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CALGARY, April 28, 2020 /CNW/ - Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT) ("Sugarbud" or the "Company") is pleased to announce that as part of the previously announced third-party licensing and distribution agreement with Agro-Greens Natural Products Ltd. it will officially launch its Craft Cannabis Collection of adult use recreational cannabis products on June 23, 2020. Sugarbud is also pleased to announce that it has filed and been receipted for a preliminary short-form prospectus with the securities regulatory authorities in all provinces of Canada (except Québec) in connection with a commercially reasonable "best efforts" marketed public offering (the "Offering") of secured convertible debenture units (each, a "Debenture Unit") at a price of $1,000 per Debenture Unit for gross proceeds of up to a maximum of $4.0 million. Mackie Research Capital Corporation (the "Agent") will act as sole book-runner and agent in respect of the Offering.

READ: Sugarbud Announces Brand Licensing & Distribution Agreement with Agro-Greens Natural Products, Updates Timing on Entry into Authorized Provincial Retail Sales

Sugarbud Craft Cannabis Collection

"Comprised of some of the most exquisite and exclusive strains, the Sugarbud Craft Cannabis Collection promises to deliver an exceptional experience to even the most discerning of customers," stated Sugarbud CEO, John Kondrosky.  "In addition to the consistency of our flower, we view potency and terpene profiles to be a very strong indicator of quality and, based upon our results to date, we could not be more thrilled with what we have currently in our new product pipeline," continued Mr. Kondrosky. "Our operating and cultivation teams continue to execute extremely well and in a manner consistent with our vision to deliver superior products to legal markets in Canada. With an average total THC value of 23.6%¹ across our entire first harvest, we view the results we have achieved to date as a clear indication of superior outcomes and we have every reason to believe that our approach to the cultivation of ultra-premium craft cannabis will consistently deliver on our commitment to quality and an exceptional consumer experience," continued Mr. Kondrosky.

"The launch of the Sugarbud Craft Cannabis Collection and our entry into the recreational cannabis market in Canada represents both a pivotal and transformational catalyst for growth and value creation for Sugarbud," concluded Mr. Kondrosky.

Public Offering of Convertible Debenture Units

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.

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 during 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. 

The closing of the Offering is currently expected to be on or about the week of May 18, 2020 and is subject to certain conditions including, but not limited to the execution of an agency agreement and the receipt of all necessary regulatory approvals including the approval of the TSXV. 

Overview of Sugarbud's Operations

Sugarbud operates a purpose built 29,800 sq. ft. facility in Stavely, Alberta for the cultivation of high quality, ultra-premium cannabis. As at the date hereof, the Company has substantially completed construction of, and fully occupies, Phase 1a of the Stavely Facility. Phase 1a includes two dedicated flower rooms with 28-foot ceilings allowing up to four vertical grow layers per room, which the Company estimates will have an approximate maximum annual production design capacity of between 3,308 and 3,891 kilograms. Sugarbud is positioned to unlock significant shareholder value with its anticipated increase in production capacity upon completion of Phase 1, inclusive of Phase 1b and 1c.

Sugarbud has recently entered into a third-party licensing, contract manufacturing and distribution agreement with Agro-Greens Natural Products Ltd. to sell and distribute Sugarbud's Craft Cannabis Collection products, including craft cannabis dried flower and pre-rolls, to authorized provincial wholesalers and retailers in Alberta, British Columbia and Saskatchewan. Under the terms of this agreement and subject to customary regulatory approvals and new product notifications, Sugarbud now expects to begin shipping its Sugarbud branded craft cannabis dried flower products to authorized provincial wholesalers and retailers within the next 75 – 90 days, significantly earlier than the late Q3 launch date provided in previous guidance. In addition, Sugarbud has also entered into a provincial wholesale distribution and supply agreement with National Cannabis Distribution for the Province of Saskatchewan, and previously entered into supply agreements with Adastra Labs Holding Ltd. and Heritage Cannabis Holdings Corp. The Company submitted its sales license amendment for dried cannabis to Health Canada in February 2020 and expects to receive approval in the second half of 2020.

About Sugarbud

Sugarbud is a federally licensed Alberta based craft cannabis company, focused on the cultivation and production of genetically diverse, exceptionally high quality, select-batch cannabis products. Our mission is to delight the most discerning cannabis consumer and evolve the way people think about incorporating cannabis into their daily lives.

http://www.sugarbud.ca/

Forward Looking and Cautionary Statements

This news release contains forward-looking statements. More particularly, and without limitation, this news release contains statements concerning: Sugarbud's assessment of future plans, operations and cannabis cultivation, including with respect to the Craft Cannabis Collection; the Offering, including the receipt, in a timely manner, of regulatory and other required approvals and clearances, including the approval of the TSXV; the number of Debenture Units to be sold; the maximum gross proceeds of the Offering; the number of Convertible Debentures, Warrants and Compensation Warrants to be issued by the Company; the payment of interest and the principal amount, and the conversion or exercise of other rights attached to the Convertible Debentures, the Warrants and the Compensation Warrants; the listing of the Convertible Debentures, Secured Notes, Warrants and the Common Shares issuable upon conversion of the Convertible Debentures or the exercise of the Warrants and Compensation Warrants on the TSXV; the exercise of the Over-Allotment Option; and the use of the net proceeds of the Offering. 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: establishing a trading market for the Convertible Debenture, Secured Notes and Warrants; fluctuations in the market price of the Common Shares, Convertible Debentures, Secured Notes and Warrants; risks relating to the dilution of the Common Shares, Convertible Debentures and Warrants; risks and uncertainties relating to the actual use of the net proceeds of the Offering; changes in market conditions; stock price volatility; Sugarbud may not obtain the necessary regulatory approvals to list the Convertible Debentures, Secured Notes, the Warrants and the Common Shares issuable upon conversion of the Convertible Debentures and the exercise of the Warrants and the Compensation Warrants on the TSXV; currently contemplated expansion and development plans may cease or otherwise change; production of cannabis may be lower than expected, Sugarbud may not obtain the required approvals from Health Canada, the size of the medical marijuana market and the recreational marijuana market; government regulations, including future legislative and regulatory developments involving medical and recreational marijuana; construction delays; risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks which can have a significant impact on the size and quality of the harvest of cannabis crops; competition from other industry participants; and other factors more fully described from time to time in the reports and filings made by Sugarbud with securities regulatory authorities. In addition, the Company cautions that current global uncertainty with respect to the spread of the COVID-19 virus and its effect on the broader global economy may have a significant negative effect on the Company. While the precise impact of the COVID-19 virus on the Company remain unknown, rapid spread of the COVID-19 virus may have a material adverse effect on global economic activity, and can result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company. 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.

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.

SOURCE SugarBud Craft Growers Corp.

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