Pauric Duffy (“
PD”) and Peter Comerford
(“
PC”) announce today that certain Series 1 voting
convertible redeemable preferred shares (the “
Preferred
Shares”) in the capital of The Flowr Corporation
(“
Flowr” or the “
Issuer”) will be
converted into Common Shares (as defined below) on February 20,
2020. PD and PC previously acquired, through DFT Trading Limited
(“
Pauric Holdco”) and Pleiades Trading Ltd.
(“
Peter Holdco”), respectively, indirect ownership
of an aggregate of 32,632,545 Preferred Shares (the
“
Consideration Shares”) as partial consideration
for the sale of their respective interests in Holigen Holdings
Limited (“
Holigen”). The sale of Holigen to Flowr
(the “
Acquisition”) was completed pursuant to a
share purchase agreement dated June 24, 2019, as amended, between
Flowr (as purchaser), Pauric Holdco and Peter Holdco (together, the
“
Vendors”) (as vendors), and Pleiades Holdings
Ltd. (“
Peter Topco”), DFT Holdings Limited
(“
Pauric Topco”), PC and PD (as guarantors) (the
“
SPA”). In connection with the SPA, the Vendors
entered into a share conversion agreement with Flowr (the
“
Conversion Agreement”) that sets out the process
for, and conditions to, conversion of the Consideration Shares into
common shares of the Issuer (“
Common Shares”).
This press release is being issued pursuant to Canadian early
warning requirements.
Pursuant to the terms of the Conversion Agreement,
on February 20, 2020, 40% of the Consideration Shares (the
“Converted Shares”) will convert to Common Shares
(the “Conversion”).
The Converted Shares, being 13,053,018 Preferred
Shares, immediately prior to the Conversion, represent
approximately 50% of the issued and outstanding Preferred Shares on
a non-diluted basis.
Together, immediately following the Conversion, PD
and PC (including, for certainty their joint actors) will
beneficially own, and have control and direction over 13,053,019
Preferred Shares, representing all of the issued and outstanding
Preferred Shares.
No consideration will be paid or received in
connection with the Conversion.
The conversion of the Converted Shares will be for
investment purposes. The Preferred Shares are subject to the terms
of escrow agreements dated as of the date of closing of the
Acquisition, in each case, among the applicable Vendor, Flowr and
The Laurel Hill Advisory Group Company, as escrow agent, (the
“Escrow Agreements”). In addition, in connection
with the closing of the Acquisition, each Vendor has entered into a
lock-up agreement with Flowr (collectively, the “Vendor
Lock-Up Agreements”), the Vendors have entered into the
Conversion Agreement and PD has entered into a governance agreement
with Pauric Holdco and Flowr (the “Governance
Agreement”). Subject to the terms of the SPA, the Escrow
Agreements, the Vendor Lock-Up Agreements, the Conversion Agreement
and the Governance Agreement, PD, PC and their respective joint
actors may, from time to time and at any time, acquire, as
applicable, additional Preferred Shares and/or Common Shares and/or
other equity, debt or other securities or instruments of Flowr in
the open market or otherwise, as applicable, and reserve the right
to dispose of any or all of the Preferred Shares and/or Common
Shares in the open market or otherwise at any time and from time to
time, and to engage in similar transactions with respect to the
Preferred Shares and/or Common Shares, the whole depending on
market conditions, the business and prospects of Flowr and other
relevant factors, including compliance with applicable securities
laws and the terms of the relevant agreements described herein.
Pursuant to the SPA, Flowr appointed PD to the
Flowr Board following the closing of the Acquisition.
Board Observer Right
Until the earlier of (i) the first business day on
which PD beneficially owns Preferred Shares and Common Shares (the
“Shares”) representing less than 10% of the then
issued and outstanding Common Shares on a partially diluted basis,
and (ii) the first business day on which PD ceases to be a director
of Flowr, PD has the right to appoint one non-voting observer to
attend and observe meetings of the Flowr Board, subject to such
observer first providing Flowr a confidentiality agreement in form
and content satisfactory to Flowr, acting reasonably.
