UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 40-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

  OR

 

ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended _____________ Commission File Number: _____________

 

High Tide Inc.
(Exact name of Registrant as specified in its charter)

 

Alberta, Canada   5990   N/A
(Province or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code)
  (I.R.S. Employer
Identification No.)

 

Unit 112, 11127 – 15 Street N.E.
Calgary, Alberta
Canada T3K 2M4
(403) 770-9435
(Address and telephone number of Registrant’s principal executive offices)

 

CCS Global Solutions, Inc.
530 Seventh Avenue, Suite 508
New York, New York 10018
(800) 300-5067

 

(Name, address (including zip code) and telephone number (including
area code) of agent for service in the United States)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Shares   HITI   The NASDAQ Stock Market LLC

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

 

For annual reports, indicate by check mark the information filed with this Form:

 

  Annual Information Form   Audited Annual Financial Statements

 

Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the period covered by the annual report: Not applicable.

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes              ☐   No              ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

 

Yes              ☐   No              ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

 

Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

 

 

 

 

EXPLANATORY NOTE

 

High Tide Inc. (the “Company” or the “Registrant”) is a Canadian issuer eligible to file its registration statement pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3.

 

FORWARD LOOKING STATEMENTS

 

The Exhibits incorporated by reference into this Registration Statement of the Registrant contain forward-looking statements that reflect management’s expectations with respect to future events, the Registrant’s financial performance and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of the words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “would”, “could”, “likely”, “potential”, “proposed” and other similar words (including negative and grammatical variations), or statements that certain events or conditions “may” or “will” occur, and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking information includes, among other things, information regarding:

 

the competitive and business strategies of the Registrant;

 

the intention to grow the business, operations and potential activities of the Registrant;

 

the intention to maximize the utilization of the Registrant’s existing assets and investments;

 

the expected production capacity of the Registrant;

 

the expected demand for the Registrant’s products;

 

the expected category growth of the Registrant’s products;

 

the expected number of licensed cannabis stores in Canada and its Provinces;

 

the success of the entities that the Registrant acquires and the Registrant’s collaborations;

 

the market for the Registrant’s current and proposed products, as well as the Registrant’s ability to capture market share;

 

the anticipated timing for the release of expected product offerings;

 

the development of affiliated brands, product diversification and future corporate development;

 

expectations with respect to the Registrant’s product development, product offering and the expected sales mix thereof;

 

the ability of the Registrant to source components, products and inventory;

 

the Registrant’s satisfaction of international demand for its products;

 

the Registrant’s plans with respect to importation and exportation;

 

the Registrant’s expectations with respect to harvest;

 

the competitive conditions of the industry and the Registrant’s market expertise;

 

whether the Registrant will have sufficient working capital and its ability to obtain financing required in order to develop its business and continue operations;

 

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the applicable laws, regulations, licensing and any amendments thereof related to the cultivation, production and sale of cannabis product in the Canadian, U.S and other international markets;

 

the applicable laws and regulations, and the potential time frame for the implementation of such laws and regulations, to legalize and regulate medical and adult-use cannabis (and the consumer products derived therefrom) internationally;

 

the grant, renewal and impact of any license or supplemental license to conduct activities with cannabis or any amendments thereof;

 

the anticipated future gross sales and margins of the Registrant’s operations and the potential for significant growth or losses;

 

the potential for the Registrant to record future impairment losses;

 

the performance of the Registrant s business and operations;

 

the Registrant’s ability to capitalize on the U.S. market;

 

future steps to be taken in response to COVID-19; and

 

the ability of the Registrant to continue to attract, develop, motivate and retain highly- qualified and skilled employees.

 

Readers are cautioned that the above list of cautionary statements is not exhaustive.

 

These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. Applicable risks and uncertainties include, but are not limited to, those identified under the heading “Risk Factors” on page 37 of the Annual Information Form for the year ended October 31, 2020, attached as Exhibit 99.149 to this Registration Statement and incorporated herein by reference, and under the heading “Risks Assessment” on page 16 of the Registrant’s Management’s Discussion & Analysis for the year ended October 31, 2020, attached as Exhibit 99.141 to this Registration Statement and incorporated herein by reference, and in other filings that the Registrant has made and may make with applicable securities authorities in the future.

 

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Importantly, forward-looking statements are estimates reflecting Management's current expectations and beliefs, and are based upon certain assumptions that Management believes to be reasonable based on the information currently available to Management, including, but not limited to, the assumptions that:

 

current and future Management will abide by the business objectives and strategies from time to time established by the Registrant;

 

the Registrant will retain and supplement its Board and Management, or otherwise engage consultants and advisors, having knowledge of the industries (or segments thereof) within which the Registrant may from time to time participate;

 

the Registrant will have sufficient working capital and the ability to obtain the financing required in order to develop its business and continue operations;

 

the Registrant will continue to attract, develop, motivate and retain highly qualified and skilled employees;

 

no adverse changes will be made to the regulatory framework governing cannabis, taxes and all other applicable matters in the jurisdictions in which the Registrant conducts its business from time to time, and any other jurisdiction in which the Registrant may conduct its business in the future;

 

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the Registrant will be able to generate cash flow from operations, including, through the retail sale of cannabis and cannabis products, and the manufacture and distribution of smoking accessories and cannabis lifestyle products;

 

the Registrant will be able to execute on its business strategy, as in place from time to time;

 

the Registrant will be able to meet the requirements necessary to obtain and/or maintain its governmental authorizations and permits;

 

general economic, financial market, regulatory and political conditions in which the Registrant operates will remain the same;

 

the Registrant will be able to compete in, and remain competitive within, the cannabis industry;

 

cannabis prices will not decline materially;

 

the Registrant will be able to effectively manage anticipated and unanticipated costs; and

 

the Registrant will be able to maintain internal controls over financial reporting and disclosure, and procedures in order to ensure compliance with applicable laws and regulations.

 

No assurance can be given that these expectations will prove to be correct and such forward-looking statements in the Exhibits incorporated by reference into this Registration Statement should not be unduly relied upon. The Registrant’s forward-looking statements contained in the Exhibits incorporated by reference into this Registration Statement are made as of the respective dates set forth in such Exhibits. Such forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made. In preparing this Registration Statement, the Registrant has not updated such forward-looking statements to reflect any change in circumstances or in management’s beliefs, expectations or opinions that may have occurred prior to the date hereof. Nor does the Registrant assume any obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

 

DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES

 

The Registrant is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this Registration Statement in accordance with Canadian disclosure requirements, which are different from those of the United States. The Registrant has historically prepared its consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, which differ in certain respects from United States generally accepted accounting principles (“US GAAP”) and from practices prescribed by the SEC. Therefore, the Registrant’s financial statements filed with this Registration Statement may not be comparable to financial statements prepared in accordance with U.S. GAAP.

 

PRINCIPAL DOCUMENTS

 

In accordance with General Instruction B.(1) of Form 40-F, the Registrant hereby incorporates by reference Exhibits 99.1 through 99.154, inclusive, as set forth in the Exhibit Index attached hereto.

 

In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed the written consent of the experts named in the foregoing Exhibits as Exhibits 99.153 and 99.154 as set forth in the Exhibit Index attached hereto.

 

TAX MATTERS

 

Purchasing, holding, or disposing of securities of the Registrant may have tax consequences under the laws of the United States and Canada that are not described in this registration statement on Form 40-F.

 

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DESCRIPTION OF COMMON SHARES

 

The required disclosure is included under the heading “Description of Capital Structure” in the Registrant’s Annual Information Form for the fiscal year ended October 31, 2020, attached hereto as Exhibit 99.149.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Registrant has no off-balance sheet arrangements (as that term is defined in paragraph 11(ii) of General Instruction B to Form 40-F) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

CURRENCY

 

Unless otherwise indicated, all dollar amounts in this Registration Statement are in Canadian dollars. The exchange rate of Canadian dollars into United States dollars, on October 31, 2020, based upon the daily average closing rate as quoted by the Bank of Canada, was U.S.$1.00 = Cdn$1.3745. The exchange rate of Canadian dollars into United States dollars, on March 10, 2021, based upon the daily average closing rate as quoted by the Bank of Canada, was US$1.00 = Cdn$1.2637.

 

CONTRACTUAL OBLIGATIONS

 

The following table summarizes the undiscounted contractual obligations of the Registrant as of October 31, 2020:

 

    Total     Less than 1
year
    1-3 years     3-5 years     Greater than
5 years
 
    (Cdn$000)     (Cdn$000)     (Cdn$000)     (Cdn$000)     (Cdn$000)  
Accounts payable and accrued liabilities   $ 6,421     $ 6,421            -            -             -  
Notes payable   $ 4,730     $ 3,660     $ 180     $ 890       -  
Convertible debentures   $ 32,790     $ 16,463     $ 10,106     $ 6,221       -  
Lease obligations   $ 21,554     $ 3,564     $ 6,892     $ 4,022     $ 7,076  
Total   $ 65,495     $ 30,108     $ 17,178     $ 11,133     $ 7,076  

 

NASDAQ CORPORATE GOVERNANCE

 

A foreign private issuer that follows home country practices in lieu of certain provisions of the listing rules of the Nasdaq Stock Market LLC (the “Nasdaq Stock Market Rules”) must disclose the ways in which its corporate governance practices differ from those followed by domestic companies. As required by Nasdaq Rule 5615(a)(3), the Registrant will disclose on its website, https://www.hightideinc.com/, as of the listing date, each requirement of the Nasdaq Stock Market Rules that it does not follow and describe the home country practice followed in lieu of such requirements.

 

UNDERTAKING

 

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form 40-F or transactions in said securities.

 

CONSENT TO SERVICE OF PROCESS

 

The Registrant has concurrently filed a Form F-X in connection with the class of securities to which this Registration Statement relates.

 

Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the Commission by amendment to the Form F-X referencing the file number of the Registrant.

 

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SIGNATURES

 

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  HIGH TIDE INC.
     
  By: /s/ Raj Grover
    Name: Raj Grover
    Title: President and Chief Executive Officer

 

Date: March 19, 2021

 

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EXHIBIT INDEX

 

The following documents are being filed with the Commission as Exhibits to this Registration Statement:

 

Exhibit No.   Description
     
99.1   MD&A dated for the year ended October 31, 2019
99.2   News Release dated November 7, 2019
99.3   News Release dated November 15, 2019
99.4   News Release dated November 21, 2019
99.5   Report of exempt distribution excluding Schedule 1 of 45-106F1
99.6   News Release dated November 27, 2019
99.7   News Release dated December 5, 2019
99.8   Share Purchase Agreement dated December 9, 2019
99.9   News Release dated December 10, 2019
99.10   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated December 19, 2019
99.11   News Release dated December 27, 2019
99.12   Loan Agreement dated January 6, 2020
99.13   News Release dated January 7, 2020
99.14   News Release dated January 7, 2020
99.15   Early Warning Report dated January 9, 2020
99.16   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated January 16, 2020
99.17   News Release dated January 27, 2020
99.18   News Release dated January 28, 2020
99.19   News Release dated January 31, 2020
99.20   Condensed Interim Consolidated Financial Statements for the three months ended January 31, 2020 and 2019
99.21   MD&A for the three months ended January 31, 2020 and 2019
99.22   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated February 6, 2020
99.23   News Release dated February 14, 2020
99.24   News Release dated February 21, 2020
99.25   ON Form 13-502F1 (Class 1 and 3B Reporting Issueers – Participation Fee) dated February 28, 2020
99.26   Audited Annual Financial Statements dated February 28, 2020
99.27   AB Form 13-501F1 (Class 1 and 3B Reporting Issuers – Participation Fee) dated February 27, 2020
99.28   51-109FV1 – Certification of annual filings – CFO (E) dated February 28, 2020
99.29   51-109FV1 – Certification of annual filings – CEO (E) dated February 28, 2020
99.30   News Release dated March 2, 2020
99.31   News Release dated March 31, 2020
99.32   52-109FV2 – Certification of Interim filings – CFO (E) dated March 30, 2020
99.33   52-109FV2 – Certification of Interim filings – CEO (E) dated March 30, 2020
99.34   News Release dated April 6, 2020
99.35   News Release dated April 8, 2020
99.36   News Release dated April 13, 2020
99.37   News Release dated April 20, 2020
99.38   News Release dated April 22, 2020
99.39   Condensed Interim Consolidated Financial Statements for the three and six months ended April 30, 2020 and 2019
99.40   MD&A for the three and six months ended April 30, 2020 and 2019
99.41   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated May 1, 2020
99.42   News Release dated May 4, 2020
99.43   News Release dated May 8, 2020
99.44   News Release dated May 14, 2020
99.45   Notice of the meeting and record dated, dated May 21, 2020
99.46   News Release dated May 25, 2020
99.47   News Release dated June 9, 2020
99.48   News Release dated June 15, 2020
99.49   News Release dated June 17, 2020
99.50   52-109FV1 – Certification of Interim filings – CFO (E) dated June 16, 2020

 

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99.51   52-109FV1 – Certification of Interim filings – CEO (E) dated June 16, 2020
99.52   Notice of Meeting dated June 19, 2020
99.53   Management Information Circular dated June 19, 2020
99.54   Form of Proxy
99.55   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated July 2, 2020
99.56   Security Agreement dated July 22, 2020
99.57   Debt Restructuring Agreement dated July 22, 2020
99.58   News Release dated July 24, 2020
99.59   News Release dated July 31, 2020
99.60   Letter from former auditor dated July 31, 2020
99.61   Notice of Change of Auditor dated July 31, 2020
99.62   Condensed Interim Consolidated Financial Statements for the three and nine months ended July 31, 2020 and 2019
99.63   MD&A for the three and nine months ended July 31, 2020 and 2019
99.64   Letter from Ernst & Young regarding Change of Auditor Notice dated July 31, 2020
99.65   News Release dated August 7, 2020
99.66   News Release dated August 10, 2020
99.67   Arrangement Agreement dated August 20, 2020
99.68   Support and Voting Agreement dated August 20, 2020
99.69   News Release dated August 21, 2020
99.70   Material Change Report dated August 28, 2020
99.71   Amended and Restated Asset Purchase Agreement dated September 1, 2020
99.72   News Release dated September 1, 2020
99.73   News Release dated September 1, 2020
99.74   News Release dated September 8, 2020
99.75   News Release dated September 14, 2020
99.76   52-109FV2 – Certification of Interim filings – CFO (E) dated September 16, 2020
99.77   52-109FV2 – Certification of Interim filings – CEO (E) dated September 16, 2020
99.78   News Release dated September 16, 2020
99.79   News Release dated September 16, 2020
99.80   News Release dated September 22, 2020
99.81   Management Information Circular dated September 23, 2020
99.82   Report of exempt distribution excluding Schedule 1 of 45-106F1 (amended) dated October 19, 2020
99.83   News Release dated October 28, 2020
99.84   News Release dated November 3, 2020
99.85   First Supplemental Warrant Indenture dated November 16, 2020
99.86   First Supplemental Debenture Indenture dated November 16, 2020
99.87   News Release dated November 17, 2020
99.88   News Release dated November 17, 2020
99.89   Support and Voting Agreement dated November 18, 2020
99.90   Articles of Arrangement dated November 18, 2020
99.91   News Release dated November 23, 2020
99.92   News Release dated November 25, 2020
99.93   Material Change Report dated November 25, 2020
99.94   News Release dated November 30, 2020
99.95   News Release dated December 3, 2020
99.96   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated December 4, 2020
99.97   News Release dated December 8, 2020
99.98   News Release dated December 9, 2020
99.99   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated December 10, 2020
99.100   News Release dated December 14, 2020

 

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99.101   News Release dated December 29, 2020
99.102   News Release dated January 4, 2021
99.103   News Release dated January 7, 2021
99.104   NI 44-101 Notice of Intent to Qualify dated January 6, 2021
99.105   News Release dated January 10, 2021
99.106   Report of exempt distribution excluding Schedule 1 of 45-106F1 dated January 13, 2021
99.107   Business Acquisition Report dated January 15, 2021
99.108   News Release dated January 22, 2021
99.109   News Release dated January 25, 2021
99.110   News Release dated February 1, 2021
99.111   News Release dated February 1, 2021
99.112   News Release dated February 2, 2021
99.113   Amended and Restated Bought Deal Offering of Units dated February 2, 2021
99.114   Cover Letter from Newsfile Corp. dated February 2, 2021
99.115   Letter from Foreign Issuer dated February 2, 2021
99.116   Term Sheet dated February 1, 2021
99.117   Amended and Restated Term Sheet dated February 2, 2021
99.118   Qualification Certificate dated February 5, 2021
99.119   Preliminary Short Form Prospectus dated February 5, 2021
99.120   Decision Document dated February 5, 2021
99.121   Marketing materials dated February 9, 2021
99.122   Other material contract(s) dated February 9, 2021
99.123   News Release dated February 10, 2021
99.124   News Release dated February 16, 2021
99.125   Undertaking to file documents and material contracts dated February 16, 2021
99.126   Government of Alberta Certificate of Amendment and Registration of Restated Articles
99.127   Consent letter of underwriters' legal counsel dated February 16, 2021
99.128   Consent letter of issuer's legal counsel
99.129   Auditors' consent letter dated February 16, 2021
99.130   Auditors' consent letter dated February 16, 2021
99.131   Underwriting or agency agreement dated February 16, 2021
99.132   Final short form prospectus dated February 16, 2021
99.133   Decision Document dated February 17, 2021
99.134   News Release dated February 18, 2021
99.135   News Release dated February 22, 2021
99.136   2021 Warrant Indenture dated February 22, 2021
99.137   News Release dated February 23, 2021
99.138   ON Form 13-502F1 (Class 1 and 3B Reporting Issuers – Participation Fee) dated March 1, 2021
99.139   Consolidated financial statements for the years ended October 31, 2020 and 2019
99.140   AB Form 13-501F1 (Class 1 and 3B Reporting Issuers – Participation Fee) dated March 1, 2021
99.141   MD&A for the year ended October 31, 2020
99.142   52-109FV1 – Certification of annual filings – CFO (E) dated March 1, 2021
99.143   52-109FV1 – Certification of annual filings – CEO (E) dated March 1, 2021
99.144   News Release dated March 1, 2021
99.145   News Release dated March 4, 2021
99.146   News Release dated March 5, 2021
99.147   News Release dated March 8, 2021
99.148   News Release dated March 10, 2021
99.149   Annual Information Form dated March 5, 2021
99.150   52-109F1 – AIF – Certification of filings with voluntarily filed AIF – CFO (E) dated March 11, 2021
99.151   52-109F1 – AIF – Certification of filings with voluntarily filed AIF – CEO (E) dated March 11, 2021
99.152   News Release dated March 15, 2021
99.153   Consent of Independent Registered Public Accounting Firm dated March 19, 2021 from MNP LLP
99.154   Consent of Independent Registered Public Accounting Firm dated March 19, 2021 from Ernst & Young LLP

 

 

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EXHIBIT 99.1

 

 

 

 

 

 

 

 

 

 

 

Management’s Discussion & Analysis

For the year ended October 31, 2019 and 2018

Dated as at February 25, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

1.0 Preface

 

1.1 Overview

 

This Management’s Discussion and Analysis (“MD&A”) of the results of operations and of the unaudited consolidated financial position of High Tide Inc. (“High Tide” or the “Company”) is for the three and nine months ended July 31, 2019 and 2018, and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended October 31, 2018 (hereafter the “Financial Statements”) and with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).

 

In this document, the terms “we”, “us”, and “our” refer to High Tide. This document also refers to the Company’s three reportable operating segments: the “Retail” Segment represented by businesses including Canna Cabana, KushBar, Grasscity and Smoker’s Corner, the “Wholesale” Segment represented by RGR and Famous Brandz, and the “Corporate” Segment.

 

High Tide is a vertically-integrated manufacturer, distributor and retailer of smoking accessories as well as a downstream-focused retailer of cannabis products. The Company’s shares are listed on the Canadian Stock Exchange (“CSE”) under the symbol “HITI”, the Frankfurt Stock Exchange (“FSE”) under the securities identification code ‘WKN: A2PBPS’ and the ticker symbol “2LY”, and on the OTCQB Market (“OTCQB”) under the symbol “HITIF”. The address of the Company’s corporate and registered office is # 120 – 4954 Richard Road SW, Calgary, Alberta T3E 6L1, while the address of the Company’s headquarters is #112, 11127 15 Street NE, Calgary, Alberta, T3K 2M4.

 

Additional information about the Company, including the October 31, 2018, audited consolidated financial statements, news releases and the Company’s long form prospectus can be accessed at www.sedar.com and at www.hightideinc.com.

 

1.2 Metrics

 

System-Wide Sales is a non-GAAP financial measure. Non-GAAP measures are not defined under the International Financial Reporting Standards (defined as (“IFRS”) as issued by the IASB) and therefore may not be comparable to similarly titled measures reported by other issuers. Accordingly, System-Wide Sales are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

 

System-Wide Sales is defined as the sum of the external merchandise sales made by High Tide’s divisions and includes sales by both corporate, franchise and partnered retail locations. Sales are inclusive of returns, allowances and discounts; sales exclude other revenue sources including rent revenue, royalties, interest and freight. Management believes this measure is useful in evaluating growth, the strength of our brands, performance across High Tide’s businesses and in evaluating the financial and operational performance of the Company.

 

1.3 Forward-Looking Information and Statements

 

Certain statements contained within this MD&A, and in certain documents incorporated by reference into this document, constitute forward-looking statements. These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “budget”, “plan”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.

 

In particular, this MD&A contains the following forward-looking statements pertaining, without limitation, to the following: changes in general and administrative expenses; future business operations and activities and the timing thereof; the future tax liability of the Company; the estimated future contractual obligations of the Company; the future liquidity and financial capacity of the Company; and its ability to fund its working capital and forecasted capital expenditures.

 

We believe the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this MD&A should not be unduly relied upon.

 

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High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

These statements speak only as of the date of this MD&A or as of the date specified in the documents incorporated by reference into this MD&A, as the case may be. The actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this MD&A; counterparty credit risk; access to capital; limitations on insurance; changes in environmental or legislation applicable to our operations, and our ability to comply with current and future environmental and other laws; changes in income tax laws or changes in tax laws and incentive programs relating to the cannabis industry; and the other factors discussed under Section 10: “Financial Instruments and Risk Management” in this MD&A.

 

Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this MD&A and the documents incorporated by reference herein are expressly qualified by this cautionary statement. The forward-looking statements contained in this document speak only as of the date of this document and the Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.

 

2.0 Accounting Framework

 

Financial data disclosed in this MD&A has been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the IASB. The Financial Statements and MD&A have been prepared on a historical cost basis except for financial instruments which are measured at fair value. Accordingly, the financial information contained herein have been prepared on the basis of accounting policies applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

 

These Financial Statements are presented in Canadian dollars (“$”), which is the Company’s and its Canadian subsidiaries functional currency. The functional currency of its European subsidiaries is Euro (“€”) and the functional currency of its USA subsidiaries is USD.

 

2.1 Critical Accounting Estimates and Assumptions

 

The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, and have been applied consistently by the Company and its subsidiaries.

 

Use of estimates & accounting judgements

 

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and shareholders’ equity at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

 

The estimates and assumptions are reviewed on an ongoing basis. Revisions in accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

 

A. Use of estimates

 

Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate or assumption is made. Critical accounting estimates are also those that could potentially have a material impact on the Company’s financial results where a different estimate or assumption is used. The significant areas of estimation uncertainty are:

 

Expected credit losses

 

The Company’s accounts receivables are typically short-term in nature and the Company recognizes an amount equal to the lifetime expected credit losses (“ECL”). The Company measures loss allowances based on historical experience and including forecasted economic conditions. The amount of ECLs is sensitive to changes in circumstances of forecast economic conditions.

 

3

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

A. Use of estimates (Continued)

 

Going concern

 

Determining if the Company has the ability to continue as a going concern is dependent on its ability to achieve profitable operations. Certain judgments are made when determining if the Company will achieve profitable operations.

 

Inventory valuation

 

Inventory is carried and the lower of cost and net realizable value; in estimating net realizable value, the Company makes estimates related to obsolescence, future selling prices, seasonality, customer behaviour, and fluctuations in inventory levels.

 

Estimated useful lives, residual values and depreciation of property and equipment

 

Depreciation of property and equipment is dependent upon estimates of useful lives and residual values, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

 

Intangible asset impairment

 

Amortization of intangible assets is dependent upon estimates of useful lives, lease terms and residual values which are determined through the exercise of judgment.

 

Fair value of financial instruments

 

The individual fair values attributed to different components of a financing transaction are determined using valuation techniques. The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine; (a) the values attributable to each component of a transaction at the time of their issuance; (b) the fair value measurement for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.

 

Impairment of non-financial assets

 

Impairment exists when the carrying value of an asset or cash generating unit (“CGU”) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The estimated future cash flows are derived from management estimates, budgets and past performance and do not include activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and the growth rate used for extrapolation purposes.

 

Share-based compensation & Warrants

 

In calculating share-based compensation & warrant expense, key estimates such as the value of the common shares, the rate of forfeiture of options granted, the expected life of the option, the volatility of the value of the comparable companies’s common shares and risk-free interest rate are used.

 

Taxation

 

The calculations for current and deferred taxes require management’s interpretation of tax regulations and legislation in the various tax jurisdictions in which the Company operates, which are subject to change. The measurement of deferred tax assets and liabilities requires estimates of the timing of the reversal of temporary differences identified and management’s assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire, which involves estimating future taxable income. The Company is subject to assessments by various taxation authorities in the tax jurisdictions in which it operates, and these taxation authorities may interpret the tax legislation and regulations differently. In addition, the calculation of income taxes involves many complex factors. As such, income taxes are subject to measurement uncertainty and actual amounts of taxes may vary from the estimates made by management.

