VANCOUVER, British Columbia, March 18, 2019 /CNW/ --
Not For Distribution to U.S. Newswire Services or For Dissemination in the United States
HEMPTOWN ORGANICS CORP. ("Hemptown" or the "Company") is pleased to announce that it has entered into an agreement with Canaccord Genuity Corp. ("Canaccord Genuity") pursuant to which Canaccord Genuity has agreed to act as lead agent on behalf of a syndicate of investment dealers to be named in connection with a best efforts offering (the "Brokered Offering") of convertible debenture units of the Company (the "Units") at a price of C$1,000 per Unit, for gross proceeds of up to C$15,000,000.
Alongside the Brokered Offering, the Company is also undertaking a non-brokered offering (the "Non-Brokered Offering" and together with the Brokered Offering, the "Offerings") of up to an additional C$15,000,000 in Units on the same terms as the Brokered Offering.
Each Unit will consist of (i) one 9.0% unsecured convertible debenture (each, a "Convertible Debenture") of the Company in the principal amount of C$1,000, (ii) one common share purchase warrant of the Company (each, a "Warrant") to provide for 50% warrant coverage in context of the Liquidity Event Price (as defined below), and (iii) a right (a "Right") exercisable for no additional consideration and with no further action on the part of the holder thereof to acquire an additional 10% principal amount of Convertible Debentures in the event the Company does not complete a Liquidity Event (as defined below) on or before the Liquidity Deadline (as defined below). The Convertible Debentures mature two years following the date of issuance and will bear simple interest at a rate of 9.0% per annum from the date of issue, payable semi-annually on the last day of December and June in each year, commencing June 30, 2019. The Convertible Debentures will (i) automatically convert into common shares of the Company (the "Conversion Shares") upon the announcement of a Liquidity Event, and (ii) be convertible into Conversion Shares at the option of the holder upon the Maturity Date at a conversion price (the "Conversion Price") equal to the lesser of a 30% discount to the Liquidity Event Price, or C$2.00 per share.
A "Liquidity Event" will mean the occurrence of any of the following, which results in the common shares or other equity securities of the Company (or of any resulting issuer) being listed on a recognized stock exchange in Canada or the United States: (i) the Company completing a bona-fide initial public offering of common shares or other equity securities under a prospectus filed with securities regulatory authorities in Canada (a "Public Offering Transaction"); or (ii) the consummation of any transaction including, without limitation, any consolidation, amalgamation, merger, plan of arrangement, reverse take-over, qualifying transaction, change of business or any other business combination or similar transaction (a "RTO/Merger Transaction").
The "Liquidity Event Price" will be: (i) in the event of a Public Offering Transaction, the price at which the common shares or other equity securities of the Company are issued and sold to the public; or (ii) in the event of an RTO/Merger Transaction, the price attributed to the Company's common shares in that transaction or deemed issue price of the Company's common shares (or the common shares or other equity securities of the resulting issuer) issued pursuant to the RTO/Merger Transaction.
Each Warrant will entitle the holder thereof to acquire such number of common shares of the Company equal to 50% of the number of Conversion Shares that the Convertible Debenture to which the Warrant relates to at an exercise price equal to a 50% premium to the Liquidity Event Price for a period of two years following the Liquidity Event, subject to adjustment in certain events and exchange and regulatory approval (if applicable). The Rights shall be exercisable for no additional consideration (and with no further action on the part of the holder thereof) if the Company fails to complete a Liquidity Event on or prior to 5:00 p.m. (EST) on the date (the "Liquidity Deadline") that is 18 months following the closing of the Offerings.
The Company intends to use the net proceeds from the Offerings for capital projects and other general corporate purposes.
The closing date of the Brokered Offering will be on or about April 9, 2019, while the closing date of the Non-Brokered Offering will be on or about March 29, 2019. The Company reserves the right to increase the Offerings at its discretion.
The Units will be offered and sold by private placement: (i) in Canada to "accredited investors" within the meaning of National Instrument 45-106 – Prospectus Exemptions and other exempt purchasers in each province of Canada; (ii) in the United States pursuant to applicable exemptions from the registration requirements of the United States Securities Act of 1933, as amended, and applicable state securities laws; and (iii) outside Canada and the United States on a basis which does not require the qualification or registration of any of the Convertible Debentures, Warrants or Rights comprising the Units.
The Units shall be subject to applicable hold periods on resale restrictions imposed under applicable securities legislation. Since the Company is not currently a reporting issuer in any jurisdiction in Canada, the Convertible Debentures, the Warrants, the Rights and the securities issuable thereunder will be subject to an indefinite hold period under Canadian securities law. The Liquidity Event is to be structured such that upon the occurrence of the Liquidity Event the Convertible Debentures, the Warrants and the securities issuable upon exercise or conversion thereof will not be subject to resale restrictions under National Instrument 45-102 - Resale of Securities that extend beyond four months following the closing of the Offerings.
About Hemptown Organics Corp.
From the rich soils of Southern Oregon's Emerald Triangle, Hemptown is producing some of the finest cannabinoid products in the world. Following an impressive first year yield, the Company is scaling up its operation to meet domestic and international demand. With expansion of farmland, in-house extraction/processing facilities and a branded product line, Hemptown's vertically integrated business model is well-positioned to capitalize on a global market expected to exceed $22 billion by 2020.
Disclaimer for Forward-Looking Statements
This news release contains forward-looking statements that involve various risks and uncertainties regarding future events. Such forward-looking statements are based on current expectations of management, involve a number of risks and uncertainties, and are not guarantees of future performance of the Company. These statements generally can be identified by the use of forward-looking words such as "may", "should", "will", "could", "intend", "estimate", "plan", "anticipate", "expect", "believe" or "continue", or the negative thereof or similar variations. Forward-looking statements in this news release include statements regarding the closing date of the financing, the attributes of the securities to be offered and sold by the Company, the proposed use of the net proceeds of the Offerings and the occurrence of a Liquidity Event. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors that may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include general market conditions, significant business, competitive, political and social risks and other factors beyond the control of the Company. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
SOURCE HEMPTOWN ORGANICS CORP.