The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) (“Flowr” or the
“Company”) announced a non-brokered private placement for gross
proceeds of CAD$20,000,000 (the “Offering”), with the ability, at
the Company’s discretion, to upsize the amount to an aggregate
gross proceeds of CAD$25,000,000. The Company expects to use the
proceeds of the Offering for general working capital purposes.
Chairman & Chief Strategist Steve Klein and
Chief Executive Officer Vinay Tolia are leading the Offering with
commitments in excess of $10 million. Management and insiders
will continue to own approximately 58% of the shares of the Company
post financing on a fully diluted basis (including equity
incentives).
In addition, certain directors, officers,
employees and executives of Flowr, including Chairman & Chief
Strategist Steve Klein, Chief Executive Officer Vinay Tolia,
Founder and Managing Partner Thomas Flow, Managing Director, Europe
Pauric Duffy and Managing Director, Australia & Asia Pacific
Peter Comerford who currently collectively control approximately
58% of the Company have agreed to voluntary lock-up agreements (the
“Lock-Up Agreements”) in connection with the closing of the
Offering whereby all shares held by these shareholders will be
subject to restrictions on sale until released under the terms of
the Lock-Up Agreements on the 12-month anniversary of the closing
date of the Offering (the “Closing Date”).
The Offering consists of units of the Company
(the “Units”) at a price of CAD$1,000.00 per Unit. Each Unit
consists of one subordinated secured debenture of the Company
(each, a “Debenture”) and one common share (“Common Share”)
purchase warrant (each, a “Warrant”).
Each Debenture is comprised of CAD$1,000.00
principal amount of convertible debentures of the Company. The
Debentures will bear interest at a rate of 10.0% per annum from the
Closing Date, calculated semi-annually in arrears on June 30 and
December 31 of each year. Interest will, subject to TSX
Venture Exchange (“TSXV”) approval, be paid annually in Common
Shares and paid on December 31 of each year, with the last interest
payment to be paid on the fourth anniversary of the Closing Date
(the “Maturity Date”). Subject to TSXV approval, the conversion
price with respect to the Common Shares issued as payment in kind
on account of interest shall be the market price of the Common
Shares on the business day immediately prior to the conversion date
of such interest payment. Notwithstanding the foregoing, in the
event that the TSXV does not approve the payment of interest in
Common Shares for any particular interest payment period, such
interest shall instead be paid in cash pursuant to the debenture
indenture to be entered into between the Company and the
debentureholders.
The Debentures will be convertible into Common
Shares at the option of the debentureholder at any time and from
time to time prior to the Maturity Date upon such holder providing
five (5) business days’ notice to the Company. The conversion price
with respect to the Common Shares issued upon conversion of
Debentures is $0.58 per Common Share. Debentureholders
converting their Debentures will be entitled to receive accrued and
unpaid interest thereon for the period from and including the
date of the latest interest payment date, to and including the
date of conversion.
Any outstanding principal amount of the
Debentures not converted prior to the Maturity Date will be repaid
by the Company, at the election of the holders of the Debentures,
in cash or Common Shares on the Maturity Date.
Each Warrant entitles the holder thereof to
acquire one Common Share (each, a “Warrant Share”) at an exercise
price of $0.76 per Warrant Share (the “Exercise Price”) for a
period of 36 months from the closing date (the “Expiry Date”). Any
Warrants not exercised prior to the Expiry Date shall be deemed to
be void and of no further force and effect.
The Debentures will rank subordinate to any and
all current secured indebtedness and senior to any and all current
and future unsecured indebtedness of the Company and any and all
future secured indebtedness of the Company.
The closing of the Offering is currently
expected to occur on or about April 23, 2020, but is at the
discretion of the Company and is subject to certain conditions
including, but not limited to, receipt of approval of the TSXV as
well as finalization and execution of definitive documentation.
AltaCorp Capital Inc. ("AltaCorp") is
participating in this Offering as an advisor to the Company.
