TREES CORPORATION AND 1287406 B.C. LTD ANNOUNCE CLOSING OF PRIVATE PLACEMENT

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CALGARY, AB, Dec. 20, 2021 /CNW/ - Trees Corporation ("Trees") and 1287406 B.C. Ltd., ("406") are pleased to announce the closing of the previously announced non-brokered private placement (the "Private Placement") of subscription receipts of Trees (the "Subscription Receipts"). Pursuant to the Private Placement, Trees issued an aggregate of 101,500,000 Subscription Receipts at a price of $0.02 per Subscription Receipt (the "Subscription Price") for aggregate gross proceeds of $2,030,000. 

Summary of the Private Placement

The Private Placement was completed in connection with the previously announced proposed amalgamation of Trees and 406 (the "Amalgamation"), to be completed pursuant to the terms of an amalgamation agreement between Trees and 406 dated October 26, 2021, as amended and restated on November 10, 2021 (the "Amalgamation Agreement"). As previously announced, Trees has received conditional approval of the Neo Exchange Inc. ("NEO") for the listing of the common shares (the "Resulting Issuer Shares") in the capital of the the company resulting from the Amalgamation (the "Resulting Issuer") on the NEO.

Further details of the Amalgamation were previously announced by Trees and 406 on October 27, 2021 and November 15, 2021 (together, the "Press Releases") and are set out in the joint information circular of Trees and 406 dated November 12, 2021 (the "Circular"). The Circular constitutes Trees' "Listing Document" in the context of its NEO listing application. The Press Releases and the Circular are available on the SEDAR profile of 406 at www.sedar.com.

The Subscription Receipts are governed by the terms of a subscription receipt agreement (the "Subscription Receipt Agreement") dated December 17, 2021 between Trees and Odyssey Trust Company (the "Subscription Receipt Agent").

Pursuant to and in accordance with the Subscription Receipt Agreement, each Subscription Receipt shall be automatically exchanged, without payment of any additional consideration or any further action by the holder thereof, for one class A common share in the capital of Trees (each, a "Trees Share") upon the satisfaction or waiver of certain escrow release conditions set out in the Subscription Receipt Agreement ("Escrow Release Conditions") at or before 11:59 p.m. (Toronto time) on April 16, 2022 (the "Escrow Release Deadline"), all in accordance with the terms of the Subscription Receipt Agreement.

On closing of the Private Placement, the gross proceeds of the Private Placement, less 50% of the Finder's Fee (as defined below) were delivered to the Subscription Receipt Agent (together with all interest and other income earned thereon, the "Escrowed Funds"), to be held in escrow pending the satisfaction or waiver of the Escrow Release Conditions at or prior to the Escrow Release Deadline, in accordance with the provisions of the Subscription Receipt Agreement.

The Escrowed Funds will be released to Trees upon the satisfaction or waiver of the Escrow Release Conditions at or before the Escrow Release Deadline, at which time each Subscription Receipt shall automatically be exchanged for one Trees Share. Prior to completion of the Amalgamation and in connection therewith, the Trees Shares shall be consolidated at a ratio of between 2:1 and 50:1 (the "Consolidation"), as determined by, and subject to the discretion of, the board of directors of Trees. Each post-Consolidation Trees Share will be exchanged for one Resulting Issuer Share upon completion of the transactions contemplated by the Amalgamation Agreement.

In the event that: (i) the Escrow Release Conditions are not satisfied or waived (to the extent such waiver is permitted) on or before the Escrow Release Deadline; (ii) prior to the Escrow Release Deadline, Trees announces to the public that it does not intend to or cannot satisfy any one or more of the Escrow Release Conditions; or (iii) the Amalgamation Agreement is terminated in accordance with its terms at any earlier time, then Trees will direct the Subscription Receipt Agent to return to the holders of the Subscription Receipts an amount equal to the aggregate purchase price for the Subscription Receipts held by such holder plus a pro rata share of any interest or other income earned on the subscription proceeds (less applicable withholding tax, if any). To the extent that the Escrowed Funds are insufficient to refund 100% of the aggregate purchase price of the Subscription Receipts to the holders thereof, Trees will be liable for and will be required to contribute such amounts as are necessary to satisfy any shortfall. 

In connection with the Private Placement, Trees paid certain finders an aggregate cash fee of $45,000 (the "Finder's Fee") and issued warrants to purchase up to 175,000 Trees Shares (the "Finder's Warrants"). The Finder's Warrants shall be exercisable upon satisfaction of the Escrow Release Conditions for a period of two years from the date of completion of the transactions contemplated by the Amalgamation Agreement at an exercise price per share equal to the Subscription Price, as may be adjusted to account for the Consolidation, as applicable.

All Subscription Receipts issued in connection with the Private Placement are subject to a statutory hold period in accordance with Canadian securities laws. Following completion of the Amalgamation, the Resulting Issuer Shares received upon the exchange of Trees Shares underlying the Subscription Receipts will not be subject to a statutory hold period in Canada. 

Upon completion of the Amalgamation, the proceeds of the Private Placement are anticipated to be used by the Resulting Issuer: (i) for legal and other costs related to the transactions contemplated by the Amalgamation Agreement; (ii) to open additional cannabis retail locations; and (iii) for general administrative expenses and working capital purposes.

