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Hydropothecary Closes $25.1 Million Bought Deal Private Placement

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Smokemonster   Wednesday, 07/19/17 07:55:16 AM
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Hydropothecary Closes $25.1 Million Bought Deal Private Placement
of Convertible Debenture Units

Toronto, ON – July 18, 2017 – The Hydropothecary Corporation (“THCX” or the “Company”) (TSX VENTURE:THCX) is pleased to announce the closing of its previously announced bought deal private placement of convertible debenture units for aggregate gross proceeds of $25.1 million (the “Offering”), which includes the partial exercise of the over-allotment option by the underwriters.

The Company intends to use the net proceeds of the Offering for expansion of its production facility in Gatineau, Québec and for working capital and general corporate purposes.

“With this new financing, we will deliver a licensed and operational 300,000 sq. ft. platform for both medical and adult use marijuana products in 2018. I would like to take this opportunity to thank Canaccord Genuity Corp. for their assistance with this financing,” said Sébastien St-Louis, Co-founder and CEO. “Raising an additional $25 million has allowed us to increase our cash on hand to over $40 million, and will allow us to significantly broaden the scope of our previously announced 250,000 sq. ft. expansion to go beyond medical products and include manufacturing and distribution systems dedicated to the adult-use market expected to open in July 2018.”

“Hydropothecary’s adult use distribution platform, scale, low cost producer status and commitment to quality and innovative products including our Decarb cannacaps will position us to aggressively compete in the adult use market in 2018 and to increase our market share across Canada.”

Pursuant to the Offering, the Company issued a total of $25.1 million of 8.0% senior unsecured convertible debentures (the “Debentures”) and 7,856,300 common share purchase warrants (the “Warrants”). The Debentures are convertible at the option of the holder into common shares of the Company at any time prior to the close of business on June 30, 2019 at a conversion price of $1.60 per share (the “Conversion Price”). Beginning on November 19, 2017, the Company may force the conversion of all of the then outstanding Debentures at the Conversion Price on 30 days’ notice should the daily volume weighted average trading price of the common shares of the Company be greater than $2.25 for any 15 consecutive trading days. Each Warrant is exercisable to acquire one common share of the Company at an exercise price of $2.00 per share until July 18, 2019, subject to adjustment in certain events, and subject to the Company’s right to accelerate expiry of the Warrants if, beginning on November 19, 2017, the closing trading price of the common shares of the Company equals or exceeds $3.00 for any 15 consecutive trading days (the “Acceleration Right”).

The Offering was led by Canaccord Genuity Corp. with a syndicate of underwriters that included Cormark Securities Inc. and Beacon Securities Limited. In consideration for their services, the underwriters received a cash commission of $1,205,000, being 5% of the gross proceeds from the Offering with a reduced cash commission of 2.5% in respect of subscriptions from subscribers on the President’s List of the Company, and 753,125 non-transferable compensation warrants, being 5% of the gross proceeds from the Offering divided by the Conversion Price with a reduced amount of 2.5% in respect of subscriptions from subscribers on the President’s List. Each compensation warrant entitles the holder to purchase one common share at an exercise price of $2.00 per share until July 18, 2019, subject to adjustment in certain events and to the Acceleration Right.

In connection with subscriptions from subscribers on the President’s List of the Company, the Company paid a finder’s fee of $50,000 to CCFL Capital in respect of certain subscriptions from subscribers on the President’s List of the Company and issued CCFL Capital 31,250 non-transferable finder’s warrants, being 2.5% of the gross proceeds from the Offering in respect of certain subscriptions from subscribers on the President’s List divided by the Conversion Price. Each finder’s warrant entitles the holder to purchase one common share at an exercise price of $2.00 per share until July 18, 2019, subject to adjustment in certain events and to the Acceleration Right.

A leading industry institutional investor was a lead subscriber under the Offering, purchasing $15 million of the convertible debenture units.

All securities issued in connection with the Offering, which includes certain insider participation, are subject to a four month hold period expiring November 19, 2017.

An insider of the Company purchased and was issued, indirectly, $1.0 million of Debentures and 313,000 Warrants under the Offering, which constituted a “related party transaction” within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The issuance to the insider is exempt from the formal valuation and the minority shareholder approval requirements of MI 61-101, as the fair market value of the Debentures and Warrants issued to and the consideration paid by such person did not exceed 25% of the Company’s market capitalization.

For further details on the Offering, please refer to the Company’s new releases dated June 27, 2017.


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