Agraflora’s SUHM closes $1.63M private placement

Feb 11, 2021

2021-02-11 18:11 ET – News Release

Mr. Nicholas Konkin reports

Agraflora Organics International Inc.’s subsidiary, SUHM Investments Inc., has completed a non-brokered private placement of 3.27 million common shares of SUHM at a price of 50 cents per common share for gross proceeds of $1,635,000. The securities issued pursuant to the offering are subject to a hold period of four months and a day from the later of the date of issuance of the common shares and the date that SUHM becomes a reporting issuer under the applicable securities laws. The proceeds of the offering are planned to be used by Edibles and Infusions Corp. for general continuing working capital and corporate purposes.

The company further announced that it has entered into a third amending agreement with Mulberry Capital Inc. amending the previously amended terms of a share purchase agreement dated April 25, 2019, between Mulberry and Organic Flower Investment Group Inc. Pursuant to the share purchase agreement, Organic agreed to acquire all of the issued and outstanding shares of SUHM from Mulberry, and agreed to assume all obligations of Mulberry with respect to the financing of the construction and the purchasing of equipment required to operate the Edibles facility in accordance with a joint venture agreement between SUHM and Quality Confections Canada Ltd. On June 7, 2019, the company acquired all of the interest of Organic in the JV agreement, and assumed all of Organic’s obligations pursuant to the share purchase agreement and JV agreement.

Pursuant to the amending agreement, the remaining unpaid portion of the purchase price owing to Mulberry under the share purchase agreement, being an aggregate maximum amount of $27.5-million, shall be forgone by Mulberry in consideration for the following:

  • Agra reconveying a 26.25-per-cent ownership interest in SUHM, such ownership percentage shall be non-dilutable to Mulberry until $7-million in debt or equity has been advanced to finance the Edibles and Infusions facility in Winnipeg, Man.;
  • Agra issuing 10 per cent of the issued and outstanding shares of Agra to Mulberry on the date that is the later of it issuing shares pursuant to the JV agreement and Feb. 8, 2021.

Following the completion of the offering and payment of the consideration under the amending agreement, Agraflora would own approximately 49.75 per cent of the joint venture comprising the Winnipeg facilities.

Debt settlement

The company announces that its board of directors has approved the settlement of services rendered through the issuance of common shares of the company. Pursuant to the debt settlement, the company issued an aggregate of 1,120,422 common shares of the company at a deemed price of five cents per share to certain creditors of the company.

All securities issued will be subject to a statutory hold period which will expire on the date that is four months and one day from the date of issuance.

Debenture amendment

The company is also pleased to announce that it has entered into an agreement with holders of the company’s 10 per cent senior unsecured convertible debentures originally due March 12, 2021, to amend the terms of the debentures. The maturity date for the amended debentures will be extended for an additional 12 months to March 12, 2022, in consideration for the conversion price of the amended debentures being reduced to five cents. Additionally, the amended debentures shall pay interest at the rate of 20 per cent per annum for the period commencing as of July 1, 2020, and ending as of Dec. 31, 2020. For all periods subsequent to Dec. 31, 2020, the debentures shall pay interest at the rate of 10 per cent per annum, calculated and payable semi-annually.

The company has satisfied the aggregate interest payment of $2.7-million owing on Dec. 31, 2020, pursuant to the amended debentures by the issuance of 54 million common shares in the capital of the company on a pro rata basis to the holders of the amended debentures.

Payment on EIC joint venture

The company also announced that it has issued 49,667,785 common shares to 10026310 Manitoba Ltd. pursuant to the JV agreement entered into among SUHM, Quality Confections Canada, Edibles and Infusions, and the manager.

All securities issued in connection with the JV agreement will be subject to a statutory hold period which will expire on the date that is four months and one day from the date of issuance.

Farmako settlement

The company additionally announced that it has entered into a settlement agreement with Unicorn Asset Management GmbH, Sivota Holding GmbH, HB Capital GmbH and Tiger Soft Pharma UF (sellers), amending the terms of the previously signed share purchase agreement among the company and the sellers. The purchase agreement provided for the purchase and sale of all of the issued and outstanding shares of The Good Company GmbH, the parent company of German EU (European Union) GMP (good manufacturing practice) medical cannabis distributor, Farmako GmbH, from the sellers in consideration for: (i) a cash consideration of $1-million, (ii) the issuance of an aggregate of 47,916,667 common shares and (iii) repayment of certain shareholder loans.

Pursuant to the purchase agreement, the consideration shares are subject to an 18-month lockup period, whereby one-third of the consideration shares are to be released six, 12 and 18 months from the closing date, with the final one-third of the consideration shares being scheduled for release on May 6, 2021. Moreover, the company is obliged to issue additional common shares at the end of the third lockup period where the price of the shares on the Canadian Securities Exchange is below the share price contemplated in the purchase agreement, as well as for the achievement of certain milestones.

Accordingly, the settlement provides that in consideration for the waiver by the sellers of their entitlement to additional shares and earn-out shares, Agra shall: (i) release the third lockup shares with immediate effect; and (ii) issue 20 million common shares of the company. Once completed, the company shall have entirely fulfilled its obligations with regard to share issuances under the purchase agreement.

All securities issued in connection with the JV agreement will be subject to a statutory hold period which will expire on the date that is four months and one day from the date of issuance.

About AgraFlora Organics International Inc.

AgraFlora Organics International Inc. is a leading cannabis company building shareholder value through the development of revenue generating operating assets in the global cannabis industry. AgraFlora is focused primarily on the Canadian cannabis industry – the world’s most advanced and regulated legal cannabis market. Flagship Canadian assets include: Edibles & Infusions, a fully automated manufacturing facility in Winnipeg, MB for white-label and consumer-branded edibles production; Propagation Services Canada, a large-scale commercial greenhouse in Delta, BC focused on reshaping the Canadian flower market with high-potency, low-cost cannabis; and AAA Heidelberg, a craft-focused cannabis producer in London, ON. In addition, AgraFlora’s wholly-owned subsidiary, Farmako GmbH, is focused on becoming Europe’s leading distributor of medical cannabis. Farmako currently has active distribution operations in Germany and expects to commence active operations in the United Kingdom in 2021. For more information about AgraFlora, please visit agraflora.ca and its profile page on SEDAR at www.sedar.com.

ON BEHALF OF THE BOARD OF DIRECTORS

Nick Kuzyk, Investor Relations
E: [email protected]
T: (800) 783-6056

For French inquiries:

Maricom Inc.
Remy Scalabrini
E: [email protected]
T: (888) 585-MARI

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Forward-looking Information Cautionary Statement

Except for statements of historic fact, this news release contains certain “forward-looking information” within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements including, but not limited to delays or uncertainties with regulatory approvals, including that of the CSE. There are uncertainties inherent in forward-looking information, including factors beyond the Company’s control. There are no assurances that the business plans for AgraFlora Organics described in this news release will come into effect on the terms or time frame described herein. The Company undertakes no obligation to update forward-looking information if circumstances or management’s estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. Additional information identifying risks and uncertainties that could affect financial results is contained in the Company’s filings with Canadian securities regulators, which are available at www.sedar.com.