The Flowr Corporation Announces a CAD $20 million Private Placement led by Insiders & Fourth Quarter Earnings Date
Flowr announces non-brokered private placement of convertible debenture units of $20 million, with ability to upsize to an aggregate of $25 million
Continued support by management and insiders who commit in excess of $10 million, led by Chairman and CEOGroup of major insiders agree to a voluntary 1-year lock-upFlowr will release fourth quarter earnings after the close on Wednesday, April 29th, 2020 and will host a conference call to review results on Wednesday, April 29th, 2020 at 5:30pm ET.TORONTO, April 21, 2020 (GLOBE NEWSWIRE) — 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; andthe 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 CALLThe 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: 1-833-227-5845
Webcast: flowrcorp.com/investorsConference call replay details are as follows:Toll Free: 1-800-585-8367
Webcast: flowrcorp.com/investorsThe replay of the conference call will be available through midnight on Wednesday, May 6, 2020.About The Flowr CorporationThe 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 Tolia
CEO and DirectorContact Info:INVESTORS & MEDIA:
Head of Capital Markets
(877) 356-9726 ext. 1528
[email protected]Forward-Looking Information and StatementsThis 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.