Supreme Cannabis Obtains Approval from Debentureholders to Partially Convert and Amend Debentures

Rhea-AI Summary

The Supreme Cannabis Company has received approval from debentureholders to amend the terms of its 6.0% senior unsecured convertible debentures. Key changes include reducing the principal amount from $100.0 million to $36.5 million and extending the maturity date by five years. The conversion price is also lowered from $2.45 to $0.285 per share. Annual interest payments will decrease from $6.0 million to $2.9 million, and the company will issue 116.6 million common shares to debentureholders as part of the agreement.

Positive

• Reduction of total principal from $100.0 million to $36.5 million.
• Lower annual interest payments from $6.0 million to $2.9 million.
• Issuance of 116.6 million common shares to debentureholders.

Negative

• Reduction of conversion price from $2.45 to $0.285 per share.
• Potential dilution of existing shareholders due to the issuance of new shares.

TORONTO, Aug. 31, 2020 /PRNewswire/ - The Supreme Cannabis Company, Inc. ("Supreme Cannabis" or the "Company") (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) announced today that holders (the "Debentureholders") of the Company's outstanding 6.0% senior unsecured convertible debentures issued in October 2018 (the "Debentures") have approved an extraordinary resolution approving the previously announced amendments to the terms of the Debentures.

The following amendments, among others, were approved (the "Amendments"):

• Reduction of the total principal amount of Debentures outstanding from $100.0 million to $36.5 million.
• Extension of the maturity date of the Debentures from October 19, 2021 to the date that is 5 years plus one day from the Closing Date (as defined below) unless repurchased, redeemed or converted prior to maturity.
• Reduction of the conversion price of the Debentures from $2.45 per share to $0.285 per share (the "Conversion Price").
• The Company will have the right to force the conversion of the remaining principal amount of the Debentures outstanding at the Conversion Price on not less than 30 days' notice if the daily volume weighted average trading price of the common shares of the Company (the "Common Shares") is greater than $0.45 for any 10 consecutive trading days.
• Amortization of the principal amount of the remaining Debentures at 1.0% per month over the 24-month period prior to maturity.
• Reduction of annual interest payments to $2.9 million from $6.0 million.
• The remaining Debentures will accrete at a rate of 11.06% per annum, compounding on a semi-annual basis commencing on the closing date of the Amendments (the "Closing Date") and ending on the date that is 3 years from the Closing Date.

The Debentures will continue to trade on the Toronto Stock Exchange under the trading symbol FIRE.DB.

The accreted portion of the principal is payable in cash upon maturity but does not bear cash interest and is not convertible into Common Shares. This accreted principal will be evidenced by new debentures (the "Accretion Debentures"), which will not be listed on the Toronto Stock Exchange, will bear a separate CUSIP and will trade separately from the Debentures.

In consideration of the reduction of the principal amount of the Debentures by $63.5 million, among other consideration, the Company will issue an aggregate of 116.6 million Common Shares (the "Consideration Shares") to Debentureholders. Debentureholders resident in eligible jurisdictions will receive half of their Consideration Shares as freely-trading shares, and the other half of the Consideration Shares will be subject to a four-month restricted period. Debentureholders resident in other jurisdictions will be entitled to receive Consideration Shares subject to restricted periods, subject to applicable securities laws.

In order for eligible Debentureholders to receive freely-trading Consideration Shares, such Debentureholders are required to instruct their CDS participants to make the appropriate election with respect to jurisdiction of residency through CDS before the election deadline (the "Election Deadline"), which is expected to be on or around September 8, 2020. Any eligible Debentureholder that fails to elect prior to the Election Deadline will receive 100% of the Consideration Shares subject to a four-month restricted period.

The foregoing description of the Amendments is a summary only and is qualified in its entirety by reference to the supplemental trust indenture the Company intends enter into with the trustee on the Closing Date and which will be filed on the Company's SEDAR profile at www.sedar.com.  At such time, all Amendments to the Debentures will become effective and Debentureholders will receive Consideration Shares and Accretion Debentures.

About Supreme Cannabis.

The Supreme Cannabis Company, Inc., (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1), is a global diversified portfolio of distinct cannabis companies, products and brands. Since 2014, the Company has emerged as one of the world's most premium producers of recreational, wholesale and medical cannabis products.

Supreme Cannabis' portfolio of brands caters to diverse consumer and patient experiences, with brands and products that address recreational, wellness, medical and new consumer preferences. The Company's recreational brand portfolio includes, 7ACRES, Blissco, 7ACRES Craft Collective, Sugarleaf, and Hiway. Supreme Cannabis addresses national and international medical cannabis opportunities through its premium Truverra brand.

Supreme Cannabis' brands are backed by a focused suite of world-class operating assets that serve key functions in the value chain, including, scaled cultivation, value-add processing, automated packaging and product testing and R&D. Follow the Company on Instagram, Twitter, Facebook, LinkedIn and YouTube.

We simply grow better.

Forward-Looking Information.

Certain statements made in this press release, including statements concerning the Amendments to the Debentures and the completion and timing thereof, constitute "forward-looking information" within the meaning of applicable securities laws. Forward-looking information may relate to anticipated events or results and other statements that are not historical facts. The forward-looking information contained in this press release is made as of the date hereof, and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. 

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SOURCE The Supreme Cannabis Company, Inc.

FAQ

What is the significance of the debenture amendments announced by Supreme Cannabis (SPRWF)?

The amendments significantly reduce the principal amount and interest payments, easing financial pressure on Supreme Cannabis.

What changes were made to the conversion price of debentures by Supreme Cannabis (SPRWF)?

The conversion price was reduced from $2.45 to $0.285 per share.

How many common shares will be issued to debentureholders by Supreme Cannabis (SPRWF)?

Supreme Cannabis will issue 116.6 million common shares to debentureholders.

What are the new maturity terms for the debentures of Supreme Cannabis (SPRWF)?

The maturity date is extended by five years from the previous date of October 19, 2021.