/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
VANCOUVER, BC, Dec. 2, 2021 /CNW/ - Freshlocal Solutions Inc.
(TSX: LOCL) ("Freshlocal" or the "Company") is pleased to announce
that it has entered into agreements that further strengthen its
access to the financial resources necessary to grow its business.
The Company today announces the closing of the first tranche
of its previously announced brokered private placement of up to
13,915 convertible debenture units (the "Offering"). In the closing
of the first tranche of the Offering, Freshlocal issued 12,415
convertible debenture units (the "Convertible Debenture Units") at
a price of $1,000 per Convertible
Debenture Unit for aggregate gross proceeds to Freshlocal of
$12,415,000. Desjardins Capital
Markets, acting as lead agent, and Cormark Securities Inc., acting
as co-agent, exercised in full their option to sell up to 1,815
additional Convertible Debenture Units under the Offering.
The Company expects to close a second tranche of the Offering
during the week of December 6, 2021,
at which it expects to issue an additional 1,500 Convertible
Debenture Units for additional gross proceeds to Freshlocal of
$1,500,000, which will increase the
total gross proceeds received by Freshlocal under the Offering to
$13,915,000.
In addition, the Company has successfully executed a forbearance
agreement with Silicon Valley Bank ("SVB") in relation to its
existing debt facility with SVB. Fort Capital Partners acted as an
advisor to the Company in relation to the SVB agreement.
Adding to its corporate governance capabilities, the Company is
also pleased to announce the appointment of Neil McDonnell to its Board of Directors. Mr.
McDonnell brings deep technology leadership along with valuable
capital markets and corporate governance experience to Freshlocal
during a critical point in its corporate development.
The Offering
Each Convertible Debenture Unit is comprised of (i) one 8%
subordinated unsecured convertible debenture of the Company in a
principal amount of $1,000
(collectively, the "Convertible Debentures"), which is convertible
into common shares of the Company (each a "Common Share") at a
conversion price of $1.90 per Common
Share, subject to adjustment in certain events (the "Conversion
Price") and maturing on December 31,
2024 (the "Maturity Date"); and (ii) 263 common share
purchase warrants of the Company (the "Warrants"). Each Warrant
entitles the holder thereof to purchase one Common Share at a price
of $1.25 per share until the Maturity
Date.
The Convertible Debentures bears interest at a rate of 8.0% per
annum from the date of issue, payable semi-annually in arrears in
cash on June 30 and December 31 of each year, with the first interest
payment payable on June 30, 2022. The
Convertible Debentures are convertible at the holder's option into
Common Shares at any time prior to the close of business on the
earlier of the Maturity Date and the business day immediately
preceding the date fixed for redemption of the Convertible
Debentures at the Conversion Price, being a ratio of 526.32 Common
Shares per $1,000 principal amount of
Convertible Debentures. Holders converting their Convertible
Debentures will receive accrued and unpaid interest thereon to the
date of conversion.
The Convertible Debentures may be prepaid in cash for an amount
equal to 105% of the principal amount plus accrued interest at any
time on a date that is 24 months following the completion of the
Offering on not greater than 60 days' and not less than 30 days'
notice, provided that the Company elects to prepay the then
outstanding aggregate amount of Convertible Debentures
outstanding.
The Company intends to use the net proceeds of the Offering for
working capital, repayment of debt and/or general corporate
purposes. The Convertible Debentures will be unsecured obligations
of the Company and rank pari passu in right of payment of
principal and interest with all other previously existing unsecured
subordinated indebtedness of the Company.
This news release does not constitute an offer to sell or a
solicitation of an offer to sell any of securities in the United States. The securities 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" (as
such terms are defined in Regulation S under the U.S. Securities
Act) unless registered under the U.S. Securities Act and applicable
state securities laws or an exemption from such registration is
available.
Forbearance Agreement with Silicon Valley Bank
In relation to the Company's debt facility with SVB (the "SVB
Facility") that was originally announced on May 19, 2021, and the Company's breach of certain
financial covenants of the facility as disclosed on August 17, 2021, a forbearance agreement between
the Company and SVB was successfully entered into on December 2, 2021 (the "Forbearance Agreement").