AltaCorp is a subsidiary of ATB Financial (“ATB”), which entered
into a credit agreement with the Company for access to debt
financing of up to CAD$25 million on November 18th, 2019 (the
“Credit Agreement”). ATB has consented to the Offering
pursuant to the terms of the Credit Agreement. As part of the
Offering, the Company and ATB have agreed to amend the terms of the
Credit Agreement (the “Amending Agreement”). The
Amending Agreement amends, among other things, the following:
- the CAD$3.5 million cash collateral account put into place on
the closing of the Credit Agreement will be used to permanently
paydown the credit facilities under the Credit Agreement on a
pro-rata basis;
- the inclusion of certain cash-flow reporting requirements and
additional certification requirements;
- the reduction of certain baskets under the Credit Agreement,
including permitted financial assistance and permitted investment
baskets being reduced from CAD$15 million to CAD$9.5 million;
and
- the entering into of a subordination agreement between the
senior lenders under the Credit Agreement and the debentureholders
under the Offering.
“Despite the challenging capital markets
environment, we are extremely fortunate to announce this financing
and to have continued support from management and insiders who have
been instrumental in Flowr’s founding, strategic direction and
financing since inception,” said Vinay Tolia, Flowr’s CEO. “This
capital is expected to enable Flowr to become cash flow positive in
H2 2020 as we build on our focus of delivering premium dry flower
to the Canadian marketplace driven by our flagship product BC Pink
Kush and other high THC strains we will be launching imminently as
all of our 20 grow rooms in our Kelowna 1 facility will soon be in
harvest cycles. We expect to continue to achieve premium
price points in the market with our optimized library of high THC
strains. Future revenue growth will be further enhanced with
contributions from Holigen given the recent receipt of our EU GMP
license in Portugal.”
A material change report in respect of the
Offering is expected to be filed less than 21 days before the
expected Closing Date, which the Company believes is reasonable in
the circumstances in order to facilitate an expeditious closing and
quicker improvement in the Company’s balance sheet and financial
position.
FOURTH QUARTER 2019 RESULTS RELEASE AND CONFERENCE
CALL
The Company will release its
fourth quarter 2019 results after the close of the financial
markets on Wednesday, April 29th, 2020, which will be followed by a
conference call and webcast to review these results on Wednesday,
April 29th at 5:30pm Eastern Time.
Conference call and webcast
details are as follows:
Toll Free:
1-833-227-5845Toll/International:
1-647-689-4072Webcast:
flowrcorp.com/investors
Conference call replay
details are as follows:
Toll Free:
1-800-585-8367 Toll/International:
1-416-621-4642Passcode: 6296956Webcast: flowrcorp.com/investors
The replay
of the conference call will be available through midnight on
Wednesday, May 6, 2020.
About The Flowr Corporation
The Flowr Corporation is a Toronto-headquartered cannabis
company with operations in Canada, Europe, and Australia. Its
Canadian operating campus, located in Kelowna, BC, includes a
purpose-built, GMP-designed indoor cultivation facility; an outdoor
and greenhouse cultivation site; and a state-of-the-art R&D
facility that is currently under construction. From this
campus, Flowr produces recreational and medicinal products.
Internationally, Flowr intends to service the global medical
cannabis market through its subsidiary Holigen, which has a license
for cannabis cultivation in Portugal and operates GMP licensed
facilities in Portugal and Australia.
Flowr aims to support improving outcomes through
responsible cannabis use and, as an established expert in cannabis
cultivation, strives to be the brand of choice for consumers and
patients seeking the highest-quality craftsmanship and product
consistency across a portfolio of differentiated cannabis
products.
For more information, please visit flowrcorp.com
or follow Flowr on Twitter: @FlowrCanada and LinkedIn: The Flowr
Corporation.