 

4

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

A. Use of estimates (Continued)

 

Deferred tax assets

 

Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess the likelihood that the Company will generate sufficient taxable income in future periods in order to utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.

 

B. Judgments

 

Judgment is used in situations when there is a choice and/or assessment required by management. The following are critical judgments apart from those involving estimations, that management has made in the process of applying the Company’s accounting policies and that have a significant effect on the amounts recognized in the consolidated financial statements.

 

Determination of CGUs

 

For the purposes of assessing impairment of non-financial assets, the Company must determine CGUs. Assets and liabilities are allocated into CGUs at the lowest level of separately identified cash flows. Determination of what constitutes a CGU is subject to management judgment. The asset composition of a CGU can directly impact the recoverability of assets included within the CGU. The determination of the Company’s CGUs was based on management’s judgment in regard to shared infrastructure, geographical proximity and similar exposure to market risk and materiality.

 

Business combinations and asset acquisitions

 

Classification of an acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Where an acquisition is classified as a business combination or an asset acquisition can have a significant impact on the entries made on and after the acquisition.

 

The initial measurement of assets acquired and liabilities assumed in an asset acquisition is determined based on an allocation of the purchase consideration, which can be comprised of cash or cash equivalents and the fair value of other consideration given to acquire the asset at the time of the acquisition. In the event that the consideration includes share-based consideration, the Company considers the specific requirements of IFRS 2, Share Based payments.

 

Consolidation

 

The determination of which entities require consolidation is subject to management judgment regarding levels of control, assumptions of risk and other factors that may ultimately include or exclude an entity from the classification of a subsidiary or other entity requiring consolidation.

 

Segmented information

 

Operating segments are determined based on internal reports used in making strategic decisions that are reviewed by the Chief Operating Decision Makers (CODMs). The Company’s CODMs are the Chief Financial Officer, Chief Executive Officer and Chief Operating Officer.

 

5

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

B. Judgments (continued)

 

Going concern assessment

 

At each reporting period, management assesses the basis of preparation of the consolidated financial statements. These consolidated financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

 

Contingencies

 

Management uses judgment to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgment to assess the likelihood of the occurrence of one or more future events.

 

C. Current Accounting Policy Changes

 

IFRS 9 Financial Instruments:

 

Effective November 1, 2018, the Company adopted IFRS 9, which introduces new requirements for:

 

i) The classification and measurement of financial assets and liabilities,
ii) The recognition and measurement of impairment of financial assets, and
iii) General hedge accounting

 

In accordance with the transition provisions of the standard, the Company has elected to not restate prior periods. The impact of adopting IFRS 9 was recognized in Accumulated Deficit at November 1, 2018 and related to the recognition of additional expected credit losses. The net impact resulted in an increase in the expected credit losses allowance of $35,776, an increase in deferred income tax assets of $9,660, and a $26,117 increase in Accumulated Deficit.

 

IFRS 15 Revenue from Contracts with Customers

 

The Company has adopted IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) with an initial adoption date of November 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition, which is outlined below. The Company has elected to adopt IFRS 15 retrospectively with the modified retrospective method of transition practical expedient and has elected to apply IFRS 15 only to contracts that are not completed contracts at the date of initial application. Comparative information has not been restated and is reported under IAS 18 Revenue (“IAS 18”). Refer to the Company’s most recent audited consolidated financial statements for information on its prior accounting policy.

 

The Company recognized the cumulative impact of the initial application of the standard as a reclassification on the Consolidated Statement of Financial Position as well as an increase in Accumulated Deficit as at November 1, 2018. Applying the significant performance obligation requirements to specific contracts resulted in the following:

 

i) An increase in Accumulated Deficit of $66.

 

The impact to Accumulated Deficit related to franchise arrangements. IFRS 15 requires that, in determining the timing of revenue recognition, that if there is a reasonable expectation that the franchisor will undertake activities that will significantly affect the brand name to which the franchisee has rights, and the franchisee is directly exposed to any positive or negative effects of that brand and image throughout the franchise period, that the performance obligation is satisfied over the period of the franchise agreement, or in the case of specific brand development activities, deferred as a contract liability until such time as the related activity and associated costs are incurred. There were no impacts to the statement of cash flows as a result of adopting IFRS 15.

 

6

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

3.0 Corporate Overview

 

3.1 Nature of Operations

 

The Company’s retail operations are focused on business-to-consumer markets. The operations of Canna Cabana and KushBar are focused both on the retail sale of recreational cannabis products for adult use as well as smoking accessories. Canna Cabana is one of Canada’s largest premier cannabis retail network. Smoker’s Corner relate solely to the retail sale of smoking accessories, while the operations Grasscity has been operating as a major e-commerce retailer of smoking accessories for over 20 years and has significant brand equity in the United States and around the world. Its acquisition by High Tide in late 2018 has been complementary as the Company is utilizing its manufacturing and distribution channels to enhance gross margins within the Grasscity business, while Grasscity brings a recognizable name and an established online sales channel for High Tide to sell its proprietary products.

 

The wholesale operations of RGR are primarily focused on the manufacturing and distribution of smoking accessories and cannabis lifestyle products. RGR designs and distributes a proprietary suite of branded smoking accessories including overseeing their contract manufacturing by third parties. RGR also distributes a minority of the products in its catalogue that are manufactured by third parties. RGR does not sell its products directly to consumers but operates an e-commerce platform for wholesale customers. Similar to RGR, the wholesale operations of Famous Brandz are primarily focused on the manufacturing and distribution of smoking accessories and cannabis lifestyle products. Famous Brandz differentiates itself from RGR by focusing on acquiring celebrity licences, designing and distributing branded products. Famous Brandz has developed an extensive network of wholesale clients across Canada, the United States and Europe. It also sells directly to consumers through its own e-commerce platform.

 

Company’s vision it to provide the full spectrum of best-in-class products and services for cannabis consumers, while growing organically and through acquisitions, to become the world’s premier retail-focused and vertically integrated enterprise.

 

Established Consumer Brands:

 

 

7

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

3.2 Competitive Landscape

 

As of the date of this MD&A, the Company operates 27 corporately-owned retail Canna Cabana locations and 2 KushBar locations. Further, Canna Cabana is currently represented by one branded locations selling cannabis products in Toronto as well as one franchise in Calgary. In total, the Company currently has a total of 31 branded retail cannabis stores operating across Canada.

 

Canna Cabana and KushBar were established to sell recreational cannabis products following the deregulation of cannabis for adult use across Canada on October 17, 2018. Canna Cabana and Kushbar operate amongst a variety of large and small competitors, both consolidated and independent. Notable competitors include 420 Premium Market, Choom, Fire & Flower, NewLeaf Cannabis, Nova Cannabis, Prairie Records, Spiritleaf and YSS, as well as numerous independent retailers.

 

The Company anticipates additional growth in revenue due to legalization of edibles, vapes and concentrates.

 

The Company operates 4 corporately owned retail locations under the Smoker’s Corner banner across Alberta. As of the date of this MD&A, the Company is currently represented by 2 franchised Smoker’s Corner locations operating across Alberta and Nova Scotia.

 

Smoker’s Corner mainly competes with independent retailers of smoking accessories without significant market concentration. Smoker’s Corner has created a strong brand over 10 years of operations through its network of stores and emphasis on customer service, as well as the depth and breadth of its product offering that is largely supplied by RGR.

 

Most of the Company’s competitors applicable to its Wholesale Segment operate primarily as product distributors, while RGR and Famous Brandz both design, directly source, import and distribute their products. This creates advantages through vertical integration, brings unique product designs to market as well as offers wholesale customers favourable and flexible pricing.

 

In the future, the Company expects its Retail Segment to experience increased competition from the recreational cannabis industry as greater number of third-party stores are established across Canada offering cannabis products and smoking accessories. The Company believes that its product knowledge, operational expertise and margin maximization achieved through its vertically integrated smoking accessories business will enable it to operate profitably over the long term. In addition, the Company expects opportunities to arise from the legalization of recreational cannabis for its Wholesale Segment to acquire new clients by supplying third-party retailers with smoking accessories on a wholesale basis, thereby offsetting some of the risks associated with increased competition affecting the Retail Segment.

 

Focusing initially on its existing markets of Alberta, Saskatchewan and Ontario, the Company intends to enter the British Columbia and other Canadian markets as regulations permit. The Company anticipates being able to grow both organically as well as through acquisition in the future.

 

8

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

4.0 Operating Performance (Unaudited)

 

    Year ended Oct 31  
$ Millions (except where noted)   2019     2018  
    $     $  
System Wide Sales     51.2       11.4  
                 
Merchandise sales (excluding franchisee revenues)     31.4       8.7  
Gross Margin     12.1       3.1  
Gross Margin Percentage     39 %     55 %
Total Expenses     (30.1 )     (6.8 )
Loss Before Taxes     (19.5 )     (6.1 )
Net Loss for the Year     (18.9 )     (4.6 )
Loss Per Share (Basic)     (0.09 )     (0.04 )
Loss Per Share (Diluted)     (0.09 )     (0.04 )

 

During the year ended October 31, 2019, the Company raised additional capital of $22.8 million through the sale of convertible debentures, which allowed it to close the acquisition of Grasscity, the acquisition of Dreamweavers Cannabis Products Ltd. (“Dreamweavers”) and to continue establishing Canna Cabana’s retail network. The operations of Canna Cabana, the acquisition of Grasscity and the acquisition of Dreamweavers supported the achievement of significant sales and revenue growth in the period.

 

The Company reported a net loss of $18.9 million during the twelve-month period, which was primarily attributable to expenses incurred to expand its business inclusive of personnel costs, rent and operating costs associated with its expanded retail network, as well as transaction and compliance costs incurred to operate publicly, raise capital and complete business acquisitions.

 

4.1 Consolidated Results of Operations in Detail

 

Revenue

 

During the twelve-month period ended October 31, 2019, High Tide achieved a System-Wide Sales of $51.2 million. The increase in sales was driven primarily by the operations of Canna Cabana, which began selling recreational cannabis products and smoking accessories on October 27, 2018, the acquisition of Grasscity, the acquisition of Dreamweavers and by new customers acquired in the Company’s Wholesale Segment.

 

Sales growth (excluding franchisee revenues) led to increases in revenues of $22.7 million between all segments. During the 2019 fiscal year, Canna Cabana locations served over 857,000 customers, which reflects a retail cannabis business with a loyal customer base, due to a strong brand that focuses on customer service through a one-stop-shopping experience. The Company has been also attracting new customers and positioning itself to be a key accessories supplier in the cannabis industry for 2019 and beyond. In 2018, the Company entered into supply agreements for smoking accessories with the Ontario Cannabis Store (“OCS”) and received a large purchase order for white-label smoking accessories from Aurora Cannabis Inc. that was fulfilled during the year.

 

Gross Margin

 

For the twelve-months ended October 31, 2019, gross margin increased by $9.0 million as compared to the same period during the prior year, which was driven by the increase in sales volume. The gross margin rate declined from 55% to 39% largely attributable to changes in the overall product mix and sales strategy, with cannabis products driving growth at lower margins than accessories and with discounting applied to smoking accessories to support a differentiated cannabis retail experience as well as to drive traffic to Smoker’s Corner and Canna Cabana locations.

 

9

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

Expenses

 

Total operating expenses increased by $23.3 million for the twelve-months period ending October 31, 2019, compared to the same period during the prior year. The increase was a result of the Company’s aggressive growth efforts to take advantage of significant market opportunities created due to the deregulation of recreational cannabis for adult use across Canada, which officially occurred on October 17, 2018 with the introduction of Bill C-45. This increased effort resulted in the Company being represented by 30 branded stores across Canada as at the date of this MD&A.

 

The increase in costs was largely attributed to salaries, wages and benefits expenses, which increased by $7.6 million compared to the prior year with an additional $2.2 million being incurred for share-based compensation. The increase in staffing was due to the need for additional personnel, within both the Retail and the Corporate Segments. The increase in staffing was required to facilitate growth and to ensure the Company could take full advantage of various market opportunities. General and administrative expenses increased by $5.9 million compared to the same period in 2018 as a result of this expansion. Additionally, there was an increase in professional fees of $4.2 million during the year ended October 31, 2019, compared to the same period in the prior year attributed to costs incurred for compliance reporting, the implementation of an enterprise resource planning software system to support the expanded operations as well as professional fees associated with raising capital and acquiring businesses. The company also incurred bad debt expense of $0.9 million during the year ended October 31, 2019, related to Smokers Corner franchises.

 

5.0 Segment Operations

 

For the year ended Oct 31,   Retail
2019
($)
    Retail
2018
($)
    Wholesale
2019
($)
    Wholesale
2018
($)
    Corporate
2019
($)
    Corporate
2018
($)
    Total
2019
($)
    Total
2018
($)
 
Net Revenue     24,151       3,757       6,686       4,992       606       -       31,443       8,749  
Gross margin     8,909       3,280       2,642       (171 )     600       -       12,151       3,109  
Net (loss) Income     (5,012 )     944       (2,006 )     (4,134 )     (11,967 )     (1,380 )     (18,986 )     (4,571 )
Total assets     37,462       8,375       6,254       7,173       5,115       10,375       48,831       25,922  
Total liabilities     4,677       847       682       1,000       28,690       761       34,049       2,607  

 

10

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

5.1 Retail Segment Performance

 

 

The Company’s Retail Segment demonstrated significant sales and revenue growth year-over-year with revenue $20.4 million higher than last year. Revenue growth is primarily attributable to Canna Cabana, which became operational and began selling recreational cannabis products for adult use in the period, along with the Grasscity acquisition that was closed in December of 2018. During the period, Canna Cabana experienced strong product demand and consistent retail margins being reported across in the industry.

 

Grasscity was acquired by High Tide on December 19, 2018 and contributed sales of $4.3 million during the year. Grasscity is an online retailer of smoking accessories and cannabis lifestyle products, primarily to customers in the USA and Europe. Grasscity attracts approximately 5.8 million users to its online website each year and has had over 34 million unique users join its online forums since its inception. High Tide is investing in Grasscity to renew its online sales platform, increase its searchability and align its supply chain with RGR and Famous Brandz. Grasscity is a strong strategic fit with High Tide with its advantages in branding and online presence, while enabling the Company to leverage its vertical integration to improve order fulfillment, customer reach, product margins and the overall profitability of the business.

 

Smoker’s Corner sales declined in the period compared to last year due to the closure of five corporate stores and seven franchise stores. Four of the closed locations are converted into Canna Cabana locations. High Tide expects to recapture and expand upon lost revenues under Canna Cabana.

 

Gross margin dollars for the twelve-month period ended October 31, 2019 increased by $5.6 million while the gross margin rate declined to 37%. The decline in gross margin rate is due, in combination, to the product mix at Canna Cabana that earns a lower blended margin than purely from the sale of higher-margin smoking accessories, as well as due to a decline in financing and fixed royalty revenues. High Tide will continue to optimize its operations to improve margins as cannabis sales become an increasingly large portion of the product mix.

 

Expenses increased significantly in the period due to the operations of Canna Cabana and Grasscity. For the year ended October 31, 2019, the Retail Segment incurred a loss of $5.0 million.

 

11

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

5.2 Wholesale Segment Performance

 

Revenues in the Company’s Wholesale Segment increased by $1.7 million to $6.7 million in the twelve-month period ended October 31, 2019, from $5.0 million for the same period in 2018. The increase in revenue was driven by the attraction of new customers created by the deregulation of recreational cannabis for adult use and the resulting retail cannabis industry. High Tide’s Wholesale Segment has positioned itself as a key supplier to a number of retail cannabis competitors that have entered the marketplace since October 17, 2018.

 

Gross margins dollars increased by $2.8 million.

 

Expenses in the Wholesale Segment increased due to additional investments made to hire product developers, marketing professionals and digital marketing specialists. The additional staff were hired to expand product mix and further develop various proprietary brands.

 

The Wholesale Segment incurred a net loss of $2.0 million compared to loss of $4.1 million in the prior year.

 

5.3 Corporate Segment Performance

 

The Corporate Segment earned revenues of $0.6 million in the twelve months ended October 31, 2019, compared to no revenue being earned in the same period in the prior year. Revenue of $0.6 million was made up of royalty fees and interest revenues. This Segment’s main function is to administer the other two Segments (Retail and Wholesale) and is responsible for the executive management and financing needs of the business.

 

12

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

5.4 Geographical Segments

 

 

The following presents information related to the Company’s geographical Segments:

 

For the year ended October 31, 2019   Retail     Wholesale     Corporate     Total  
    $     $     $     $  
Primary geographical markets                        
Canada     20,025       4,692       606       25,323  
USA     3,684       1,901       -       5,585  
International     443       92       -       535  
Total revenue     24,152       6,686       606       31,443  
Major products and services                                
Cannabis     16,366       -       -       16,366  
Smoking accessories     6,753       6,477       -       13,230  
Franchise royalties and fees     953       -       562       1,515  
Interest and other revenue     80       208       44       333  
Total revenue     24,151       6,686       606       31,443  
Timing of revenue recognition                                
Transferred at a point in time     23,291       6,477       -       29,768  
Transferred over time     860       208       606       1,675  
Total revenue     24,151       6,686       606       31,443  

 

Sales performance increased significantly in all segments, with Canna Cabana lifting Canadian sales and Grasscity contributing to US sales and International sales. Grasscity’s operations are located in Amsterdam, Netherlands, leading to the addition of an International geographical segment. Revenues in this segment are comprised of sales made to all countries outside of North America.

 

13

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

5.5 Summary of Quarterly Results

 

 

(C$ in millions,   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  
except per share amounts)   2018     2018     2018     2018     2019     2019     2019     2019  
Net Revenue     2.7       1.7       2.2       2.1       5.0       6.6       8.3       11.5  
Income (Loss) Before OCI     0.3       (0.4 )     (0.6 )     (3.8 )     (3.8 )     (3.3 )     (3.7 )     (7.8 )

 

Aside from the seasonal increase in consumer spending leading up to and slightly after the winter holiday period, which occurs in the first quarter of the Company’s fiscal year, seasonality is becoming a decreasing factor in the Company’s sales performance as the Retail Segment grows. In the first, second, third and fourth quarters of 2019, revenues increased as the Company began operating Canna Cabana stores and selling recreational cannabis products, as well as from integrating its acquisition of Grasscity. These two businesses have no prior comparisons in quarterly performance. In the second quarter of 2018, expenses increased as the Company began to expand its Canna Cabana business as well as initiating the listing process of High Tide on the Canadian Securities Exchange, a process which continued through the third and fourth quarters of fiscal 2018.

 

The primary reason for increase in loss was due to write off Smoker’s Corner franchise accounts receivable of $939, change in estimate of tax provision resulting in reversal of $4,013 tax recovery and impairment loss of $220 on Smoker’s Corner.

 

14

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

6.0 Financial Position

 

    October-31-
2019
    October-31-
2018
 
Total current assets     14,009       17,509  
Total non-current assets     34,822       8,413  
Total current liabilities     11,775       2,590  
Total non-current liabilities     22,274       17  
Share capital     26,283       35,695  
Contributed surplus     2,119       -  
Convertible debentures – equity     600       -  
Warrants     5,348       16,904  
Special warrants     -       905  
Accumulated other comprehensive loss     (368 )     -  
Non-controlling interest     (179 )     (13 )
Deficit, at end of the year     (19,022 )     (30,176 )

 

Assets

 

As at October 31, 2019, the Company had a working capital surplus of $2,234, compared to $14,920 on October 31, 2018. The change is mainly due to the growth in the Company’s operations as it opened Canna Cabana stores and acquired Grasscity. As mentioned in Section 12: “Subsequent Events” within this MD&A the Company secured a credit facility up to $10,000 from Windsor Capital and agreed to sell the assets of KushBar to Halo Labs for $12,000 this gives the Company enough liquidity for working capital and to pursue its expansion plan.

 

Total assets of the Company were $48,831 on October 31, 2019 compared to $25,922 on October 31, 2018. The increase in total assets is primarily due to an increase in intangible assets as a result of the acquisition of the GrassCity and Dreamweavers. Assets also increased due to capital asset additions, inventory purchases, and prepaid lease deposits as a result of the expansion into the recreational retail sector during the period.

 

Liabilities

 

Total liabilities increased to $34,048 at October 31, 2019 compared to $2,607 on October 31, 2018 primarily due to convertible debentures issued which were valued at 22,057. The proceeds from convertible debenture were used for expansion and working capital. Liabilities also increased due to $2,000 loan from Cay innovations Inc. and vendor loan for a building purchased in Niagara for $1,600 which are due within next 12 months.

 

6.1 Summary of Outstanding Share Data

 

The Company had the following securities issued and outstanding as at the date of this MD&A:

 

Securities(1)   Units Outstanding  
Issued and outstanding common shares     223,929,507  
Warrants     121,335,066  
Stock options     10,860,000  
Convertible debentures     26,055  

 

(1) Refer to the Company’s Consolidated Financial Statements for a detailed description of these securities.

 

15

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

Liquidity and Capital Resources

 

The Company anticipates that it will begin to generate positive operating cash flow in the second half of the fiscal 2020 year. To achieve the Company’s expansion plans, additional funding will be required to account for store capital buildout costs and the associated inventory and other start-up costs. The Company’s expansion plans are subject to additional financing, appropriate lease arrangements for each potential retail location and required approvals from the applicable regulatory authorities in each of the provinces (and municipalities) in which the Company plans to open retail cannabis locations. As well, certain provincial regulatory authorities have limited the number of retail cannabis licences available for issuance and this may prohibit the Company from achieving its expansion goals. These future funding requirements may be met in several ways including, but not limited to, a combination of equity financings, debt financings and other capital markets alternatives.

 

For the twelve months ended October 31, 2019, the Company generated a net loss of $18,986 compared to $4,584 in prior year and had net operating cash outflows of $15,626 compared to $3,722 in prior year. The net loss and operating cash outflows are primarily driven by costs incurred to incorporate and finance the new High Tide and Canna Cabana entities which were not operational during this period in the prior year, as well as to close the acquisitions of Grasscity and Dreamweavers. This resulted in the hiring of new staff for both administration as well as retail operations, along with professional fees and increased rent.

 

6.2 Capital Management

 

The Company’s objectives when managing capital resources are to:

 

I. Deploy capital to provide an appropriate return on investment to its shareholders.
II. Maintain financial flexibility to preserve the Company’s ability to meet financial obligations; and
III. Maintain a capital structure that provides financial flexibility to execute on strategic opportunities.

 

The Company’s strategy is formulated to maintain a flexible capital structure consistent with the objectives as stated above and to respond to changes in economic conditions and the risk characteristics of the underlying assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather promotes year over-year sustainable profitable growth. The Company is not subject to any externally imposed capital requirements or covenants. The Company’s capital structure consists of equity and working capital. In order to maintain or alter the capital structure, the Company may adjust capital spending, raise new debt and issue share capital. The Company anticipates it will have adequate liquidity to fund future working capital, commitments, and forecasted capital expenditures through a combination of cash flow, cash on hand, and financings subsequent to the end of the year.

 

6.3 Off Balance Sheet Transactions

 

The Company does not have any financial arrangements that are excluded from the Financial Statements as at October 31, 2019, nor are any such arrangements outstanding as of the date of this MD&A.

 

7.0 Commitments

 

The Company has commitments relating to operating leases for its office space and outlets under non-cancelable operating leases. The future minimal annual rental payments under these operating leases are as follows:

 

 

As at   October 31, 2019     October 31, 2018  
    $     $  
Less than one year     3,962       2,336  
Between one and five years     13,830       10,103  
Greater than five years     3,426       2,532  
      21,218       14,971  

 

As at October 31, 2019 the Company has entered contracts totalling $21,218.

 

16

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

8.0 Transactions Between Related Parties

 

8.1 Financing Transactions

 

As at October 31, 2019, the Company owed the non-controlling interest shareholder of KushBar $701. The loan carries no interest and is due on demand.

 

Included in the convertible debenture that closed on December 12, 2018, was an investment by related party, CannaIncome Fund Corporation, for a total subscription amount of $250.

 

8.2 Operational Transactions

 

The Company paid $2,176 (2018 - $295), to 1990299 Alberta Ltd. (“199”), a company controlled by the President and CEO of the Company, for inventory purchases. 199 primarily facilitates the import of goods and sells these imported goods to the Company at 199’s purchasing and transportation costs, without markup. High Tide incorporated HT Global Imports and has transitioned the process of facilitation of its imports from 199 to HT Global Imports instead. An office and warehouse unit has been developed by Grover Properties Inc., a company that is related through a common controlling shareholder and the President & CEO of the company. The office and warehouse space were leased to High Tide to accommodate the Company’s operational expansion. The lease was established by an independent real estate valuations services company at prevailing market rates and has annual lease payments totalling $386 per annum. The primary lease term is 5 years with two additional 5-year term extensions exercisable at the option of the Company. To facilitate the mortgage for the development of this unit, a loan guarantee of up to $1,500 has been provided by Smoker’s Corner Ltd., a subsidiary of High Tide Inc.

 

Executive compensation

 

The Company defines key management personnel as being the Chief Executive Officer (who is also the major shareholder and director), Chief Operating Officer, Chief Financial Officer, Chief Revenue Officer and Chief Strategy Officer.