Consent Right
Until the earlier of the first business day on
which (i) PD beneficially owns Shares representing less than 13% of
the then issued and outstanding Common Shares on a partially
diluted basis, and (ii) the conversion or redemption of all of the
Preferred Shares held by PD and his affiliates, the completion of a
Consent Transaction (as defined herein) by Flowr will require the
prior written consent of PD (not to be unreasonably withheld). This
consent right, however, will not restrict the board of directors of
Flowr (the “Flowr Board”) from exercising its
fiduciary duties to the Issuer. “Consent
Transaction” means either (A) a merger, amalgamation,
arrangement, reorganization, or other business combination or
similar transaction involving Flowr and/or any of its subsidiaries
in which (i) the consent or approval of the Flowr Board and the
holders of Common Shares is required to complete the transaction,
(ii) less than 10% of the total consideration payable pursuant to
the transaction is cash consideration, and (iii) the holders of
Common Shares on a partially diluted basis immediately before the
completion of the transaction would hold less than 50% of the
common shares or other equity securities of Flowr’s successor or of
the continuing or surviving entity immediately following the
completion of such transaction, assuming the conversion of all of
the Preferred Shares and Class A preferred shares of The Flowr
Canada Holdings ULC immediately prior to the completion of the
transaction; or (B) (i) a share sale transaction that would result
in a direct or indirect change of control of RPK Biopharma,
Unipessoal Lda. (“RPK”) or TCann Pty Ltd.
(“TCann”); or (ii) the sale of all or
substantially all of the assets of RPK or TCann (in the case of (i)
and (ii), to a person that is not an affiliate of Flowr, but for
avoidance of doubt does not include an internal reorganization the
result of which would have Flowr continue to have ultimate control
of such entities).
Standstill
Until the first business day on which PD and his
affiliates collectively beneficially own Shares (including other
equity rights convertible into shares or equity interests of Flowr)
representing less than 5% of the then issued and outstanding Common
Shares (on a partially diluted basis), PD and his affiliates will
not, directly or indirectly, without the prior written consent or
waiver by Flowr: (i) acquire, or agree to acquire, or make any
proposal to acquire, directly or indirectly, by means of purchase,
merger, consolidation, take-over bid, exchange offer, tender offer,
business combination, arrangement, amalgamation or in any other
manner, whether in one transaction or a series of transactions, any
securities or assets of Flowr or any of its subsidiaries, other
than conversion of Preferred Shares into Common Shares through the
process set out in the Conversion Agreement; or (ii) undertake
certain additional actions that may affect control of or which are
hostile to Flowr (including, among others as set out in the
Governance Agreement, initiating any shareholder proposals or
soliciting proxies, commencing any take-over bid or similar
transaction; acting alone or in concert with others to control
Flowr or any of its subsidiaries, assisting with the foregoing or
announcing any intention with respect to the foregoing).
Voting
Subject to compliance with applicable laws, in the
event that the holders of Preferred Shares are entitled to vote as
a separate class on a shareholder proposal, PD has agreed to vote
any Preferred Shares (and use commercially reasonable efforts to
cause all of the Preferred Shares owned or beneficially owned by PD
or any of his affiliates or over which PD or any of his affiliates
has voting control or the power to direct voting control), to be
voted in accordance with a recommendation of the Flowr Board.
Flowr’s head office is located at 60 Adelaide
Street East, Suite 1000, Toronto, Ontario, M5C 3E4. A copy of the
early warning reports with respect to the foregoing will appear on
Flowr’s profile on the System for Electronic Document Analysis and
Retrieval at www.sedar.com. A copy of the early warning report with
respect to PD may be obtained by contacting PD at +351 219 259 507.
A copy of the early warning report with respect to PC may be
obtained by contacting PC at +351 219 259 507.
