Swiss Water Decaffeinated Coffee Inc. (SWP) Earnings Call Transcript & Summary

Good afternoon. Before the Swiss Water Decaffeinated Coffee Inc. conference call starts, they are required to remind you that certain information in today's presentation is forward-looking in nature. Any such forward-looking information or statements are based on assumptions that may consider reasonable at the time the information was prepared. Such information involves known and unknown risks, uncertainties and other factors outside of our control that could cause actual results to differ materially than those expressed in the forward-looking information. Swiss Water Decaffeinated Coffee Incorporated does not assume responsibility for accuracy and completeness of the forward-looking information. Similarly, they do not undertake any obligation to publicly revise the forward-looking information to reflect subsequent events or circumstances, except as required by law. Please refer to the Swiss Water Decaffeinated Incorporated management's discussion and analysis posted on SEDAR and Swiss Water's... [Audio Gap] Thank you for standing by. This is the conference operator. Welcome to the Swiss Water Decaffeinated Coffee Inc. Annual General and Special Meeting of Shareholders Conference Call. [Operator Instructions] And this conference is being recorded. During the meeting, there will be an opportunity for registered shareholders and duly appointed proxy holders who preregistered to speak to the items of business. [Operator Instructions] It is now my pleasure to turn over today's meeting to Don Tringali, Chairman of the Annual General and Special Meeting. Mr. Tringali, the floor is yours.

Thank you very much, and good afternoon, everyone. My name is Don Tringali. I'm currently Swiss Water's appointed Chairman of the Board of Directors. I have been appointed to chair today's meeting in accordance with the articles and the bylaws of the company. On behalf of the Board of Directors, I wish to welcome shareholders, employees and guests to the 2021 Annual General and Special Meeting of Shareholders of Swiss Water Decaffeinated Coffee Inc. We wish this meeting could have been done in person. But of course, as you know, to protect the health and well-being of all who would normally attend an in-person meeting, we are conducting this year's meeting via a live teleconference. We are pleased that you are here today, and we look forward to reporting on our company's activities. It is now 12:02 p.m., and I would like to call the meeting to order. At the end of the meeting, the management and I will be able to address your questions for those of you who have preregistered for today's meeting. As this meeting is held virtually via teleconference, we think it is necessary to set out a few rules for the orderly conduct of the meeting. First rule. For the purposes of the meeting today, voting on all matters will be conducted by telephone. If you are a registered shareholder of record or a duly appointed proxy holder, and you wish to vote during the call, you must have preregistered and you must have joined the meeting using the dial-in numbers and PIN that were sent to you when you preregister. The public access call is listen-only. So for those of you who have preregistered, voting by phone will be your only opportunity to vote by ballot during the meeting, and you will only have a certain amount of time to do so when the polls are open. The second rule, questions. Questions in respect of a motion can only be asked by registered shareholders or duly appointed proxy holders who have preregistered. When asking a question, please indicate your name, which entity you represent, if any, and confirm that you are a registered shareholder or a duly appointed proxy holder. Questions regarding procedural matters, which are directly related to motions, will be addressed during the meeting. I will provide instructions on how and when to raise those questions. Questions not relating to procedural matters will be addressed at the end of the meeting. We will begin today with the formal business of the Annual General and Special Meeting of Shareholders. After which, we will open the floor for those of you who have preregistered for any questions that you may have. First, I'd like to introduce you to some directors, executive officers and other people who are present here today. In addition to myself, Directors Robert Johnston, Anne Saunders and Nancy McKenzie are present. Director nominee Alan Wallace is also present. From the company, we have Frank Dennis, the President and CEO, who is also a Director; Iain Carswell, the CFO; Eve Bartnik, the Director of Financial Reporting and Treasury and Secretary of the company. Also here is Teresa Kwan of Computershare Investor Services Inc. I hereby appoint Eve Bartnik to act as a recording secretary and Teresa Kwan to act as the scrutineer for the meeting. The notice calling this meeting, together with the related information circular and proxy form, was delivered to all shareholders of record as of May 17, 2021, and in accordance with the applicable securities legislation to all beneficial holders of shares. I have received from the secretary a statutory declaration attesting to the mailing, and I direct the secretary to attach the declaration to the minutes of this meeting. According to the company's bylaws, a quorum at a shareholders' meeting is met when at least 2 persons are present where each is entitled to vote at the meeting and holding or representing by proxy not less than 10% of the votes entitled to be cast at the meeting. I have been advised by the secretary that the scrutineer's report is complete and that a quorum is present. I therefore declare this meeting to be properly constituted for the transaction of the company's business. The minutes of last year's Annual Meeting of Shareholders are available for inspection. Unless there is any objection, I will dispense with reading them. Please press star 1 on your telephone if you object. Again, this is available only to registered shareholders and proxy holders who have preregistered for today's meeting.