 

Key management compensation for the years ended January 31 is as follows:

    2019     2018  
Salaries and other short-term employee benefits (i)   $ 973     $ 272  
Shares issued on private placement in lieu of payment     71       25  
Total   $ 1,044     $ 297  

 

i) Included in the total is $6 for the fair value of a Company vehicle provided to the CEO and $2 for a vehicle and telephone allowance paid to the Chief Strategy Officer and Chief Operating Officer.

 

17

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

9.0 Changes in Accounting Policies Including Initial Adoption

 

9.1 Changes in Accounting Standards Not Yet Adopted

 

(i) IFRS 16 Leases

 

In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term greater than twelve months, unless the underlying asset’s value is insignificant. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. Lessors will continue to classify leases as operating or finance, with lessor accounting remaining substantially unchanged from the preceding guidance under IAS 17, Leases.

 

Management is currently executing its implementation plan and has completed the initial scoping phase to identify material lease contracts. However, the analysis of such contracts to quantify the transitional impact is still in progress. The most significant impact of IFRS 16 will be our initial recognition of the present value of unavoidable future lease payments as right-of-use assets under property, plant and equipment and the concurrent recognition of a lease liability on the consolidated statement of financial position. Majority of our property leases, which are currently treated as operating leases, are expected to be impacted by the new standard which will result in lower rent expense, higher depreciation expense and higher finance costs related to accretion and interest expense of the lease liability. IFRS 16 will also impact the presentation of the consolidated statement of cash flows by decreasing operating cash flows and increasing financing cash flows.

 

The standard will be effective for the Company for the fiscal year commencing November 1, 2019. The Company will be adopting the standard retrospectively by recognizing the cumulative impact of initial adoption in opening retained earnings (i.e. the difference between the right-of-use asset and the lease liability). The Company will measure the right-of-use asset at an amount equal to the lease liability on November 1, 2019, apply a single discount rate to leases with similar remaining lease terms for similar classes of underlying assets and will not separate non-lease components from lease components for certain classes of underlying assets.

 

(ii) Definition of a Business

 

In October 2018, the IASB issued “Definition of a Business (Amendments to IFRS 3)”. The amendments clarify the definition of a business, with the objective of assisting entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendment provides an assessment framework to determine when a series of integrate activities is not a business. The amendments are effective for business combinations occurring on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. The Company is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

 

18

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

10.0 Financial Instruments and Risk Management

 

The Company’s activities expose it to a variety of financial risks. The Company is exposed to credit, liquidity, and market risk because of holding certain financial instruments. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

 

Risk management is carried out by senior management in conjunction with the Board of Directors.

 

Credit risk

 

Credit risk arises when a party to a financial instrument will cause a financial loss for the counter party by failing to fulfill its obligation. Financial instruments that subject the Company to credit risk consist primarily of cash, accounts receivable, marketable securities and loans receivable. The credit risk relating to cash and cash equivalents and marketable securities balances is limited because the counterparties are large commercial banks. The amounts reported for accounts receivable in the statement of financial position is net of allowances for doubtful accounts and bad debts and the net carrying value represents the Company’s maximum exposure to credit risk. Accounts receivable credit exposure is minimized by entering into transactions with creditworthy counterparties and monitoring the age and balances outstanding on an ongoing basis. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. The following table sets forth details of the aging profile of accounts receivable and the allowance for doubtful accounts:

 

As at   October 31, 2019     October 31, 2018  
    $     $  
Current (for less than 30 days)     1,038       343  
31 – 60 days     336       233  
61 – 90 days     295       73  
Greater than 90 days     2,315       334  
Loss allowance     (1,606 )     (128 )
      2,378       855  

 

During the year ended Oct 31, 2019, $1,024 in trade receivables were written off due to bad debts (year ended October 31, 2018 – $396). Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. The remaining accounts receivable are assessed collectively to determine whether there is objective evidence that an impairment has been incurred but not yet been identified.

 

The Company performs a regular assessment of collectability of accounts receivables. The Company monitors the financial performance and/or cash flows of its franchisees through observation of their point of sale system, receipt of cash from customers and maintains regular contact/discussions. In fiscal 2018, the Company reviewed the expected payment schedule and discounted it using an average franchisee credit adjusted rate of 11% resulting in the receivables being discounted by $474. For the year ended October 31, 2019, management reviewed the estimates and have created loss allowances for the Smokers Corner’s franchise receivable.

 

19

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

11.0 Liquidity Risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company generally relies on funds generated from operations and equity financings to provide sufficient liquidity to meet budgeted operating requirements and to supply capital to expand its operations. The Company continues to seek capital to meet current and future obligations as they come due. Maturities of the Company’s financial liabilities are as follows:

 

    Contractual cash flows     Less than one year     1-5 years     Greater than 5 years  
    $     $     $     $  
October 31, 2018                        
Accounts payable and accrued liabilities     2,515       2,515       -           -  
Shareholder loans     36       36       -       -  
Finance lease obligation     23       6       17       -  
Total     2,574       2,557       17       -  
July 31, 2019                                
Accounts payable and accrued liabilities     4,428       4,428       -       -  
Shareholder loans     701       701       -       -  
Finance lease obligation     17       6       11       -  
Total     5,147       5,135       11       -  

 

11.1 Foreign Currency Risk

 

Foreign currency risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company maintains cash balances and enters into transactions denominated in foreign currencies, which exposes the Company to fluctuating balances and cash flows due to variations in foreign exchange rates.

 

The Canadian dollar equivalent carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities as at October 31, 2019 was as follows:

 

(Canadian dollar equivalent amounts of US dollar and Euro balances)   October 31,
2019
(Euro)
    October 31,
2019
(USD)
    October 31,
2019
Total
    October 31,
2018
 
    $     $     $     $  
Cash     32       220       252       90  
Accounts receivable (including long term portion)     136       285       421       522  
Accounts payable and accrued liabilities     (618 )     (492 )     (1,110 )     (218 )
Net monetary assets     (450 )     13       (437 )     394  

 

Assuming all other variables remain constant, a fluctuation of +/- 5.0 percent in the exchange rate between the United States dollar and the Canadian dollar would impact the carrying value of the net monetary assets by approximately +/- $11 (October 31, 2018 - $20). Maintaining constant variables, a fluctuation of +/- 5.0 percent in the exchange rate between the Euro and the Canadian dollar would impact the carrying value of the net monetary assets by approximately +/- $23 (October 31, 2018 - $Nil). To date, the Company has not entered into financial derivative contracts to manage exposure to fluctuations in foreign exchange rates. The Company had no balances denominated in Euros as at October 31, 2018.

 

20

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

12.0 Subsequent Events

 

(i) On Nov 5, 2019, the Company issued unsecured convertible debentures under a non-brokered private placement with proceeds of $2,000. Subject to the need for further growth capital, the Company’s Board of Directors has authorized the issuance of an optional second tranche of the Offering for aggregate proceeds of up to $5,000. The outstanding principal amount under the Debentures is convertible at any time before maturity and at the holder’s option, into common shares of the Company at a conversion price of $0.252 per share. The Debentures are due 24 months from the date of issuance and carry an interest cost of 10% per annum, payable annually in advance in shares. The interest cost is payable in shares at a deemed price equal to the volume-weighted average price per common share for the 10-day period prior to the date upon which interest is due. Concurrent with the issuance of the Debentures, the Company paid the annual amount of interest due up-front in the form of 784,314 Shares. Under the offering, the Company also issued common share purchase warrants such that each subscriber received one warrant for each $0.252 original principal amount of its Debenture, resulting in 7,936,507 warrants being issued as part of the Offering. Each warrant entitles the holder to acquire one Share at an exercise price of $0.50 per Share for two years from the date of issuance.
   
(ii) On Dec 5, 2019, the Company closed the second tranche of the sale of unsecured convertible debentures of the Company under the private placement previously announced on November 14, 2019. Gross proceeds from the Second Tranche were $2,115. The outstanding principal amount under the Debentures is convertible at any time before maturity and at the holder’s option, into common shares of the Company at a conversion price of $0.252 per share. The debentures are due 24 months from the date of issuance and carry an interest cost of 10% per annum, payable annually in advance in Shares. The interest rate is payable in Shares at a deemed price equal to the volume-weighted average price per common share for the 10-day period prior to the date upon which interest is due. Concurrent with the issuance of the debentures, the Company paid the annual amount of interest due up-front in the form of 1,016,826 shares. Under the second tranche of the offering, the Company also issued common share purchase warrants such that each subscriber received one warrant for each $0.252 original principal amount of its debenture, resulting in 8,392,857 warrants being issued as part of the Offering. Each warrant entitles the holder to acquire one Share at an exercise price of $0.50 per Share for two years from the date of issuance.
   
(iii) On Dec 10, 2019, the Company entered into a definitive share purchase agreement with 2651576 Ontario Inc. (the “Minority Holder”), a private Ontario company, to acquire the remaining 49.9% interest (the “Minority Interest”) in High Tide’s majority-owned subsidiary, KushBar Inc. (“KushBar”). Pursuant to the Definitive Agreement, High Tide, which presently holds a controlling interest of 50.1% in KushBar, will acquire the Minority Interest in a transaction (the “Transaction”) that will result in KushBar becoming a wholly owned subsidiary of High Tide. The consideration paid for the minority interest was by the issuance of a secured convertible debenture in the principal amount of approximately $700 and such number of common shares in the capital of High Tide (“Shares”) having an aggregate value of $500, with each Share priced at the 10-day volume weighted average trading price of the shares on the CSE immediately prior to the Closing Date. The outstanding principal amount under the Debenture is convertible, at the holder’s option, before the maturity date into Shares at a price of $0.25 per Share. The Debenture will be due 24 months from the issuance date and will not bear interest, provided however that any principal amount outstanding following the maturity date will bear interest at a rate of 10% per annum until repaid. If, following the expiry of all hold periods imposed by applicable Canadian securities laws, the volume-weighted average trading price of the Shares on the CSE exceeds $0.30 for a period of 30 consecutive days, High Tide will be entitled to, subject to certain other conditions being met, cause the holder to convert all or part of the outstanding principal amount of the debenture into Shares. In addition, if at any time during the term thereof, High Tide issues securities at a price deemed lower than the conversion price then in effect, then, subject to certain other conditions, such conversion price will be adjusted downward to such lower price.
   
(iv) On Dec 13, 2019, the Company issued to $2,000 in convertible debt and 7,936,508 warrants to the sellers of GrassCity to settle the put option valued at $2,121 as of October 31, 2019.

 

21

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

12. Subsequent Events (continued)

 

(v) On Jan 7, 2020, the Company entered into a loan agreement with Windsor Private Capital, a Toronto-based merchant bank, to secure a senior secured, non-revolving term credit facility in the amount of up to $10 million. The Company will have immediate access to an initial $6 million in working capital, that can be drawn down at Company’s discretion, and subject to satisfaction of certain conditions, will provide the Company with access to an additional $4 million. Amounts drawn down under the Facility will bear interest at a rate of 11.5% per annum, payable monthly, in arrears, on the last day of each calendar month. Provided that certain conditions are satisfied, the Facility will automatically extend for an additional one-year term. The principal amount advanced under the facility is convertible, during its term at any time after an initial 6 month hold period, and at Windsor’s option, into common shares in the capital of the Company at a conversion price of $0.17. The conversion price is subject to downward adjustment if the Company, at any time during the term of the Facility, issues securities at a price deemed lower than the conversion price then in effect. Pursuant to the loan agreement, Windsor is entitled to a one-time placement fee equal to 3.5% of the Initial Facility Amount, which the Company intends to capitalize into the principal amount advanced under the facility. In addition, Company will issue to Windsor such number of Share purchase warrants (the “Warrants”) equal to the aggregate principal amount of the facility divided by the conversion price. The warrants will be subject to vesting as follows: (i) with respect to such number of warrants equal to the Initial Facility Amount divided by the conversion price, such warrants will vest on the earlier of the date on which Windsor advances to the Company the total initial facility amount, and February 6, 2020, and (ii) with respect to the remaining warrants, such number of warrants equal to the quotient obtained by dividing the principal amount advanced to the Company (from the Remaining Facility Amount) by the Conversion Price, will vest on the date of each such advance. Each warrant will entitle the holder thereof, following the vesting date applicable to such Warrant, to acquire one Share at an exercise price equal to 150% of the Conversion Price per Share for a period of two years from the date of issuance.
   
(vi) On Jan 27, 2020, the Company completed the acquisition of the Canna Cabana retail cannabis store in Hamilton, Ontario. As consideration for the acquisition, the Company paid to the vendor $2,097 in cash and issued to the Vendor 4,761,904 common shares in the capital of the Company. The Transaction, which was completed with the consent of the Alcohol and Gaming Commission of Ontario (the “AGCO”) following the expiry of certain restrictions on change of control established under the rules applicable to the first cannabis retail lottery conducted by the AGCO on January 11, 2019 (the “First Lottery”). In connection with the Transaction, the Company acquired all the issued and outstanding shares of a numbered company that was wholly owned by the holder of a cannabis retail store.
   
  PPA
   
(vii) On Jan 28, 2020, the Company acquired a 50% interest in the Canna Cabana store in Sudbury, Ontario from Saturninus Partners. As consideration for the transaction, the Company issued to a nominee of the partners of the partnership an aggregate of 5,319,149 common shares of the Company, which are subject to a four month and one day statutory hold period, as well as common share purchase warrants to purchase up to an aggregate of 2,500,000 shares of the Company. Each Warrant entitles the holder to acquire one share at an exercise price of $0.40 per share for a period of two years from the date of issuance. In addition, for a period of 2 years following the closing date, one of the outgoing partners will be entitled to receive, from the Company, a royalty of 1% of the gross revenues of the Sudbury store.
   
(viii)  On Feb 14, 2020, the Company entered into a binding asset purchase agreement with Halo Labs Inc. (“Halo”), under which High Tide will sell its KushBar retail cannabis assets and the rights to 5 permitted retail cannabis stores (the “Portfolio”) to Halo for $12 Million, payable in the form of 46,153,846 common shares of Halo, of which $3.5 Million has been paid to High Tide as a non-refundable deposit, subject to certain limited circumstances. In addition, Halo has agreed to engage High Tide to substantially oversee all aspects of its retail cannabis operations with respect to the Portfolio and will pay High Tide ongoing royalties for regulatory advisory services and retail management, and a fixed fee for managing the construction of the unopened stores.

 

22

 

 

High Tide Inc.

Management’s Discussion and Analysis

For the year ended October 31, 2019 and 2018

(In thousands of Canadian dollars, except share and per share amounts or otherwise stated)

 

13.0 Internal Control over Financial Reporting

 

The Chief Executive Officer and Chief Financial Officer, as the case may be, of the Company are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on timely basis. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No changes were made in the Company’s internal control over financial reporting during the period covered by this MD&A that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

23

 

 

EXHIBIT 99.2

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

High Tide Opens 26th Canna Cabana and 3rd KushBar Bringing its Total to 29 Branded Retail Cannabis Stores across Canada

 

The Company’s number of branded retail cannabis stores is expected to reach 30 locations across Canada this month

 

Calgary, AB, November 7, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that the Canna Cabana location in Unit #130 at 6751 50 Avenue in Red Deer and the KushBar location in Unit #103 at 7701 44 Street in Lloydminster (the “New Stores”) received their first deliveries of recreational cannabis products from Alberta Gaming, Liquor and Cannabis (“AGLC”) and today will begin selling cannabis and accessories. To celebrate each of their grand openings, festivities will take place at the New Stores on Saturday, November 9th.

 

High Tide currently has 29 branded locations stores selling recreation cannabis products across Canada, inclusive of the New Stores. “Adding this Gaetz Avenue location to our other store on Gasoline Alley provides the residents of Red Deer with two great options to enjoy the customer-focused Canna Cabana retail experience,” said Raj Grover, President and Chief Executive Officer of High Tide. “Based on the warm reception to the KushBar banner in Camrose and Morinville so far, opening this third location in Lloydminster is also an exciting development for our company and customers alike,” added Mr. Grover. High Tide is expected to have 30 branded retail cannabis locations across Canada this month, barring any changes to the current rate of licensing by AGLC.

 

The development permits for the remaining Canna Cabana and KushBar stores needed to achieve the AGLC’s maximum of 42 are currently under various stages of development and construction. Outside of Alberta, High Tide currently has a Canna Cabana retail cannabis store in Swift Current, Saskatchewan, along with 3 branded locations in Hamilton, Sudbury and Toronto, Ontario.

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX: APHA) (NYSE: APHA) and Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB).

 

 

 

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 12 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 26 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

2

 

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

3

 

EXHIBIT 99.3

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

High Tide Issues $2 Million of Convertible Debentures

 

Calgary, AB, November 15, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that it has issued unsecured convertible debentures of the Company (the “Debentures”) under a non-brokered private placement (the “Offering”) with proceeds of $2,000,000. The proceeds of the Offering will be used by High Tide to fund the construction of its next Canna Cabana and KushBar stores as well as for general working capital purposes. Subject to the need for further growth capital, the Company’s Board of Directors has authorized the issuance of an optional second tranche of the Offering for aggregate proceeds of up to $5,000,000.

 

The outstanding principal amount under the Debentures is convertible at any time before maturity and at the holder’s option, into common shares of the Company (the “Shares”) at a conversion price of $0.252 per share. The Debentures are due 24 months from the date of issuance and carry an interest cost of 10% per annum, payable annually in advance in Shares. The interest cost is payable in Shares at a deemed price equal to the volume-weighted average price per common share for the 10-day period prior to the date upon which interest is due. Concurrent with the issuance of the Debentures, the Company paid the annual amount of interest due up-front in the form of 784,314 Shares.

 

Under the Offering, the Company also issued common share purchase warrants (the “Warrants”) such that each subscriber received one Warrant for each $0.252 original principal amount of its Debenture, resulting in 7,936,507 Warrants being issued as part of the Offering. Each Warrant entitles the holder to acquire one Share at an exercise price of $0.50 per Share for two years from the date of issuance. The final closing of the Offering is expected to occur on such date or dates as agreed to between the Company and the investors.

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).

 

 

 

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 12 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 26 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

2

 

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

3

 

 

EXHIBIT 99.4

 

 

 

High Tide Opens 27th Canna Cabana Bringing its Total to 30 Branded Retail Cannabis Stores across Canada

 

/NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS./

 

CALGARY, Nov. 21, 2019 /CNW/ - High Tide Inc. ("High Tide" or the "Company") (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that the Canna Cabana location in Unit #6128 at 403 Mackenzie Way SW in Airdrie (the "Airdrie Store") has received its first delivery of recreational cannabis products from Alberta Gaming, Liquor and Cannabis ("AGLC") and today will begin selling cannabis and accessories. To celebrate its grand opening, festivities will take place at the Airdrie Store on Saturday, November 23rd.

 

High Tide currently has 30 branded locations selling recreation cannabis products across Canada, inclusive of the Airdrie Store. "As promised, High Tide has steadily executed on its growth plans to become the largest retailer of recreational cannabis in Alberta. By hitting the 30-store milestone, we continue to be a leading retailer in the country as well," said Raj Grover, President and Chief Executive Officer of High Tide. "Airdrie is rapidly growing as a neighbouring community to the north of Calgary and we are excited to open this Canna Cabana store in this excellent location," added Mr. Grover. The development permits for the remaining Canna Cabana and KushBar stores needed to achieve the AGLC's maximum of 42 are currently under various stages of development and construction. Outside of Alberta, High Tide currently has a Canna Cabana retail cannabis store in Swift Current, Saskatchewan, along with 3 branded locations in Hamilton, Sudbury and Toronto, Ontario.

 

Separately, the Company recently authorized 4,500,000 warrants with an exercise price of $0.30 per share for issuance to various arm's length third parties as payment for capital markets advisory services.

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically- integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker's Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide's strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX: APHA) (NYSE: APHA) and Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB).

 

Representing the core of High Tide's business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz' products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker's Corner Ltd. is among Canada's largest counter-culture chains with 12 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world's preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

 

 

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements. Such information and statements, referred to herein as "forward-looking statements" are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as "outlook", "expects", "intend", "forecasts", "anticipates", "plans", "projects", "estimates", "envisages, "assumes", "needs", "strategy", "goals", "objectives", or variations thereof, or stating that certain actions, events or results "may", "can", "could", "would", "might", or "will" be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia's Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved.

 

Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward- looking statements.

 

The forward looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

View original content to download multimedia:

http://www.newswire.ca/en/releases/archive/November2019/21/c3249.html

 

%SEDAR: 00045217E

 

For further information: Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

CO: High Tide Inc.

 

CNW 07:10e 21-NOV-19

 

 

 

 

EXHIBIT 99.5

 

Note: [05 Oct 2018] - The following is a consolidation of 45-106F1. It incorporates the amendments to this document that came
into effect on October 5, 2018. This consolidation is provided for your convenience and should not be relied on as authoritative.

 

Form 45-106F1 Report of Exempt Distribution

 

A. General Instructions

 

1. Filing instructions

 

An issuer or underwriter that is required to file a report of exempt distribution and pay the applicable fee must file the report and pay the fee as follows:

 

In British Columbia – through BCSC eServices at http://www.bcsc.bc.ca.
In Ontario – through the online e-form available at http://www.osc.gov.on.ca.
In all other jurisdictions – through the System for Electronic Document Analysis and Retrieval (SEDAR) in accordance with National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) if required, or otherwise with the securities regulatory authority or regulator, as applicable, in the applicable jurisdictions at the addresses listed at the end of this form.

 

The issuer or underwriter must file the report in a jurisdiction of Canada if the distribution occurs in the jurisdiction, and the issuer or underwriter is relying on a specific exemption from the prospectus requirement set out in section 6.1 of the Instrument. The requirement to file this report might also be a condition of a prospectus exemption provided in a national, multilateral or local rule or instrument, or a condition of an exemptive relief order. If a distribution is made in more than one jurisdiction of Canada, the issuer or underwriter may satisfy its obligation to file the report by completing a single report identifying all purchasers, and file the report in each jurisdiction of Canada in which the distribution occurs. Filing fees payable in a particular jurisdiction are not affected by identifying all purchasers in a single report.

 

In order to determine the applicable fee in a particular jurisdiction of Canada, consult the securities legislation of that jurisdiction.

 

2. Issuers located outside of Canada

 

If an issuer located outside of Canada determines that a distribution has taken place in a jurisdiction of Canada, include information about purchasers resident in that jurisdiction only.

 

3. Multiple distributions

 

An issuer may use one report for multiple distributions occurring within 10 days of each other, provided the report is filed on or before the 10th day following the first distribution date. However, an investment fund issuer that is relying on the exemptions set out in subsection 6.2(2) of NI 45-106 may file the report annually in accordance with that subsection.

 

4. References to purchaser

 

References to a purchaser in this form are to the beneficial owner of the securities.

 

However, if a trust company, trust corporation, or registered adviser described in paragraph (p) or (q) of the definition of “accredited investor” in section 1.1 of NI 45-106 has purchased the securities on behalf of a fully managed account, provide information about the trust company, trust corporation or registered adviser only; do not include information about the beneficial owner of the fully managed account.

 

Joint purchasers may be treated as one purchaser for the purposes of Item 7(f) of this form.

 

5. References to issuer

 

References to “issuer” in this form include an investment fund issuer and a non-investment fund issuer, unless otherwise specified.

 

6. Investment fund issuers

 

If the issuer is an investment fund, complete Items 1-3, 6-8, 10, 11 and Schedule 1 of this form.

 

7. Mortgage investment entities

 

If the issuer is a mortgage investment entity, complete all applicable items of this form other than Item 6.

 

 

 

8. Language

 

The report must be filed in English or in French. In Québec, the issuer or underwriter must comply with linguistic rights and obligations prescribed by Québec law.

 

9. Currency

 

All dollar amounts in the report must be in Canadian dollars. If the distribution was made or any compensation was paid in connection with the distribution in a foreign currency, convert the currency to Canadian dollars using the daily exchange rate of the Bank of Canada on the distribution date. If the distribution date occurs on a date when the daily exchange rate of the Bank of Canada is not available, convert the currency to Canadian dollars using the most recent daily exchange rate of the Bank of Canada available before the distribution date. For investment funds in continuous distribution, convert the currency to Canadian dollars using the average daily exchange rate of the Bank of Canada for the distribution period covered by the report.

 

If the distribution was not made in Canadian dollars, provide the foreign currency in Item 7(a) of the report.

 

10. Date of information in report

 

Unless otherwise indicated in this form, provide the information as of the distribution end date.

 

11. Date of formation

 

For the date of formation, provide the date on which the issuer was incorporated, continued or organized (formed). If the issuer resulted from an amalgamation, arrangement, merger or reorganization, provide the date of the most recent amalgamation, arrangement, merger or reorganization.

 

12. Security codes

 

Wherever this form requires disclosure of the type of security, use the following security codes:

 

Security code   Security type
BND   Bonds
CER   Certificates (including pass-through certificates, trust certificates)
CMS   Common shares
CVD   Convertible debentures
CVN   Convertible notes
CVP   Convertible preferred shares
DCT   Digital coins or tokens
DEB   Debentures
DRS   Depository receipts (such as American or Global depository receipts/shares)
FTS   Flow-through shares
FTU   Flow-through units
LPU   Limited partnership units and limited partnership interests (including capital commitments)
MTG   Mortgages (other than syndicated mortgages)
NOT   Notes (include all types of notes except convertible notes)
OPT   Options
PRS   Preferred shares
RTS   Rights
SMG   Syndicated mortgages
SUB   Subscription receipts
UBS   Units of bundled securities (such as a unit consisting of a common share and a warrant)
UNT   Units (exclude units of bundled securities, include trust units and mutual fund units)
WNT   Warrants (including special warrants)
OTH   Other securities not included above (if selected, provide details of security type in Item 7d)

 

13. Distributions by more than one issuer of a single security

 

If two or more issuers distributed a single security, provide the full legal names of the co-issuers in Item 3.

