The Flowr Corporation Closes Oversubscribed $C36 Million Subscription Receipt Offering in Step Toward Share Listing
Funds To Be Used For Buildout of Company’s Ultra-Clean, High Yield Cultivation Facilities
Markham, Ontario, Sept. 04, 2018 (GLOBE NEWSWIRE) — The Flowr Corporation (“Flowr” or the “Company”) is pleased to announce that it has closed its offering (the “Offering”) of subscription receipts of Flowr (“Subscription Receipts”), which was oversubscribed and raised approximately $C36 million. The offering is a further step toward completing the Company’s previously announced plan to effect a reverse takeover of The Needle Capital Corp. (“Needle”), which is anticipated to occur on or before September 10. Further detail on the offering is below.
Flowr, through its subsidiaries, is a vertically-integrated cannabis company and Health Canada Licensed Producer that currently offers premium quality cannabis under the FlowrRx brand in the Canadian medicinal market. The Company has agreements with several provinces to provide its Flowr brand premium cannabis for sale in province-controlled adult-use retail channels following the expected October 17, 2018 legalization of adult recreational use in Canada.
The primary use of proceeds from the offering will be funding the buildout of Flowr’s 85,000 square foot Kelowna, BC cultivation facility. The Kelowna facility, which is currently approximately 20% complete, is being built using proprietary designs and patent-pending growing systems that are expected to enable Flowr to grow ultra-clean, premium quality cannabis at scale and with high yields. Flowr expects the facility to reach full capacity in 2019, targeted to be in excess of 12,000 kilograms annually. The Company is also building a 50,000 square foot research and development facility integrated into its Kelowna campus and funded through an exclusive alliance with the Hawthorne Gardening subsidiary of The Scotts Miracle-Gro Company (NYSE: SMG).
“Completing this oversubscribed offering is another exciting milestone on Flowr’s journey to producing the finest cannabis experience in the world as well as an acknowledgement of investors’ belief in our business model,” said Vinay Tolia, Flowr’s incoming Chief Executive Officer. “Coming on the heels of obtaining our Health Canada sales licence, these funds will enable us to scale operations and provide consumers and patients with Flowr’s clean, consistent, premium-quality product in the medicinal and adult-use markets.”
About the Offering
In aggregate, 13,807,734 Subscription Receipts were sold under the Offering at a subscription price of $2.60 per Subscription Receipt for aggregate gross proceeds of $35,900,104. The Offering was comprised of both a brokered and a non-brokered financing. The Subscription Receipts sold as part of the brokered financing were sold pursuant to the terms of an agency agreement dated August 28, 2018 among the Company, Needle, Clarus Securities Inc. and Eight Capital (the “Co-Lead Agents”) on behalf of a syndicate of agents (together with the Co-Lead Agents, the “Agents”). All proceeds from the sale of the Subscription Receipts, less 50% of the commissions payable to the Agents and the Agents’ expenses (the “Escrowed Funds”), have been placed in escrow pending the satisfaction of the Escrow Release Conditions (as defined below).
The Subscription Receipts were issued pursuant to a subscription receipt agreement (the “Subscription Receipt Agreement”) among the Company, the Co-Agents, on behalf of the Agents and Computershare Trust Company of Canada, as subscription receipt agent.
Upon satisfaction or waiver of all conditions precedent to the proposed business combination transaction (the “Transaction”) between the Company and Needle whereby Needle and Flowr will effect a transaction that will result in a reverse takeover of Needle by the shareholders of Flowr to ultimately form the resulting issuer (the “Resulting Issuer”), and the satisfaction of other customary conditions (the “Escrow Release Conditions”), each Subscription Receipt issued will be automatically converted into one (1) common share of Flowr (“Flowr Share”) without any further consideration on the part of the purchaser. Subject to applicable laws and the policies of the TSX Venture Exchange (the “Exchange”), it is anticipated that, upon completion of the Transaction, each Flowr Share issued pursuant to the Offering will be exchangeable into one (1) freely tradable common share of the Resulting Issuer (“Resulting Issuer Share”).
The Company and Needle are currently working on the documentation to complete the Transaction, which is expected to close on or prior to September 10, 2018
In consideration of the services provided by the Agents in connection with the Offering, the Company has paid the Agents a cash commission equal to 6% of the gross proceeds of the Offering (and reduced to 3% on the president’s list orders and 1% for the lead order) (“Agents’ Commission”) and has issued the Agents broker warrants (the “Broker Warrants”) equal to 3% of the total Subscription Receipts sold in the Offering (and reduced to 1.5% on the president’s list orders). Provided the Escrow Release Conditions are satisfied, each Broker Warrant will entitle the holder thereof to purchase one Resulting Issuer Share at an exercise price of $2.60 per share for a period of 24 months following the closing of the Offering.
The Company has placed 50% of the Agents’ Commission in escrow, subject to the satisfaction or completion of the Escrow Release Conditions whereupon the Flowr Shares underlying the Subscription Receipts will be issued to the purchasers and the Escrowed Funds will be paid to Flowr and the balance of the Agents’ Commission will be paid to the Agents.
Upon completion of the Transaction, it is intended that the net proceeds from the Offering will be used for facility expansion, marketing initiatives, capacity expansion, working capital and general corporate purposes.
All securities of Flowr issued pursuant to the Offering are subject to a hold period ending on the later of: (a) August 28, 2018; or (b) the date that Flowr becomes a reporting issuer pursuant to applicable securities laws.
There can be no assurance that the Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Flowr should be considered highly speculative.
About The Needle Capital Corp.
The Needle Capital Corp. is a CPC. The Company’s principal business activity is to identify and evaluate opportunities for acquisition of assets or business. The Company was incorporated on June 1, 2016, and is headquartered in Calgary, Alberta.
About The Flowr Corporation
Flowr, through its subsidiaries, is a vertically-integrated Canadian cannabis company focused on the natural science of cannabis. With head offices in Markham, ON and production in Kelowna, B.C., Flowr builds and operates large-scale, GMP compliant cultivation facilities utilizing their own patented growing systems. Flowr’s investment in research and development ensures that its master growers are able to supply patients with consistent, high-quality medicinal cannabis. With a sense of craftsmanship and a spirit of innovation, Flowr is also well positioned with a line of premium quality cannabis products for the upcoming adult-use market.