Sugarbud Announces Financial & Operating Results for Third Quarter 2019 and Intention to be Cash Flow Positive in Third Quarter of 2020

CALGARY, Alberta, Nov. 28, 2019 (GLOBE NEWSWIRE) — Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT, SUGR.RT) (“Sugarbud” or the “Company”) is pleased to announce the filing of its unaudited condensed consolidated interim financial statements (“Financial Statements”) for the three and nine months ended September 30, 2019 (“Q3 2019”) and related management’s discussion and analysis (“MD&A”), which are available on SEDAR at www.sedar.com and on Sugarbud’s website at www.sugarbud.ca.

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

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

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

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

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

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

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