 

2

 

 

B. Terms used in the form

 

1. For the purposes of this form:

 

“designated foreign jurisdiction” means Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland or the United Kingdom of Great Britain and Northern Ireland;

 

“eligible foreign security” means a security offered primarily in a foreign jurisdiction as part of a distribution of securities in either of the following circumstances:

 

(a) the security is issued by an issuer
(i) that is incorporated, formed or created under the laws of a foreign jurisdiction,
(ii) that is not a reporting issuer in a jurisdiction of Canada,
(iii) that has its head office outside of Canada, and
(iv) that has a majority of the executive officers and a majority of the directors ordinarily resident outside of Canada;

 

(b) the security is issued or guaranteed by the government of a foreign jurisdiction;

 

“foreign public issuer” means an issuer where any of the following apply:

 

(a) the issuer has a class of securities registered under section 12 of the 1934 Act;

 

(b) the issuer is required to file reports under section 15(d) of the 1934 Act;

 

(c) the issuer is required to provide disclosure relating to the issuer and the trading in its securities to the public, to security holders of the issuer or to a regulatory authority and that disclosure is publicly available in a designated foreign jurisdiction;

 

“legal entity identifier” means a unique identification code assigned to the person

 

(a) in accordance with the standards set by the Global Legal Entity Identifier System, or

 

(b) that complies with the standards established by the Legal Entity Identifier Regulatory Oversight Committee for pre-legal entity identifiers;

 

“NRD” means National Registration Database;

 

“permitted client” has the same meaning as in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;

 

“SEDAR profile” means a filer profile required under section 5.1 of National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR).

 

2. For the purposes of this form, a person is connected with an issuer or an investment fund manager if either of the following applies:

 

(a) one of them is controlled by the other;

 

(b) each of them is controlled by the same person.

 

3

 

 

 

4

 

 

 

 

5

 

 

 

6

 

 

 

7

 

 

 

8

 

 

 

9

 

 

 

10

 

 

 

 

11

 

 

SCHEDULE 1 TO FORM 45-106F1 (CONFIDENTIAL PURCHASER INFORMATION)

 

Schedule 1 must be filed in the format of an Excel spreadsheet in a form acceptable to the securities regulatory authority or regulator.

 

The information in this schedule will not be placed on the public file of any securities regulatory authority or regulator. However, freedom of information legislation may require the securities regulatory authority or regulator to make this information available if requested.

 

a) General information (provide only once)
1. Name of issuer
2. Certification date (YYYY-MM-DD)

 

Provide the following information for each purchaser that participated in the distribution. For each purchaser, create separate entries for each distribution date, security type and exemption relied on for the distribution.

 

b) Legal name of purchaser

 

If two or more individuals have purchased a security as joint purchasers, provide information for each purchaser under the columns for family name, first given name and secondary given names, if applicable, and separate the individuals’ names with an ampersand. For example, if Jane Jones and Robert Smith are joint purchasers, indicate “Jones & Smith” in the family name column.

 

1. Family name
2. First given name
3. Secondary given names (if applicable)
4. Full legal name of non-individual (if applicable)

 

c) Contact information of purchaser

 

1. Residential street address
2. Municipality
3. Province/State
4. Postal code/Zip code
5. Country
6. Telephone number
7. Email address (if available)

 

d) Details of securities purchased

 

1. Date of distribution (YYYY-MM-DD)
2. Number of securities
3. Security code
4. Amount paid (Canadian $)

 

e) Details of exemption relied on

 

1. Rule, section and subsection number
2. If relying on section 2.3 [Accredited investor] of NI 45-106, provide the paragraph number in the definition of “accredited investor” in section 1.1 of NI 45-106 that applies to the purchaser. (select only one – if the purchaser is a permitted client that is not an individual, “NIPC” can be selected instead of the paragraph number)
3. If relying on section 2.5 [Family, friends and business associates] of NI 45-106, provide:
a. the paragraph number in subsection 2.5(1) that applies to the purchaser (select only one); and
b. if relying on paragraphs 2.5(1)(b) to (i), provide:
i. the name of the director, executive officer, control person, or founder of the issuer or affiliate of the issuer claiming a relationship to the purchaser. (Note: if Item 9(a) has been completed, the name of the director, executive officer or control person must be consistent with the name provided in Item 9 and Schedule 2.)

 

ii. the position of the director, executive officer, control person, or founder of the issuer or affiliate of the issuer claiming a relationship to the purchaser.

 

4. If relying on subsection 2.9(2) or, in Alberta, New Brunswick, Nova Scotia, Ontario, Québec, or Saskatchewan, subsection 2.9(2.1) [Offering memorandum] of NI 45-106 and the purchaser is an eligible investor, provide the paragraph number in the definition of “eligible investor” in section 1.1 of NI 45-106 that applies to the purchaser. (select only one)

 

12

 

 

f) Other information

 

Paragraphs f)1. and f)2. do not apply if any of the following apply:

 

(a) the issuer is a foreign public issuer;
(b) the issuer is a wholly owned subsidiary of a foreign public issuer;
(c) the issuer is distributing only eligible foreign securities and the distribution is to permitted clients only.

 

1. Is the purchaser a registrant? (Y/N)
2. Is the purchaser an insider of the issuer? (Y/N) (not applicable if the issuer is an investment fund)
3. Full legal name of person compensated for distribution to purchaser. If a person compensated is a registered firm, provide the firm NRD number only. (Note: the names must be consistent with the names of the persons compensated as provided in Item 8.)

 

INSTRUCTIONS FOR SCHEDULE 1

 

Any securities issued as payment for commissions or finder’s fees must be disclosed in Item 8 of the report, not in Schedule 1.

 

Details of exemption relied on – When identifying the exemption the issuer relied on for the distribution to each purchaser, refer to the rule, statute or instrument in which the exemption is provided and identify the specific section and, if applicable, subsection or paragraph. For example, if the issuer is relying on an exemption in a National Instrument, refer to the number of the National Instrument, and the subsection or paragraph number of the specific provision. If the issuer is relying on an exemption in a local blanket order, refer to the blanket order by number.

 

For exemptions that require the purchaser to meet certain characteristics, such as the exemption in section 2.3 [Accredited investor], section 2.5 [Family, friends and business associates] or subsection 2.9(2) or, in Alberta, New Brunswick, Nova Scotia, Ontario, Québec, or Saskatchewan, subsection 2.9(2.1) [Offering memorandum] of NI 45-106, provide the specific paragraph in the definition of those terms that applies to each purchaser.

 

Reports filed under paragraph 6.1(1)(j) [TSX Venture Exchange offering] of NI 45-106 – For reports filed under paragraph 6.1(1)(j) [TSX Venture Exchange offering] of NI 45-106, Schedule 1 must list the total number of purchasers by jurisdiction only, and is not required to include the name, residential address, telephone number or email address of the purchasers.

 

13

 

 

SCHEDULE 2 TO FORM 45-106F1 (CONFIDENTIAL DIRECTOR, EXECUTIVE OFFICER, PROMOTER AND CONTROL PERSON INFORMATION)

 

Schedule 2 must be filed in the format of an Excel spreadsheet in a form acceptable to the securities regulatory authority or regulator.

 

Complete the following only if Item 9(a) is required to be completed. This schedule also requires information to be provided about control persons of the issuer at the time of the distribution.

 

The information in this schedule will not be placed on the public file of any securities regulatory authority or regulator. However, freedom of information legislation may require the securities regulatory authority or regulator to make this information available if requested.

 

a) General information (provide only once)

 

1. Name of issuer
2. Certification date (YYYY-MM-DD)

 

b) Business contact information of Chief Executive Officer (if not provided in Item 10 or 11 of report)

 

1. Email address
2. Telephone number

 

c) Residential address of directors, executive officers, promoters and control persons of the issuer

 

Provide the following information for each individual who is a director, executive officer, promoter or control person of the issuer at the time of the distribution. If the promoter or control person is not an individual, provide the following information for each director and executive officer of the promoter and control person. (Note: names of directors, executive officers and promoters must be consistent with the information in Item 9 of the report, if required to be provided.)

 

1. Family name
2. First given name
3. Secondary given names
4. Residential street address
5. Municipality
6. Province/State
7. Postal code/Zip code
8. Country
9. Indicate whether the individual is a control person, or a director and/or executive officer of a control person (if applicable)

 

d) Non-individual control persons (if applicable)

 

If the control person is not an individual, provide the following information. For locations within Canada, state the province or territory, otherwise state the country.

 

1. Organization or company name
2. Province or country of business location

 

14

 

 

Questions:

 

Refer any questions to:

 

Alberta Securities Commission

Suite 600, 250 – 5th Street SW

Calgary, Alberta T2P 0R4

Telephone: 403-297-6454

Toll free in Canada: 1-877-355-0585

Facsimile: 403-297-2082

Public official contact regarding indirect collection of information: FOIP Coordinator

 

British Columbia Securities Commission

P.O. Box 10142, Pacific Centre

701 West Georgia Street

Vancouver, British Columbia V7Y 1L2

Inquiries: 604-899-6854

Toll free in Canada: 1-800-373-6393

Facsimile: 604-899-6581
Email: FOI-privacy@bcsc.bc.ca

Public official contact regarding indirect collection of information: FOI Inquiries

 

The Manitoba Securities Commission

500 – 400 St. Mary Avenue

Winnipeg, Manitoba R3C 4K5

Telephone: 204-945-2561

Toll free in Manitoba: 1-800-655-5244

Facsimile: 204-945-0330

Public official contact regarding indirect collection of information: Director

 

Financial and Consumer Services Commission (New Brunswick)

85 Charlotte Street, Suite 300

Saint John, New Brunswick E2L 2J2

Telephone: 506-658-3060

Toll free in Canada: 1-866-933-2222

Facsimile: 506-658-3059

Email: info@fcnb.ca

Public official contact regarding indirect collection of information: Chief Executive Officer and Privacy Officer

 

Government of Newfoundland and Labrador Financial Services Regulation Division

P.O. Box 8700

Confederation Building

2nd Floor, West Block

Prince Philip Drive

St. John’s, Newfoundland and Labrador A1B 4J6

Attention: Director of Securities

Telephone: 709-729-4189

Facsimile: 709-729-6187

Public official contact regarding indirect collection of information: Superintendent of Securities

 

 

 

 

Government of the Northwest Territories

Office of the Superintendent of Securities

P.O. Box 1320

Yellowknife, Northwest Territories X1A 2L9

Telephone: 867-767-9305

Facsimile: 867-873-0243

Public official contact regarding indirect collection of information: Superintendent of Securities

 

Nova Scotia Securities Commission

Suite 400, 5251 Duke Street

Duke Tower

P.O. Box 458

Halifax, Nova Scotia B3J 2P8

Telephone: 902-424-7768

Facsimile: 902-424-4625

Public official contact regarding indirect collection of information: Executive Director

 

Government of Nunavut Department of Justice

Legal Registries Division

P.O. Box 1000, Station 570

1st Floor, Brown Building

Iqaluit, Nunavut X0A 0H0

Telephone: 867-975-6590

Facsimile: 867-975-6594

Public official contact regarding indirect collection of information: Superintendent of Securities

 

Ontario Securities Commission

20 Queen Street West, 22nd Floor

Toronto, Ontario M5H 3S8

Telephone: 416-593-8314

Toll free in Canada: 1-877-785-1555

Facsimile: 416-593-8122

Email: exemptmarketfilings@osc.gov.on.ca

Public official contact regarding indirect collection of information: Inquiries Officer

 

Prince Edward Island Securities Office

95 Rochford Street, 4th Floor Shaw Building

P.O. Box 2000

Charlottetown, Prince Edward Island C1A 7N8

Telephone: 902-368-4569

Facsimile: 902-368-5283

Public official contact regarding indirect collection of information: Superintendent of Securities

 

15

 

 

Autorité des marchés financiers    
800, rue du Square-Victoria, 22e étage    
C.P. 246, tour de la Bourse    
Montréal, Québec H4Z 1G3    
Telephone: 514-395-0337 or 1-877-525-0337    
Facsimile: 514-873-6155 (For filing purposes only)    
Facsimile: 514-864-6381 (For privacy requests only)    
Email: financementdessocietes@lautorite.qc.ca (For corporate finance issuers); fonds_dinvestissement@lautorite.qc.ca (For investment fund issuers)    
Public official contact regarding indirect collection of information: Corporate Secretary    
     
Financial and Consumer Affairs Authority of Saskatchewan    
Suite 601 - 1919 Saskatchewan Drive    
Regina, Saskatchewan S4P 4H2    
Telephone: 306-787-5842    
Facsimile: 306-787-5899    
Public official contact regarding indirect collection of information: Director    
     
Office of the Superintendent of Securities Government of Yukon    
Department of Community Services    
307 Black Street, 1st Floor    
P.O. Box 2703, C-6    
Whitehorse, Yukon Y1A 2C6    
Telephone: 867-667-5466    
Facsimile: 867-393-6251    
Email: securities@gov.yk.ca    
Public official contact regarding indirect collection of information: Superintendent of Securities    

 

 

16

 

EXHIBIT 99.6

 

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

High Tide Selected to Manage Cannabis Retail Store in West Edmonton Mall

 

Calgary, AB, November 27, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that it has been selected by Aurora Cannabis Inc. (“Aurora”) to manage its flagship retail store at West Edmonton Mall (“WEM”) opening to the public on November 27th in Aurora’s home city of Edmonton, Alberta. The Company has signed an agreement with an affiliate of Aurora to provide services including, but not limited to: inventory, marketing, operations, sales, staffing, training, and security, in accordance with both Health Canada and Alberta Gaming, Liquor and Cannabis requirements, over a base term of three years with an option to extend the term, in exchange for service provider fees (the “Agreement”).

 

“We are excited to be a part of the growing cannabis retail environment with new store openings changing the industry dynamic,” said Raj Grover, President and Chief Executive Officer of High Tide. “We are committed to enabling an unparalleled retail experience in the stores that we support, ensuring best in class execution built on High Tide’s customer knowledge, operational know-how and overall retail management expertise.”

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).

 

 

 

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 12 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

2

 

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

3

 

 

EXHIBIT 99.7

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

High Tide Closes Second Tranche of Convertible Debenture Offering

 

Calgary, AB, December 5, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that it has closed the second tranche (the “Second Tranche”) of the sale of unsecured convertible debentures (the “Debentures”) of the Company under the private placement (the “Offering”) previously announced on November 14, 2019. Gross proceeds from the Second Tranche were $2,115,000. The net proceeds of the Second Tranche will be used by High Tide for general working capital purposes and inventory purchases.

 

The outstanding principal amount under the Debentures is convertible at any time before maturity and at the holder’s option, into common shares of the Company (the “Shares”) at a conversion price of $0.252 per share. The Debentures are due 24 months from the date of issuance and carry an interest cost of 10% per annum, payable annually in advance in Shares. The interest rate is payable in Shares at a deemed price equal to the volume-weighted average price per common share for the 10-day period prior to the date upon which interest is due. Concurrent with the issuance of the Debentures, the Company paid the annual amount of interest due up-front in the form of 1,016,826 Shares.

 

Under the Second Tranche of the Offering, the Company also issued common share purchase warrants (the “Warrants”) such that each subscriber received one Warrant for each $0.252 original principal amount of its Debenture, resulting in 8,392,857 Warrants being issued as part of the Offering. Each Warrant entitles the holder to acquire one Share at an exercise price of $0.50 per Share for two years from the date of issuance. All securities issued in connection with the Offering are subject to a four month and one day hold period from the date of issuance in accordance with applicable securities laws. A finder’s fee of $2,875 was paid in connection to the Second Tranche.

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).

 

 

 

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 11 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

2

 

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

3

 

EXHIBIT 99.8

 

Execution Copy 

 

                                ONTARIO INC.

as the Vendor

 

- and -

 

HIGH TIDE INC.

as the Purchaser

 

- and -

 

KUSHBAR INC.

as the Corporation

 

 

 

SHARE PURCHASE AGREEMENT

 

December 9, 2019

 

 

 

 

 

Execution Copy 

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of December 9, 2019, is entered into between                                   Ontario Inc., a corporation existing under the laws of the Province of Ontario (the “Vendor”), High Tide Inc., a corporation existing under the laws of the Province of Alberta (the “Purchaser”), and KushBar Inc., a corporation existing under the laws of the Province of Alberta (the “Corporation”) (each a “Party” and together, the “Parties”).

 

WHEREAS, the Purchaser is the registered and beneficial owner of 50.1 Class A common shares in the capital of the Corporation (the “Shares”), which Shares represent fifty and one-tenth percent (50.1%) of the issued and outstanding Shares;

 

AND WHEREAS, the Vendor is the registered and beneficial owner of 49.9 Shares (such shares, the “Minority Shares”), which Shares represent forty-nine and nine-tenth percent (49.9%) of the issued and outstanding Shares;

 

AND WHEREAS, the Vendor wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Vendor, the Minority Shares, subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereto agree as follows:

 

ARTICLE I
DEFINED TERMS

 

Section 1.01  Definitions. In this Agreement and in the Schedules and Exhibits hereto, the following terms and expressions will have the following meanings:

 

(a) Agreement” means this share purchase agreement and all instruments amending it; “hereof”, “hereto” and “hereunder” and similar expressions mean and refer to this Agreement and not to any particular Article, Section, or other subdivision; “Article”, “Section” or other subdivisions of this Agreement followed by a number means and refers to the specified Article, Section or other subdivision of this Agreement.

 

(b) Contract” means any agreement, contract, licence, undertaking, engagement or commitment of any nature, whether written or oral.

 

(c) Damages” means any losses, liabilities, damages or expenses (including legal fees and expenses on a full indemnity basis without reduction for tariff rates or similar reductions) whether resulting from an action, suit, proceeding, arbitration, claim or demand that is instituted or asserted by a third party, including a Regulatory Authority, or a cause, matter, thing, act, omission or state of facts not involving a third party.

 

(d) including” and “includes” mean, respectively, “including, without limitation” and “includes, without limitation”.

 

(e) Intellectual Property” means domestic and foreign: (i) patents, applications for patents and reissues, divisions, continuations, renewals, extensions and continuations-in-part of patents or patent applications; (ii) proprietary and non-public business information, including inventions (whether patentable or not), invention disclosures, improvements, discoveries, trade secrets, confidential information, know-how, methods, processes, designs, technology, technical data, schematics, formulae and customer lists, and documentation relating to any of the foregoing; (iii) copyrights, copyright registrations and applications for copyright registration; (iv) mask works, mask work registrations and applications for mask work registrations; (v) designs, design registrations, design registration applications and integrated circuit topographies; (vi) trade names, business names, corporate names, domain names, website names and world wide web addresses, common law trade-marks, trade-mark registrations, trade mark applications, trade dress and logos, and the goodwill associated with any of the foregoing; (vii) software; and (viii) any other intellectual property and industrial property.

 

 

 

(f) Interim Period” means the period between the close of business on the date of this Agreement and the Closing.

 

(g) Law” or “Laws” means all requirements imposed by statutes, regulations, rules, ordinances, by-laws, decrees, codes, policies, judgments, orders, rulings, decisions, approvals, notices, permits, guidelines or directives of any Regulatory Authority.

 

(h) person” includes any individual, corporation, partnership, firm, joint venture, syndicate, association, trust, government, governmental agency and any other form of entity or organization.

 

(i) Purchaser’s Closing Date Knowledge” means, with respect to such matter(s) to which such term refers, the actual knowledge, as of the Closing Date, of any director or officer of the Purchaser after due inquiry and arising directly by reason of the Purchaser’s direct involvement in the management of such portions of the affairs of the Corporation for which the Purchaser was responsible for prior to the Closing Date.

 

(j) Regulatory Authority” means any government, regulatory or administrative authority, agency, commission, utility or board (federal, provincial, municipal or local, domestic or foreign) having jurisdiction in the relevant circumstances and any person acting under the authority of any of the foregoing and any judicial, administrative or arbitral court, authority, tribunal or commission having jurisdiction in the relevant circumstances.

 

(k) Unanimous Shareholder’s Agreement” means the unanimous shareholders agreement dated April 1, 2018, entered into by and among the Vendor (as the successor to                            , an original party to the agreement), the Purchaser, and the Corporation, as amended from time to time.

 

ARTICLE II
PURCHASE AND SALE

 

Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth herein, the Vendor shall sell to the Purchaser, and the Purchaser shall purchase from the Vendor, the Minority Shares, free and clear of any, and all, pledges, liens, security interests, adverse claims or other encumbrances (each, an “Encumbrance”).

 

Section 2.02 Purchase Price. The purchase price (the “Purchase Price”) for the Minority Shares shall be the aggregate of the following:

 

(a) the actual amount of the Vendor’s shareholder’s loans to the Corporation (the “Vendor Loans”), being the aggregate amount of                                                                                                                                  , which shall be payable by the issuance, to the Vendor, of a secured convertible debenture of the Purchaser (“Convertible Debenture”), having the terms set forth in Section 2.05; and

 

3

 

(b)                                                 (such amount, the “Equity Amount”), which shall be payable by the issuance, to the Vendor, of common shares in the capital of the Purchaser (“HITI Shares”), with each HITI Share having a price equal to                                                                                                                                      .

 

Section 2.03 Transactions to be Effected at the Closing 

 

(a) At the closing, the Purchaser shall deliver to the Vendor:

 

(i) share certificates or Direct Registration System Advices representing such number of HITI Shares as is equal to the Equity Amount, free and clear of all Encumbrances, with each HITI Share having a price equal to the 10-day volume weighted average trading price of the HITI Shares on the Canadian Securities Exchange immediately prior to the Closing Date;

 

(ii) a certificate representing the Convertible Debenture in the principal amount of the Vendor Loans;

 

(iii) a mutual release, by and among the Vendor, the Corporation, the Purchaser, and such other persons as the Purchaser may reasonably request, substantially in the form attached hereto as Schedule “A” duly executed by the Purchaser;

 

(iv) a share pledge agreement, in the form attached as Schedule “B” (the “Share Pledge Agreement”), duly executed by the Purchaser, pursuant to which the Purchaser will pledge all of its rights and interest in the Shares held by the Purchaser upon completion of the transactions contemplated hereby, as security for the obligations of the Purchaser to the Vendor pursuant to the Convertible Debenture;

 

(v) a general security agreement, in the form attached as Schedule “C” (the “General Security Agreement”), duly executed by the Corporation, pursuant to which the Corporation will grant a security interest in the assets of the Corporation, as security for the obligations of the Purchaser to the Vendor pursuant to the Convertible Debenture;

 

(vi) an assignment of debt agreement, in the form attached as Schedule “D” (the “Debt Assignment Agreement”), duly executed by the Purchaser and the Corporation, pursuant to which the Purchaser will assign to the Vendor its rights and interest in certain debts owed to the Purchaser by the Corporation in respect of certain loans advanced by the Purchaser to the Corporation, as security for the obligations of the Purchaser to the Vendor pursuant to the Convertible Debenture;

 

(vii) resignations and releases, in the form attached as Schedule “E” (together, the “Resignations and Releases”), duly executed by each of the directors and/or officers of the Corporation listed            in Schedule         “F” (together, the “Outgoing Directors and Officers”);

 

4

 

(viii) an agreement to terminate the Unanimous Shareholders Agreement, in the form attached as Schedule “I” (the “USA Termination Agreement”), duly executed by the Purchaser and the Corporation; and

 

(ix) all other agreements, documents, instruments or certificates required to be delivered by the Purchaser under this Agreement.

 

(b) At the closing, the Vendor shall deliver to the Purchaser:

 

(i) share certificates representing the Minority Shares, free and clear of all Encumbrances, duly endorsed in blank for transfer, or accompanied by irrevocable security transfer powers of attorney duly executed in blank, in either case by the holders of record, together with evidence satisfactory to the Purchaser that the Purchaser or its nominee(s) have been entered upon the books of the Corporation as the holder of the Purchased Shares;

 

(ii) the subscription agreement, substantially in the form attached hereto as Schedule “G” (the “Subscription Agreement”), properly completed and executed with respect to the HITI Shares and the Convertible Debenture to be issued to the Vendor pursuant to Section 2.02;

 

(iii) a non-competition agreement, substantially in the form attached hereto as Schedule “H” (the “Non-Compete Agreement”) duly executed by the Vendor and such other persons as the Purchaser may reasonably request;

 

(iv) a mutual release, by and among the Vendor, the Corporation, the Purchaser, and such other persons as the Purchaser may reasonably request; substantially in the form attached hereto as Schedule “A” duly executed by the Vendor and the Corporation and such other persons as the Purchaser may reasonably request;

 

(v) the USA Termination Agreement, duly executed by the Vendor and the Corporation; and

 

(vi) all other agreements, documents, instruments or certificates required to be delivered by the Vendor under this Agreement.

 

Section 2.04 Closing. The purchase and sale of the Minority Shares contemplated by this Agreement (the “Closing”) shall take place on December 12, 2019 or such earlier or later date as the Parties may agree in writing, provided that such date may not be later than December 16, 2019 (the “Outside Date”). The Closing shall occur at the offices of Garfinkle Biderman LLP, legal counsel to the Purchaser, at 1 Adelaide Street East, Suite 801, Toronto, Ontario, M5C 2V9 at 1:00 p.m. (Toronto time) or such other time as the Parties may agree in writing.

