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

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

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

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

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

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

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

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

Pursuant to the Rights Offering, each holder ("Eligible Holder") of Common Shares as of the Record Date that is a resident in any province of territory of Canada (other than Québec) (the "Eligible Jurisdictions") will receive one transferable right (each, a "Right") for every Common Share held.  Every four Rights will entitle the holder to purchase one Unit at a price of $0.0550 until 4:00 p.m. (Calgary time) on the expiry date of December 20, 2019 (the "Expiry Date"), after which all outstanding Rights will terminate. Each Unit will be comprised of one Common Share and one Warrant. The Warrants issued pursuant to the Rights Offering will be on the same terms as those issued pursuant to the Private Placement, including early expiry upon the VWAP equaling or exceeding $0.125. Subscribers of Units under the Private Placement will have a right to participate in the Rights Offering with respect to any Common Shares acquired pursuant to the Private Placement.  There will be no additional subscription privilege and no standby commitment in respect of the Rights Offering. The completion of the Rights Offering will not be subject to Sugarbud receiving any minimum amount of subscriptions from Eligible Holders.

READ: Sugarbud Closes $925,000 Private Placement

READ: Sugarbud Announces Rights Offering

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

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

Significant Market Opportunity Remains

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

About Sugarbud

Sugarbud is a federally licensed Alberta-based publicly traded cannabis company focused on the cultivation and production of high-quality premium cannabis, and product leadership through the development, production and distribution of value-added cannabis products in Canada.

http://www.sugarbud.ca/

John Kondrosky Chief Executive Officer Sugarbud Craft Growers Corp. Phone: [phone] E-mail: [e-mail]

Investor Relations Contact Gary Perkins, President Tekkfund Capital Corp. Tel: [phone] E-mail: [e-mail]

Website: http://www.sugarbud.ca/

Address: Suite 620, 634 - 6th Avenue S.W., Calgary, Alberta T2P 0S4

Forward Looking and Cautionary Statements

This news release contains forward-looking statements. More particularly, and without limitation, this news release contains statements concerning: Sugarbud’s assessment of future plans, operations and cannabis cultivation; product quality; the supply agreements and partnerships; the timing of obtaining necessary approvals required to conduct the contemplated business of the supply agreements; future value-added cannabis product offerings of the Company, including pre-rolls and concentrates; legalization of broader spectrum cannabis products; and participation in the market for such products. When used in this document, the words “will,” “anticipate,” “believe,” “estimate,” “expect,” “intent,” “may,” “project,” “should,” and similar expressions are intended to be among the statements that identify forward-looking statements. The forward-looking statements are founded on the basis of expectations and assumptions made by Sugarbud. Forward-looking statements are subject to a wide range of risks and uncertainties, and although Sugarbud believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, but not limited to: currently contemplated expansion and development plans may cease or otherwise change; production of cannabis may be lower than expected, Sugarbud may not obtain the required approvals from Health Canada, including approving an amendment to its dried cannabis sales licence to permit interprovincial sales, demand for Sugarbud's products may be lower than anticipated; results of production and sale activities; results of scientific research; changes in prices and costs of inputs; demand for labour; demand for products; failure of counter-parties to perform contractual obligations; failure to maintain consumer brand recognition and loyalty of customers; substantial and increasing regulation and uncertainty related to the regulation and taxation of vaporizer products; reliance on relationships with wholesalers and retailers for distribution of products and failure to maintain strategic business relationships; intense competition, including from illicit sources; uncertainty and continued evolution of markets; product liability litigation; the scientific community's lack of information regarding the long-term health effects of electronic cigarettes, vaporizers and e-liquids; reliance on information technology; infringement on intellectual property; failure to benefit from partnerships; sensitivity of end-customers to increased sales taxes and economic conditions; failure to comply with certain regulations; departure of key management personnel or inability to attract and retain talent; risks associated with the e-cigarette, vaporizer and e-liquid industry in general; actions and initiatives of federal and provincial governments and changes to government actions, initiatives and policies and the execution and impact thereof; and the size of the global e-cigarette and vaping market; the ability to implement corporate strategies; the state of domestic capital markets; the ability to obtain financing; changes in general market conditions; industry conditions and events; the size of the medical marijuana market and the recreational marijuana market; government regulations, including future legislative and regulatory developments involving medical and recreational marijuana; construction delays; risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks which can have a significant impact on the size and quality of the harvest of cannabis crops; competition from other industry participants; and other factors more fully described from time to time in the reports and filings made by Sugarbud with securities regulatory authorities. Please refer to Sugarbud’s most recent annual information form and management’s discussion and analysis for additional risk factors relating to Sugarbud, which can be accessed under Sugarbud’s profile on www.sedar.com. 

This news release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about SugarBud’s prospective future financings, prospective operations, future cannabis production capacity, return on investment, capital expansion plan, balance sheet, revenue, cash flow, including the intention to have sustainable positive cash flow by late Q3 2020, expenses and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraph. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about SugarBud’s future business operations. SugarBud disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.

Except as required by applicable laws, Sugarbud does not undertake any obligation to publicly update or revise any forward-looking statements.

Neither the TSXV nor its regulation services provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.