/NOT FOR DISTRIBUTION OR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./

CALGARY, Nov. 15, 2019 /CNW/ - Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT) ("Sugarbud") is pleased to announce a non-brokered private placement (the "Private Placement") for gross proceeds of $925,000 and the execution of an agreement in respect of non-dilutive equipment financing arrangements (the "Capital Equipment Financing"). Sugarbud is also pleased to announce a rights offering (the "Rights Offering") to holders of common shares ("Common Shares") of Sugarbud as of November 25, 2019 (the "Record Date") for proceeds of up to approximately $5.2 million.

"Despite very challenging market conditions, we continue to make good progress with our overall capital financing efforts to fuel our expansion and strengthen our balance sheet, stated Sugarbud CEO, John Kondrosky. We remain mindful of overall shareholder value and continue to approach our capital funding requirements in a measured and balanced manner. Combined with a strong insider lead Private Placement, significant non-dilutive Capital Equipment Financing and the planned Rights Offering, Sugarbud is well positioned to drive meaningful progress and sustainable growth heading into 2020", added Mr. Kondrosky.

Pursuant to the Private Placement, Sugarbud will issue 18,500,000 units ("Units") of Sugarbud at a price of $0.05 per Unit, for total proceeds of $925,000. Each Unit will be comprised of one Common Share and one Common Share purchase warrant (each, a "Warrant"). Each Warrant will entitle the holder to purchase one Common Share at a price of $0.10 for a period of two years from the date of issuance, subject to early expiry in the event that the 5-day volume weighted average trading price of the Common Shares ("VWAP") equals or exceeds $0.125.

The Common Shares and Warrants will be subject to a four month hold period under applicable securities laws in Canada. The Private Placement is fully subscribed and committed and is expected to close on or before November 18, 2019, subject to customary closing conditions, including the approval of the TSX Venture Exchange (the "TSXV").

Due to the participation of directors, officers and other insiders of Sugarbud, who are related parties of Sugarbud pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Private Placement will constitute a "related party transaction" within the meaning of MI 61-101. In its consideration and approval of the Private Placement, the board of directors of Sugarbud determined that the Private Placement was exempt from the formal valuation and minority approval requirements of MI 61-101 on the basis that the fair market value of the Private Placement to related parties did not exceed 25% of the market capitalization of Sugarbud, in accordance with Sections 5.5 and 5.7 of MI 61-101.

Pursuant to the Capital Equipment Financing, Sugarbud has the opportunity to utilize equipment financing to advance the final build out and full scale-up of two existing cultivation rooms and one new room.  Under the terms of the agreement, Grand HVAC will provide Sugarbud with $0.4 million in immediate vendor lease back funds for capital equipment already deployed at the Company's cultivation facility in Stavely, Alberta (the "Stavely Facility").  The agreement has a six-year term and includes the option to buyout the equipment.  The Capital Equipment Financing allows the Company to better utilize the collateral value associated with its Stavely Facility.

The Company is pursuing similar financing terms for the acquisition of additional HVAC, lighting and racking equipment associated with the final scale-up of the two licensed cultivation rooms Phase 1a and the first new cultivation room within Phase 1b.  Such lease financing would allow the Company to fund approximately 75% ($2.2 million) of the $3.0 million estimated costs associated with the buildout.   

Upon completion of this near-term capital expansion plan, Sugarbud estimates that it will have a dried cannabis production design capacity of approximately 4,150,550 – 5,836,800 grams annually. Sugarbud expects the final scale up of Phase 1a to be complete prior to starting their second harvest cycle in early Q1 2020 and the additional cultivation room in Phase 1b to be complete and fully licensed by Q3 of 2020.

Please click here to access and view an updated version of the Company's corporate presentation.