  

5

 

Section 2.05 Convertible Debenture. In addition to customary terms and conditions otherwise applicable to convertible debentures from time to time issued by the Purchaser (including, for greater certainty, such terms and conditions imposed by applicable Laws), the Convertible Debenture to be issued to the Vendor in satisfaction of the Vendor Loans pursuant to Section 2.02(a) shall have the following terms and conditions:

 

(a) Upon and subject to the terms and conditions of the Convertible Debenture, the holder thereof shall be entitled, at its option and at any time and up until the close of business on the date that is two (2) years from the date of issuance (the “Expiry Time”), to convert all or any portion of the principal amount of the Convertible Debenture into fully paid and non-assessable HITI Shares (the shares resulting from such conversion, the “Conversion Shares”) at a price of $0.25 per HITI Share (the “Conversion Price”), subject to customary adjustments in accordance with the terms and conditions of the Convertible Debenture or in Section 2.05(b) below.

 

(b) If at any time while any portion of the principal amount of the Convertible Debenture is outstanding, any securities (including, shares of any class, options, and warrants) of the Purchaser are issued or sold for a price less than the Conversion Price then in effect, the Conversion Price of the Convertible Debenture will be adjusted downward to the price of such issuance (such price the “New Conversion Price”), provided however that in no event shall the New Conversion Price be lower than the 10-day volume weighted average trading price of the HITI Shares on the Canadian Securities Exchange immediately prior to the Closing Date (the “Closing Date Conversion Price”), and provided further, that any downward adjustment shall be subject to prior approval of the Canadian Securities Exchange (or such other stock exchange on which the HITI Shares may principally trade from time to time).

 

(c) If the Purchaser has not:

 

(i) established a New Conversion Price which is lesser than, or equal to, 110% of the Closing Date Conversion Price; or

 

(ii) been able to obtain the approval of the Canadian Securities Exchange (or such other stock exchange on which the HITI Shares may principally trade from time to time) for the New Conversion Price, in either case on or prior to the Legend Expiry Date (as defined below), then the Expiry Time shall be accelerated to the date that is nine (9) months from the date of issuance of the Convertible Debenture.

 

(d) If at any time following the Legend Expiry Date, the volume-weighted average trading price of the HITI Shares on the Canadian Securities Exchange (or such other recognized stock exchange on which the HITI Shares may from time to time principally trade) exceeds $0.30 for a period of 30 consecutive days with trading volume of not less than 225,000 HITI Shares on each such trading day, then the Purchaser shall be entitled to, at its option and without penalty or bonus, cause the holder of the Convertible Debenture to convert all or part of the then outstanding principal amount of the Convertible Debenture. For the purposes of this Section 2.05, “Legend Expiry Date” means the date on which, in the opinion of legal counsel to the Purchaser, all applicable restrictions with respect to trading in the Convertible Debenture and the HITI Shares underlying such Convertible Debenture imposed by applicable Canadian securities laws expire or are removed.

 

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VENDOR

 

The Vendor represents and warrants as follows to the Purchaser and acknowledges and agrees that the Purchaser is relying upon the representations and warranties in connection with its purchase of the Minority Shares:

 

Section 3.01 Status, Authorization, Enforceability. The Vendor is a corporation incorporated and existing under the Laws of the Province of Ontario and has not been discontinued or dissolved under such Laws. No steps or proceedings have been taken to authorize or require such discontinuance or dissolution. The Vendor has the power and capacity to enter into this Agreement and the documents to be delivered hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Vendor of this Agreement and the documents to be delivered hereunder and the consummation by the Vendor of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Vendor. This Agreement has been duly executed and delivered by the Vendor, and (assuming due authorization, execution and delivery by the Purchaser), this Agreement and the documents to be delivered hereunder constitute legal, valid and binding obligations of the Vendor enforceable against the Vendor in accordance with their respective terms.

 

Section 3.02 Authorized and Issued Capital. All the Minority Shares have been duly authorized and are validly issued in compliance with all applicable Laws (including applicable securities laws) as fully paid and non-assessable, and the Vendor is the registered and beneficial owner of the Minority Shares, free and clear of all Encumbrances. Upon consummation of the transactions contemplated by this Agreement, the Purchaser shall own all the Minority Shares, free and clear of all Encumbrances.

 

Section 3.03  No Other Agreements to Purchase. Except for the Purchaser’s right under this Agreement, no person has any written or oral agreement, option or warrant or any right or privilege (whether by Law, pre-emptive or contractual) capable of becoming such for (i) the purchase or acquisition from the Vendor of any of the Minority Shares or from the Corporation of any securities issued by such Corporation, or (ii) the purchase, subscription, allotment or issuance of any of the unissued shares or other securities of the Corporation.

 

Section 3.04  Title to Minority Shares. The Minority Shares are owned by the Vendor as the registered and beneficial owner with a good title, free and clear of all Encumbrances other than those restrictions on transfer, if any, contained in the articles of the Corporation. Upon completion of the transaction contemplated by this Agreement, the Purchaser will have good and valid title to the Minority Shares, free and clear of all Encumbrances, which would otherwise have affected the Vendor’s title to the Minority Shares.

 

Section 3.05 No Conflicts and Consents. The execution, delivery and performance by the Vendor of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not:

 

(a) violate or conflict with the articles of incorporation, by-laws or unanimous shareholder agreement of the Vendor;

 

(b) violate or conflict with any Law applicable to the Vendor;

 

(c) conflict with, or result in (with or without notice or lapse of time or both) any violation of, or default under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit           under any contract or other instrument to which the Vendor is a party; or

 

(d) result in the creation or imposition of any Encumbrance on any properties or assets of the Vendor.

 

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Notwithstanding the foregoing, the Corporation and the Purchaser acknowledge that notice of the change in the ownership of the Corporation must be made to:

 

(a) the Alberta Liquor, Gaming and Cannabis Commission; and

 

(b) the landlords of the various premises pursuant to which the Corporation has entered into lease agreements;

 

(hereinafter collectively the “Notice Requirement”). To the Vendor’s knowledge, other than the Notice Requirement:

 

(c) no consent, approval, waiver or authorization is required to be obtained by the Vendor or the Corporation from any person or entity (including any governmental authority) in connection with the execution, delivery and performance by the Vendor of this Agreement and the consummation of the transactions contemplated hereby; and

 

(d) there is no requirement to (i) make any filing with, give any notice to, or obtain any authorization of, any governmental entity as a condition to the lawful completion of the transactions contemplated by this Agreement, or (ii) obtain any consent, approval or waiver of a party under any lease or any contract to which the Corporation is a party to any of the transactions contemplated by this Agreement.

 

Section 3.06 Privacy. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, (A) the Corporation is, and has been since incorporation, conducting its business in compliance with all applicable Laws governing privacy and the protection of personal information, including the Personal Information Protection Act (Alberta) other than acts of non-compliance which individually or in the aggregate are not material, and (B) neither the Vendor nor the Corporation is aware of any data breach that has occurred since incorporation.

 

Section 3.07 Undisclosed Liabilities. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, the Corporation has no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise (collectively, the “Liabilities”), except those that have been incurred in the ordinary course of business consistent with past practice and that are not, individually or in the aggregate, material in amount.

 

Section 3.08 Absence of Certain Changes, Events and Conditions. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, since January 1, 2019, other than in the ordinary course of business consistent with past practice, there has not been, with respect to the Corporation, any:

 

(a) event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Corporation;

 

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(b) entry into any contract that would constitute a Material Contract;

 

(c) incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice;

 

(d) transfer, assignment, sale or other disposition of any of the assets of the Corporation or cancellation of any debts or entitlements;

 

(e) transfer, assignment or grant of any licence or sublicence of any material rights under or with respect to any Intellectual Property of the Corporation;

 

(f) material damage, destruction or loss (whether or not covered by insurance) to its property;

 

(g) acceleration, termination, material modification to or cancellation of any Material Contract to which the Corporation is a party or by which it is bound;

 

(h) any material capital expenditures;

 

(i) imposition of any Encumbrance upon any of the Corporation’s properties, shares or assets, tangible or intangible;

 

(j) (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or benefits in respect of its current or former employees, officers, directors, independent contractors or consultants, other than as provided for in any written agreements or required by applicable Law; (ii) change in the terms of employment for any employee or any termination of any employees for which the aggregate costs and expenses exceed $10,000; or (iii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, director, independent contractor or consultant;

 

(k) any loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its shareholders or current or former directors, officers and employees;

 

(l) entry into a new line of business or abandonment or discontinuance of existing lines of business;

 

(m) purchase, lease or other acquisition of the right to own, use or lease any property or assets for an amount in excess of $10,000, individually (in the case of a lease, per annum) or $50,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of inventory or supplies in the ordinary course of business consistent with past practice; or

 

(n) any authorization, agreement, or commitment to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 3.09 No Material Adverse Change. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, since January 1, 2019, there has not been any material adverse change in the affairs, prospects, operations or condition of the Corporation, any of its properties and assets, or its business, and no event has occurred or circumstance exists which may result in such a material adverse change.

 

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Section 3.10 Compliance with Laws. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, the Corporation is conducting and has always conducted its business and any past business in compliance with all applicable Laws, other than acts of non-compliance which, individually or in the aggregate, are not material.

 

Section 3.11 Material Contracts 

 

(a) Except for the contracts of the Corporation disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge (such contracts collectively, the “Material Contracts”), the Corporation is neither a party to nor bound by:

 

(i) any distributor, sales, advertising, agency or manufacturer’s representative Contract;

 

(ii) any continuing Contract for the purchase of materials, supplies, equipment or services involving in the case of any such Contract more than $1,000 over the life of the Contract;

 

(iii) any Contract that expires or may be renewed at the option of any person other than the applicable Corporation so as to expire more than one year after the date of this Agreement;

 

(iv) any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, interest rate, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with generally accepted accounting principles applicable to the Corporation;

 

(v) any Contract for capital expenditures;

 

(vi) any confidentiality, secrecy or non-disclosure Contract or any Contract limiting the freedom of either Corporation to engage in any line of business, compete with any other person, solicit any persons for any purpose, operate its assets at maximum production capacity or otherwise conduct its business;

 

(vii) any Contract pursuant to which either Corporation is a lessor of any machinery, equipment, office furniture, fixtures or other personal property;

 

(viii) any Contract with any person with whom either Corporation or the Vendor does not deal at arm’s length within the meaning of the Income Tax Act (Canada);

 

(ix) any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of any other person;

 

(x) any Contract in respect of any Intellectual Property owned by, licensed to or used by either Corporation or       otherwise       in connection with the Corporation’s business;

 

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(xi) any Contract made out of the ordinary course of business; or

 

(xii) any Contract that is material to the Corporation’s business.

 

(b) Each Material Contract is valid and binding on the Corporation in accordance with its terms and is in full force and effect. None of the Corporation or, to the Vendor’s knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. True, complete, and correct copies of each Material Contract have been made available to the Purchaser.

 

Section 3.12 Condition of Assets. To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, the buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the Corporation are structurally sound, are in good operating condition and repair and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.

 

Section 3.13 Legal Proceedings, and Governmental Orders 

 

(a) To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, there is no claim, action, suit, proceeding or governmental investigation (each, an “Action”) of any nature pending or, to the Vendor’s knowledge, threatened against or by (i) the Corporation affecting any of its properties or assets (or by or against the Vendor and relating to the Corporation), or (ii) the Corporation or the Vendor that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the knowledge of the Vendor, no event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

(b) To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, there are no outstanding governmental orders and no unsatisfied judgments, penalties or awards against or affecting the Corporation or any of its properties or assets.

 

Section 3.14 Compliance with Laws, and Permits 

 

(a) To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, the Corporation has complied, and is now complying, with all federal, provincial, territorial and local Laws applicable to it or its business, properties or assets.

 

(b) To the knowledge of the Vendor, except as disclosed to the Purchaser in writing or except as may be within the Purchaser’s Closing Date Knowledge, (i) all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights from governmental authorities required by the Corporation to conduct its business (collectively, the “Permits”) are valid and in full force and effect, (ii) all fees and charges with respect to the Permits as of the date hereof have been paid in full, and (iii) no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit.

 

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Section 3.15 Securities Laws. The Vendor or such person as the vendor may nominate (such person, the “Vendor Nominee”), as the case may be, is acquiring the HITI Shares and the Convertible Debentures issuable in satisfaction of the Purchase Price pursuant to this Agreement as principal and not as agent and is acquiring such HITI Shares and the Convertible Debentures for investment purposes only and not with a view to resale or distribution. The Vendor or the Vendor Nominee, as the case may be, is a resident of the Province of Ontario and is a purchaser described in one or more applicable prospectus exemptions available under National Instrument 45-106 Prospectus Exemption.

 

Section 3.16 Full Disclosure. No representation or warranty by the Vendor in this Agreement and no statement contained in any certificate or other document furnished or to be furnished to the Purchaser in connection with this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. There is no fact known to either the Corporation or the Vendor which materially and adversely affects the affairs, prospects, operations or condition of the Corporation, its assets and properties or its business which has not been set forth in this Agreement. The Vendor represents and warrants to the Purchaser that the statements contained in this ARTICLE III are true and correct as of the date of this Agreement and are true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants as follows to the Vendor and acknowledges and agrees that the Vendor is relying on such representations and warranties in connection with the sale of the Minority Shares:

 

Section 4.01  

 

(a) Incorporation and Qualification. The Purchaser is a corporation incorporated and existing under the Laws of the Province of Alberta and has not been discontinued or dissolved under such Laws. No steps or proceedings have been taken to authorize or require such discontinuance or dissolution. The Purchaser has the corporate power and capacity to (i) own, operate or lease its properties and assets now owned, operated or leased by it, (ii) carry on its business as it has been and is currently conducted, and (iii) enter into and perform its obligations under this Agreement and each of the documents to be delivered hereunder to which it is a party. The Purchaser is qualified, licensed or registered to carry on business in each jurisdiction within which it currently conducts business, and has submitted all notices or returns of corporate information and other filings required by Law to be submitted by it to any governmental authority in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or registration necessary.

 

(b) The Purchaser has the power and capacity to enter into this Agreement and the documents to be delivered hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Purchaser of this Agreement and the documents to be delivered hereunder and the consummation by the Purchaser of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser, and (assuming due authorization, execution and delivery by the Vendor), this Agreement and the documents to be delivered hereunder constitute legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms.

 

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Section 4.02 Authorized and Issued Capital

 

(a) The authorized capital of the Purchaser consists of an unlimited number of HITI Shares, Class B common shares, and Class C common shares, of which, as of December 3, 2019, 208,468,628 HITI Shares, nil Class B common shares, and nil Class C common shares are issued and outstanding.

 

Section 4.03 No Conflicts; Consents. The execution, delivery and performance by the Purchaser of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not violate or conflict with:

 

(a) the articles of incorporation, by-laws, unanimous shareholder agreements or other organizational documents of the Purchaser;

 

(b) any Law applicable to the Purchaser.

 

No consent, approval, waiver or authorization is required to be obtained by the Purchaser from any person or entity (including any governmental authority) in connection with the execution, delivery and performance by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 4.04 Legal Proceedings. There is no Action of any nature pending or, to the Purchaser’s knowledge, threatened against or by the Purchaser that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

Section 4.05 Full Disclosure. No representation or warranty by the Purchaser in this Agreement and no statement contained in any certificate or other document furnished or to be furnished to the Vendor in connection with this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. The Purchaser represents and warrants to the Vendor that the statements contained in this ARTICLE III are true and correct as of the date of this Agreement and are true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date.

 

Section 4.06 Certain Securities Law Matters.

 

(a) Compliance with Securities Laws. The Purchaser is a reporting issuer (as such italicized term is defined pursuant to applicable Canadian securities laws (the “Canadian Securities Laws”)) in the Provinces of               British Columbia, Alberta, and Ontario (the “Reporting Jurisdictions”). The Purchaser is in compliance with its timely disclosure obligations under Canadian Securities Laws, including the policies of the Canadian Securities Exchange, and no order ceasing or suspending trading in the securities of the Purchaser or prohibiting the transactions contemplated hereby has been issued and no proceedings for such purpose are ongoing or pending, or to the knowledge of the Purchaser, threatened. All HITI Shares and other securities of the Purchaser issued by the Purchaser prior to the date of this Agreement have been issued in compliance with applicable Securities Laws in all material respects.

 

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(b) HITI Shares. Subject to applicable securities laws and the rules and policies of the Canadian Securities Exchange, the Purchaser has the full and lawful right and authority to issue the HITI Shares to be issued to the Vendor in accordance with this Agreement, and on Closing, such HITI Shares (i) will be issued as fully paid and non-assessable shares of the Purchaser, (ii) will be duly registered as directed by the Vendor in the books and registers of the Purchaser’s transfer agent; and (c) will be duly listed and posted for trading on the Canadian Securities Exchange, subject to applicable restrictions on the resale and transfer imposed by applicable securities laws and/or the rules and policies of the Canadian Securities Exchange.

 

(c) Convertible Debentures. Subject to applicable securities laws and the rules and policies of the Canadian Securities Exchange, the Purchaser has the full and lawful right and authority to issue the Convertible Debentures to be issued to the Vendor in accordance with this Agreement, and on Closing, such Convertible Debentures, (i) will be duly and validly created, authorized and issued as directed by the Vendor, and (ii) the HITI Shares issuable upon conversion of the Convertible Debentures will be issued as fully paid and non-assessable HITI Shares upon due conversion of the Convertible Debentures in accordance with their terms. The Convertible Debentures will be subject to applicable restrictions on the resale and transfer imposed by applicable securities laws and/or the rules and policies of the Canadian Securities Exchange.

 

ARTICLE V
COVENANTS

 

Section 5.01 Confidentiality. From and after the Closing, the Vendor shall hold, and shall use its reasonable best efforts to cause its directors and officers to hold, in confidence any, and all, information, whether written or oral, concerning the Corporation, except to the extent that the Vendor can show that such information is (i) generally available to and known by the public through no fault of the Vendor or its directors or officers, or (ii) lawfully acquired by the Vendor from and after the Closing from sources that are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation.

 

Section 5.02 Books and Records 

 

(a) To facilitate the resolution of any claims made against or incurred by the Vendor before the Closing, or for any other reasonable purpose, for a period of three (3) years after the Closing, the Purchaser shall (i) retain the books and records (including personnel files) of the Corporation relating to periods before the Closing in a manner reasonably consistent with the prior practices of the Corporation, and (ii) upon reasonable notice, afford representatives of the Vendor reasonable access (including the right to make, at the Vendor’s expense, photocopies), during normal business hours, to such books and records.

 

(b) To facilitate the resolution of any claims made by or against or incurred by the Corporation or the Purchaser after the Closing, or for any other reasonable purpose, for a period of three (3) years after the Closing, the Vendor shall (i) retain the books and records (including personnel files) of the Vendor which relate to the Corporation and its operations for periods before the Closing, and (ii) upon reasonable notice, afford representatives of the Purchaser or the Corporation reasonable access (including the right to make, at Purchaser’s expense, photocopies), during normal business hours, to such books and records.

 

(c) Neither the Purchaser nor the Vendor shall be obligated to provide the other Party with access to any books or records (including personnel files) under this Section 5.02 where such access would violate any applicable Law.

 

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Section 5.03 Public Announcements and Closing Press Release. Unless otherwise required by applicable Law or stock exchange requirements (including the requirements of the Canadian Securities Exchange), neither Party shall make any public announcements regarding this Agreement or the transactions contemplated hereby without the prior written consent of the other Party (which consent shall not be unreasonably withheld or delayed). For greater certainty, and without limiting the foregoing, the Vendor and the Purchaser, each acting reasonably and in good faith, shall agree to the form and content of the closing press release to be issued by the Purchaser with respect to the closing of the transactions contemplated by this Agreement.

 

Section 5.04  Purchaser Equalization Funding. In the event the transactions contemplated by this Agreement are abandoned or are not consummated by the Outside Date (in which case the Unanimous Shareholders Agreement will not be terminated), all rights, obligations, interests, and privileges of each of the Parties under the Unanimous Shareholders Agreement, including the obligations of each of the Vendor and the Purchaser to provide certain funding to the Corporation on the terms set forth in the Unanimous Shareholders Agreement, shall continue in full force and effect, unaltered. The Vendor shall equalize any difference between the amount of monies advanced by the Purchaser to the Corporation and the Vendor Loans.

 

Section 5.05 Filings. The Purchaser undertakes to file or cause to be filed all forms or undertakings required to be filed by it in connection with the issuance of the HITI Shares so that the distribution of the HITI Shares may lawfully occur (but on terms that will permit the HITI Shares acquired by the Vendor to be sold by Vendor subsequent to the Legend Expiry Date subject to, and in compliance with, other restrictions under applicable Canadian Securities Laws. All fees payable in connection with such filings shall be at the sole expense of the Purchaser.

 

Section 5.06  Maintain Status as “Reporting Issuer”; Maintain Listing. The Purchaser shall use its commercial reasonable efforts to maintain:

 

(a) its status as a reporting issuer not in default of any requirement of applicable Canadian Securities Laws in those provinces in which it is reporting issue, for a period of at least twelve (12) months from the Closing Date; and

 

(b) the listing on the Canadian Securities Exchange or such other recognized stock exchange or quotation system in Canada of the class of shares of which the HITI Shares form a part for a period of at least twelve (12) months from the Closing Date;

 

provided that this clause shall not be construed as limiting or restricting the Purchaser from completing a consolidation, amalgamation, arrangement, a sale of all or substantially all of the Purchaser’s assets, a take-over bid, merger, or other similar transaction.

 

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Section 5.07 Further Assurances. Following the Closing, each of the Parties hereto shall execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the documents to be delivered hereunder.

 

ARTICLE VI
CONDITIONS OF CLOSING

 

Section 6.01  Conditions for the Benefit of the Purchaser. The purchase and sale of the Minority Shares is subject to the following conditions being satisfied on or prior to the Closing Date, which conditions are for the exclusive benefit of the Purchaser and may be waived, in whole or in part, by the Purchaser in its sole discretion:

 

(a) Truth of Representations and Warranties. The representations and warranties of the Vendor contained in this Agreement and in each document to be delivered hereunder are true and correct as of the date of this Agreement and are true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of such date and the Vendor shall have delivered a certificate to that effect duly executed by the Vendor, or where applicable, a duly authorized officer of the Vendor. Upon the delivery of such certificate, the representations and warranties of the Vendor in ARTICLE III will be deemed to have been made on and as of the Closing Date with the same force and effect as if made on and as of such date.

 

(b) Performance of Covenants. The Vendor shall have fulfilled or complied with all covenants contained in this Agreement and in each document to be delivered hereunder are required to be fulfilled or complied with by it at or prior to the Closing, and the Vendor shall have delivered a certificate to that effect duly executed by the Vendor, or where applicable, a duly authorized officer of the Vendor.

 

(c) Consents and Authorizations. All consents, approvals and waivers necessary to give effect to the transactions contemplated by this Agreement (including any consents, approvals and waivers required to be given by the Vendor) will have been made, given or obtained on terms acceptable to the Purchaser, acting reasonably, and all such consents, approvals, waivers, filings, notifications and authorizations will be in force and will not have been modified.

 

(d) Due Diligence. The Purchaser shall have completed its investigation into the Corporation, its business, the books and records, the Vendor’s title to the Minority Shares, the assets of the Corporation, and all other matters it deems relevant and such investigation will not have disclosed any matter which the Purchaser, acting reasonably, considers to be materially adverse to either the Corporation, its business or the assets of the Corporation or materially adverse to its decision to acquire the Minority Shares.

 

 

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(e) Deliveries. The Vendor shall deliver or cause to be delivered to the Purchaser the following in form and substance satisfactory to the Purchaser:

 

(i) share certificates representing the Minority Shares, free and clear of all Encumbrances, duly endorsed in blank for transfer, or accompanied by irrevocable security transfer powers of attorney duly executed in blank, in either case by the holders of record, together with evidence satisfactory to the Purchaser that the Purchaser or its nominee(s) have been entered upon the books of the Corporation as the holder of the Purchased Shares;

 

(ii) the Non-Compete Agreement, duly executed by the Vendor and such other persons as the Purchaser may reasonably request;

 

(iii) a mutual release, by and among the Vendor, the Corporation, the Purchaser, and such other persons as the Purchaser may reasonably request; substantially in the form attached hereto as Schedule “A” duly executed by the Vendor and the Corporation and such other persons as the Purchaser may reasonably request;

 

(iv) the Subscription Agreement, duly completed and executed by the Vendor;

 

(v) the Debt Assignment Agreement, duly executed by the Vendor and the Corporation;

 

(vi) the Resignations and Releases, duly executed by each of the Outgoing Directors and Officers;

 

(vii) the USA Termination Agreement, duly executed by the Vendor and the Corporation; and

 

(viii) evidence that all necessary steps and proceedings as approved by legal counsel for the Purchaser to permit all of the Minority Shares to be transferred to the Purchaser or its nominee(s) have been taken.

 

(f) Change in Law. During the Interim Period, no Law, proposed Law, any change in any Law, or the interpretation or enforcement of any Law will have been introduced, enacted or announced, the effect of which will be to prevent the Purchaser from or to increase materially the cost to the Purchaser of (i) completing of the transaction contemplated in this Agreement, or (ii) operating the business of the Corporation after Closing on substantially the same basis as currently operated.

