CALGARY, Dec.13, 2018 /CNW/ – High Tide Inc. (“High Tide” or the “Company”) today announced that it has closed the first tranche of the sale of senior unsecured convertible debentures (the “Debentures”) of the Company under the brokered private placement (the “Offering”) previously announced on November 28, 2018. The Company has issued 10,000 Debentures at a price of $1,000 per Debenture to Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) (Frankfurt: 21P; WKN: A1C4WM) (“Aurora”) as well as 1,330 Debentures to other Offering participants for gross proceeds to date of $11,330,000.
Raj Grover, President & Chief Executive Officer of High Tide, said, “Receiving such a strong level of support from Aurora, a fellow Alberta-based company, is an exciting vote of confidence for our established and differentiated business. Securing this first tranche of funding for our current list of growth initiatives enables us to continue adding value to High Tide for shareholders.” The net proceeds of the Offering will be used by the Company to fund retail acquisitions, Canna Cabana and Smoker’s Corner store upgrades, for strategic acquisition opportunities as well as for general working capital purposes.
The Offering is being led by Canaccord Genuity Corp., as lead agent and sole bookrunner, (the “Agent”) and High Tide intends to close a second and final tranche of the Offering for aggregate gross proceeds of up to $20,000,000. The Company has granted the Agent an option, exercisable in whole or in part at the discretion of the Agent, to arrange for the purchase of up to an additional $20,000,000 of the Debentures, for total proceeds of up to $40,000,000, if the Agent’s option is fully exercised, at any time until the closing of the Offering.
The Debentures will bear interest at a rate of 8.5% per annum from the closing date of the final tranche of the Offering, payable on the last business day of each calendar quarter. The Debentures are convertible to common shares of High Tide at a post-split price of $0.75 per common share, which is a 50% premium to the last price at which units were issued by the Company, and will mature two years from the closing date of the Offering. The Debentures are subject to a statutory hold period that extends four months and one day from the closing date of the Offering.
One insider of the Company subscribed for 250 Debentures issued pursuant to this tranche of the Offering. This issuance constitutes a “related party transaction” within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company is relying on an exemption available from the formal valuation requirements under Section 5.5(a) of MI 61-101 and an exemption available from minority approval requirements under Section 5.7(a) of MI 61-101 on the basis that the fair market value of such Debentures does not exceed 25% of the Company’s market capitalization. The Company did not file a material change report more than 21 days prior to the closing of this tranche of the Offering as the insider participation was only recently confirmed, and the Company and the insider were ready and able to close prior to such 21-day period.