Sugarbud Files Final Short Form Prospectus for Convertible Debenture Unit Offering

Sugarbud Files Final Short Form Prospectus for Convertible Debenture Unit Offering

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.CALGARY, Alberta, June 15, 2020 (GLOBE NEWSWIRE) — Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT) (“Sugarbud” or the “Company”) is pleased to announce that it has filed and obtained a receipt for a final short form prospectus in each of the provinces of Canada, except Québec, in connection with its previously announced offering (the “Offering”) of convertible debenture units of the Company (the “Debenture Units”) at a price of $1,000 per Debenture Unit for gross proceeds of a minimum of $3.0 million and up to a maximum of $4.0 million. Mackie Research Capital Corporation (the “Agent“) is acting as agent in respect of the Offering.
Each Debenture Unit, including those sold pursuant to the Over-Allotment Option (as defined below), will consist of: (i) one 12.0% secured convertible debenture (each, a “Convertible Debenture“); and (ii) 20,000 common share purchase warrants of the Company (the “Warrants“). Each Warrant will entitle the holder to purchase one common share in the capital of the Company (each, a “Common Share“) at an exercise price of $0.05, at any time up to 36 months following the date of issuance.The Convertible Debentures shall bear interest at a rate of 12.0% per annum from the date of issue, payable semi-annually in arrears on the last day of June and December in each year, commencing June 30, 2020, and will have a maturity 36 months from the date of issuance (the “Maturity Date”). On the closing of the Offering (the “Closing Date“), an interest reserve account will be established and funded from the proceeds of the Offering in an amount equal to 12 months of interest payments (“Interest Reserve”). The Interest Reserve shall be used exclusively to fund the semi-annual interest payments to the holders.The principal amount of each Convertible Debenture will, at the option of the holder, be convertible, for no additional consideration, into Common Shares at a conversion price equal to: (i) $0.05, at any time prior to the date that is one year from the Closing Date; and (ii) $0.10, at any time following the date that is one year and one day from the Closing Date and prior to the earlier of: (i) the close of business on the Maturity Date; and (ii) the business day immediately preceding the date specified by the Company for redemption of the Convertible Debentures upon a change of control.  If the holder elects to convert the Convertible Debentures, then the holder will also receive an amount equal to the interest that the holder would have received if the holder had held the Convertible Debentures until the Maturity Date (the “Effective Interest“), payable in: (i) Common Shares at a price equal to the daily volume weighted average trading price of the Common Shares on the TSX Venture Exchange (the “TSXV“) for the consecutive 20 trading days preceding the date of such election; (ii) cash; or (iii) a combination of cash and Common Shares, at the Company’s option. Upon the Maturity Date and if the holder has not elected to convert the Convertible Debentures, the principal amount of the Convertible Debentures shall be repaid in cash by the Company.Each holder of Convertible Debentures may, at their option, any time following the date that is twelve months from the Closing Date, elect to exchange the aggregate principal amount of such holder’s Convertible Debentures for an equivalent aggregate principal amount of 15.0% secured non-convertible notes (each, a “Secured Note”) on a one for one basis (the “Exchange Option”). The Secured Notes shall bear interest at a rate of 15.0% per annum from the date of issue, payable semi-annually in arrears on the last day of June and December in each year, and will mature on the Maturity Date. Any accrued interest from the date of exchanging the Convertible Debentures for Secured Notes will be carried forward and be payable on the applicable interest payment date, together with the interest accruing from the Secured Notes beginning on the date of exchange.The Convertible Debentures and Secured Notes may, at the Company’s option, be prepaid in cash for an amount equal to 110% of the principal amount plus accrued interest at any time following the date that is twelve months from the Closing Date.The obligations of the Company under the Convertible Debentures and Secured Notes will be secured by way of a security interest in the purpose built 29,800 sq. ft. facility in Stavely, Alberta (the “Stavely Facility“) and shall be subordinate in priority and ranking to: (1) current senior indebtedness (“Existing Indebtedness“) of the Company for amounts up to $5.0 million, including any additional credit extended