The proceeds of the facility will be used to support working capital requirements and to continue to equip Phase 1 of the company’s 29,800 square foot Stavely, Alberta indoor cannabis cultivation facility.
The Phase 1 Stavely Facility is expected to be capable of approximately 13,926,000 to 16,384,000 grams of annual dried cannabis production per year once fully equipped and operational.
Craig Kolochuk, SugarBud president and CEO, commented, “This non-dilutive credit facility allows us to continue the diligent execution of our business plan prior to the receipt of our cultivation license from Health Canada, which we view as a major milestone and catalyst. We expect to obtain our cultivation license imminently, as we received confirmation of readiness from Health Canada on April 18, 2019 and we submitted our affirmation of readiness package prior thereto.”
It is SugarBud’s intention to replace this facility with a larger credit facility from another senior financial institution upon receipt of its cultivation license from Health Canada. SugarBud is currently in negotiations with a leading credit union based in Alberta regarding the said senior facility. It is expected that the senior facility will either be held by the credit union alone, or in a syndicate led by the credit union.
The current facility is guaranteed by SugarBud and its wholly owned subsidiary Trichome Holdings. The first $2 million of the credit facility is available for drawdown at SugarBud’s discretion, with draws thereafter subject to approval by Pillar. The credit facility bears interest at 12.5% per annum, calculated monthly on the daily balance outstanding.
In connection with the facility, SugarBud will issue 1,000,000 common share purchase warrants to Pillar. Each warrant will entitle Pillar to purchase one common share of SugarBud at a price of $0.16 for a period of five years. The warrants will be subject to a four month hold period.
The credit facility and the issuance of warrants to Pillar are subject to final approval of the TSX Venture Exchange.
The company also cancelled, at its discretion, its previously announced equity facility with Alumina Partners.