 

(g) No Legal Action. No action or proceeding will be pending or threatened by any person (other than the Purchaser) in any jurisdiction, and no order or notice will have been made, issued or delivered by any governmental entity, seeking to enjoin, restrict or prohibit, or enjoining, restricting or prohibiting, on a temporary or permanent basis any of the transactions contemplated by this Agreement or imposing any temporary or permanent terms or conditions on the transactions contemplated by this Agreement, the Businesses or the business of the Purchaser including requiring that any assets or shares be held separate or divested or requiring any form of behavioural or other remedy or otherwise limiting the right of the Purchaser to conduct its business or the Businesses after Closing on substantially the same basis as heretofore operated.

 

17

 

Section 6.02  Conditions for the Benefit of the Vendor. The purchase and sale of the Minority Shares is subject to the following conditions being satisfied on or prior to the Closing Date, which conditions are for the exclusive benefit of the Vendor and may be waived, in whole or in part, by the Vendor in its sole discretion:

 

(a) Truth of Representations and Warranties. The representations and warranties of the Purchaser contained in this Agreement and in each document to be delivered hereunder are true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of such date and the Purchaser shall have delivered a certificate to that effect duly executed by a duly authorized officer of the Purchaser. Upon the delivery of such certificate, the representations and warranties of the Purchaser in ARTICLE IV will be deemed to have been made on and as of the Closing Date with the same force and effect as if made on and as of such date.

 

(b) Performance of Covenants. The Purchaser shall have fulfilled or complied with all covenants contained in this Agreement and in each document to be delivered hereunder are required to be fulfilled or complied with by it at or prior to the Closing, and the Purchaser shall have delivered a certificate to that effect duly executed by a duly authorized officer of the Purchaser.

 

(c) Deliveries. The Purchaser shall deliver or cause to be delivered to the Vendor the following in form and substance satisfactory to the Purchaser:

 

(i) share certificates or Direct Registration System Advices representing such number of HITI Shares required to be delivered pursuant to Section 2.03(a)(i), free and clear of all Encumbrances, together with evidence satisfactory to the Vendor that the Purchaser or its nominee(s) will be entered upon the books of the Corporation’s transfer agent as the holder of the HITI Shares promptly upon Closing;

 

(ii) a certificate representing the Convertible Debenture required to be delivered pursuant to Section 2.03(a)(ii), together with evidence satisfactory to the Vendor that the Purchaser or its nominee(s) has been entered upon the books of the Corporation as the holder of such Convertible Debenture;

 

(iii) a mutual release, by and among the Vendor, the Corporation, the Purchaser, and such other persons as the Purchaser may reasonably request; substantially in the form attached hereto as Schedule “A” duly executed by the Vendor and the Corporation and such other persons as the Purchaser may reasonably request;

 

(iv) the Share Pledge Agreement, duly executed by the Purchaser;

 

(v) the General Security Agreement, duly executed by the Corporation;

 

(vi) the USA Termination Agreement, duly executed by the Purchaser and the Corporation; and

 

(vii) the Debt Assignment Agreement, duly executed by the Purchaser and the Corporation.

 

(d) No Legal Action. No action or proceeding will be pending or threatened by any person (other than the Vendor) in any jurisdiction, and no order or notice will have been made, issued or delivered by any governmental entity, seeking to enjoin, restrict or prohibit, or enjoining, restricting or prohibiting, on a temporary or permanent basis any of the transactions contemplated by this Agreement or imposing any temporary or permanent terms or conditions on the transactions contemplated by this Agreement.

 

(e) Assets. Immediately prior to the Closing Date, the properties and assets of the Corporation shall include, but not be limited to, (i) the four (4) retail outlets operated by the Corporation in the Province of Alberta, (ii) the five (5) commercial leases in the Province of Ontario (the “Leases”), and (ii) all other contracts, agreements, licenses, permits or other pertinent documents necessary for the Corporation to occupy and operate each of the locations subject to the Leases as retail cannabis outlets following the Closing Date.

 

18

 

ARTICLE VII
INDEMNIFICATION

 

Section 7.01 Survival. All representations, warranties, covenants and agreements contained herein and all related rights to indemnification shall survive the Closing for a period of three (3) years from the Closing Date.

 

Section 7.02 Indemnification by the Vendor. Subject to Section 7.04, the Vendor shall defend, indemnify and hold harmless the Purchaser, its affiliates and their respective shareholders, directors, officers and employees from and against all claims, judgments, damages, liabilities, settlements, losses, costs and expenses, including legal fees, disbursements and charges, arising from or relating to any:

 

(a) inaccuracy in or breach of any of the representations or warranties of the Vendor contained in this Agreement or in any document to be delivered hereunder; or

 

(b) breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Vendor under this Agreement or any document to be delivered hereunder.

 

Section 7.03 Indemnification by the Purchaser. Subject to Section 7.05, the Purchaser shall defend, indemnify and hold harmless the Vendor, its affiliates and their respective shareholders, directors, officers and employees from and against all claims, judgments, damages, liabilities, settlements, losses, costs and expenses, including legal fees, disbursements and charges, arising from or relating to any:

 

(a) inaccuracy in or breach of any of the representations or warranties of the Purchaser contained in this Agreement or in any document to be delivered hereunder; or

 

(b) breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Purchaser under this Agreement or any document to be delivered hereunder.

 

Section 7.04  Limitations on the Vendor Indemnification. The Vendor shall not have any obligation to defend, indemnify and hold harmless the Purchaser or make any payment for damages for indemnification or otherwise with respect to the matters described in Section 7.02, until the total of all Damages with respect to such matters exceeds $25,000 and then only for 49.9% of the amount by which such Damages exceed $25,000. Notwithstanding the foregoing, the Vendor shall be liable for all Damages with respect to (i) any breach or inaccuracy of any of the Vendor’s representations and warranties of which the Vendor had actual knowledge at any time prior to the date on which such representation and warranty was made, (ii) any claim involving fraud or fraudulent misrepresentation, and or (viii) any intentional breach by the Vendor of any covenant or obligation under this Agreement.

 

19

 

Section 7.05  Limitations on the Purchaser Indemnification. The Purchaser shall not have any obligation to defend, indemnify and hold harmless the Vendor or make any payment for damages for indemnification or otherwise with respect to the matters described in Section 7.03, until the total of all Damages with respect to such matters exceeds $25,000 and then only for 50.1% of the amount by which such Damages exceed $25,000. Notwithstanding the foregoing, the Purchaser shall be liable for all Damages with respect to (i) any breach or inaccuracy of any of the Purchaser’s representations and warranties of which the Purchaser had actual knowledge at any time prior to the date on which such representation and warranty was made, (ii) any claim involving fraud or fraudulent misrepresentation, and or (viii) any intentional breach by the Purchaser of any covenant or obligation under this Agreement.

 

Section 7.06 Tax Treatment of Indemnification Payments. All indemnification payments made by the Vendor under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price for tax purposes, unless otherwise required by Law.

 

Section 7.07 Effect of Investigation. The Purchaser’s right to indemnification or other remedy based on the representations, warranties, covenants and agreements of the Vendor set out herein will not be affected by any investigation conducted by the Purchaser, or any knowledge acquired by the Purchaser at any time, with respect to the accuracy of, or compliance with, any such representation, warranty, covenant or agreement.

 

Section 7.08 Cumulative Remedies. The rights and remedies provided in this ARTICLE VI are cumulative and are in addition to and not in substitution for any other rights and remedies available at Law or in equity or otherwise.

 

ARTICLE VIII
CORPORATION CONSENT AND ASSURANCES

 

Section 8.01 Consent. In consideration of the representations and covenants of the Vendor and the Purchaser hereunder, the Corporation hereby consents to the sale and purchase of the Minority Shares as contemplated by this Agreement.

 

Section 8.02 Notwithstanding anything to the contrary herein, the Corporation is a party to this Agreement solely for the purposes of (i) providing the consents, assurances and covenants set forth in this ARTICLE VIII, and (ii) executing and delivering all documents and instruments to which it is required to be a party pursuant to this Agreement, including, for greater certainty, the mutual release, in the form attached hereto as Schedule “A”, the General Security Agreement, the Debt Assignment Agreement, and the USA Termination Agreement.

 

Section 8.03 The Corporation agrees to execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions of ARTICLE VIII and give effect to the transactions contemplated by this Agreement and the documents to be delivered hereunder, provided, however, that nothing in the provisions of ARTICLE VIII shall in any way limit the Corporation’s right to claim any benefits inuring to it under any other sections of this Agreement.

 

20

 

ARTICLE IX
MISCELLANEOUS

 

Section 9.01 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses.

 

Section 9.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given:

 

(a) when delivered by hand (with written confirmation of receipt);

 

(b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested);

 

(c) on the date sent by facsimile or email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or

 

(d) on the fifth (5th) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.

 

Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.02):

 

(a) If to the Vendor:

 

 

                           Ontario Inc.

                                                                               

                                             

                          

                                               

                                                                                  

 

with a copy to (which shall not constitute notice):

 

                                                                          

Barristers & Solicitors

150 York Street - Suite 800

Toronto, Ontario, M5H 3S5

Attention:                                                        

E-mail:                                                     

Phone:                            

Fax:                           

 

(b) If to the Purchaser:

 

High Tide Inc.

Unit 112, 11127 - 15 Street N.E.

Calgary, Alberta, T3K 2M4

Attention:                             

E-mail:                                                              

 

with a copy to (which shall not constitute notice):

 

Garfinkle Biderman LLP

1 Adelaide Street East

Toronto, Ontario, M5C 2V9

Attention:                            

E-mail:                                                        

 

21

  

Section 9.03 Headings. The division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and shall not affect the interpretation of this Agreement.

 

Section 9.04 Currency. All references in this Agreement or any documents delivered in connection with this Agreement to dollars, or to $ are expressed in Canadian currency unless otherwise specifically indicated.

 

Section 9.05 Knowledge. Where any representation or warranty contained in this Agreement or any document to be delivered hereunder is expressly qualified by reference to the knowledge of a Party, it will be deemed to refer, unless indicated otherwise, (i) to the actual or constructive knowledge of such Party after due inquiry, and (ii) in the case of a Party that is a corporation, it will be deemed to refer to the actual or constructive knowledge of any director or officer of such corporation, after due inquiry.

 

Section 9.06 Disclosed in Writing. As used in this Agreement, “disclosed in writing”, “disclosed to the other Party in writing” and words of similar import shall mean actually disclosed in writing by one Party to the other Party or its advisors prior to the Closing Date.

 

Section 9.07  Gender and Number. Any reference in this Agreement or any documents delivered in connection with this Agreement to gender includes all genders. Words importing the singular number only include the plural and vice versa.

 

Section 9.08 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

Section 9.09 Entire Agreement. This Agreement and all documents to be delivered hereunder constitute the sole and entire agreement of the Parties with respect to the subject matter contained herein and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and the documents to be delivered hereunder, the Exhibits and Schedules (other than an exception expressly set forth as such in the Schedules), the statements in the body of this Agreement will control.

 

Section 9.10 Successors and Assigns. This Agreement shall be binding upon and shall enure to the benefit of the Parties hereto and their respective successors and permitted assigns. Neither Party may assign its rights or obligations hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning Party of any of its obligations hereunder.

 

22

 

Section 9.11 No Third-Party Beneficiaries. Except as expressly provided herein, this Agreement is for the sole benefit of the Parties hereto and their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 9.12 Amendment, Modification, and Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each Party hereto. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 9.13 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein.

 

Section 9.14 Forum Selection. Any action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be brought in the courts of the Province of Ontario, and each Party irrevocably submits and agrees to attorn to the non-exclusive jurisdiction of such courts in any such action or proceeding.

 

Section 9.15 Choice of Language. The Parties confirm that it is their express wish that this Agreement, as well as any other documents relating to this Agreement, including notices, schedules and authorizations, have been and shall be drawn in the English language only. Les Parties aux présentes confirment leur volenté expresse que cette convention, de même que tous les documents s’y rattachant, y compris tous avis, annexes et autorisations s’y rattachant, soient rédigés en langue anglaise seulement.

 

Section 9.16 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at Law or in equity.

 

Section 9.17 Time. Time shall be of the essence of every provision of this Agreement.

 

Section 9.18 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

Section 9.19 No Contra Proferentem. This Agreement has been reviewed by each Party’s professional advisors, and revised during the course of negotiations between the Parties. Each Party acknowledges that this Agreement is the product of their joint efforts, that it expresses their agreement, and that, if there is any ambiguity in any of its provisions, no rule of interpretation favouring one Party over another based on authorship will apply.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

23

 


SCHEDULE “A”

MUTUAL RELEASE

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “B”

SHARE PLEDGE AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “C”

GENERAL SECURITY AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “D”

DEBT ASSIGNMENT AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “E”

RESIGNATION & RELEASES

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “F”

OUTGOING DIRECTORS AND OFFICERS

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “G”

SUBSCRIPTION AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “H”

NON-COMPETE AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

 

 

SCHEDULE “I”

USA TERMINATION AGREEMENT

 

[Redacted for confidentiality reasons due to potential prejudice to the Purchaser.]

 

 

EXHIBIT 99.9

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

High Tide to Acquire Remaining 49.9% of KushBar Joint Venture with 4 Retail Cannabis Locations in Alberta

 

Calgary, AB, December 10, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, is pleased to announce that it has entered into a definitive share purchase agreement (the “Definitive Agreement”) with 2651576 Ontario Inc. (the “Minority Holder”), a private Ontario company, to acquire the remaining 49.9% interest (the “Minority Interest”) in High Tide’s majority-owned subsidiary, KushBar Inc. (“KushBar”). Pursuant to the Definitive Agreement, High Tide, which presently holds a controlling interest of 50.1% in KushBar, will acquire the Minority Interest in a transaction (the “Transaction”) that will result in KushBar becoming a wholly-owned subsidiary of High Tide. It is anticipated that the Transaction will close on or about December 12, 2019.

 

The Transaction marks a crucial step in High Tide’s strategy to capitalize on the second wave of the legalization of recreational cannabis products, including but not limited to concentrates, edibles and infused beverages, which are expected to be available in Alberta in early 2020. High Tide’s goal has always been to exceed the expectations of cannabis consumers and elevate their retail experience. The acquisition of the remaining stake in the 3 operating KushBar stores in Camrose, Lloydminster and Morinville, with the fourth location opening in Medicine Hat shortly, will enable us to build on our retail strategy to help meet the upcoming increase in demand expected from Cannabis 2.0 products,” said Raj Grover, High Tide’s President & Chief Executive Officer. “As we move closer towards the new year, we are excited for what Cannabis 2.0 will have in store for High Tide and its customers,” added Mr. Grover.

 

Subject to applicable laws and the policies of the Canadian Securities Exchange (the “CSE”), the consideration payable for the Minority Interest will be satisfied by the issuance of a secured convertible debenture in the principal amount of approximately $700,000 (the “Debenture”) and such number of common shares in the capital of High Tide (“Shares”) having an aggregate value of $500,000, with each Share priced at the 10-day volume weighted average trading price of the Shares on the CSE immediately prior to the Closing Date. The outstanding principal amount under the Debenture is convertible, at the holder’s option, before the maturity date into Shares at a price of $0.25 per Share. The Debenture will be due 24 months from the issuance date and will not bear interest, provided however that any principal amount outstanding following the maturity date will bear interest at a rate of 10% per annum until repaid.

 

 

 

 

If, following the expiry of all hold periods imposed by applicable Canadian securities laws, the volume-weighted average trading price of the Shares on the CSE exceeds $0.30 for a period of 30 consecutive days, High Tide will be entitled to, subject to certain other conditions being met, cause the holder to convert all or part of the outstanding principal amount of the Debenture into Shares. In addition, if at any time during the term thereof, High Tide issues securities at a price deemed lower than the conversion price then in effect, then, subject to certain other conditions, such conversion price will be adjusted downward to such lower price. Completion of the Transaction remains subject to compliance with applicable laws (including the policies of the CSE), as well as a number of customary terms and conditions, including the entering into of definitive documentation with respect to the grant of certain security interests to secure the obligations of High Tide under the Debenture.

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 11 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 operating stores in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

2

 

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements, including, but not limited to statements with regard to the consummation of the Transaction, the ability of High Tide to build on its existing cannabis retail strategy in order to address market demand and the needs of mainstream cannabis consumers, and High Tide’s growth and expansion prospects and outlook. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved, or that the terms and conditions relating to the Transaction will be satisfied and that the Transaction will be completed as anticipated, or at all. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

3

 

 

EXHIBIT 99.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 99.11

 

 

FOR IMMEDIATE RELEASE

 

NOT FOR DISTRIBUTION TO NEWSWIRE SERVICES IN THE UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS.

 

Famous Brandz Secures Merchandising License for The Fabulous Furry Freak Brothers

 

Calgary, AB, December 27, 2019 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (CSE:HITI) (OTCQB:HITIF) (Frankfurt:2LY), an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that its wholly-owned subsidiary, Famous Brandz Inc. (“Famous Brandz”), recently signed a royalty-based merchandising license agreement with FFFB Media, LLC to use The Fabulous Furry Freak Brothers trade marks and names, logos and artwork (the “Freak Brothers License”). The Freak Brothers License grants Famous Brandz the worldwide right and license to use, manufacture, have manufactured, advertise and sell certain types of smoking accessories via any distribution channels over a term of 2 years.

 

The Fabulous Furry Freak Brothers is an underground comic about a fictional trio of characters created in 1968. Earlier in 2019, it was announced that The Fabulous Furry Freak Brothers was being re-launched as a television series, which is currently under development. “High Tide’s industry-leading position in licensed product manufacturing and wholesale distribution is further strengthened by adding the Freak Brothers License to our portfolio of celebrity brands, which includes but is not limited to Snoop Dogg Pounds, Cheech & Chong’s Up in Smoke, Trailer Park Boys and Guns N’ Roses,” said Raj Grover, President and Chief Executive Officer of High Tide. Famous Brandz has begun the process of designing and producing the smoking accessories under the Freak Brothers License.

 

Separately, the Company issued $2,000,000 in unsecured convertible debentures (the “Debentures”) under a third and final tranche (the “Third Tranche”) of the private placement previously announced on November 14, 2019. The principal amount of the Debentures is convertible at the holder’s option at a conversion price of $0.252 per HITI Share and the Debentures are due 24 months from their issuance date and carry a 10% interest cost per annum, payable annually in advance in HITI Shares at a price equal to the volume-weighted average price per HITI Share for the 10-days prior to the day on which interest is due. Concurrent with the issuance of the Debentures, the Company paid the interest due up-front in the form of 1,142,857 HITI Shares. Under the Third Tranche, the Company also issued Warrants such that subscribers received one Warrant for each $0.252 of original principal amount of Debentures, resulting in 7,936,508 Warrants being issued in the Third Tranche. Each Warrant issued in the Third Tranche entitles the holder to acquire one HITI Share at an exercise price of $0.50 per share for two years from the date of issuance.

 

 

 

 

About High Tide Inc.

 

High Tide is an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including RGR Canada Inc., Famous Brandz Inc., Kush West Distribution Inc., Smoker’s Corner Ltd., Grasscity.com, Canna Cabana Inc. and the majority of KushBar Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).

 

Representing the core of High Tide’s business, RGR Canada Inc. is a high-quality and innovative designer, manufacturer and distributor of cannabis accessories. Famous Brandz Inc. is a dominant manufacturer of licensed lifestyle accessories, through partnerships with celebrities and entertainment companies including Snoop Dogg and Paramount Pictures. Famous Brandz’ products are sold to wholesalers and retailers around the world. Founded in 2009 and approved by the Canadian Franchise Association, Smoker’s Corner Ltd. is among Canada’s largest counter-culture chains with 11 locations. Kush West Distribution is in the process of becoming a cannabis wholesaler in the province of Saskatchewan. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8 million site visits annually. With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a retail cannabis joint venture with 3 locations in Alberta, offering a modern experience that is focused on the growing customer bases in Alberta and Ontario.

 

For more information about High Tide Inc., please visit www.hightideinc.com and its profile page on SEDAR at www.sedar.com.

 

Forward-Looking Information

 

Certain statements in this news release are forward-looking information or forward-looking statements, including, but not limited to statements with regard to the ability of High Tide to build on its existing cannabis retail strategy in order to address market demand and the needs of mainstream cannabis consumers, and High Tide’s growth and expansion prospects and outlook. Such information and statements, referred to herein as “forward-looking statements” are made as of the date of this news release or as of the date of the effective date of information described in this news release, as applicable. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (generally, forward-looking statements can be identified by use of words such as “outlook”, “expects”, “intend”, “forecasts”, “anticipates”, “plans”, “projects”, “estimates”, “envisages, “assumes”, “needs”, “strategy”, “goals”, “objectives”, or variations thereof, or stating that certain actions, events or results “may”, “can”, “could”, “would”, “might”, or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions, and other similar terminology) are not statements of historical fact and may be forward-looking statements.

 

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Such forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to the ability of High Tide to execute on its business plan and that High Tide will receive one or multiple licenses from Alberta Gaming, Liquor & Cannabis, British Columbia’s Liquor Distribution Branch, Liquor, Gaming and Cannabis Authority of Manitoba, Alcohol and Gaming Commission of Ontario or the Saskatchewan Liquor and Gaming Authority permitting it to carry on its Canna Cabana Inc. and KushBar Inc. businesses. High Tide considers these assumptions to be reasonable in the circumstances. However, there can be no assurance that any one or more of the government, industry, market, operational or financial targets as set out herein will be achieved. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements.

 

The forward-looking statements contained herein are current as of the date of this news release. Except as required by law, High Tide does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission from any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances. Any and all forward-looking statements included in this news release are expressly qualified by this cautionary statement, and except as otherwise indicated, are made as of the date of this news release.

 

SOURCE High Tide Inc.

 

For further information, please contact Nick Kuzyk, Chief Strategy Officer & SVP Capital Markets at High Tide Inc.; Tel: (403) 265-4207; Email: Nick@HighTideInc.com; Web: www.HighTideInc.com.

 

 

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EXHIBIT 99.12

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY AND ANY SECURITY ISSUED ON CONVERSION HEREOF MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY FROM THE CLOSING DATE.

 

Loan Agreement

 

dated as of
JANUARY 6, 2020

 

between

 

HIGH TIDE INC.
as Borrower

 

and

 

Windsor Private Capital Limited Partnership
as Lender

 

 

 

CDN $6,000,000 Loan

 

 

 

TORKIN MANES LLP

 

 

 

Table of ContentS

 

1. Definitions 1
2. Facility 10
3. Conditions Precedent to the Advance 12
4. Conditions Precedent to Subsequent Advances 14
5. Interest 14
6. Fees 16
7. Payments and Prepayments 16
8. Security 17
9. Legal Fees and Expenses 19
10. Representations and Warranties 19
11. Affirmative Covenants 24
12. Negative Covenants 27
13. Reporting Requirements 29
14. Events of Default 30
15. Acceleration 32
16. Remedies Cumulative 33
17. No Prejudice, etc. 33
18. Application of Payments and Proceeds of Realization After an Event of Default 33
19. Rights and Waivers 34
20. Power of Attorney 34
21. Books and Records 34
22. Indemnification by the Borrower 35
23. Release of Security 35
24. Notices 35
25. Confidentiality 36
26. General 38

 

- i -

 

 

Loan agreement

 

THIS AGREEMENT is made as of January 6, 2020 among High Tide Inc., a corporation formed under the laws of the Province of Alberta, as borrower, and Windsor Private Capital Limited Partnership by its general partner, Windsor Private Capital Inc., as lender.

 

Recitals

 

A. The Borrower has requested the Lender to make available to it a convertible loan in the principal amount of Six Million Canadian Dollars (CDN$6,000,000) (the “Loan”).

 

B. The Lender is willing to make the Loan available to the Borrower on the terms and subject to the conditions set out in this Agreement.

 

C. The Lender may, in its sole and absolute discretion, make available to the Borrower an additional Four Million Canadian Dollars (CDN$4,000,000) on the terms and subject to the conditions set out in this Loan Agreement.

