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Second Cup: Aegis Brands announces deferral of filing first quarter results

Second Cup

MISSISSAUGA, ON, Canada – The Second Cup Ltd. (“Aegis Brands” or the “Company”) (TSX: SCU) announced today that will rely on the blanket relief provided by the Canadian Securities Administrators and Ontario Instrument 51-102 – Temporary Exemption from Certain Corporate Finance Requirements of the Ontario Securities Commission to postpone the filing of its interim financial report for the first quarter of 2020, the associated management’s discussion & analysis and related certification filings (collectively, the “Interim Documents”) due to logistical issues arising from remote working arrangements of key personnel as a result of the COVID-19 pandemic.

The blanket relief provides for up to a 45-day extension for periodic filings normally required to be made by reporting issuers during the period from March 23, 2020 to June 1, 2020. At this time, the Company anticipates being able to complete and file the Interim Documents on or before June 19, 2020.

The following material developments of the Company have occurred since March 12, 2020, being the date of filing of its annual financial statements. Certain of these developments were previously disclosed by the Company in its March 30, 2020 press release:

  • 130 of the Company’s 244 Second Cup cafés and all 19 Bridgehead coffeehouses have temporarily suspended operations in response to the COVID-19 pandemic. In addition, four Second Cup cafés have closed pending conversion of those locations to cannabis retail stores and four other locations have closed permanently.
  • The Company has deferred the collection from franchisees of the accrued royalties and cooperative advertising fund contributions for the periods of February 23 to March 21, 2020 and March 22 to April 18, 2020. The Company is presently considering deferring collection of such royalties and contributions for the period of April 19 to May 16, 2020. The Company does not currently intend to collect deferred royalties and contributions from franchisees that are in good standing.
  • The Company has engaged in discussions with landlords, both on its own behalf and on behalf of its franchisees, to request abatements and/or deferrals of rent, and, where appropriate, to discuss potential amendments to or the termination of lease agreements for certain underperforming café locations. The Company is also supporting conversations on behalf of its franchisees with financial institutions to request deferrals of loan repayments, as required. The Company is assisting its franchisees to access applicable relief programs that the Canadian Government has introduced in response to COVID-19, including the Canada Emergency Commercial Rent Assistance (CECRA) program for small businesses.
  • The Company is working with the full network of Second Cup suppliers to arrange deferred payment terms to provide franchisees with additional flexibility to manage cash and payroll.
  • Second Cup cafés across Canada that remain open are currently only offering take-out, delivery and drive-thru service.

The Company expects the ongoing COVID-19 pandemic and events and circumstances resulting from that pandemic to have a material impact on its business, operations and financial performance for at least the first half of 2020. However, this impact cannot be quantified at this time because of the significant uncertainty associated with the ultimate extent, duration and severity of the pandemic itself, and with the government restrictions, effects on consumer behaviour and other factors associated with or resulting from that pandemic, many of which are beyond the Company’s control. The Company continues to actively monitor all aspects of its business and operations and to work closely with its franchisees and other business partners but does not expect to provide further updates except as required by applicable law.

In connection with utilizing the blanket relief, the Company confirms that its management and other insiders are subject to an insider trading black-out policy that reflects the principles in Section 9 of National Policy 11-207 – Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

2020 Annual Meeting of Shareholders

After careful consideration, the Company has decided to postpone its annual meeting of shareholders to a later date in 2020. The Company intends to rely on the temporary blanket relief provided by the Canadian Securities Administrators, including the exemptive relief contained in Ontario Instrument 51-504 – Temporary Exemptions from Certain Requirements to File or Send Securityholder Materials of the Ontario Securities Commission to postpone the public filing of its executive compensation disclosure until such time as it is filed and delivered to shareholders as part of the Company’s information circular relating to its 2020 annual meeting of shareholders. The Company is considering an appropriate format for its annual meeting of shareholders, which it is planning to hold on July 23, 2020. The Company will provide further information on its annual meeting of shareholders when it has appropriately considered all applicable issues.