LEEF Brands, Inc. announced its adoption of Bitcoin as a treasury reserve asset, making it one of the first publicly traded cannabis companies to take this step. To further support its Bitcoin strategy, the Company has announced that it has entered into an agreement with Canaccord Genuity (the “Lead Agent”), to act as the lead agent, in connection with a best-efforts private placement offering (the “Offering”) of up to approximately $5,000,000 in convertible debenture units (the “Debenture Units”). Each Debenture Unit shall consist of: (i) US$1,000 principal amount of convertible debenture (each, a “Debenture”); and (ii) 5,660 detachable common share purchase warrants of the Company (each, a “Warrant”). The closing of the Offering is expected to occur in January 2025, on such date as may be agreed to by the Company and the Lead Agent (the “Closing Date”).
Each Debenture will be due in 2030, will bear interest at 10% per annum, payable at maturity or upon conversion, and will be convertible into common shares of the Company (each, a “Common Share”) at the option of the holder at approximately US$0.18 (the “Conversion Price”) per Common Share at any time prior to close of business on the date that is two business days prior to the earlier of the date that is 5 years from the closing of the Offering and the redemption of the Debentures. Following three months from the Closing Date, if the 10-day volume weighted average price (the “VWAP”) of the Common Shares on the Canadian Securities Exchange (the “CSE”) is greater than or equal to approximately US$0.25 (being C$0.35 converted into U.S. dollars using a fixed exchange rate of US$1.00:C$1.415 (the “Fixed Exchange Rate”)) over 10 consecutive trading days, the Company has the option to convert the Debentures into Common Shares at the Conversion Price by providing at least 30 days’ notice to holders of Debentures. Trading prices of the Common Shares on the CSE are quoted in Canadian dollars and all references in this press release to VWAP in U.S. dollars refer to the Canadian dollar VWAP as converted into U.S. dollars using the Fixed Exchange Rate.
The Debentures will be redeemable by the Company for the principal amount owing plus accrued and unpaid interest upon giving 30 days’ notice to holders of Debentures, provided that the VWAP of the Common Shares on the CSE over the 10 consecutive trading days ending on the 5th trading day preceding such notice is not less than 110% of the Conversion Price. Principal owing under the Debentures may be satisfied, at the discretion of the Company, in cash or upon providing not less than 25 and not more than 60 days’ notice, the number of freely tradable Common Shares obtained by dividing the principal amount of Debentures owing by 95% of the VWAP of the Common Shares on the CSE over the 10 consecutive trading days ending 5 trading days prior to the applicable date.
All securities issued under the Offering comprised in the Debenture Units will be subject to a statutory four month hold period under applicable Canadian securities laws. The Debentures will be secured solely by Bitcoin held by the Company and will be effectively subordinate to all senior secured debt obligations of the Company to the extent of the value of the assets securing such obligations, with the exception of the Bitcoin held by the Company. The Debentures will be the Company’s first lien debt obligations with respect to the Bitcoin held by the Company. If the liquidation of Bitcoin is insufficient to repay the holders of the Debentures in full, such holders will be considered unsecured creditors for the purposes of the Company repaying such balance owing.
Each Warrant will entitle the holder to purchase one Common Share at the exercise price of US$0.28 per Common Share for a period of 36 months from the Closing Date. Following the Closing Date, if the VWAP of the Common Shares is approximately US$0.49 (C$0.70) or more over 10 consecutive trading days, the Company shall have the right upon providing notice to holders of Warrants to accelerate the expiry date of the Warrants to a date at least 30 days following the date of such notice.
The Convertible Dentures and the Warrants will be governed by respective indentures to be entered into as of the Closing Date.
The Company has also granted the Agents an option (the “Over-Allotment Option”), exercisable in whole or in part, to purchase up to an additional US$750,000 of Debenture Units. If the Over-Allotment Option is exercised in full, the aggregate gross proceeds of the Offering will be US$5,750,000.
The net proceeds raised under the Offering are intended to acquire bitcoin, fund growth opportunities, capital expenditures and for general corporate purposes.
Upon closing of the Offering, the Company shall pay to the Agents a customary commission for a transaction of this nature, payable in a combination of cash and Debenture Units.
The Offering will be made on a private placement basis in each province of Canada pursuant to available prospectus exemptions, in the United States pursuant to available registration requirement exemptions and in other jurisdictions agreed upon by the Company and the Lead Agent. Closing of the Offering is subject to certain conditions, including obtaining existing noteholder approvals, execution of definitive documentation, and completion of customary filings with the CSE.
The Company’s Bitcoin-backed debentures align with its strategic plan to integrate Bitcoin into its treasury strategy. As part of this plan, LEEF has already acquired 3.937 Bitcoin at an average cost basis of US$88,255.17 and secured them in an institutionally delegated multi-signature cold wallet. After the purchases contemplated by this Offering, any future trading of Bitcoin will be at management’s discretion. Investments in Bitcoin are subject to price volatility and a number of other risks and uncertainties more particularly described below under the heading “Forward-Looking Statements”.
