafted Cannabis for a New Era". The Company is proudly Albertan and is proud to share Western Canada's long tradition of exceptional craft cannabis with the most discerning of enthusiasts.
Sugarbud strives to define the intersection of product craftsmanship, quality, and value for consumers in the Canadian craft cannabis space. Our vision and mission are to become a trusted and well-respected consumer brand renowned for providing exceptional high-quality craft cannabis products to legal markets.
We Take Pride.
We Take Our Time.
Experience The Difference.
Sugarbud Craft Cannabis products are currently available to adult recreational consumers in the Yukon Territory, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and nationally to registered medical patients through MendoCannabis.ca. Sugarbud products are also distributed in the Province of Quebec through ROSE LifeScience.
CONTACTS:
John Kondrosky
Chief Executive Officer
Sugarbud Craft Growers Corp.
Phone: (604) 499-7847
E-mail: johnk@sugarbud.ca