On behalf of The Flowr Corporation:
Vinay ToliaCEO and Director
Contact Info:
INVESTORS & MEDIA:Thierry ElmalehHead of Capital
Markets(877) 356-9726 ext. 1528thierry@flowr.ca
Forward-Looking Information and Statements
This press release contains “forward-looking
information” within the meaning of Canadian Securities laws, which
may include but is not limited to: the aggregate gross proceeds of
the Offering, including the Company’s ability to upsize the
Offering; commitments by management and insiders of the Company to
participate in the Offering; the intended use of proceeds of the
Offering; the Lock-Up Agreements, including the terms thereof;
conversion of the Debentures into Common Shares; the calculation of
interest on the Debentures and dates for payment thereof; the
conversion price for Common Shares issued as payment in kind on
account of interest on the Debentures, and TSXV approval thereof;
payments of interest on the Debentures being made in cash; the
repayment of any outstanding principal under the Debentures in cash
or Common Shares on the Maturity Date; the terms of the Warrants;
the ranking of the Debentures with respect to future indebtedness
of the Company; the anticipated Closing Date; receipt of
conditional approval from the TSXV for the Offering; the
finalization and execution of definitive documentation; the
entering into and terms of the Amending Agreement; Flowr becoming
cash flow positive, and the timeline therefor; Flowr’s focus on
delivering premium dry flower to the Canadian marketplace; the
launch of additional high THC strains by the Company, and the
timeline therefor; the grow rooms at Flowr’s Kelowna 1 facility
being in harvest cycle; Flowr continuing to achieve premium price
points; Holigen enhancing further revenue growth; the anticipated
timing for the Company filing a material change report in respect
of the Offering; the anticipated release date for the Company’s
annual financial results; Flowr servicing the global medical
cannabis market and operating GMP-designed manufacturing facilities
in Portugal and Australia; Flowr supporting improving outcomes
through responsible cannabis use and striving to be the brand of
choice for consumers and patients seeking highest-quality
craftmanship and product consistency; and Flowr’s business,
production and products. 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
information and 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 such information and 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 relating to: the
inability of Flowr to close the Offering on the anticipated
timeline, or at all; management and insiders of the Company being
unable to fulfill their commitments to participate in the Offering;
the Company being unable to use the proceeds of the Offering as
intended; the inability of the Company to make interest payments on
the Debentures on the scheduled dates for payment, or at all; the
inability of the Company to repay any outstanding principal under
the Debentures on the Maturity Date; the inability of the Company
to receive TSXV approval to make interest payments on the
Debentures in kind by issuing Common Shares; the inability of the
Company to incur any future indebtedness; the Company not receiving
approval from the TSXV for the Offering; the inability to finalize
and execute definitive documentation; the inability of the Company
to finalize terms and enter into the Amending Agreement; Flowr not
becoming cash flow positive on the anticipated timeline, or at all;
Flowr being unable to deliver premium dry flower to the Canadian
marketplace; the inability of the Company to launch additional high
THC strains on the anticipated timeline or at all; the inability of
the Company to complete harvests from its grow rooms at its Kelowna
1 facility; Flowr being unable to continue to achieve premium price
points; Holigen being unable to enhance further revenue growth for
the Company; the inability of the Company to file a material change
report with respect to the Offering on the anticipated timeline, or
at all; the Company being unable to release its annual financial
results on the anticipated timeline, or at all; Flowr being unable
to service the global medical cannabis market and/or operate
GMP-designed manufacturing facilities in Portugal and Australia;
Flowr being unable to support improving outcomes through
responsible cannabis use and/or striving to be the brand of choice
for consumers and patients seeking highest-quality craftmanship and
product consistency; the construction and development of the
Company’s cultivation and production facilities; general economic
and stock market conditions; adverse industry events; loss of
markets; future legislative and regulatory developments in Canada
and elsewhere; the cannabis industry in Canada generally; the
ability of Flowr to implement its business strategies; Flowr’s
inability to produce or sell premium quality cannabis, risks and
uncertainties detailed from time to time in Flowr’s filings with
the Canadian Securities Administrators; the Company’s inability to
raise capital or have the liquidity to operate or advance its
strategic initiatives 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 or statements, there may be other
factors that cause actions, events or results to differ from those
anticipated, estimated or intended. No forward-looking information
or statement can be guaranteed. Except as required by applicable
securities laws, forward-looking information and statements speak
only as of the date on which they are made and Flowr undertakes no
obligation to publicly update or revise any forward-looking
information or statements, whether as a result of new information,
future events or otherwise. When considering such forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in Flowr’s Annual
Information Form dated April 3, 2019 (the “AIF”) and filed with the
applicable securities regulatory authorities in Canada. The risk
factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
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