TORONTO, Canada — Spot Coffee LTD. (TSX-V: SPP) (“Spot” or the “Company”) is pleased to announce that the directors of Spot met at the Company’s head offices in Toronto on the 4th, 5th and 6th of December, 2019 to review, discuss and approve the Company’s business and financial plan for the year 2020.
New Financing of Spot Coffee
The Company’s directors have unanimously approved the terms of a $2.5 million new convertible debenture financing to support the Company’s business and financial plan for the year 2020, which includes:
- The cost of the full development of one (1) company-owned traditional Spot café and one (1) Spot Express café location in the City of Toronto, Ontario, Canada;
- The cost of the full development of Spot’s new coffee roasting facility to accommodate the continually rising retail demand for the Company’s award-winning gourmet coffee, as well as the demand by Spot’s company-owned and managed cafés along with a growing number of new franchises scheduled to open in 2020;
- Payment in full of the Company’s current debentures, which carry an interest rate of 9% per annum and which will be paid from the proceeds of the newly approved convertible debenture financing at the lesser interest rate of 6% per annum; and
- The cost of upgrades to company-owned cafés and Spot’s central kitchen facility.
The newly approved convertible debentures will be categorized in three classes; Class A, Class B and Class C. The terms of each class will be as follows:
- The Class A debenture will be for the total amount of $1,000,000 comprising 1,000 units of $1,000 each bearing interest at the rate of 6% per annum on an accumulating basis calculated at maturity with a conversion date of July 15, 2021, at which the entire principal amount as well as the accumulated interest thereon will be converted into common shares in the capital stock of the Company on terms and conditions that are shown below and that are applicable to all convertible debenture classes;
- The Class B debenture will be for the total amount of $1,000,000 comprising 1,000 units of $1,000 each bearing interest at the rate of 6% per annum on an accumulating basis calculated at maturity with a conversion date of February 28, 2023; and
- The Class C debenture will be for the total amount of $500,000 comprising 500 units of $1,000 each bearing interest at the rate of 6% per annum on an accumulating basis calculated at maturity with a conversion date of April 30, 2023.
Each of the amounts of the above mentioned convertible debenture classes plus the accumulated interest will be converted into shares in the capital stock of the Company at the average share market price for the month immediately preceding the maturity date discounted, if any, by the maximum amount approved by the TSX Venture Exchange notwithstanding that all of the shares that will be issued as a result of this conversion will be subject to the statutory four-month hold period in accordance with securities laws.
New Company-Owned and Franchise Cafés
The Company’s business and financial plan considers the development of nine (9) Spot Express café locations, eight (8) of which are anticipated to be franchise Express cafés in Western New York, extending Spot’s multi-franchise strategic alliances. One new company-owned Express café will be developed in downtown Toronto, Canada.
Furthermore, the Company is currently in the process of studying, for the purpose of selecting, four (4) new suitable locations for the development of traditional Spot cafés, out of which three (3) will be Spot franchise cafés in the Rochester suburban towns of Pittsford or Victor, both of which are in Monroe County, New York, as well as the villages of Blasdell and Lancaster, both in Erie County, New York. These franchise locations have been requested by two existing franchisees and one new franchisee with whom Spot has entered into a franchise deposit agreement. The fourth new full Spot café will be developed and operated by the Company in a neighborhood in Toronto. This Toronto company-owned and operated café will serve as Spot’s new flagship café in Ontario, where there has been a growing demand for Spot franchises.
The anticipated opening schedule for three (1) additional franchise Express and traditional café locations that commenced construction in 2019 is as follows:
- The fourth Spot Express café in Tops supermarket number 227, located at 9660 Transit Road, East Amherst, New York, is expected to open for business in early January of 2020;
- The Spot franchise café in Niagara Falls, New York, is expected to open for business in March of 2020; and
- The Spot franchise café in the town of Tonawanda, New York, is expected to open for business in May of 2020.
“On behalf of the directors of Spot, I would like to thank our entire team, especially our Spotters, franchisees, stakeholders and shareholders. These are the people who have helped to build this company up over the past 15 years into a thriving, 30-location family of community cafés,” said John Lorenzo, the Executive Chairman of Spot. Since its acquisition and restructuring in the 2000s, Spot has gone public, grown from three to thirty cafes, expanded its kitchen and roastery operations, and adopted a highly successful franchise business model. With new personnel, reporting systems and marketing initiatives in place, we now conservatively estimate that 40 of our traditional café and Express café locations will be open and serving customers by the end of next year. We continue to focus on growth, increasing revenue and achieving sustained profitability. Together with Workers United, the union voted for by our employees, we will strive to set an example of social justice, promote community-oriented thought, and continue to deliver high quality service to all of our neighborhoods.”
