— Plus Products Inc. (CSE: PLUS) (OTCQX: PLPRF) (the “Company” or “PLUS”), a cannabis and hemp branded products company in the U.S., today announced the completion of a non-dilutive share exchange transaction (the “Transaction”), under which an existing shareholder of the Company exchanged 75,500 Common Shares for 15,100,000 newly created Class B Common Shares (the “Class B Subordinate Voting Shares”), on the basis of 200 Class B Subordinate Voting Shares for each Common Share. The aggregate value of the exchanged Common Shares (CAD$0.7405 per share, representing an aggregate value of CAD$55,907.75) was equivalent to the aggregate value of the newly issued Class B Subordinate Voting Shares (CAD$0.0037025 per share, representing an aggregate value of CAD$55,907.75). In aggregate, the 15,100,000 Class B Subordinate Voting Shares represent the same economic and voting rights as the 75,500 Common Shares for which they were exchanged. The Transaction will not adversely impact the economic or voting rights of current holders of Common Shares.
Creation of Class B Subordinate Voting Shares
The shareholders of the Company authorized the creation of Class B Subordinate Voting Shares by special resolution of the shareholders at the 2020 Annual General & Special Meeting held on June 15, 2020. With the creation of the Class B Subordinate Voting Shares, the Company’s authorized capital consists of the following:
Common Shares: Common Shares are sometimes referred to as the “Subordinated Voting Shares”, and are publicly traded on the CSE and OTCQX. Each Common Share represents one vote per share at meetings of the shareholders of the Company and distributions and dividends of the Company are made pro rata based on the number of issued and outstanding Common Shares, on an as converted basis.
Class A Common Shares: Class A Common Shares are sometimes referred to as the “Proportionate Voting Shares”. Subject to certain restrictions, each Proportionate Voting Share is convertible into 100 Common Shares, and holders are entitled to vote and participate in economic rights, on an as converted basis, with Common Shares.
Class B Common Shares: Class B Common Shares are sometimes referred to as the “Class B Subordinate Voting Shares”. Subject to certain restrictions, each Class B Subordinate Voting Share is convertible into 1/200 of one Common Share, and holders are entitled to vote and participate in economic rights, on an as converted basis, with Common Shares.
Copies of the Company’s Amended Articles and Notice of Articles are available under the Company’s profile on SEDAR (www.sedar.com).
Description of Transaction
The Transaction was completed on a private placement basis pursuant to a share exchange agreement between the Company and Matt Schmidt, a Non-Executive Director of the Company. Mr. Schmidt owned 75,600 Common Shares, representing 0.17% of the Company’s 43,288,460 issued and outstanding Common Shares, on an as-converted basis. Under the share exchange agreement, Mr. Schmidt exchanged 75,500 Common Shares for 15,100,000 Class B Subordinate Voting Shares, which are convertible into 75,500 Common Shares, subject to certain conversion limitations set forth in the Company’s articles. Mr. Schmidt’s voting and economic interest in the Company following the Transaction remains at 0.17% of the Company’s issued and outstanding Common Shares, on an as-converted basis. The Transaction is exempt from the issuer bid requirements under applicable securities legislation due to the fact that Mr. Schmidt is a director of the Company, the value of the consideration for the Class B Subordinate Voting Shares acquired is not greater than the market price determined in accordance with applicable legislation and the aggregate number of Common Shares acquired by the Company does not exceed 5% of the outstanding Common Shares.
The Transaction was structured, in part, to preserve the Company’s status as a “foreign private issuer” under Rule 3b-4 of the Securities Exchange Act of 1934, as amended.
Since a director of the Company is exchanging Common Shares for Class B Subordinate Voting Shares, the Transaction is a “related party transaction” within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The participation of the director is exempt from the formal valuation and minority shareholder approval requirements provided under MI 61-101 in accordance with sections 5.5(a) and 5.7(1)(a) of MI 61-101. The Company is relying on an exemption from the formal valuation requirements of MI 61-101 available because the fair market value of the participation in the Transaction by the director does not exceed 25% of the Company’s market capitalization, as determined in accordance with MI 61-101. The Company did not file a material change report related to this Transaction more than 21 days before the expected closing of the Transaction as required by MI 61-101 since the details of the participation by the director were not settled until shortly prior to the closing of the Transaction and the Company wished to close on an expedited basis for sound business reasons.
Early Warning Report
In connection with the Transaction, Mr. Schmidt has filed an Early Warning Report as required by National Instrument 62-103 The Early Warning System and Related Take Over Bids and Insider Reporting Issues.
Prior to the Transaction, Mr. Schmidt owned 75,600 Common Shares, representing 0.17% of the 43,288,460 Common Shares issued and outstanding, on an as-converted basis.
After giving effect to the Transaction, Mr. Schmidt owns 15,100,000 Class B Subordinate Voting Shares, representing 100% of the issued and outstanding Class B Subordinate Voting Shares, and 100 Common Shares. However, as detailed above, Mr. Schmidt’s effective economic and voting interests in the Company, on an as-converted basis, are the same as before the Transaction was completed.
Further, Mr. Schmidt has entered into an agreement with the Company such that in the case of any shareholder action that would entitle holders of Class B Subordinate Voting Shares to vote as a separate class or series, and the requisite majority of holders of Common Shares have approved such action, Mr. Schmidt will: (a) vote all of his Class B Subordinate Voting Shares in favor of such shareholder action and (b) execute and deliver all resolutions, consents and other instruments, related to his Class B Subordinate Voting Share holdings, in favor of such shareholder action.
Mr. Schmidt acquired the securities for purposes described above and may, depending on market and other conditions, increase, decrease or change his beneficial ownership over the Class B Subordinate Voting Shares or other securities of the Company through market transactions, private agreements, treasury issuances, exercise of convertible securities or otherwise.
A copy of the Early Warning Report filed under applicable securities laws is available under the Company’s profile on SEDAR (www.sedar.com).
PLUS is a cannabis and hemp branded products company focused on using nature to bring balance to consumers’ lives. PLUS’s mission is to make cannabis safe and approachable – that begins with high-quality products that deliver consistent consumer experiences. PLUS is headquartered in San Mateo, CA.
For further information contact:
CEO & Co-founder
Tel +1 213.282.6987
The CSE does not accept responsibility for the adequacy or accuracy of this release.
This press release includes statements containing certain “forward-looking information” within the meaning of applicable securities law (each, a “forward-looking statement”). Forward-looking statements are frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur.
These forward-looking statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this press release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the success of the Company’s investments, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of the Company’s products, customer experience and retention, the continued development of adult-use sales channels, managements estimation of consumer demand in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete capital projects and facilities improvements, the ability to expand and maintain distribution capabilities, the impact of competition, the ability of the Company to implement initiatives and the possibility for changes in laws, rules, and regulations in the industry. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
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