Tinley's Secures $3.5M Strategic Investment By Blaze Life Through Convertible Note, New Director Nominees Revealed

The Tinley Beverage Company Inc. OTCQX:TNYBF (CSE:TNY) has issued an up to $3.5 million 12% secured convertible grid note of the company to Blaze Life Holdings, LLC, an arm's length party to the company, and finalized the terms of its $612,250 advance from Richard Gillis, president and COO of Tinley's USA, and member of Tinley's office of the CEO, which is now evidenced by a $612,250 12% secured convertible promissory note of the company.

Blaze Life Holdings was founded in 2017 by two cannabis visionaries: Los Angeles real estate investor Scott Kim and Paul Burgis, former COO and CFO of Los Angeles-based Golden Road Brewing, which was acquired by Anheuser-Busch InBev NYSE:BUD in 2015. They saw the opportunity for a sophisticated, vertically integrated cannabis business that operationally parallels the craft brewing and brew pub scene, adapted to drive efficiency and growth in a rapidly growing cannabis beverage industry.

The company and BLH have also agreed to enter into a management services agreement pursuant to which BLH will provide certain management services to Tinley's, Algonquin and Tinley's other US-based subsidiaries. Such services are expected to include operations management and engineering support, and collaboration on recruitment, supply chain synergies, best practices, and business systems.

Annual and Special Meeting of Shareholders

In connection with the issuance of the BLH Note, the company has agreed to recommend two director nominees of BLH for election to the board of directors of the company at the next annual and special meeting of shareholders of the company. The BLH nominees are expected to include Paul Burgis, co-founder of BLH, and Anthony ("Tony") Yanow.

The date of the Meeting is expected to be on or about the first week in August 2022.

The BLH Note

The BLH note is a grid note that will bear interest at a rate of 12% per annum and has a term of five years from the date of issuance. All indebtedness under the BLH note, including all principal amounts advanced under the note from time to time and accrued and unpaid interest, shall be convertible into units of the company at the option of BLH at a price of CA$0.105 per unit. Each unit shall consist of one common share in the capital of the company and one-half of one common share purchase warrant, with each warrant exercisable for a period of two years from the date of issuance of such warrant at an exercise price equal to the conversion price.

The initial advance under the BLH note is $1 million, with an additional $500,000 to be advanced on the last business day of each calendar month following the issuance of the BLH note, with the first such advance due on June 30, 2022, subject to any modifications that BLH and the company mutually agree to in writing. The obligations under the BLH note are secured against the assets of the company and the company's US subsidiary, Algonquin Springs Beverage Management LLC ("Algonquin").

The BLH note provides for the automatic conversion of: 33.33% of the indebtedness under the BLH note if the closing price of the common shares on the facilities of the Canadian Securities Exchange exceeds $0.50 for five consecutive trading days; an additional 66.66% of the indebtedness under the BLH note if the closing price of the common shares on the facilities of the CSE exceeds $0.75 for five consecutive trading days; and the remaining indebtedness under the BLH note if the closing price of the common shares on the facilitates of the CSE exceeds $1.00 for five consecutive trading days.

As a result of the closing of the BLH note, Yanow is entitled to a receive a $100,000 capital markets advisory fee from the company. This fee is payable by the company pursuant to the terms of an advisory services agreement entered into between Yanow and the company.

The Gillis Note

The Gillis note will bear interest at a rate of 12% per annum and has a term of one year from the date of issuance. All indebtedness under the Gillis note, including all principal amounts advanced under the note from time to time and accrued and unpaid interest, shall be convertible into units at the option of Gillis at the conversion price. Each unit shall consist of one common share in the capital of the company and one-half of one warrant, with each whole warrant exercisable for a period of two years from the date of issuance of such warrant at an exercise price equal to the conversion price.

In the event of a liquidity event, all of the then remaining indebtedness will automatically convert into units at a 25% discount to the deemed price per common share paid in connection with the liquidity event, or, if such discount is not permitted by the CSE, then the maximum applicable discount permitted by the CSE.

The obligations under the Gillis note are secured against the assets of the company and its US subsidiaries, which security is second in priority behind the security of BLH noted above.

Photo by Giorgio Trovato on Unsplash

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