Pursuant to the Rights Offering, each holder ("Eligible Holder") of Common Shares as of the Record Date that is a resident in any province of territory of Canada (other than Québec) (the "Eligible Jurisdictions") will receive one transferable right (each, a "Right") for every Common Share held.  Every four Rights will entitle the holder to purchase one Unit at a price of $0.0550 until 4:00 p.m. (Calgary time) on the expiry date of December 20, 2019 (the "Expiry Date"), after which all outstanding Rights will terminate. Each Unit will be comprised of one Common Share and one Warrant. The Warrants issued pursuant to the Rights Offering will be on the same terms as those issued pursuant to the Private Placement, including early expiry upon the VWAP equaling or exceeding $0.125. Subscribers of Units under the Private Placement will have a right to participate in the Rights Offering with respect to any Common Shares acquired pursuant to the Private Placement.

There will be no additional subscription privilege and no standby commitment in respect of the Rights Offering. The completion of the Rights Offering will not be subject to Sugarbud receiving any minimum amount of subscriptions from Eligible Holders.

The Rights Offering will be made in the Eligible Jurisdictions and in such other jurisdictions where Sugarbud is eligible to make such offering. Details of the Rights Offering will be described in the rights offering circular (the "Rights Offering Circular"), which will be filed on Sugarbud's profile on the SEDAR website on the Record Date.

Subject to the receipt of final approval from the TSXV, the Common Shares are expected to commence trading on the TSXV on an ex-Rights basis at the opening of business on November 22, 2019. This means that Common Shares purchased on or following November 22, 2019 will not be entitled to receive Rights under the Rights Offering. At that time, the Rights are expected to be posted for trading on a "when issued" basis on the TSXV under the symbol "SUGR.RT". Trading of the Rights is expected to continue until 10:00 a.m. (Calgary time) on the Expiry Date.  

All shareholders of Sugarbud as of the Record Date will be offered Rights. Accordingly, up to 94,349,114 Common Shares and up to 94,349,114 Warrants will be subscribed for under the Rights Offering. Only Eligible Holders will be issued and forwarded certificates representing the number of Rights they are entitled to ("Rights Certificates").

Registered shareholders wishing to exercise their Rights must forward the completed Rights Certificates along with the applicable funds to the depositary for the Rights Offering, Computershare Trust Company of Canada, by 4:00 p.m. on the Expiry Date. Shareholders who own their Common Shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.

The Rights Offering notice will be delivered to all shareholders of Sugarbud as of the Record Date. Rights Certificates will not be issued and forwarded to holders of Common Shares not resident in the Eligible Jurisdictions.

Completion of the Rights Offering is subject to receiving all necessary regulatory approvals, including, but not limited to, final approval from the TSXV.

Sugarbud will raise gross proceeds of up to approximately $5.2 million pursuant to the sale of Common Shares and Warrants under the Rights Offering, assuming 100% participation. Sugarbud will use the proceeds of the Private Placement, Capital Equipment Financing and Rights Offering to further develop its high capacity state-of-the-art vertical cannabis cultivation facility in Stavely, Alberta and for general working capital purposes.

About Sugarbud

Sugarbud is a federally licensed Alberta-based publicly traded cannabis company focused on the cultivation and production of high-quality premium cannabis, and product leadership through the development, production and distribution of exceptional value-added cannabis products in Canada.

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: the Private Placement, the Capital Equipment Financing and the Rights Offering, including the terms, timing and completion thereof, the use of proceeds therefrom and the number of securities issued pursuant thereto; other proposed capital lease arrangements; cannabis cultivation in the Stavely Facility, including estimates regarding cannabis crop capacity; and construction of additional cultivation rooms. 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, the receipt of required regulatory and TSXV approvals, and the timing thereof, and other factors more fully described from time to time in the reports and filings made by Sugarbud with securities regulatory authorities. 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.

This press release is not an offer of the securities for sale in the United States. The securities may not be offered or sold in the United States absent registration or an available exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and applicable U.S. state securities laws. Sugarbud will not make any public offering of the securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act.

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 these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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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