Hemptown Announces $7.5M Concurrent Financing to Proposed Qualifying Transaction

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Vancouver, British Columbia–(Newsfile Corp. – May 27, 2021) – Hemptown Organics Corp. (the “Company” or “Hemptown“), a privately held British Columbia company is providing an update further to its news releases of September 9, 2020, October 2, 2020, October 13, 2020 and March 23, 2021 on the proposed acquisition of Hemptown by Spectre Capital Corp. (TSXV: SOO.P) (“Spectre“), a capital pool company listed on the TSX Venture Exchange (the “Exchange“) (the “Transaction“). The Transaction, once complete, is expected to result in the reverse takeover of Spectre (thereafter, referred to as the “Resulting Issuer“) and will constitute Spectre’s Qualifying Transaction under Policy 2.4 – Capital Pool Companies of the Exchange (the “CPC Policy“).

Concurrent Financing

In connection with the Transaction, Hemptown and Spectre have entered into an engagement letter dated May 27, 2021 (the “Engagement Letter“) with Canaccord Genuity Corp. (the “Agent“) to complete an equity financing (the “Concurrent Financing“) by way of a private placement of up to 8,823,530 subscription receipts (each, a “Subscription Receipt“) at $0.85 per Subscription Receipt for aggregate gross proceeds of up to $7,500,000, with such proceeds to be deposited in escrow (the “Escrowed Funds“) pursuant to the terms of an escrow agreement to be entered into among the Company, Spectre and an escrow agent (the “Escrow Agent“) acceptable to the Agent.

Pursuant to the Engagement Letter, the Company also agreed to grant the Agent an option (the “Over-Allotment Option“) to place up to an additional 1,323,530 Subscription Receipts, or 15% of the maximum number of Subscription Receipts issuable under the Concurrent Financing, for additional gross proceeds of up to $1.125 million.

Immediately prior to the closing of the Transaction (the “Closing“) and upon satisfaction of all conditions precedent to the Transaction (the “Escrow Release Condition“), each Subscription Receipt will be automatically converted into a unit comprised of one common share in the capital of Hemptown (“Hemptown Shares” and each such Hemptown Share, a “Hemptown Financing Share“) and one-half of one common share purchase warrant of Hemptown (each whole warrant, a “Hemptown Financing Warrant“), and the Escrowed Funds, less the Agent’s Cash Commission (as defined below) and the reasonable expenses of the Agent, will be released to Hemptown. Each Hemptown Financing Warrant will be exercisable into one additional Hemptown Share for two years from the date of satisfaction of the Escrow Release Condition (the “Escrow Release Date“) at an exercise price of $1.15 per share.

The Escrow Release Condition must be satisfied on or before the later of: (a) 5:00 p.m. (Vancouver time) 120 days after the closing of the Concurrent Financing, and (b) such later date as Hemptown, Spectre and the Agent may agree in writing (in each case, the “Outside Date“). In the event that the Escrow Release Conditions are not satisfied by the Outside Date, the Escrowed Funds together with accrued interest earned thereon will be returned to the holders of the Subscription Receipts.

Pursuant to the Engagement Letter, the Agent will be paid a cash commission equal to 9% of the gross proceeds of the Concurrent Financing (the “Agent’s Cash Commission“), provided that a commission of 4.5% will be paid in respect of sales to identified investors set out on a president’s list provided by the Company to the Agent (the “President’s List Purchasers“). On the closing of the Concurrent Financing, Hemptown has also agreed to pay to the Agent a corporate finance fee of $200,000, with 50% payable in cash and 50% payable by the issue of Hemptown Shares. The Agent will also receive broker warrants (the “Broker Warrants“) exercisable into that number of Hemptown Shares as is equal to 9% of the total number of Subscription Receipts issued pursuant to the Concurrent Financing (4.5% in respect of Subscription Receipts issued to the President’s List Purchasers). Each Broker Warrant will be exercisable at $0.85 per Hemptown Share for up to 24 months following the Escrow Release Date. Hemptown has also agreed to pay for the Agent’s reasonable expenses incurred in connection with the Concurrent Financing.

