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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of Report (Date of earliest event reported):
August 19,
2022
Lowell Farms
Inc.
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(Exact name of registrant as specified in its
charter)
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British Columbia, Canada
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000-56254
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N/A
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(State or other jurisdiction
of incorporation)
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(Commission
file number)
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(IRS Employer
Identification Number)
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19 Quail Run Circle, Suite BSalinas,
California 93907
(Address of principal executive offices)
(831) 998-8214
(Registrant’s telephone number, including area
code)
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
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Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading
Symbol(s)
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Name of each exchange
on which registered
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N/A
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N/A
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N/A
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17
CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 1.01. Entry into a Material Definitive
Agreement.
The information set forth in Item 3.02 regarding the Private
Placement is hereby incorporated by reference into this Item
1.01.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The information set forth in Item 3.02 regarding the Private
Placement is hereby incorporated by reference into this Item
2.03.
Item 3.02. Unregistered Sales of Equity
Securities.
On August 19, 2022, Lowell Farms Inc. (the “Company”) and Indus
Holdings Company (“Indus”), a wholly-owned subsidiary of the
Company, completed a US $4.2 million non-brokered private placement
of convertible debentures and warrants (the “Private
Placement”).
Pursuant to the subscription agreements entered into in connection
with the Private Placement (the “Subscription Agreements”), Indus
sold senior secured convertible debentures, maturing on October 13,
2023 (“Debentures”), for aggregate gross proceeds of US $4.2
million. The Debentures bear a fixed interest rate of 5.5% per
annum and will mature on October 13, 2023. Each Debenture is
convertible into non-voting common shares of Indus (“Indus Shares”)
at a conversion price of $0.2313. Such Indus Shares are redeemable
at the option of the holder for subordinate voting shares of the
Company (“Shares”) on a one-for-one basis. Each purchaser of a
Debenture received, for no additional consideration, (i) a warrant
for the purchase of a number of Shares equal to the number of Indus
Shares into which the Debenture is convertible (the “Company
Warrant”) and (ii) a warrant for the purchase of a number of Indus
Shares equal to 150% of the number of Indus Shares into which the
Debenture is convertible (the “Indus Warrant,” together with the
Company Warrant, the “Warrants”). Each Warrant is exercisable at
any time until February 19, 2026 at an exercise price of US $0.2613
per share, subject to customary anti-dilution adjustments.
Investors will have the right to require the Company to repurchase
their Indus Warrants and any Indus Warrant Shares issued following
exercise of the Indus Warrants on a Share-equivalent basis (i) in
connection with a sale of the Company or substantially all of its
assets (a “Sale Transaction”), in the event the Indus Warrants and
Indus Warrant Shares are not included in the Sale Transaction on
terms that are economically equivalent to the treatment of the
Shares, at a purchase price equal to the consideration per Share
paid in the Sale Transaction and (ii) upon expiration of the Indus
Warrants, at a purchase price per Share equal to the average
closing price for the Shares over the 30 trading-day period ending
three trading days prior to the last day of the Indus Warrant
exercise period. The foregoing prices are payable in cash or, if
legally permissible and the Company applies for and obtains all
necessary regulatory approvals (including, without limitation, the
approval of any stock exchange on which the Shares are listed), in
Shares.
As further consideration for their investments in the Debentures,
the expiration date applicable to previously issued warrants held
by certain investors will be extended from October 13, 2023 to
April 13, 2025 and, if applicable regulatory approvals are
obtained, will be further extended to February 19, 2026.
The Debentures are part of the same series of convertible
debentures issued in connection with the Company’s and Indus’s
April 2020 financing (“2020 Debentures”). The amounts due under the
Debentures and the 2020 Debentures are secured on a pari passu
basis by substantially all assets of the Company (other than the
Company’s Monterey County processing facility).
Proceeds from the Private Placement are contemplated to be used for
working capital purposes, automation investments and expansion into
new markets.
Certain officers and directors of the Company purchased an
aggregate of $2,415,000 in Debentures and accompanying Warrants
pursuant to the Private Placement on the same terms as the other
participants in the Private Placement. Participation by such
insiders of the Company in the Private Placement was considered a
"related party transaction" under relevant U.S. and Canadian
securities laws and was approved by the disinterested directors of
the Company.
The Debentures, their components and underlying securities were
offered and will be issued in reliance upon Rule 506(b) of
Regulation D promulgated under the Securities Act of 1933, as
amended (the “Securities Act”), as a transaction not requiring
registration under Section 5 of the Securities Act. Each investor
represented that it is an accredited investor and that it is
acquiring the securities for investment purposes only and not with
a view to any resale, distribution or other disposition of such
securities in violation of the United States federal securities
laws. Securities issued in the Private Placement are "restricted
securities" under the Securities Act and may not be transferred,
sold or otherwise disposed of unless they are subsequently
registered or an exemption is available under the Securities Act.
Neither this Current Report on Form 8-K, nor the exhibits attached
hereto, is an offer to sell or the solicitation of an offer to buy
the securities described herein.
The foregoing summaries of the terms of the Subscription
Agreements, Debentures and Warrants do not purport to be complete
and are qualified in their entirety by reference to the complete
text of the form of Subscription Agreement, which is attached
hereto as Exhibit 10.1 and is incorporated herein by reference, to
the complete text of the form of Debenture, which is attached
hereto as Exhibit 10.2 and is incorporated herein by reference, to
the complete text of the form of Company Warrant, which is attached
hereto as Exhibit 10.3 and is incorporated herein by reference, and
to the complete text of the form of Indus Warrant, which is
attached hereto as Exhibit 10.4 and is incorporated herein by
reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
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Lowell Farms Inc. |
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Date: August 19, 2022 |
By: |
/s/ Brian Shure |
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Name: Brian Shure |
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Title: Chief Financial Officer |
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