FLUENT — Regulatory Filings 2024

Dec 23, 2024

FORM 51-102F3
Material Change
Report

Item 1 Name and Address of Company

Cansortium Inc. (“FLUENT” or the “Company”)
5540 W. Executive Drive, Suite 100
Tampa, FL 33609

Item 2 Date of Material Change

December 19, 2024

Item 3 News Release

A news release relating to the material change described herein was disseminated on December 19, 2024 through the services of GlobeNewswire.

Item 4 Summary of Material Change

On December 19, 2024, FLUENT and RIV Capital Inc. (“RIV Capital”) announced the completion of their previously announced arrangement (the “Transaction”), whereby FLUENT acquired all of the issued and outstanding Class A common shares (the “RIV Capital Shares”) of RIV Capital in exchange for FLUENT Shares (as defined below) pursuant to the terms of an arrangement agreement dated May 30, 2024 (as amended, the “Arrangement Agreement”).

Item 5 Full Description of Material Change

5.1 Full Description of Material Change

On December 19, 2024, FLUENT and RIV Capital announced the completion of the Transaction, whereby FLUENT acquired all of the issued and outstanding RIV Capital Shares in exchange for FLUENT Shares pursuant to the terms of the Arrangement Agreement. Under the terms of the Arrangement Agreement, RIV Capital shareholders (the “RIV Capital Shareholders”) received 1.245 of a common share of FLUENT (the “FLUENT Shares”) in exchange for each RIV Capital Share held. As a result, shareholders of FLUENT (the “FLUENT Shareholders”) hold approximately 51.25% of the combined business of FLUENT and RIV Capital (the “Combined Company”) and the RIV Capital Shareholders and The Hawthorne Collective, Inc. (“The Hawthorne Collective”), together, hold approximately 48.75% of the Combined Company, each on a fully diluted basis. The Combined Company will continue to operate under the FLUENT name and the FLUENT Shares will continue to trade on the Canadian Securities Exchange (the “CSE”) under the symbol “TIUM.U” and on the OTCQB Venture Market under the symbol “CNTMF”.

Under the terms of the Arrangement Agreement, Robert Beasley has been named Chief Executive Officer of the Combined Company. The RIV Capital Shares were delisted from the CSE at market close on December 19, 2024. The Company has caused RIV Capital to apply to the relevant Canadian securities regulatory authorities to cease to be a reporting issuer under applicable Canadian securities laws.

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Concurrent Transactions

Hawthorne Notes Exchange

Further to the Company's news release dated May 30, 2024, the Company and The Hawthorne Collective entered into an exchange and protection agreement on December 18, 2024 (the "Exchange and Protection Agreement"), pursuant to which The Hawthorne Collective exchanged its existing unsecured convertible notes in the aggregate principal amount of US$160 million, including any accrued and unpaid interest payable by RIV Capital, for 153,069,395 non-voting exchangeable shares (the "Exchangeable Shares") in the capital of the Company (the "Hawthorne Notes Exchange"). In addition, the Exchange and Protection Agreement contains certain provisions that prohibit The Hawthorne Collective from converting its Exchangeable Shares into FLUENT Shares where such conversion would result in The Hawthorne Collective, together with any person or company acting jointly or in concert with The Hawthorne Collective, having an aggregate beneficial ownership of, or control or direction over, directly or indirectly, over 19.99% of the Company's issued and outstanding voting securities immediately after giving effect to such conversion, unless and until the Company has received the necessary shareholder approval in accordance with all applicable policies of the CSE. For more information on the Exchange and Protection Agreement and the Hawthorne Notes Exchange, see the Company's news release dated May 30, 2024 and the management information circular of the Company dated July 12, 2024 filed under the Company's profile on SEDAR+ at www.sedarplus.ca.

The foregoing description of the Exchange and Protection Agreement is not complete and is qualified in its entirety by reference to the full text of the Exchange and Protection Agreement, a copy of which will be filed on the Company's profile on SEDAR+ at www.sedarplus.ca.

Investor Rights Agreements

In connection with the Hawthorne Notes Exchange, the Company and The Hawthorne Collective also entered into an investor rights agreement (the "Hawthorne Investor Rights Agreement"), providing for, among other things, the right of The Hawthorne Collective to nominate up to two members to the board of directors of the Company (the "FLUENT Board"), so long as The Hawthorne Collective and its affiliates maintain certain specified beneficial ownership requirements as set forth in the Hawthorne Investor Rights Agreement. In addition, for so long as the beneficial ownership requirement is satisfied, The Hawthorne Collective is entitled to certain participation rights in order to maintain its pro rata equity ownership position in the Company in connection with any offering of FLUENT Shares, or securities exercisable, convertible or exchangeable for FLUENT Shares, by the Company, subject to certain exceptions, and certain other customary rights, including demand registration rights, piggyback rights and information rights.

In addition, further to the Company's news release dated November 26, 2024, the Company and certain of its affiliates and William Smith, a director and the Executive Chair of the Company, and certain companies controlled by Mr. Smith (together with Mr. Smith, collectively, the "Smith Group"), have entered into an investor rights agreement (the "Smith Investor Rights Agreement") in connection with that certain amended and restated termination agreement dated November 26, 2024, providing for, among other things, the Smith Group's continued right to nominate two members of the FLUENT Board, so long as the Smith Group and its affiliates maintain certain specified beneficial ownership requirements as set forth in the Smith Investor Rights Agreement. The Smith Investor Rights Agreement contains substantially similar terms as the Hawthorne Investor Rights Agreement, including certain participating and piggyback registration rights.

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The foregoing descriptions of the Hawthorne Investor Rights Agreement and the Smith Investor Rights Agreement are not complete and are qualified in their entirety by reference to the full texts of the Hawthorne Investor Rights Agreement and the Smith Investor Rights Agreement, copies of which will be filed on the Company’s profile on SEDAR+ at www.sedarplus.ca.

Item 6 Reliance on subsection 7.1(2) of National Instrument 51-102

Not Applicable.

Item 7 Omitted Information

Not Applicable.

Item 8 Executive Officer

The name and business number of an executive officer of the Company who is knowledgeable about the material change and this report is:

Robert Beasley
Chief Executive Officer
Tel: 850-972-8077

Item 9 Date of Report

December 23, 2024

Forward-Looking Statement

Certain information in this material change report may constitute forward-looking information within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent the Company's expectations, estimates, and projections regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company's control.

Forward-looking information is necessarily based on many opinions, assumptions, and estimates that, while considered reasonable by the Company as of the date of this material change report, are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in the public filings of the Company and RIV Capital filed with Canadian securities regulators and available under the Company's and RIV Capital's respective profiles at www.sedarplus.ca. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct.

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The Company, through several of its subsidiaries, is directly involved in the manufacture, possession, use, sale, and distribution of cannabis in the adult-use and medical cannabis marketplace in the United States. Local state laws where the Company operates permit such activities however, investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the United States Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute, or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable United States federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with adult-use and medical cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under United States federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. The enforcement of federal laws in the United States is a significant risk to the business of the Company and any proceedings brought against the Company thereunder may adversely affect operations and financial performance.

The forward-looking statements contained in this material change report are made as of the date of this material change report, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

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