About Trees

Trees was incorporated under the Business Corporations Act (Alberta) (the "ABCA") on February 2, 2018. On December 15, 2020, Trees changed its name from "Budbank Information Systems Corp." to "Trees Corporation" pursuant to the filing of articles of amendment pursuant to the ABCA. Trees' registered and head office is located at 1600, 520 – 3^rd Ave SW, Calgary AB, T2P 0R3.

Trees is an independent retail cannabis operator that currently operates six fully licensed retail cannabis stores that sell cannabis products and accessories in the Province of Ontario. Trees intends to enter the British Columbia retail cannabis market upon the closing of the acquisition of 1015712 B.C. Ltd. ("101") pursuant to the terms of the second amended and restated asset purchase agreement (the "101 Purchase Agreement") entered into between Trees and 101. 101 currently operates five existing retail cannabis stores in the Province of British Columbia. The closing of the transactions contemplated by the 101 Purchase Agreement is subject to certain conditions precedent, including the receipt of certain licensing approvals and related regulatory consents.

In addition to the six retail cannabis stores that Trees currently owns and operates in the Province of Ontario, Trees has completed the construction and build-out of two additional stores, which stores have received conditional licenses to operate, with final approval subject to the completion of final regulatory inspections. Trees has also identified an additional seven unbuilt cannabis retail store locations for which it has received conditional license approvals from the provincial regulator, with final licensing approvals subject to completion of store construction and final regulatory inspections. 

About 406

406 was incorporated under the Business Corporations Act (British Columbia) as "1287406 B.C. Ltd." on February 3, 2021 as a wholly-owned subsidiary of 1289625 B.C. Ltd. ("406 Parent"). Pursuant to the arrangement agreement dated March 25, 2021 entered into among 406, 1289625 B.C. Ltd., 1287390 B.C. Ltd., 1287398 B.C. Ltd., 1287401 B.C. Ltd., 1287405 B.C. Ltd., 1287396 B.C. Ltd., 1287409 B.C. Ltd., 1287411 B.C. Ltd., 1287412 B.C. Ltd. and 1287413 B.C. Ltd., 1289625 B.C. Ltd., 406 Parent reorganized its capital such that each holder of common shares disposed of their holdings to 1289625 B.C. Ltd. and, in consideration therefor, received, among other things, certain 406 Shares, which resulted in 406 ceasing to be a subsidiary of 1289625 B.C. Ltd.

406 is a reporting issuer under the securities laws of the jurisdictions of Alberta and British Columbia and currently has 3,850,000 406 Shares issued and outstanding. None of its securities, including the 406 Shares, are listed or posted for trading on any stock exchange and no public market exists for any securities of 406. 406 has no material assets and does not currently conduct any business operations.

406's head office is located at 3400 22 Adelaide S.W., Toronto, ON M5H 4E3 and its registered and records offices are located at 1200 Waterfront Centre, 200 Burrard Street, Vancouver, BC V7X 1T2.

Further Information

All information contained in this news release with respect to Trees and 406 was supplied by the respective party, for inclusion herein, without independent review by the other party, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Completion of the Amalgamation is subject to a number of conditions, including but not limited to, final NEO acceptance. There can be no assurance that the Amalgamation or the listing of Resulting Issuer Shares on the NEO will be completed as proposed or at all.

Readers are cautioned that, except as disclosed in the Circular, any information released or received with respect to the Amalgamation may not be accurate or complete and should not be relied upon. Trading in the securities of the Resulting Issuer should be considered highly speculative.

The NEO has not in any way passed upon the merits of the proposed Amalgamation and has neither approved nor disapproved the contents of this news release.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the 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 unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward Looking Information

Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include but are not limited to statements or information with respect to: the satisfaction of the Escrow Release Conditions; the use of net proceeds from the Private Placement; the terms and conditions of the Amalgamation; the completion of the Amalgamation; the receipt of final approval to list the Resulting Issuer Shares on the NEO; and the details of any securities issuances, exchanges or cancellations in connection with the Private Placement and the Amalgamation. Often, but not always, forward-looking statements or information can be identified by the use of words such as "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.

With respect to forward-looking statements and information contained herein, 406 and Trees have made numerous assumptions including among other things, assumptions about general business and economic conditions of Trees and the market in which it operates. The foregoing list of assumptions is not exhaustive. Although management of 406 and Trees believe that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that forward-looking statements or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. These factors include, but are not limited to: risks relating to the Private Placement; risks relating to the receipt of all requisite approvals for the Amalgamation and/or other ancillary transactions, including the approval of Trees and 406 shareholders and the NEO; and other risk factors as detailed from time to time. 406 and Trees do not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Readers should not place undue reliance on the forward-looking statements and information contained in this news release. 406 and Trees assume no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law. The statements in this press release are made as of the date of this release.

SOURCE Trees Corporation

1287406 B.C. Ltd.: James Ward, Chief Executive Officer, Chief Financial Officer, and Director, Email: [email protected]; Trees Corporation: Jeff Holmgren, Executive VP & CFO, Email: [email protected]