 

NOW THEREFORE, in consideration of the mutual obligations contained herein and for other consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

 

1. Definitions

 

In this Agreement, unless the context otherwise requires, the following terms have the respective meanings set out below (and all such terms that are defined in the singular have the corresponding meaning in the plural and vice versa):

 

Acquisition” means, with respect to a Person, any purchase or other acquisition, regardless of how accomplished or effected (including any such purchase or other acquisition effected by way of amalgamation, merger, arrangement, business combination or other form of corporate reorganization or by way of purchase, lease or other acquisition arrangements), of (a) any other Person, (b) all or substantially all of the property, assets and undertaking of any other Person; (c) all or any portion of any division, business, or operation or undertaking of any other Person; or (d) all or substantially all of the property, assets and undertakings of all or any portion of any division, business, operation or undertaking of any other Person;

 

Advance” means an extension of credit by the Lender to the Borrower pursuant to this Agreement;

 

Affiliate” means, with respect to a Person, any other person that directly or indirectly Controls, or is controlled by, or is under common Control with, that Person;

 

Agreement” means this agreement and all Schedules attached hereto as the same may be amended, restated, replaced or superseded from time to time;

 

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Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), assignment, conveyance, transfer or other disposition by the Borrower or a Corporate Subsidiary to, or any exchange of property by the Borrower or a Corporate Subsidiary with, any Person, in one transaction or a series of transactions, of all or any non-immaterial part of the Borrower’s or a Corporate Subsidiary’s business, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, other than inventory sold in the ordinary course of business and other than one or more development permits held by the Borrower or a Corporate Subsidiary;

 

Banking Day” means a day other than a Saturday or a Sunday or other day on which banks are required or authorized to close in Toronto, Canada;

 

Borrower” means High Tide Inc., a corporation incorporated under the Business Corporations Act (Alberta), and its successors and permitted assigns;

 

Canadian Dollars” and “CDN$” mean the lawful currency of Canada in immediately available funds;

 

Cannabis Laws” means the Cannabis Act (Canada), Cannabis License Act, 2018 (Ontario), the Gaming, Liquor and Cannabis Act (Alberta), the Cannabis Control Act (Saskatchewan), the Criminal Code (Canada), and any other law, statute, rule or regulation in Canada or any other applicable jurisdiction (including any Province, Territory or other sub-jurisdiction), in force or which may be enacted from time to time, relating in any way to the production, cultivation, possession, storage, transportation, distribution, sale or use of cannabis and related substances and products, and including all policies, regulations, official directives, orders, judgments and decrees promulgated under any of the foregoing, including without limitation the Retail Cannabis Store Handbook (Alberta) and the Cannabis Representative Handbook (Alberta);

 

Closing Date” means the date on which the Lender confirms to the Borrower that the conditions set forth in Section 3(a) have been met to its satisfaction;

 

Control” (including any correlative term) means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person (whether through ownership of securities or partnership or trust interests, by contract or otherwise); without limiting the generality of the foregoing (i) a Person is deemed to Control a corporation if such Person (or such Person and its Affiliates) holds outstanding shares of the corporation carrying votes in sufficient number to elect a majority of the board of directors of the corporation, (ii) a Person is deemed to Control a partnership if such Person (or such Person and its Affiliates) holds more than 50% in value of the equity of the partnership, (iii) a Person is deemed to Control a trust if such Person (or such Person and its Affiliates) holds more than 50% in value of the beneficial interests in the trust, and (iv) a Person that Controls another Person is deemed to Control any Person controlled by that other Person. For greater certainty, (i) a Person is not deemed to control another Person by virtue only of such first Person’s role of director or manager of the second Person, and (ii) the Borrower shall not be deemed to control Saturninus Partners for so long as the Borrower holds 50% or less in value of the equity of Saturninus Partners.

 

Conversion Price” means, the lesser of: (i) $0.17; and (iii) the lowest price paid in connection with a Dilutive Issuance;

 

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Corporate Subsidiaries” means, the Guarantors and any future direct or indirect Subsidiary of the Borrower (each a “Corporate Subsidiary”);

 

Debt” means, with respect to any Person: (i) an obligation of such Person for borrowed money; (ii) an obligation of such Person evidenced by a note, bond, debenture or other similar instrument; (iii) an obligation of such Person for the deferred purchase price of property or services, excluding trade payables and other accrued current liabilities incurred in the ordinary course of business in accordance with customary commercial terms; (iv) a capitalized lease obligation of such person; (v) a guarantee, indemnity, or financial support obligation of such Person, determined in accordance with generally accepted accounting principles; (vi) an obligation of such Person or of any other Person secured by a Lien on any property of such Person, even though such Person has not otherwise assumed or become liable for the payment of such obligation; or (vii) an obligation arising in connection with an acceptance facility or letter of credit issued for the account of such Person; or (viii) a share in the capital of such Person that is redeemable by such Person either at a fixed time or on demand by the holder of such share (valued at the maximum purchase price at which such Person may be required to redeem, repurchase or otherwise acquire such share);

 

Default” means an event or circumstance, the occurrence or non-occurrence of which would, with the giving of a notice, lapse of time or a combination thereof, constitute an Event of Default unless remedied within the prescribed delays or waived in writing by the Lender;

 

Dilutive Issuance” means if at any time while the Loan Obligations are outstanding, the Borrower issues common shares or securities convertible into or exercisable for common shares: (A) at a price per share that is lower than both sub item (i) and (ii) of the definition of Conversion Price; or (B) that contains provisions for an adjustment mechanism that adjusts the exercise or conversion price per share to a price per share that is lower than the Conversion Price set forth in sub items (i) and (ii) of the definition of Conversion Price and said adjustment mechanism has been triggered; provided however, that “Dilutive Issuance” as defined shall not include either (A) the Hamilton Acquisition, provided that such transaction closes on or before the day that is the thirtieth (30th) day following the Closing Date; or (B) an issuance of shares in satisfaction of one or more accounts payable, individually or cumulatively, of the Borrower or any Corporate Subsidiary in an aggregate amount not to exceed Two Hundred and Fifty Thousand Canadian Dollars (CDN$250,000) in any twelve (12) month period, with the first day of the first twelve (12) month period beginning on the Closing Date; provided however, that if the Loan Agreement is renewed in accordance with Section 2(g) hereof, the Borrower and the Lender agree that the aggregate amount set forth in this Section (B) shall be subject to change, which change shall be mutually agreed upon by the Borrower and the Lender, each acting reasonably;

 

Draw Request” means a notice in the form of Schedule “B” given by the Borrower to the Lender for the purposes of requesting and Advance;

 

Environmental Laws” means any present or future applicable federal, provincial, municipal or other local law, statute, regulation or by-law, code, ordinance, decree, directive, standard, policy, rule, order, treaty, convention, judgment, award or determination, in each case having the force of law, for the protection of the environment or human health in any applicable jurisdiction;

 

- 3 -

 

Event of Default” means any of the events described in Section 14;

 

Facility” has the meaning attributed to such term in Section 2.

 

Facility Maximum Amount” means, subject to the terms of Section 2(f), Six Million Canadian Dollars (CDN$6,000,000);

 

Governmental Body” means the Regulator and any domestic or foreign federal, provincial, regional, state, municipal or other government, governmental department, agency, authority or body (whether administrative, legislative, executive or otherwise), court, tribunal, commission or commissioner, bureau, minister or ministry, board or agency, or other regulatory authority, including any securities regulatory authorities or stock exchange;

 

Guarantors” means, collectively, each of: (i) Famous Brandz Inc.; (ii) RGR Canada Inc.; (iii) Smoker’s Corner Ltd.; (iv) Canna Cabana Inc.; (v) KushBar Inc.; (vi) Kush West Distribution Inc.; (vii) HT Global Imports Inc.; (viii) Canna Cabana (SK) Inc.; (ix) High Tide Inc. B.V.; (x) SJV B.V.; (xii) SJV 2 B.V.; (xiii) SJV USA Inc.; (xiv) Valiant Distribution Inc. and any other Person who from time to time provides a guarantee to the Lender in respect of the Loan Obligations (each a “Guarantor”);

 

Initial Maturity Date means December 15, 2020.

 

KushBar Security” means (i) certain security granted by KushBar Inc. in favour of                  pursuant to a general security agreement dated December 12, 2019 and entered into by and between KushBar Inc. and                 , and (ii) a pledge of all common shares in the capital of KushBar Inc. held by the Borrower, granted by the Borrower in favour of                  pursuant to a share pledge agreement dated December 12, 2019 and entered into by and between the Borrower, KushBar Inc. and                 , and (iii) an assignment of certain indebtedness of KushBar Inc. owing to the Borrower, granted by the Borrower in favour of                  pursuant to an assignment of shareholder’s loan agreement dated December 12, 2019 and entered into by and between the Borrower and                 ;

 

Lender” means Windsor Private Capital Limited Partnership, represented by its general partner Windsor Private Capital Inc. and its successors and permitted assigns;

 

Lien” means any mortgage, charge, pledge, hypothecation, security interest, assignment, encumbrance, lien (statutory or otherwise), charge, title retention agreement or arrangement, restrictive covenant, adverse claims, royalties, third party claims, or other encumbrance, whether fixed or floating over any property, whether real, personal or mixed, tangible or intangible, of any nature or any other arrangement or condition that in substance secures payment or performance of an obligation;

 

Loan Documents” means, collectively, this Agreement, the Security Documents, the Warrant Certificate, the Convertible Debenture and any other agreements or documents entered into in connection with the transactions contemplated herein and therein and until the Loan Obligations are repaid in full, and “Loan Document” means any one of them;

 

- 4 -

 

Loan Obligations” means the present and future indebtedness, obligations, liabilities, promises, covenants, responsibilities and duties (actual or contingent, joint or several, absolute or contingent, direct or indirect, matured or unmatured, now existing or arising hereafter), whether arising by agreement or statute, at law, in equity or otherwise of the Borrower, whether as principal debtor, guarantor, surety or otherwise, owing or incurred to the Lender arising under, by reason of or otherwise in respect of each of this Agreement or any other Loan Document;

 

Material Adverse Change” means a material adverse change in (a) the business, assets, liabilities, financial position, prospects, results of operations, assets, or operations of the Borrower and Guarantors, taken as a whole, or (b) the ability of the Borrower or a Guarantor to perform any of its Loan Obligations to which it is a party, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of the Lender hereunder or thereunder. Notwithstanding the foregoing, the Lender agrees and acknowledges that the Borrower may                                                                                                                                                                                                 ;

 

Material Contracts” means agreements of the Borrower listed in Schedule “G”, and any other agreements of the Borrower and Guarantors, the termination or cancellation of which would result in a Material Adverse Change. A true and accurate copy of each such Material Contract in existence as at the date hereof has been delivered to the Lender;

 

Outstanding Debt” means the Outstanding Principal Obligations together with any accrued and unpaid interest thereon;

 

Outstanding Principal Obligations” means, at any time, the aggregate principal amount of the Advances made by the Lender to the Borrower hereunder, outstanding at such time;

 

Permitted Acquisitions” means each of the following:

 

(a) the Acquisition by the Borrower of (i)                                                                                  pursuant to an                          entered into by and among                                         , and the         ;

 

(b) the Acquisition by the Borrower                                                                          pursuant to                                           entered into by and among                  , and the Borrower (the “                 ”);

 

(c) the Acquisition by the Borrower                                                                pursuant to                                    entered into by and among                                    and the Borrower;

 

- 5 -

 

(d) the Acquisition by Canna Cabana (SK) Inc., a Subsidiary of the Borrower, of all of the common shares in the capital of                                    pursuant to                   entered into by and among Canna Cabana (SK) Inc., the Borrower,                                             ; and

 

(e) in order for each of items (a) through (e) above to be a Permitted Acquisition, the Borrower must provide, not less than five (5) days prior to the date of such Acquisition (or such shorter period if the acquisition is taking place within five (5) days of the Closing Date), to the Lender, in form and substance satisfactory to the Lender, acting reasonably, copies of:

 

i. to the extent available, the acquisition agreement and all material related agreements and instruments, and all opinions, certificates, lien search results, court orders and related court materials (if applicable) in connection with a Permitted Acquisition;

 

ii. to the extent available, most currently available financial statements, including without limitation, balance sheets, statements of income and statements of change in financial position, that are in the Borrower’s possession with respect to a Permitted Acquisition; and

 

iii. any other documents that the Lender may reasonably request in connection with a Permitted Acquisition.

 

Permitted Costs” means costs associated with each of the following, provided that such costs are approved by the Lender in its sole and absolute discretion:

 

(a) construction costs related to certain Alberta store openings; and

 

(b) opening inventory costs related to certain Alberta store openings.

 

Permitted Debt” shall mean:

 

(a) the Outstanding Debt;

 

(b) unsecured indebtedness to trade creditors in the ordinary course of business;

 

(c) indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; and

 

(d) any Debt of the Borrower or a Guarantor provided that the prior written consent of the Lender has been given in respect of such Debt, and the rights of the holder of such Debt are subordinated to all rights of the Lender under or in respect of the Loan Obligations and Security pursuant to a subordination agreement containing payment and non-payment, default, standstills and other provisions, satisfactory in form and substance to the Lender;

 

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(e) any intercompany Debt among the Borrower or any of the Secured Guarantors;

 

(f) any Debt of the Borrower or a Guarantor described in Schedule “I” to this Agreement;

 

(g) subject to the Lender’s written consent, any Debt of any Person that becomes a Corporate Subsidiary in connection with a Permitted Acquisition; and

 

(h) any re-financings, renewals and extensions of any of the foregoing, provided that the: (i) indebtedness outstanding under such re-financing, renewal, or extension is not increased; (ii) the terms, conditions, covenants and interest rate under such re-financing, renewal or extension remain the same or are more beneficial to the Borrower; (iii) the cash flow impact of such re-financing, renewal or extension remains the same or is more beneficial to the Borrower; and (iv) that such re-financing, renewal or extension does not prejudice the rights and remedies of the Lender under this Agreement or any of the other Loan Documents;

 

Permitted Liens” means, in respect of the Borrower and each Guarantor:

 

(a) a Lien for Taxes, assessments or governmental charges:

 

(i) which are not due or delinquent at that time; or

 

(ii) the validity of which is being contested by the Borrower or Guarantor diligently and in good faith;

 

(b) the Lien of any judgment rendered, or order filed, against the property and assets of the Borrower or Guarantor which the Borrower or Guarantor is contesting diligently and in good faith at that time:

 

(i) in respect of which the Borrower or Guarantor has set aside a reserve sufficient to pay such judgment or claim in accordance with generally accepted accounting principles; or

 

(ii) which are not material, having regard to the assets and properties of the Borrower or Guarantor;

 

(c) a Lien, privilege or other charge imposed or permitted by law (such as, without limitation, a carrier’s lien, builder’s lien or materialmen’s lien) which either:

 

(i) relates to obligations not due or delinquent at that time; or

 

(ii) at such time is not a material risk to assets of the Borrower or Guarantor whether because no steps or proceedings to enforce the Lien, privilege or charge have been initiated at that time or because the value of the assets of the Borrower or Guarantor affected thereby is not material to such Borrower or Guarantor;

 

- 7 -

 

(d) an undetermined or inchoate Lien, privilege or charge arising in the ordinary course of its current operations:

 

(i) which has not been filed pursuant to law against the Borrower or Guarantor or the property or assets of the Borrower or Guarantor at that time;

 

(ii) in respect of which no steps or proceedings to enforce such Lien, privilege or charge have been initiated at that time;

 

(iii) which relates to obligations which are not due or delinquent at that time; or

 

(iv) if, at such time, such Lien, privilege or charge does not pose a material risk to the property and assets of the Borrower or Guarantor whether because no steps or proceedings to enforce the Lien, privilege or charge have been initiated at that time or because the value of such assets of such Borrower or Guarantor affected thereby is not material to such Borrower or Guarantor;

 

(e) cash, marketable securities or bonds deposited in connection with bids or tenders, deposited with a court as security for costs in any litigation, deposited to secure workers’ compensation or unemployment insurance liabilities or deposited to secure the performance of statutory obligations not to exceed CDN$100,000 in the aggregate (among the Borrower and Guarantors, taken together) outstanding at any time;

 

(f) Liens securing the performance of statutory obligations, surety or performance bonds, and other obligations of like nature incurred in the ordinary course of business of the applicable Borrower or Guarantor, the prior written consent of the Lender has been given, such consent not to be unreasonably withheld or delayed;

 

(g) subject to the Lender’s written consent, any Lien registered against any Person that becomes a Corporate Subsidiary in connection with a Permitted Acquisition;

 

(h) Liens securing Permitted Debt and subordinated third party Debt provided that:

 

(i) such Liens rank subordinate to the Security;

 

(ii) the prior written consent of the Lender has been given; and

 

(iii) if required by the Lender, a subordination agreement has been entered into by each secured party with the Lender in form and substance satisfactory to the Lender;

 

(i) Liens arising in connection with the KushBar Security;

 

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(j) Liens arising in connection with the          Security;

 

(k) the Security;

 

(l) the Liens described in Schedule “A” to this Agreement. For greater certainty, the Lender agrees, acknowledges and covenants to (A) upon request by the Borrower, subordinate its security to the collateral that is the subject matter of the                      Security, in favour of the holders of the                    Security, on the terms to be set forth in a written agreement to be entered into at a later date by the Lender, Canna Cabans (SK) Inc., the holders of the                          Security, and such other Persons as may be reasonably required to give effect to such agreement, any security interest or Lien that Lender may have in any property or assets of Canna Cabana (SK) Inc. situated at 1010 100th Street,         , Saskatchewan, and (B) upon request by the Borrower, forthwith execute and deliver or cause to be executed and delivered, all such reasonable agreements, documents and instruments and do or cause to be done all such other matters and things which may be necessary to give effect to the subordination contemplated by the foregoing subparagraph (A); and

 

(m) any renewal, replacement or extension of any of the foregoing, provided that the: (i) indebtedness outstanding under such renewal, replacement or extension is not increased; (ii) the terms, conditions, covenants and interest rate under such renewal, replacement or extension remain the same or are more beneficial to the Borrower; (iii) the cash flow impact of such renewal, replacement or extension remains the same or is more beneficial to the Borrower; and (iv) that such renewal, replacement or extension does not prejudice the rights and remedies of the Lender under this Agreement or any of the other Loan Documents;

 

Person” means an individual, company, partnership (whether or not having separate legal personality), corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government, state or political subdivision thereof;

 

Regulator” means the any Government Body appointed to regulate the licensing of cannabis in the respective jurisdiction;

 

Regulator Licenses” means all authorizations, approvals, consents, exemptions, licenses, grants, permits, franchises, rights, privileges or no-action letters from any Governmental Body related to cannabis and issued by the Regulator;

 

Renewal Fee” means if the Facility is renewed in accordance with Section 2(g), a fee in the amount of one and a half percent (1.5%) of the then Outstanding Debt;

 

Renewal Maturity Date” means if the Facility is renewed in accordance with Section 2(g), December 15, 2021;

 

Secured Guarantor” means any Person who from time to time grants a security interest to the Lender pursuant to this Loan Agreement;

 

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“Security” means the Liens and guarantees created (or intended to be created) from time to time by the Security Documents;

 

Security Documents” means, at any time, the agreements, documents and instruments listed in Section 8(a) and each additional agreement, document and instrument delivered by the Borrower or a Guarantor to or for the benefit of the Lender at or before such time to secure or guarantee, directly or indirectly, the payment or performance of any of the Loan Obligations;

 

Smoker’s Corner Ltd. Guarantee” means the guarantee limited to          plus interest provided by Smoker’s Corner Ltd. in favour              in connection with a loan by                            pursuant to                        

 

Subsidiary” means a Person that is under the Control, directly or indirectly, of the Borrower;

 

Taxes” includes all present and future income, corporation, capital gains, capital and value-added and goods and services, harmonized sales, real property taxes and all stamp and other taxes and levies, imposts, deductions, duties, charges and withholdings whatsoever together with interest thereon and penalties with respect thereto, if any, and any other taxes, customs duties, fees, assessments, royalties, duties, deductions, compulsory loans or similar charges in the nature of a tax, including Canada Pension Plan and provincial pension plan contributions, employment insurance payments and workers compensation premiums, together with any instalments, and any interest, fines and penalties, additions to tax or other additional amounts, imposed, assessed, reassessed or collected by any governmental authority, whether disputed or not;

 

Term Sheet Execution Date” shall mean December 8, 2019;

 

         Security” means certain security to be granted over the assets of Canna Cabana (SK) Inc. situated at                            in favour of                  pursuant to                   to be entered into by and between Canna Cabana (SK) Inc. and                  ;

 

Validity Guarantee” means the validity guarantee by          in favor of the Lender; and

 

Warrant Certificate” means the warrant certificate by the Borrower to the Lender to purchase common shares in the capital of the Borrower;

 

2. Facility

 

(a) Facility Amount. Upon and subject to the conditions hereof, the Lender agrees to make available to the Borrower a non-revolving term facility (the “Facility”) in a principal amount not to exceed the Facility Maximum Amount, subject to the terms of this Section 2(f). The Borrower shall be entitled to request Advances under the Facility no more than once per month (which for certainty, shall exclude the Advance and Draw Request dated the date hereof) by submitting to the Lender a Draw Request five (5) Banking Days prior to the date of the Advance request set forth in the Draw Request, unless otherwise agreed to by the Lender.

 

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(b) Amount of Monthly Advances. Any Advances requested by the Borrower shall: (i) be subject to a minimum monthly Advance amount of Two Hundred and Fifty Thousand Canadian Dollars (CDN$250,000).

 

(c) Initial Advance. The obligation of the Lender to make the initial Advance is subject to, and conditional upon, the satisfaction by the Borrower of the conditions precedent contained in Section 3.

 

(d) Subsequent Monthly Advances. The obligation of the Lender to make subsequent monthly Advances is subject to, and conditional upon, the satisfaction by the Borrower of the conditions precedent contained in Section 4.

 

(e) Purpose of the Loan. The Borrower shall use the Loan only to fund Permitted Acquisitions, Permitted Costs, and to satisfy fees contemplated in Section 6(a) and Section 9.

 

(f) Increase in the Facility Maximum Amount. The Lender, in its sole and absolute discretion, may increase the Facility Maximum Amount by an additional Four Million Canadian Dollars (CDN$4,000,000) to be used by the Borrower to fund Permitted Acquisitions.

 

(g) Facility Renewal. The Facility shall renew on the Initial Maturity Date for an additional one (1) year term subject to:

 

(i) no Default or pending Event of Default shall have occurred or be continuing;

 

(ii) no actual or imminent Material Adverse Change in the business of the Borrower (including regulatory or general industry conditions) shall have occurred;

 

(iii) the Borrower shall have paid the Renewal Fee; and

 

(iv) there being no outstanding indebtedness owing by the Borrower to any Person, other than the Lender, maturing prior to the Renewal Maturity Date, it being understood that the Borrower shall be entitled to issue securities to satisfy any of its interest and principal repayment obligations.

 

(h) Convertible Nature of the Loan. While the Loan Obligations hereunder remain outstanding, and after the date which is six (6) months after the Closing Date, the Lender shall have the right, at its option, subject to the policies and regulations of the Canadian Stock Exchange and applicable securities laws, and upon three (3) Banking Days’ notice to the Borrower, to convert the Outstanding Debt, from to time to time and at any time, in whole or in part, into common shares of the Borrower at a price per share equal to the Conversion Price. For so long as this Loan Agreement remains in effect, the Lender hereby covenants and agrees that it will not, and shall cause any related Person to not, short sell the common shares of the Borrower. Notwithstanding the foregoing, the Lender shall be permitted, upon five (5) Banking Days’ written notice to the Borrower, to engage in short sale transactions to the extent that such transactions form part of a series of transactions in connection with the conversion of the Outstanding Debt under the Debenture into common shares of the Borrower or an exercise of warrants under the Warrant Certificate.

 

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3. Conditions Precedent to the Advance

 

Subject to Section 3(b), the Borrower shall ensure that each of the following conditions has been satisfied on the Closing Date and the obligations of the Lender under this Agreement to make the Advance are subject to and conditional upon the following conditions precedent being satisfied:

 

(a) prior to making any Advances hereunder, the Lender shall have received all of the following in form and substance satisfactory to the Lender in its sole and absolute discretion:

 

(i) the Borrower shall have given a Draw Request to the Lender in accordance with the notice requirements provided herein;

 

(ii) original copies of each of the Loan Documents duly executed and delivered by each party thereto, and such Loan Documents are in full force and effect enforceable against the parties thereto in accordance with their respective terms;

 

(iii) evidence to the satisfaction of the Lender that all registrations and other actions as may be necessary to create, perfect, preserve and protect the Security and its validity, effect and priority have been effected in all jurisdictions and under all statutes as may be required by the Lender and its counsel with priority satisfactory to the Lender, subject to Permitted Liens;

 

(iv) evidence to the satisfaction of the Lender that all directors, shareholders, regulatory, governmental, and other approvals necessary in connection with the execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby have been obtained;

 

(v) certified copies of each of: (i) the constating documents of the Borrower and each Guarantor; (ii) the resolutions authorizing the execution, delivery and performance of each of the Borrower’s and each Guarantor’s respective obligations under the Loan Documents and the transactions contemplated herein; (iii) the incumbency of the officers of the Borrower and each Guarantor; and (iv) the share register of each Guarantor;

 

(vi) a certificate of status, good standing, or equivalent for all relevant jurisdictions in respect of the Borrower and each Guarantor;

 

(vii) evidence to the satisfaction of the Lender that all existing Debt of the Borrower and each Guarantor (other than Permitted Debt) has been subordinated to the Loan and that the Security constitutes a first ranking security interest against the Borrower and each Guarantor;

 

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(viii) an executed copy of the Warrant Certificate in the form attached hereto as Schedule “K”; which for greater certainty, shall be issued subject to all applicable laws (including the policies of the Canadian Securities Exchange);

 

(ix) an executed copy of the Validity Guarantee;

 

(x) a certificate evidencing the insurance coverage required to be maintained by the Borrower pursuant to this Agreement;

 

(xi) receipt by the Lender of all fees due and payable to the Lender on the Closing Date pursuant to or otherwise in respect of this Agreement and the term sheet executed by the parties hereto, including payment to the Lender of all reasonable fees, costs and expenses (invoiced or estimated) payable by the Lender to the Lender’s counsel in respect of the Loan Documents;

 

(xii) satisfactory review by the Lender of the financial arrangements of the Borrower and each Guarantor and satisfactory completion by the Lender of its financial, operational and other due diligence of the Borrower and each Guarantor;

 

(xiii) evidence to the satisfaction of the Lender that no Default or Event of Default has occurred and is continuing or would result from making the Advance and a senior officer of the Borrower shall have certified the same to the Lender;

 

(xiv) evidence to the satisfaction of the Lender that no Material Adverse Change has occurred including, without limitation, as a result of changes to any applicable laws;

 

(xv) the certification of a senior officer of the Borrower that no material default or breach has occurred under any of the Material Contracts;

 

(xvi) evidence to the satisfaction of the Lender that all representations and warranties of the Borrower in this Agreement are true and correct as of the date of the Advance;

 

(xvii) current legal opinions addressed to the Lender from counsel to the Borrower and each Guarantor, relating to such matters as the Lender may reasonably require;

 

(xviii) an executed copy of the post-closing undertaking agreement (the “Post-Closing Undertaking”). For greater certainty, where any item contained in this Section 3(a) is to be delivered pursuant to the Post-Closing Undertaking, the timing for delivery of each such item shall be determined by the Post-Closing Undertaking;

 

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(xix) such other agreements, documents and instruments as the Lender may reasonably require.