pursuant to Existing Indebtedness, or the assignment, assumption, transfer or replacement of such Existing Indebtedness with any other form of credit arrangement (“Alternative Indebtedness“) provided that: (A) the lender(s) in respect of such Alternative Indebtedness is a chartered Canadian or U.S. bank or a credit union formed under the Credit Union Act (Alberta) or similar legislation in any other province of Canada; and (B) Existing Indebtedness is paid out in full concurrent with the execution of a definitive credit agreement in respect of Alternative Indebtedness under which funds can be unconditionally drawn by the Company; and (2) any capital equipment financing in respect of the HVAC, lighting and other equipment at the Stavely Facility.The Company has granted the Agent an option (the “Over-Allotment Option“), exercisable from time to time in whole or in part, in the sole discretion of the Agent, up to 30 days from the Closing Date, to purchase up to an additional 15% of the number of Debenture Units (or the components thereof) sold pursuant to the Offering to cover over-allotments, if any, and for market stabilization purposes.The net proceeds received by Sugarbud from the Offering are intended to be used to expand its cultivation capabilities in Phase 1a of the Stavely Facility by an additional four (4) growing layers and for working capital and general corporate purposes. To accommodate the completion of Phase 1a, Sugarbud intends to use a portion of the proceeds of the Offering to: complete final installation of vertical racking equipment, HVAC, environmental control and lighting systems. The Company expects to complete construction of Phase 1a of the Stavely Facility by the end of 2020 which will have an estimated maximum annual production design capacity of between 3,308 and 3,891 kilograms.Upon a change of control of the Company, holders of the Convertible Debentures and Secured Notes will have the right to require the Company to repurchase their Convertible Debentures and Secured Notes, in whole or in part, on the date that is 30 days following the giving of notice of the change of control, at a price equal to 104% of the principal amount of the Convertible Debentures and Secured Notes then outstanding plus accrued and unpaid interest thereon (the “Offer Price“). If 90% or more of the principal amount of the Convertible Debentures and Secured Notes outstanding on the date of notice of the change of control have been tendered for redemption, the Company will have the right to redeem all of the remaining Convertible Debentures and Secured Notes at the Offer Price.Sugarbud will use commercially reasonable efforts to obtain the necessary approvals to list the Convertible Debentures, the Secured Notes, the Warrants and the Common Shares issuable upon conversion of the Convertible Debentures and the exercise of the Warrants and the non-transferrable compensation warrants to be issued to the Agent as additional consideration for the services rendered in connection with the Offering (“Compensation Warrants“) on the TSXV.The Offering is being made pursuant to a short-form prospectus filed in each of the provinces of Canada (except Québec), and otherwise by private placement exemption in those jurisdictions where the Offering can lawfully be made, including the United States. The Debenture Units, the Convertible Debentures and Warrants forming part of the Debenture Units, the Common Shares issuable upon conversion of the Convertible Debentures or the exercise of the Warrants, the Secured Notes issuable upon exercise of the Exchange Option, the Compensation Warrants and the Common Shares issuable upon the exercise of the Compensation Warrants at a price of $0.05 for a period of 36 months from the date of issuance have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“), or any state securities laws, and may not be offered or sold in the United States, to or for the account or benefit of, persons in the United States or U.S. Persons (as defined in Regulation S under the U.S. Securities Act) absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act and in accordance with applicable state securities laws. 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 the Debenture Units in any jurisdiction in which such offer, solicitation or sale would be unlawful. About SugarbudSugarbud is a federally licensed, Alberta-based, craft cannabis company; focused on the cultivation and production of superior, select-batch, craft cannabis products. Our mission is to become a trusted and well-respected brand – renowned for providing exceptionally high-quality craft cannabis products, delighting the most discerning of cannabis consumers and evolving the way people think about incorporating cannabis into their daily lives.
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