Niagara-on-the-Lake, Ontario--(Newsfile Corp. - October 6, 2021) - Diamond Estates Wines & Spirits Inc. (TSXV: DWS) ("Diamond" or the "Company"), further to its press releases of August 5, 2021 and September 24, 2021, is pleased to announce the closing of (i) its acquisition of all of the issued and outstanding securities of Equity Wine Group Inc. ("Equity Wine", and such acquisition, the "Equity Wine Acquisition"), (ii) its acquisition of the Shiny Apple craft cider brand (the "Shiny Apple Brand") from Stonechurch Vineyard and Winery Holdings Inc. ("Stonechurch", such acquisition being the "Stonechurch Acquisition", and together with the Equity Wine Acquisition, the ("Acquisitions"), (iii) the issuance of $1,889,162 in equity upon the conversion of currently outstanding convertible debentures and accrued interest, and (iv) the issuance of $6,786,715 in equity through its previously announced private placement (the "Financing").
In connection with closing the Equity Wine Acquisition, the Company paid and issued to the shareholders of Equity Wine: (i) $1.5 million in cash (the "Equity Cash Payment"); (ii) $5.5 million in common shares of Diamond ("Common Shares"), being 30,555,557 Common Shares at a deemed issuance price of $0.18 per share (the "Equity Consideration Shares"); (iii) 22,916,670 common share purchase warrants (the "Equity Consideration Warrants") each entitling the holder to acquire one Common Share at an exercise price of $0.22 for a period of 36 months, and (iv) the assumption of the Equity Wine's term and operating debt of approximately $4.1 million with the Bank of Montreal. The Equity Consideration Shares and Equity Consideration Warrants will be subject to certain contractual restrictions on trading for a period of 12 months from the date of issuance with equal portions being released from escrow every quarter.
In connection with the closing the Stonechurch Acquisition, the Company acquired all of the rights and title to the Shiny Apple Brand from Stonechurch for aggregate consideration of $2.5 million, which was satisfied by a (i) closing cash payment of $1.1 million; (ii) $1.1 million earn-out payment (deposited into escrow by the Company on closing) payable quarterly over the course of 12 months following closing depending on sales targets being met, and (iii) $300,000 inventory holdback. Diamond and Stonechurch also entered into a production and co-packing agreement whereby Stonechurch will continue to produce the Shiny Apple Brand under Diamond's monitoring and oversight for a minimum period of 24 months.
The Financing
The Company closed its previously announced brokered private placement, conducted by Paradigm Capital Inc. (the "Agent"). The Financing consisted of the issuance of 37,703,975 units (the "Units") at a price of $0.18 per Unit for gross proceeds of $6,786,715 with each Unit consisting of one Common Share and three-quarters (¾) of one common share purchase warrant (each whole warrant, a "Warrant"). Each Warrant is exercisable to acquire one Common Share at an exercise price of $0.22 per Common Share for 36 months. The Units were sold to accredited investors in Canada in compliance with applicable securities laws. Pursuant to the terms of an agency agreement entered into between the Agent and the Company, the Agent received a cash fee equal to 6.0% of the aggregate gross proceeds of the Financing (the "Cash Commission"), subject to a reduced fee of 3.0% for Units sold to certain purchasers designated by the Company on a president's list (the "President's List"), and issued to the Agent broker warrants equal to 6.0% of the number of Units issued pursuant to the Financing (the "Broker Warrants"), subject to a reduced number of Broker Warrants equal to 3.0% of the aggregate number of Units sold to purchasers on the President's List. Each Broker Warrant entitles the holder to acquire one Unit (each, a "Broker Unit") at $0.18 per Broker Unit for a period for 24 months. Each Broker Unit consists of one Common Share and three-quarters (¾) of one common share purchase warrant (each whole warrant, a "Broker Unit Warrant"). Each Broker Unit Warrant is exercisable to acquire one Common Share at an exercise price of $0.22 per Common Share for 36 months. The Company paid an aggregate of $294,805 in Cash Commission and issued 1,636,807 Broker Units to the Agent.
Holders of the Company's 10% unsecured convertible debentures issued on June 10, 2021 in the aggregate principal amount of $1.83 million (the "Debentures") have each elected to have the Financing constitute an early maturity date pursuant to the terms of the Debentures, which Diamond has elected to satisfy pursuant to a shares for debt transaction. Therefore, the obligations of the Debentures will be extinguished, and Diamond has issued today, in satisfaction of $1,889,162 representing the principal and interest owing under the Debentures, 10,495,342 Units at a price of $0.18 per Unit to the debentureholder (the "Debt Conversion", and together with the Acquisitions and the Financing, the "Transactions".)
Certain directors and other insiders subscribed for a total of 10,953,433 Units for total gross proceeds of $1,971,617.94 under the Financing. Insiders also held all of the debentures which are the subject of the Debt Conversion. Participation by insiders is considered to be a "related party transaction" as defined in Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Financing and the Debt Conversion are exempt from the formal valuation and minority shareholder approval requirements of MI 61-101, as neither the fair market value of the securities being issued to insiders, nor the consideration being paid by such insiders, exceeds 25% of the Company's market capitalization. The Company did not file a material change report 21 days prior to the closing as the details of the participation of insiders of the Company had not been confirmed at that time.
None of the Units, Common Shares or warrants have been, nor will be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any U.S. state security laws, and may not be offered or sold in the United States without registration under the U.S. Securities Act and all applicable state securities laws or compliance with requirements of an applicable exemption therefrom. This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
All securities issued in connection with the Financing, the Equity Wine Acquisition, and the Debt Conversion are subject to a four-month hold period from the closing of the Transactions. The Company has used proceeds from the Financing to pay for the Acquisitions, and intends to use the balance of the net proceeds for general working capital purposes.
https://www.newsfilecorp.com/release/98840