It is expected that, pursuant to the Transaction the Hemptown Financing Shares, Hemptown Financing Warrants and Broker Warrants will be exchanged for, or become a right to purchase, as applicable, substantially similar securities of the Resulting Issuer.

Pursuant to the Engagement Letter, on completion of the Concurrent Financing, Hemptown and Spectre shall grant the Agent a right of first refusal to act as fiscal advisor or agent for financings and/or strategic transactions the Resulting Issuer proposes to undertake within a period of six months from the Escrow Release Date.

The closing of the Concurrent Financing is expected to occur on July 15, 2021, or such other date as may be agreed to by Hemptown, Spectre and the Agent.

Other Matters

The Company and Spectre are continuing to negotiate the terms of the definitive agreement with respect to the Transaction, and the parties expect the Transaction to be consummated by way of a plan of arrangement under the Business Corporations Act (British Columbia).

A filing statement respecting the Resulting Issuer and the Transaction will be prepared and filed in accordance with the policies of the Exchange.

Trading in Spectre’s common shares has been halted in compliance with the policies of the Exchange, and will remain halted pending the review of the Transaction by the Exchange and satisfaction of the conditions of the Exchange for resumption of trading. It is likely that trading in Spectre’s common shares will not resume prior to the closing of the Transaction.

Spectre has supplied all information contained in this news release with respect to Spectre and the Company and its directors and officers have relied on Spectre for any such information.

The securities described in this press release, and the securities into which they may be converted or exchanged, have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act of 1933, as amended) absent registration or an exemption from registration. This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction where such offer, solicitation, or sale would be unlawful.

Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. 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 a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

About Spectre

Spectre is a capital pool company governed by the policies of the Exchange. Spectre’s principal business is the identification and evaluation of assets or businesses with a view to completing a Transaction.

About Hemptown

Hemptown is a diversified cannabinoid company delivering a wide product offering across the value chain, and in multiple sales channels, to meet the growing global demand for cannabinoid-based products. State-of-the-art cultivation in Oregon’s Rogue Valley, FDA-licensed and cGMP certified product manufacturing, and a strong leadership team with Fortune 500 experience are the pillars for Hemptown’s growth model as it pushes into the consumer-packaged goods sectors with top quality white label and branded product lines for the consumer market. For more information, visit www.hemptownusa.com.

For further information, please contact:

Hemptown Investor Relations
John Martin
jmartin@hemptownusa.com
1-833-436-7896

Hemptown Sales and General Inquiries
info@hemptownusa.com
1-888-224-6691

This news release contains statements that are “forward-looking information” as defined under Canadian securities laws (“forward-looking statements“). These forward looking statements are often identified by words such as “intends”, “anticipates”, “expects”, “believes”, “plans”, “likely”, or similar words. Specifically, this news release includes forward looking statements regarding the potential Transaction, the completion of, and the terms and conditions of, the Concurrent Financing, the negotiation of a definitive agreement for the Transaction, the closing of the Transaction and the timing for those events. The forward looking statements reflect the Company and Spectre’s respective management’s expectations, estimates, or projections concerning future results or events, based on the opinions, assumptions and estimates considered reasonable by management at the date the statements are made. Although the Company and Spectre believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on forward-looking statements, as unknown or unpredictable factors could cause actual results to be materially different from those reflected in the forward looking statements. Among the key factors that could cause actual results to differ materially: whether the parties are successful in negotiating and entering a definitive agreement for the Transaction, whether they are able to obtain all necessary regulatory approvals for the Transaction and whether they are able to satisfy the listing conditions for the listing of the common shares of the Resulting Issuer on the Exchange; whether they are able to complete any necessary financing; and whether they are able to obtain all shareholder and third party consents necessary to complete the Transaction. The forward looking statements may be affected by risks and uncertainties in the business of the Company and Spectre, including those described in Spectre’s amended and restated final prospectus dated February 12, 2020, filed with the British Columbia Securities Commission, the Alberta Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan and available on www.sedar.com.

Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking information.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/85550

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