The Forbearance Agreement applies to existing covenant defaults
through January 15, 2022. The
following milestones must be met during the forbearance period:
- a capital raise of at least $10,000,000. This condition was met upon the
closing of the Offering referenced above;
- the Company obtaining a net cash advance from a new credit
facility of at least $3,500,000 on or
before January 15, 2022, to which SVB
has already provided its consent;
- periodic and continuous reductions in the amount of the SVB
Facility available to the Company commencing on December 3, 2021;
- an amendment to the maturity date of the SVB Facility from
March 12, 2023 to June 1, 2022; and
- an amendment to the rate of interest payable on amounts
borrowed under the SVB Facility such that the interest rate will be
the greater of (i) a floating per annum rate equal to 3.80% above
the Canadian Prime Rate (an increase from 3.05%) and (ii) 5.25%,
payable monthly. After the forbearance period, the interest rate
will revert back to its original terms under the SVB Facility.
The Company also paid SVB a forbearance fee.
"Our team has taken important steps to secure the liquidity our
business needs to grow and thrive, and I am really pleased these
efforts led to a successful debenture financing and paved the way
to an agreement on forbearance terms with SVB," expressed
Peter van Stolk, Chief Executive
Officer of Freshlocal.
New Strengths to Freshlocal's Board of
Directors
Freshlocal also welcomes Neil
McDonnell as a new member of its Board of Directors, to hold
office until the next annual meeting of the shareholders of the
Company. Mr. McDonnell will also take on additional
responsibilities as Board Chair and will be a member of the
Company's Audit and Compensation Committees. Mr. McDonnell fills
the seat of Todd Cherniak, who has
now resigned from the Board. The Company would like to thank Mr.
Cherniak for his contributions to Freshlocal as a long-standing
director.
Mr. McDonnell is a recognized leader in the Canadian technology
space. He is currently Chair of Redline Communications Group
Inc. (TSX: RDL) and Quorum Information Systems (TSXV: QSX), and
Director of Shiftboard Inc. and Wesgar Industries Ltd.. He has also
served in numerous board and senior executive roles including past
Chair of Photon Control Inc., Nanotech Security Corp., One45
Software Inc., BasicGov Systems Inc., SchedulePro Software,
Agreement Express Inc., and QHR Technologies Inc., Executive Chair
of ResponseTek Networks Corp., Director of Aprio Inc., Espial Group
Inc., and Symbility Solutions Inc., CEO of Wurldtech Security
Technologies Inc., Audit Chair and Director of TitanStar Properties
Inc., Director of British Columbia Lottery Corporation and Board
Advisor to ICBC. Mr. McDonnell holds a Master of Business
Administration from the University of British
Columbia and a Bachelor of Commerce from the University of Toronto.
"We are delighted to welcome Neil as a new Board member and the
Chair of the Freshlocal Board. His diverse technology experience
and track record in the Canadian capital markets will be invaluable
as we pursue the opportunities available to us in the online
grocery business, both here in Canada and internationally," expressed
Peter van Stolk, Freshlocal's CEO.
"Neil's extensive governance credentials are also well-aligned with
our continued efforts to strengthen Freshlocal's governance
practices. I would also like to thank Todd for his valued guidance
during his time on our Board."
"I am excited to begin my work with my fellow Board members and
the Company's leadership team during an important time in
Freshlocal's development as a technology solutions provider in the
eGrocery market," said McDonnell. "The Company has an opportunity
to greatly improve the cost equation for global eGrocery services,
while also reducing the grocery industry's environmental footprint
through the reduction of food waste. There is a significant need
for the solutions that Freshlocal can bring to its customers."
Mr. McDonnell was appointed as a director of the Company as a
nominee of Pender Growth Fund Inc. and PenderFund Capital
Management Ltd. (collectively, "Pender"), pursuant to an agreement
entered into with the Company in the context of the Offering.
Pursuant to such agreement, until the Convertible Debentures
purchased by Pender in the Offering are repaid or converted in
full, and thereafter so long as Pender continues to beneficially
own or control, directly or indirectly, not less than one million
Common Shares, the Company agreed to ensure that its Board of
Directors is comprised of no more than five directors and that
Pender has the right to designate one person to be nominated for
election at each annual or special meeting of shareholders of the
Company at which directors are to be elected to the Board of
Directors, such person to serve as Chair of the Company's Board of
Directors.
To learn more about Freshlocal's Board of Directors, visit our
website at www.freshlocalsolutions.com.