Mr. Chairman, no one asked to speak.

Thank you. Since there are no questions or objections regarding last year's minutes, I will move on to presenting the financial statements and the auditor's report thereon. I now place before the meeting the report to shareholders, including the consolidated financial statements of the company for the period ended December 31, 2020, and the independent auditor's report thereon. This material is contained in the annual report that was mailed to shareholders who requested financial reports and was also made available on SEDAR and the company's website. If you have any questions on the financial report, our CFO, Iain Carswell, is available to respond during the question-and-answer period, which will be after the formal meeting. As set forth in the notice of meeting and the accompanying proxy statement, there are 3 matters presented for shareholders vote: the election of directors; the appointment of auditors; and the approval of the amendment to the convertible debenture. After each matter is presented and the first and second motions are complete, I will ask registered shareholders and proxy holders to raise questions relevant to the matter. After all 3 matters have been put forward, we will -- after each matter has been put forward, we will be able to vote on each of these matters using the telephone. During the meeting, I will provide preliminary voting results, and final results will be posted on SEDAR and our website. Moving now to the first proposal to be voted on, the election of the Board of Directors. In accordance with the articles and bylaws of the company, the directors have set the number of directors at 7. The Board of Directors have nominated the 7 individuals named in the proxy statement to be elected to the Board of Directors for a term expiring at the close of the next Annual General Meeting of Shareholders. Those nominees are Frank Dennis; Roland Veit; Anne Saunders; Robert Johnston; Nancy McKenzie; and Alan Wallace; along with myself, Donald Tringali. Could I please have a motion for the appointment of Mr. Dennis, Mr. Veit, Ms. Saunders, Mr. Johnston, Ms. McKenzie, Mr. Wallace and myself, Don Tringali?

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Thank you. At this time, I request that all other nominations for election to the Board of Directors be disclosed. Registered shareholders and proxy holders, if you wish to present other nominees for the Board of Directors, please press star 1, and the operator the line for you to speak.

Mr. Chairman, there were no other nominee director.

Thank you. Since there are no other nominees, I declare the nominations for directors be closed and that the 7 persons nominated to be put forward for election as directors of the corporation. Operator, could you please provide instructions on voting on this motion?

Telephone voting is now open for a motion to elect the directors. To vote in favor of the motion, please press star 1. To withhold your vote, please press star 2. If you're voting multiple control numbers and do not want to vote the same for all or if you need voting support to attest the vote in favor of some directors but not all, please press star 4 and your line will be flagged to speak with the scrutineer and place your vote at the end of the meeting. Once again, if you're in favor, press star 1. To withhold, press star 2. To speak to a scrutineer at the end of the meeting, press star 4. Voting will close in 5 seconds. [Voting]

Voting has closed.

Thank you. The next item of business is the appointment of independent auditors of the company for the ensuing year and to authorize the directors of the company to fix the remuneration of the auditors. The Audit Committee of the Board of Directors of the company has approved, subject to shareholder confirmation, the appointment of PricewaterhouseCoopers LLP as the auditors of the company. Could I please have a motion for the appointment of PricewaterhouseCoopers LLP as the auditors of the company?

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Thank you. At this time, if there are objections or other nominations for the company's auditor, registered shareholders and proxy holders should press star 1 on their telephone, and the operator will open the line for you to speak.

Mr. Chairman, no one asked to speak.

Thank you. Since there are no questions or objections or other nominations for the company's auditor, we will move on to the vote. Operator, could you please provide instructions on voting on this motion?

Telephone voting is now open for a motion to appoint the auditor. To vote in favor of the motion, please press star 1. To withhold your vote, please press star 2. If you're voting multiple control numbers and do not want to vote the same for all or if you need voting support, please press star 4 and your line will be flagged to speak with the scrutineer and place your vote at the end of the meeting. Once again, if you're in favor, press star 1. To withhold, press star 2. To speak to a scrutineer at the end of the meeting, press star 4. Voting will close in 5 seconds. [Voting]

Voting has closed.

