BellRock Brands Inc. (“BellRock” or the “Company”) (CSE: BRCK.U), an industry-leading cannabis consumer packaged goods (“CPG”) company, announced today that it has arranged for financing (the “Loan”) of up to US$3,600,000.00 from Rose Capital (the “Investor”).
Under the terms of the Loan, Rose Capital is providing financing in the amount of up to US$3,600,000 at an annual interest rate of 15%. The Loan is secured against the Company’s assets. The Company has the right to prepay the Loan without penalty or premium provided that in the event of any such prepayment the Investor receives a minimum yield equal to 4 months’ interest on the principal amount of the Loan. BellRock intends to use the net proceeds from the Loan to refinance an existing note between one of its subsidiaries and the Investor and infuse new working capital into BellRock.
Certain directors, officers or other insiders of the Company (collectively, “Related Parties”) invested in the Loan. As a result of the participation of such Related Parties in the Loan, the Loan constitutes a related party transaction for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). Notwithstanding such participation, however, the Loan is exempt from the formal valuation and minority approval requirements of MI 61-101 by virtue of Sections 5.5(b) and 5.7(1)(a) of MI 61-101 on the basis that (i) no securities of the Company are listed or quoted on the markets specified in Section 5.5(b) of MI 61-101, and (ii) at the time the terms of the Loan were agreed upon, neither the fair market value of, nor the fair market value of the consideration for, the portion of the Loan invested by the Related Parties exceeded 25% of the Company’s market capitalization (as determined in accordance with MI 61-101). In addition, participation in the Loan by the Related Parties will not have an effect on the percentage of equity securities of the Company beneficially owned or controlled by any such Related Parties.
The terms of the Loan were negotiated with arm’s length investors rather than with the Related Parties. As a result, the board of directors of the Company determined that it was not necessary to establish a special committee in connection with the Loan or the participation of the Related Parties in the Loan as each such Related Party disclosed its participation in the Loan. No materially contrary view or abstention was expressed or made by any director of the Company in relation thereto. Further details regarding the Loan will be included in a material change report that will be filed by the Company in connection with the completion of the Loan. The Corporation did not file a material change report more than 21 days before the expected closing date of the Loan as the details of the Loan and the total amount to be invested by the applicable Related Parties were not settled until shortly prior to the completion of the Loan, and the Company wished to complete the Loan on an expedited basis for sound business reasons.
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. The securities issued referenced herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws, and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws, or an exemption from such registration is available.