Pauric DuffyLara
Buildings, Level 1 Guzeppi Calleja Street Iklin IKL 1264Malta
Peter
ComerfordLara Buildings, Level 1 Guzeppi Calleja
Street Iklin IKL 1264Malta
Forward-Looking Information and
Statements
This press release includes forward-looking
information within the meaning of Canadian securities laws
regarding Flowr and its business, which may include, but are not
limited to: statements with respect to the release date of Flowr's
financial results, Flowr’s investment in research and
development along with its sense of craftsmanship and a spirit of
innovation enabling it to provide premium-quality cannabis that
appeals to the adult-use recreational market and address specific
patient needs in the medicinal market and other factors.
Often, but not always, forward-looking information can be
identified by the use of words such as “plans”, “is expected”,
“expects”, “scheduled”, “intends”, “contemplates”, “anticipates”,
“believes”, “proposes” or variations (including negative and
grammatical variations) of such words and phrases, or state that
certain actions, events or results “may”, “could”, “would”, “might”
or “will” be taken, occur or be achieved. Such statements are based
on the current expectations of Flowr’s management and are based on
assumptions and subject to risks and uncertainties. Although
Flowr’s management believes that the assumptions underlying these
statements are reasonable, they may prove to be incorrect. The
forward-looking events and circumstances discussed in this press
release may not occur by certain specified dates or at all and
could differ materially as a result of known and unknown risk
factors and uncertainties affecting Flowr, including risks
associated with a delay in releasing Flowr’s financial
statements (which could result in a violation of applicable
laws), Flowr not being able to sustain its competitive advantage in
cultivation and being unable to remain at the forefront of industry
innovation, whether as a result of failed construction of the
facilities or otherwise, Flowr not being able to meet demand or
fulfill purchase orders, which could materially impact revenues and
its relationships with purchasers, Flowr requiring additional
financing from time to time in order to continue its operations and
such financing may not be available when needed or on terms and
conditions acceptable to the Company, new laws or regulations
adversely affecting the Company’s business and results of
operations, results of operation activities and development of
projects, project cost overruns or unanticipated costs and
expenses, the inability of Flowr’s products to be high quality, the
inability of Flowr’s products to appeal to the adult-use
recreational market and address specific patient needs in the
medicinal market, the inability of Flowr to produce and distribute
premium, high quality products, the inability to supply products or
any delay in such supply, Flowr’s securities, the inability to
generate cash flows, revenues and/or stable margins, the inability
to grow organically, risks associated with the geographic markets
in which Flowr operates and/or distributes its products, risks
associated with fluctuations in exchange rates (including, without
limitation, fluctuations in currencies), risks associated with the
use of Flowr’s products to treat certain conditions, the cannabis
industry and the regulation thereof, the failure to comply with
applicable laws, risks relating to partnership arrangements,
possible failure to realize the anticipated benefits of partnership
arrangements, product launches (including, without limitation,
unsuccessful product launches), the inability to launch products,
the failure to obtain regulatory approvals, economic factors,
market conditions, risks associated with the acquisition and/or
launch of products, the equity and debt markets generally, risks
associated with growth and competition (including, without
limitation, with respect to Flowr’s products), general economic and
stock market conditions, risks and uncertainties detailed from time
to time in Flowr’s filings with the Canadian Securities
Administrators and many other factors beyond the control of
Flowr. Although Flowr has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
information, there may be other factors that cause actions, events
or results to differ from those anticipated, estimated or intended.
No forward-looking information can be guaranteed. Except as
required by applicable securities laws, forward-looking information
speaks only as of the date on which it is made and Flowr undertakes
no obligation to publicly update or revise any forward-looking
information, whether as a result of new information, future events,
or otherwise.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this press release.
CONTACT INFORMATION:
INVESTORS:
Thierry Elmaleh
Head of Capital Markets
(877) 356-9726 ext. 1528
thierry@flowr.ca
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