Lowell Farms Inc. announced that it has entered into a subscription agreement in connection with the non-brokered private placement for the issuance of a senior secured convertible debentures on August 19, 2022. The company expects to raise $10,000,000 in the transaction by issuing securities pursuant to exemption provided under Rule 506(b) of Regulation D. The debentures bear a fixed interest rate of 5.5% per annum and will mature on October 13, 2023. Each debenture is convertible into non-voting class C common shares of the company at a conversion price of $0.2313.

Such class C common shares are redeemable at the option of the holder for subordinate voting shares of the company on a one-for-one basis. Each purchaser of a debenture received, for no additional consideration, a warrant for the purchase of a number of shares equal to the number of common shares into which the debenture is convertible and a warrant for the purchase of a number of common shares equal to 150% of the number of common shares into which the debenture is convertible. Each warrant is exercisable at any time until February 19, 2026, at an exercise price of $0.2613 per share, subject to customary anti-dilution adjustments.

Investors in the 2022 convertible debentures received warrants of the company to purchase an aggregate of 18,200,000 subordinate voting shares and warrants to purchase an aggregate of 27,300,000 non-voting common shares. Investors will have the right to require the company to repurchase its warrants and any Indus warrant shares issued following exercise of the warrants on a share-equivalent basis in connection with a sale of the company or substantially all of its assets, in the event the Indus warrants and warrant shares are not included in the sale transaction on terms that are economically equivalent to the treatment of the shares, at a purchase price equal to the consideration per share paid in the sale transaction and upon expiration of its warrants, at a purchase price per share equal to the average closing price for the shares over the 30 trading-day period ending three trading days prior to the last day of its warrant exercise period. As further consideration for their investments in the debentures, the expiration date applicable to previously issued warrants held by certain investors will be extended from October 13, 2023, to April 13, 2025, and, if applicable regulatory approvals are obtained, will be further extended to February 19, 2026.

Certain officers and directors of the company purchased an aggregate of $2,415,000 in debentures and accompanying warrants pursuant to the private placement on the same terms as the other participants in the private placement. Participation by such insiders of the company in the private placement was considered a under relevant U.S. and Canadian securities laws and was approved by the disinterested directors of the company. The securities issued in the placement are restricted securities.