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Vancouver, British Columbia--(Newsfile Corp. - February 13, 2023) - TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) ("TransCanna" or the "Company" or the "Guarantor") announced that the Company entered into a Deed in Lieu of Foreclosure Agreement, dated February 13, 2023 (the "Deed in Lieu"), by and among the Pelorus Fund REIT, LLC (the "Lender"), Dalvi, LLC, ("Propco"), Lyfted Farms, Inc. ("Opco" together with Propco, the "Borrower"), the Company and James R. Blink, solely in his individual capacity (the "Limited Guarantor" and together with the Guarantor, the "Guarantor Parties"), that provides for, among other things, the transfer at a future closing of substantially all of the Loan Collateral (excluding certain equity interests and contracts) to a designee of the Lender (the "Transactions"). The Lender reserved all rights and remedies under the previously announced Loan Agreement dated as of July 29, 2022 (the "Loan Agreement"), by and among the Borrower, Guarantor Parties and Lender whereby the Lender had provided a term loan to the Borrower in the original principal amount of $15,808,000 (the "Loan Amount"), secured against all or substantially all the assets of the Borrower and the Company (the "Loan Collateral") in accordance with the terms and provisions thereof. The Company also announces that certain events of default exist under the Loan Agreement and such events of default are acknowledged by the Borrower and Guarantor Parties under the Deed in Lieu. The Company further announces that, pursuant to the Deed in Lieu, the Borrower and the Guarantor Parties acknowledged that (i) the Lender has no obligation to disburse additional amounts to Borrower pursuant to the terms of the Loan Agreement and any disbursement or other protective advances may be made at the sole discretion of the Lender, and (ii) to the extent the Lender has elected or in the future elects to make any new money advances to or for the benefit of Borrower or any Guarantor Party, such amounts shall automatically be deemed to be: (1) added to the outstanding Loan Amount under the Loan Agreement, (2) obligations incurred under the Loan Agreement and guaranteed by the Guarantor Parties in accordance with the terms of the Loan Agreement, and (3) secured by all of the Loan Collateral in accordance with the terms of documents auxiliary and additional to the Loan Agreement. As of January 31, 2023, the total amount of outstanding principal and accrued but unpaid interest (including interest accruing at the Default Interest Rate as a result of the Existing Events of Default, to the extent permitted by applicable law) due and owing to the Lender under the Loan Agreement (including, without limitation, protective advances made to the Borrower through such date) is $17,654,612.32.
Closing of the Transactions is subject to the satisfaction of certain conditions precedent for transactions of this nature including, among other things, requisite shareholder approval of a resolution to approve the Transactions and a call option agreement to be entered into between the Company and the Lender. The Company expects to announce an annual and special meeting of shareholders in due course. James Blink and Travis Heilman, directors of the Company, have entered into a voting support agreement with the Lender agreeing to vote their common shares of the Company in favour of the Transactions and the matters related thereto.
The Company provides an update on construction at its Daly Facility in Modesto, California. On September 21, 2022, the Company announced that construction its Daly Facility would be complete within four to five months of that date. The Company does not expect construction to be completed as previously forecasted, and the Company is currently coordinating additional resources to bring the project to completion. Delays in construction have resulted, in part, from unexpected expenses associated with the need for supplemental engineering to meet County and State regulations necessitating additional capital expenditures. Once contracting resources are operating at full capacity, it is expected that the construction will take up to six months to complete the project. Due to the ongoing events of default under the Loan Agreement, the Lender has no obligation to advance the additional funds that are required to complete the planned build out and any advances made to the Borrower to
fund such construction or any other expenses of the Borrower or Guarantor are at the sole and absolute discretion of the Lender.