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
SugarbudSugarbud 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/
John Kondrosky Chief Executive
Officer Sugarbud Craft Growers Corp. Phone: (604) 499-7847
E-mail: johnk@sugarbud.ca
Investor Relations
Contact
Gary Perkins, President Tekkfund
Capital Corp. Tel: (416) 882-0020 E-mail:
garyperkins@rogers.comWebsite:
http://www.sugarbud.ca/Address: Suite 620, 634 -
6th Avenue S.W., Calgary, Alberta T2P 0S4
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.
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