 

(b) The conditions set forth in Section 3(a) are inserted for the sole benefit of the Lender and may be waived by the Lender, in whole or in part, (with or without terms or conditions) for any purpose at any time.

 

4. Conditions Precedent to Subsequent Advances

 

(a) The obligations of the Lender under this Agreement to make subsequent Advances are subject to and conditional upon the following conditions precedent being satisfied:

 

(i) the Borrower shall have given a Draw Request to the Lender in accordance with the notice requirements provided herein;

 

(ii) there being no actual or pending Material Adverse Change in the business of the Borrower;

 

(iii) the representations and warranties set forth herein and in the other Loan Documents shall be true and correct in all material respects as of the time of the Advance, except for any such representations and warranties which are specifically expressed to have been given only as at the date of this Loan Agreement;

 

(iv) there being no breach of any of the covenants set forth in Section 11 or Section 12 of this Loan Agreement, nor shall the making of the Advance result in the occurrence of a breach of the same;

 

(v) subject to the Post-Closing Undertaking, any covenants required by Section 3 of this Loan Agreement that have not been performed as of the date of a subsequent Advance shall be performed;

 

(vi) no Default or Event of Default shall have occurred and be continuing, nor shall the making of the Advance result in the occurrence of any Default or Event of Default; and

 

(vii) the then Outstanding Principal Obligations, together with the amount requested in the Draw Request, do not exceed the Facility Maximum Amount.

 

5. Interest

 

(a) Interest. The Borrower shall pay to the Lender interest on the Outstanding Principal Obligations calculated daily based on the actual number of days elapsed in a year of three hundred and sixty five (365) or three hundred and sixty six (366) days (as applicable) and payable monthly at a rate equal to eleven and a half percent (11.5%) per annum.

 

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(b) Interest Payments. Accrued interest shall be paid monthly, in arrears, on the last day of each calendar month. In the event that the last day of a calendar month is not a Banking Day, then the interest payment to be made on that date shall be made on the immediately preceding Banking Day.

 

(c) Interest on Overdue Amounts. If any sum due and payable by the Borrower hereunder is not paid when due in accordance with the applicable provisions of this Agreement (whether on its stipulated due date, on demand, on acceleration or otherwise) or upon notification to the Borrower by the Lender of the occurrence of an Event of Default, and provided such Event of Default and/or the interest payable has not been cured or paid by the Borrower or waived by the Lender, then the Borrower shall pay to the Lender interest on the outstanding balance of such overdue sum (including principal, interest, fees and other amounts) at the rate of 18% per annum (the “Default Rate”), subject to and only to the extent permitted by applicable law, calculated daily and compounded and payable monthly on the first Banking Day of each month from and after the due date of such sum or the date of the occurrence of the Event of Default to and including the date of payment in full.

 

(d) Interest Generally. Interest payable on any amount under this Agreement shall accrue and be payable both before and after maturity, demand, default and judgment at the applicable rate set out in Section 5(a) with interest on overdue interest at the rate set out in Section 5(c) until paid.

 

(e) Interest Act Compliance. For the purposes of the Interest Act (Canada) and applicable law, any rate of interest made payable under the terms of this Agreement at a rate or percentage (the “Contract Rate”) for any period that is less than a consecutive 12 month period, such as a 360 or 365 day basis, (the “Contract Rate Basis”), is equivalent to the yearly rate or percentage of interest determined by multiplying the Contract Rate by a fraction, the numerator of which is the number of days in the consecutive twelve (12) month period commencing on the date such equivalent rate or percentage is being determined and the denominator of which is the number of days in the Contract Rate Basis.

 

(f) Effective Rate. If the aggregate “interest” or “fees” payable hereunder is deemed by a court to be in the nature of an unlawful penalty, or if any payment, collection or demand pursuant to this agreement in respect of “interest” or “fees” is determined to be unlawful in any respect, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Borrower and the Lender and the amount of such payment or collection shall be refunded to the Borrower. For purposes hereof, the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term of the Loan on the basis of annual compounding of the lawfully permitted rate of interest and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Lender will be conclusive for the purposes of such determination. If it is not determinable which particular payment or collection is determined to be unlawful and contrary to the law, the Lender will, in consultation with the Borrower, determine the payments or collections to be refunded.

 

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(g) No Deemed Reinvestment. The principle of deemed reinvestment of interest shall not apply to any interest, discount or fee calculation under this Agreement.

 

(h) Rates are Nominal Rates. The rates of interest, discount and fees stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.

 

6. Fees

 

(a) Placement Fee. The Borrower shall pay, and shall be obligated to pay, contemporaneously with the execution of this Agreement, a placement fee to the Lender on or before the Closing Date in the amount of Two Hundred and Ten Thousand Canadian Dollars (CDN$210,000) representing three and a half percent (3.5%) of the Facility Maximum Amount. Notwithstanding the foregoing, the Borrower may elect to capitalize the placement fee in order to satisfy the same.

 

(b) Management Fee. Commencing on the Closing Date until the repayment in full of all amounts owing hereunder, the Borrower shall pay to the Lender a monthly administrative fee in the amount of Three Hundred Canadian Dollars (CDN$300.00), which administrative fee shall be payable on the last day of each month, beginning in the month in which the initial Advance occurs.

 

(c) Renewal Fee. If the Facility is renewed in accordance with Section 2(g), the Borrower shall pay, and shall be obligated to pay, a Renewal Fee to the Lender in the amount of one and a half percent (1.5%) of the then Outstanding Debt, which shall be paid on or before the renewal date.

 

7. Payments and Prepayments

 

(a) Maturity Date. Unless the Loan Obligations are required to be repaid at an earlier date pursuant to the terms hereof, and subject to the Loan being renewed in accordance with Section 2(g), the Borrower shall repay the Outstanding Debt together with all other amounts owing hereunder on the Initial Maturity Date. If the Loan is renewed, then the Borrower shall repay the Outstanding Debt together with all other amounts owing hereunder on the Renewal Maturity Date.

 

(b) Prepayments. The Borrower shall have the right to prepay all or a portion of the Outstanding Debt and any other amounts outstanding, at any time or from time to time, upon thirty (30) days’ prior written notice to the Lender, and subject to satisfaction of Section 7(c). Any pre-payment of Outstanding Principal Obligations will permanently reduce the Facility Maximum Amount of the Lender under the Loan and cannot be advanced again to the Borrower. Partial prepayments must be in amounts of not less than Two Hundred and Fifty Thousand Canadian Dollars (CDN$250,000.00).

 

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(c) Minimum Interest. In the event that the prepayment by the Borrower of all or a portion of the Outstanding Debt in accordance with Section 7(b) occurs, the Lender shall receive at the time of such prepayment, as consideration for the Lender making the Loan available to the Borrower, a fee in an amount such that the Lender shall have received a minimum interest return over the term equal to six (6) months of interest calculated on the amount being prepaid.

 

(d) Place of Payment. Each payment in respect of Outstanding Principal Obligations, interest, fees and other amounts owing by the Borrower under or otherwise in respect of any Loan Document shall be made for value at or before 1:00 p.m. (Toronto time) on the day such payment is due, provided that, if any such day is not a Banking Day, such payment shall be deemed for all purposes of this Agreement to be due on the Banking Day immediately preceding such day (and any such adjustment shall be taken into account for purposes of the computation of interest and fees payable under this Agreement). All payments shall be made by wire transfer to the Lender pursuant to the wire instructions set out in Schedule “C” or such other commercially reasonable means that the Lender may from time to time advise the Borrower in writing. Any payment received after 1:00 p.m. (Toronto time) on a Banking Day shall be credited for value on the next following Banking Day.

 

8. Security

 

(a) Security Documents. As general and continuing security to secure the due payment and performance of the Loan Obligations, the Borrower shall deliver on the Closing Date or in accordance with the timelines set forth in the Post-Closing Undertaking to the Lender, or cause the delivery to the Lender of, each of the agreements, documents and instruments (each in form and substance satisfactory to the Lender) listed below to be executed and/or delivered by the Borrower or a Guarantor:

 

(i) a general security agreement from the Borrower and each Guarantor in favour of the Lender, constituting a first-priority Lien (subject to Permitted Liens) on all of the present and future personal (movable) property of the Borrower and each Guarantor;

 

(ii) an unlimited guarantee agreement by each Guarantor in favour of the Lender to guarantee the Loan Obligations;

 

(iii) the Validity Guarantee;

 

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(iv) a pledge of shares, or a mortgage over shares, as applicable, granted by: (a)          (or such Person who may from time to time be the registered holder of shares beneficially owned by         ) to the Lender with respect to the shares beneficially held by          in the capital of the Borrower, it being understood that (A) certain of the pledged shares in the Borrower are subject to escrow conditions in accordance with applicable securities laws, and that such escrowed shares shall be delivered to the Lender promptly following their release from escrow, and (B) REDACT                                                                                                                                                                                                                                                                                                                                                                                                                                              ;

 

(v) a negative covenant agreement granted by the Borrower and each Guarantor that is not a Secured Guarantor;

 

(vi) such further security agreements, deeds or other instruments of conveyance, assignment, transfer, mortgage, pledge or charge as the Lender may reasonably request to effectively secure the undertaking, property and assets of the Borrower and each Guarantor in the manner contemplated by the security referred to in (i) through (iii) above.

 

(b) Insurance. The Borrower will cause the Lender (or its representative) to be named as a first loss payee and additional insured on all insurance policies relating to the assets covered by the Security (including credit insurance policies). Each policy must contain a “mortgage clause” and must also provide that the insurer will give to the Lender at least thirty (30) days’ written notice of intended cancellation or non-renewal. The Borrower must furnish to the Lender on the Closing Date evidence satisfactory that the required insurance coverage is in effect.

 

(c) Valid Lien. All Security shall constitute a valid first ranking Lien which Lien shall be a first priority Lien on the assets charged thereby subject only to the Permitted Liens.

 

(d) Survival of Representations, Warranties and Covenants. All agreements, representations, warranties and covenants made by the Borrower and any Guarantor in the Loan Documents or otherwise with respect thereto or any transactions contemplated thereby, shall be considered to have been relied upon by the Lender and shall survive the execution and delivery of the Loan Documents or any investigation made at any time by or on behalf of the Lender and any disposition or payment of the Loan until repayment in full of all Loan Obligations and termination of the Loan.

 

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(e) Further Assurances. The Borrower shall, forthwith and from time to time on request from the Lender, execute and deliver or cause to be executed and delivered, all such reasonable agreements, documents and instruments (including any change to any Loan Document) and do or cause to be done all such other matters and things which in the reasonable opinion of the Lender or the Lender’s counsel may be necessary to give the Lender (so far as may be possible under any applicable law) the Liens and the priority intended to be created by the Loan Documents or to facilitate realization under such Liens.

 

9. Legal Fees and Expenses

 

The Borrower shall on demand of the Lender pay all reasonable legal and due diligence expenses incurred by the Lender, including the reasonable fees, charges and disbursements of counsel (plus applicable HST) in connection with the preparation, negotiation, execution, and delivery of this Agreement and the other Loan Documents; provided that all legal and due diligence costs incurred by the Lender’s counsel for the period up to and including the Closing Date shall be capped at a maximum of                         , plus applicable HST and disbursements. Any of the foregoing expenses in excess of One Thousand Canadian Dollars (CDN$1,000), other than legal fees, shall be pre-approved in writing by the Borrower.

 

The Borrower further agrees to pay all reasonable fees, charges, expenses and disbursements incurred by the Lender and Lender’s counsel (plus applicable taxes) in connection with any amendment to or modification of the Loan Documents and any other deliverables as defined in the Post-Closing Undertaking, in each case subject to a maximum cap to be agreed upon by the Lender and Borrower at a later date prior to the incurring of such fee, charge, expense and disbursement, each acting reasonably.

 

The Borrower further agrees to pay: (i) all reasonable expenses incurred by the Lender, including the fees, charges and disbursements of counsel, in connection with the waiver, enforcement, protection and preservation of its rights and remedies in connection with this Agreement and the other Loan Documents, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Loan.

 

If the Borrower fails to make any required payments as set forth in this Section 9, the Lender can deduct the amounts owing by the Borrower from any future Advances or add the amounts owing to the Outstanding Debt.

 

10. Representations and Warranties

 

The Borrower represents and warrants as follows to the Lender and the Borrower acknowledges and confirms that the Lender is relying upon such representations and warranties:

 

(a) Corporate Status. The Borrower and each Guarantor is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation as set out in Schedule “E” and the Borrower and each Guarantor has all necessary corporate power and authority to conduct its business as presently conducted and to own or lease its properties and assets in each jurisdiction where such properties and assets are situated or such business is conducted.

 

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(b) Corporate Power and Authority. The Borrower and each Guarantor has full corporate power and authority to enter into each Loan Document to which it is a party, and to do all acts and things and execute and deliver all documents as are required hereunder or thereunder to be done, observed or performed by it in accordance with the terms thereof.

 

(c) Compliance. The Borrower and each Guarantor are in compliance in all material respects with all applicable laws, including for certainty all Cannabis Laws. The Borrower, the Borrower’s ownership of each Guarantor, and each Guarantor’s business have been and are being conducted in compliance with Cannabis Laws and the Regulator Licenses.

 

(d) Authorization and Enforceability. The Borrower and each Guarantor has taken all necessary corporate action to authorize the creation, execution, delivery and performance of the Loan Documents to which it is a party, and to observe and perform the provisions of each in accordance with its terms. This Agreement and each of the other Loan Documents to which it is a party have been delivered by the Borrower and each Guarantor and constitutes valid and legally binding obligations of the Borrower and each Guarantor which are enforceable against each of them in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other laws affecting the enforcement of creditors’ rights generally and to the availability of equitable remedies. The Chief Executive Officer and the Chief Financial Officer of the Borrower have read and understand the terms of the Loan Documents to which the Borrower and each Guarantor are to become a party to.

 

(e) Conflict with Constating Documents, Agreements and Applicable Law. The execution and delivery by the Borrower and each Guarantor and the performance by each of them of their respective obligations under, and compliance with the terms, conditions and provisions of, the Loan Documents to which they are a party will not: (i) conflict with or result in a breach of any of the terms or conditions of (a) its constating documents, by-laws or any shareholders’ agreement; (b) any applicable law, including Cannabis Laws; (c) any contractual restriction binding on or affecting it or its properties; or (d) any judgment, judgment or order, writ, injunction or decree of any court which is binding on it; or (ii) result in, require or permit: (a) the imposition of any Lien in, on or with respect to any of its assets or property (except in favour of the Lender); or (b) the acceleration of the maturity of any Debt.

 

(f) No Other Authorization or Consents Necessary. Other than such filings as are necessary to perfect the Security hereunder, no action (including, the giving of any consent, licence, right, approval, authorization, registration, order or permit) of, or filing with, any governmental or public body or authority is required by the Borrower or any Guarantor to authorize, or is otherwise required by the Borrower or any Guarantor in connection with, the execution, delivery and performance by the Borrower and each Guarantor of any Loan Documents to which it is a party or in order to render this Agreement or any of the other Loan Documents to which it is a party legal, valid, binding or enforceable against it, except those actions which have been obtained or filings which have been made.

 

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(g) No Third Party Consents. No consent or approval of any other party is required in connection with the execution, delivery and performance by the Borrower and each Guarantor of any Loan Document to which it is a party or in order to render each of the other Loan Documents legal, valid, binding or enforceable.

 

(h) No Default or Event of Default. No event has occurred and is continuing which constitutes a Default or an Event of Default nor will any such Default or Event of Default occur by reason of it entering into any Loan Document or performing its obligations thereunder or entitling itself to any benefits available to it thereunder.

 

(i) No Action for Winding-Up or Bankruptcy. Other than with respect to any action taken or contemplated by the Borrower with respect to winding up, dissolving, divesting its interest in, or taking such other action to terminate or cease business operations, whether in whole or in part, of Smoker’s Corner Ltd. or some or all of the business locations operated directly or indirectly by Smoker’s Corner Ltd., provided that any such action does not result in a Material Adverse Change, there has been no voluntary or involuntary action taken either by or against the Borrower or a Guarantor for its winding-up, dissolution, liquidation, bankruptcy, receivership, administration or similar or analogous events in respect of all or any material part of its assets or revenues.

 

(j) Authorized and Outstanding Capital. The authorized and outstanding capital of the Borrower and each Guarantor is as set out in Schedule “D” and each of the shares indicated in such schedule has been issued and is outstanding as fully paid and non-assessable and none of such shares is subject to any voting trust or shareholders’ agreement.

 

(k) No Subsidiaries. Save and except for the Corporate Subsidiaries provided for in Schedule “L”, neither the Borrower nor any Corporate Subsidiary has any other Subsidiary.

 

(l) Taxes. The Borrower and each Guarantor has duly and timely filed all federal, provincial or other tax returns which it is required by applicable law to file and all Taxes, assessments and other duties levied by the various governmental authorities with respect to the Borrower and each Guarantor have been paid when due, except to the extent that payment thereof is being contested diligently and in good faith thereby in accordance with the appropriate procedures, for which adequate reserves have been established in the books of the Borrower and each Guarantor, as the case may be. There is no material inquiry, action, suit, dispute, objection, appeal, investigation, audit, claim or other proceeding either in progress, pending, or to the best of the knowledge of the Borrower and Guarantors threatened by any governmental authority regarding any Taxes or tax returns, nor has the Borrower or any Guarantor requested, offered to enter into, or entered into, any agreement or arrangement, or executed any waiver providing for any extension of time within which it is required to pay, remit or collect any Taxes, file any tax returns or any governmental authority may assess, reassess or collect Taxes for which it is or may be liable.

 

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(m) Litigation. There are no actions, suits or proceedings instituted or pending nor, to the knowledge of any of the Borrower or Guarantors, after due inquiry and all reasonable investigation, threatened, against the Borrower or any Guarantor or its property before any court or arbitrator or any governmental body or instituted by any governmental body, commission, department or instrumentality, which, if decided against such party, could reasonably be expected to result in a Material Adverse Change and none of the Borrower or Guarantors is in default with respect to any law, regulation, order, writ, judgment, injunction or award of any competent government, commission, board, agency, court, arbitrator or instrumentality which could reasonably be expected to result in a Material Adverse Change.

 

(n) No Judgments. None of the Borrower or Guarantors is subject to any judgment, order, writ, injunction, decree or award, or to any restriction, rule or regulation (other than customary or ordinary course restrictions, rules and regulations consistent or similar with those imposed on other Persons engaged in similar businesses) which has not been stayed, or of which enforcement has not been suspended, which results in a Material Adverse Change on the Borrower or Guarantors, its property or its business.

 

(o) Licences, etc. and Compliance with Laws. All licences, franchises, certificates, consents, rights, approvals, authorizations, registrations, orders and permits required to enable the Borrower and each Guarantor to carry on its business as now conducted by it and to own, lease and operate its properties have been duly obtained and are currently subsisting. The Borrower and each Guarantor has complied in all material respects with all terms and provisions presently required to be complied with by it in all such material licences, franchises, certificates, consents, rights, approvals, authorizations, registrations, orders and permits and with all applicable laws and it is not in violation of any of the respective provisions thereof and in each case where such non-compliance or violation could reasonably be expected to result in a Material Adverse Change.

 

(p) Places of Business. Schedule “E” lists the head office and chief executive office of the Borrower and each Guarantor as well as each location in which any of them currently maintains assets or has maintained assets within the last 36 months.

 

(q) Ownership of Properties. The Borrower and each Guarantor has good and valid title to all of its assets including the tangible and intangible personal (movable) property reflected as assets in their books and records. The Borrower and each Guarantor owns, leases or has the lawful right to use all of the assets necessary for the conduct of its business. Except as disclosed in Schedule “M”, none of the Borrower or any Guarantor owns any real or immovable property or any assets which constitute “fixture” being personal property which has been so annexed to the realty that it is regarded as a part of the real property.

 

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(r) Intellectual Property. As of the date hereof, all patents, trademarks, trade names, service marks, copyrights, industrial designs and other similar rights owned by any of the Borrower or the Guarantors, are described in Schedule “F”. As of the date hereof, except as set forth in Schedule “F”, no claim has been asserted and is pending by any Person with respect to the use by any of the Borrower or the Guarantors of any intellectual property or challenging or questioning the validity, enforceability or effectiveness of any intellectual property described in Schedule “F”. Except as disclosed in Schedule “F”: (i) each of the Borrower and Guarantors has the right to use the intellectual property which such Person owns, (ii) all applications and registrations for such intellectual property are current, and (iii) to the knowledge of the Borrower, no other Person has asserted that the conduct of the Business infringes the intellectual property rights of any other Person.

 

(s) Material Contracts. A true and complete copy of each Material Contract existing at the date hereof has been delivered to the Lender and each Material Contract is in full force and effect. All Material Contracts are in force and effect, unamended, and the Borrower and the Guarantors and, to the knowledge of the Borrower, each counterparty thereto, are in compliance in all material respects with all of their respective obligations under such Material Contract and no breach or default has occurred. Each Material Contract is a binding agreement of each other Person who is a party to the Material Contract.

 

(t) Security. No further action is necessary on the part of Lender, the Borrower or any Guarantor in order to establish, preserve, protect and perfect the Security over all of the assets, property and undertaking of the Borrower and each Guarantor granting Security.

 

(u) Permitted Liens. Except for Permitted Liens, there are no Liens upon or with respect to any of the assets or property that are subject to the Security.

 

(v) Material Adverse Change. No Material Adverse Change has occurred.

 

(w) Securities Accounts. None of the Borrower or any Guarantor has established nor maintains any securities account or has any securities entitlement (as those terms are defined in the Securities Transfer Act, 2006 (Ontario) (“STA”) and has not granted to any Person a security interest in any of their collateral which has been perfected by control (as such term is defined in the STA).

 

(x) Insurance. The Borrower and each Guarantor maintains in full force and effect insurance in accordance with good commercial practice for all of their property and assets in accordance with good commercial practice for the business in which they are engaged.

 

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(y) Existing Debt. Except as set forth in Schedule “H”, there is no existing Debt outstanding for the Borrower or any Corporate Subsidiary.

 

(z) Full Disclosure. To the best of Borrower’s knowledge and belief, after due inquiry, no written information or document furnished by or on behalf of Borrower and each Guarantor to the Lender in connection with the negotiation or confirmation of the transactions as contemplated hereby (including, without limitation, the financial statements) contain, as of the time such information or documents were furnished, any untrue statement of a material fact or omitted as of such time, a material fact necessary to make the statements contained herein or therein not misleading and all expressions of expectation, intention, belief and opinion contained therein were honestly made on reasonable grounds after due and careful inquiry. There is no fact of which the Borrower is aware as of the date hereof, after due and diligent inquiry, that has not disclosed to the Lender in writing which materially adversely affects, or so far as it can now reasonably foresee, will materially adversely affect its assets, liabilities, affairs, business, prospects, operations or conditions, financial or otherwise, or its ability to perform its obligations under the Loan Documents.

 

11. Affirmative Covenants

 

Until payment in full of all Loan Obligations owing by the Borrower to the Lender, the Borrower covenants and agrees with the Lender, unless the Lender otherwise consents in writing, that the Borrower will and will cause each Corporate Subsidiary to:

 

(a) duly and punctually pay each sum payable by it under each Loan Document to which it is a party in the manner specified in such Loan Document;

 

(b) use the entire proceeds of the Loan only for the purposes set out in Section 2(e);

 

(c) fully and effectually maintain and keep maintained the Security granted to the Lender under the Security Documents as a valid and effective first priority Lien (subject only to Permitted Liens) at all times;

 

(d) ensure that all representations and warranties made in this Agreement are true and correct at all times, except for representations made as of a date expressly stated therein.

 

(e) insure and keep insured all property and assets of the Borrower and Guarantors in accordance with good commercial practice for the business in which the Borrower are engaged;

 

(f) maintain its corporate existence in good standing and do or cause to be done all things necessary to keep in full force and effect all properties, rights, franchisees, licences and qualifications which are material for the Borrower and each Guarantor to carry on business in any jurisdiction in which it carries on business and to maintain all of its respective properties and assets consistent with industry standards;

 

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(g) continue to conduct and operate its business in a proper, efficient and business-like manner;

 

(h) comply, in all material respects with all applicable laws, including Environmental Laws, Cannabis Laws, and Regulator Licenses;

 

(i) pay or cause to be paid, when due, all Taxes, property taxes, business taxes, social security premiums, assessments and governmental charges or levies imposed upon it or upon its income, sales, capital or profit or any, material part of any property belonging to it;

 

(j) unless otherwise agreed to by the Lender, pay or cause to be paid to the Lender, all net cash proceeds from the disposition by the Borrower or any Corporate Subsidiary in respect of an Asset Sale;

 

(k) keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and its assets and business in accordance with generally accepted accounting principles;