Related Party Transactions
Monique Wilberg and Terry Vanderkruyk, two directors of the Company,
and WF Agro Fund LP, an insider holding more than 10% of the issued
and outstanding Common Shares of the Company, the president of
which is Eric Phaneuf, also a
director of the Company, acquired 1,390 Convertible Debenture Units
for an aggregate amount of $1,390,000
under the Offering. Such participation may be considered to be
"related party transactions" within the meaning of Multilateral
Instrument 61-101 Protection of Minority Security Holders in
Special Transactions ("MI 61-101"). The Company is relying on
the exemptions from the formal valuation and minority shareholder
approval requirements of MI 61-101 in respect of related party
participation in the Offering as neither the fair market value (as
determined under MI 61-101) of the subject matter of, nor the fair
market value of the consideration received by the Company from the
Offering, insofar as it involves interested parties, exceeds 25% of
the Company's market capitalization. The Company did not file a
material change report 21 days prior to the closing date of the
first tranche of the Offering as details of the respective
participation of such insiders in the Offering was unknown at such
time.
The transactions contemplated by the Offering and the agreements
relating thereto were submitted to and approved by the directors of
the Company other than Monique
Wilberg, Eric Phaneuf and
Terry Vanderkruyk (the
"Non-Independent Directors"). The Non-Independent Directors did not
vote on the resolution to approve the Offering and the agreements
relating thereto. The remaining directors determined that the
Offering was in the best interest of the Company and unanimously
approved the Offering and the agreements relating thereto.
About Freshlocal Solutions Inc.
Freshlocal Solutions Inc. is a Vancouver-based company that is building a
leadership position in the provision of end-to-end grocery
e-commerce solutions. The Company operates two primary businesses,
FoodX and eGrocery, both of which support its corporate mission to
leverage innovation and technology to create a sustainable and
profitable food system for all. Food-X Technologies Inc. ("FoodX")
is Freshlocal's scalable end-to-end SaaS-based eGrocery Management
Solution (eGMS) which is designed to meet the needs of large and
small grocery retailers while providing profitable unit economics.
The FoodX eGMS is the culmination of over 20 years of experience in
online grocery and the company's proven track record of delivering
efficiently, sustainably and profitably. The Company's consumer
eGrocery business has expanded into one of Canada's largest online grocery companies,
with a focus on delivering fresh, local, organic produce and
groceries, along with exceptional customer experiences. Freshlocal
serves the main urban markets in Alberta and British
Columbia through its brick-and-mortar store locations
operating under the Blush Lane and Be Fresh banners and through
SPUD.ca, the Company's award-winning online marketplace eGrocery
platform. Freshlocal's common shares are listed on the Toronto
Stock Exchange under the symbol "LOCL". Please visit
www.freshlocalsolutions.com.
Notice on Forward Looking Information
Certain statements contained in this press release may be deemed
"forward–looking statements" or "forward–looking information"
within the meaning of applicable Canadian and U.S. securities laws.
Words such as "may", "will", "would", "could", "expect", "believe",
"plan", "anticipate", "intend", "estimate", "continue", or the
negative or comparable terminology, as well as terms usually used
in the future and the conditional, are intended to identify
forward– looking statements. Forward-looking statements should
not be read as guarantees of future performance or results, and
will not necessarily be accurate indications of whether, or the
times at or by which, such future performance will be achieved. No
assurance can be given that any events anticipated by the
forward–looking statements or information will transpire or occur,
including, but not limited to the use of proceeds of the Offering,
the closing of, and timing for closing, the second tranche of the
Offering, the achievement of certain milestones and the timing for
achieving them as required in the Forbearance Agreement, the
execution on growth opportunities, the strengthening of our
liquidity position, improvement in the cost of eGrocery services,
and decrease in food waste in the grocery industry. Forward-looking
information is based on information available at the time and/or
management's good-faith belief with respect to future events and
are subject to known or unknown risks, uncertainties, assumptions
and other unpredictable factors, many of which are beyond
Freshlocal's control. These risks, uncertainties and assumptions
include, but are not limited to, those risks described under "Risk
Factors" in Freshlocal's Filing Statement dated April 9, 2021, a copy of which is available on
SEDAR at www.sedar.com and could cause actual events or results to
differ materially from those projected in any forward-looking
statements. Freshlocal does not intend, nor does Freshlocal
undertake any obligation, to update or revise any forward-looking
information contained in this news release to reflect subsequent
information, events or circumstances or otherwise, except if
required by applicable laws.
SOURCE Freshlocal Solutions Inc.
