Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT, SUGR.RT) (“Sugarbud” or the “Company”) is pleased to announce the filing of its unaudited condensed consolidated interim financial statements (“Financial Statements”) for the three and nine months ended September 30, 2019 (“Q3 2019”) and related management’s discussion and analysis (“MD&A”), which are available on SEDAR at www.sedar.com and on Sugarbud’s website at www.sugarbud.ca.

“Q3 2019 was a productive and pivotal period for Sugarbud,” stated John Kondrosky, Sugarbud CEO. “In addition to receiving our cultivation, processing and medical licenses from Health Canada, we completed the transfer and receipt of our starting material under our declaration to Health Canada and began cultivation activities in our purpose built 29,800 square-foot facility in Stavely, Alberta which, at full production, currently has an estimated annual production design capacity of between 9.9 and 11.7 million grams.”

“We are pleased with the quality and variety of the cultivars we have received and while we held back production a little longer than we would have liked in order to complete our incoming quality inspections, we remain on track to deliver a strong first harvest, which we now expect will occur in early Q1,” continued Mr. Kondrosky.

During the quarter the company also announced two cornerstone supply agreements that combined represent 1,700,000 grams of committed dried cannabis supply in 2020 or approximately 72% of the total estimated initial production capacity of Sugarbud’s two fully licensed cultivation rooms in 2020. At full production capacity, these two rooms have a design capacity to produce an estimated 3.3 to 3.9 million grams annually.

“In addition to a clear line of sight to first revenue, we continue to take meaningful steps to strengthen our balance sheet and control operating expenses as we focus on scaling up our business.  We have identified and are executing against a very controlled and balanced capital expansion plan that supports sustainable growth and maximizes return on investment,” Mr. Kondrosky added.

The Company has several facility buildout options which it can deploy, however the current strategy; which is focused on achieving near term capacity expansion and generating sustainable positive cash flow by late Q3 2020,  will see Phase 1a expanded primarily through additional HVAC in cultivation rooms 1 and 2 which are already licensed.  The capital budget required to complete this expansion is estimated to be approximately $2.5 million and the Company is working towards financing a significant portion of this through previously announced equipment leasing arrangements.

The company also recently announced the close of a $925,000 private placement, of which management and board members took up 47%, and the launch of a $5 million rights offering.

Pursuant to the Rights Offering, each holder (“Eligible Holder”) of Common Shares as of the Record Date that is a resident in any province of territory of Canada (other than Québec) (the “Eligible Jurisdictions”) will receive one transferable right (each, a “Right”) for every Common Share held.  Every four Rights will entitle the holder to purchase one Unit at a price of $0.0550 until 4:00 p.m. (Calgary time) on the expiry date of December 20, 2019 (the “Expiry Date”), after which all outstanding Rights will terminate. Each Unit will be comprised of one Common Share and one Warrant. The Warrants issued pursuant to the Rights Offering will be on the same terms as those issued pursuant to the Private Placement, including early expiry upon the VWAP equaling or exceeding $0.125. Subscribers of Units under the Private Placement will have a right to participate in the Rights Offering with respect to any Common Shares acquired pursuant to the Private Placement. 

There will be no additional subscription privilege and no standby commitment in respect of the Rights Offering. The completion of the Rights Offering will not be subject to Sugarbud receiving any minimum amount of subscriptions from Eligible Holders.

READ: Sugarbud Closes $925,000 Private Placement

READ: Sugarbud Announces Rights Offering

“Our primary focus and attention is on getting our 2 licensed cultivation rooms growing on 3 to 4 layers each, which we believe is the quickest path towards demonstrating the Company can be self-sustaining and cash flow positive,” stated Mr. Kondrosky.  The buildout of additional rooms within Phase 1b and 1c will be scheduled according to available capital but the Company believes it will have at least one additional room completed during the second half of 2020.

Sugarbud’s near term product leadership strategy is to leverage its existing licensed cultivation and production facility to produce exceptional premium dry flower and inhalable derivatives such as pre-rolls and concentrates. Our strategy and approach to revenue and value generation is driven by a relentless focus on growing exceptional cannabis and providing high quality product that consumers have shown they want, through targeted, controlled expansion instead of focusing on fast paced scale up.

Significant Market Opportunity Remains

Management believes that significant opportunity remains for a company like Sugarbud to distinguish itself as a leader in the cannabis space by implementing a strategically integrated, product driven supply chain that begins and ends with the end customer in mind.  Sugarbud’s singular focus and mission is to delight customers and Sugarbud is committed to meeting or exceeding expectations 100% of the time. Sugarbud expects to submit its amended sales license application for dried cannabis to permit interprovincial adult recreational sales to authorized retailers in early Q1 2020. Sugarbud expects to launch its first adult recreational products in early Q4 2020 when facility production is targeted to exceed its current supply commitments.

SOURCE SugarBud Craft Growers Corp.