Thank you. The next item of business is the approval of amendments to the convertible debenture. In the information circular dated May 20, 2021, the directors proposed an amendment to the terms of the company's 7.85% unsecured subordinated convertible debenture with Mill Road Capital. The purpose of the amendment is to provide the company access to new capital to fund the construction of Titan 2, a second production line in Delta, British Columbia. In summary, in the proposed amendment, Mill Road has agreed to amend the senior indebtedness restrictive covenant in order to allow the company to draw down up to $60 million of senior debt, an increase from the current level of $45 million. Also, Mill Road agreed to allow the company an additional year to repay the Mill Road debenture. The maturity of the Mill Road debenture will be amended to October 31, 2024. In return, the terms of the debenture would be amended as follows: increase the maximum current interest rate from 7.85% to 9%; provide an additional 1.5% payment in kind interest; amend the conversion feature by, one, canceling the existing conversion feature, and two, replacing the existing conversion feature with warrants that allow Mill Road to purchase up to 2.2 million of common shares at a price of $3.33 per share, which price represents a premium of approximately 10% over the closing price on the date that the term sheet was executed between the company and Mill Road. The amendment will also provide for a $100,000 commitment fee payable to Mill Road on the execution of the term sheet. It removes a restriction limiting Mill Road's holdings following conversion to a maximum of 19.99% of the issued and outstanding shares of the company, and there's an agreement to reimburse Mill Road for its associated legal expenses. In order to be effective, the proposed amendment to the convertible debenture resolution must be approved by a simple majority of holders of common stock present in person or by proxy at this meeting. Any votes cast by Mill Road are excluded. The Board of Directors of the company has approved the amendment to the convertible debenture, subject to the shareholders' approval and the approval of the TSX. Could I please have a motion to approve the proposed amendments to the convertible debenture as described in the Swiss Water information circular dated May 20, 2021?

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Thank you. At this time, I request that all questions relevant to the amendments to the convertible debenture are raised. Registered shareholders and proxy holders, if you wish to speak, please press star 1, and the operator will open the line for you to speak.

Mr. Chairman, no one asked to speak.

Thank you. Since there are no questions, I will move on to the vote. Operator, could you please provide instructions on voting on this motion?

Telephone voting is now open for a motion to approve the amendment for the convertible debenture. To vote in favor of the motion, please press star 1. To vote in opposition to the motion, please press star 2. If you're voting multiple control numbers and do not want to vote the same for all or if you need voting support, please press star 4 and your line will be flagged to speak with the scrutineer and place your vote at the end of the meeting. Once again, if you're in favor, press star 1. To vote in opposition, press star 2. Voting will close in 5 seconds. [Voting]

Voting has closed.

Thank you. The shareholders and proxy holders have cast their votes on all matters of this meeting. I would ask that the conference operator transfer the voting report to the scrutineer and ask that the scrutineer compile the report regarding the results of voting on all business matters. We will pause briefly to allow votes to be counted.

Mr. Chairman, the scrutineer has compiled their report on votes on all business matters.

Thank you. The ballots have been counted, and the votes tabulated by the scrutineer. The scrutineer is reporting the following preliminary results. There were 2,831,324 shares or 31% of the total issued and outstanding shares present and voting in person or by proxy. The preliminary results are as follows. On the first proposal, each of the 7 nominees have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed. On the second proposal, the appointment of PricewaterhouseCoopers LLP as the independent auditors of the company, PricewaterhouseCoopers has been approved, and the Board of Directors of the company has been authorized to fix their remuneration. On the third proposal, the amendment to the convertible debenture has been approved. I direct that the results of the poll be included with the minutes of the meeting and the results of the voting be announced in a press release in accordance with the policies of the TSX and filed on SEDAR. All of the business for which this Annual General -- and Special Meeting of Shareholders was called has now been completed. At this time, I request that all other business be brought before we terminate the meeting. Registered shareholders and proxy holders, if you wish to speak, please press star 1, and the operator will open the line for you to speak.

Mr. Chairman, no one asked to speak.

Thank you. Could I have a motion to terminate the meeting?

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Thank you. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. I now turn the meeting over to Frank Dennis, the CEO of the company; and Iain Carswell, the CFO of the company, to answer any questions that you may have.

Thank you, Mr. Chairman. I am Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee Inc. And I ask that all attendees who would like to ask a question, please ask your questions now. We will answer as many questions as time permits. [Operator Instructions] Operator, please open the line to the first caller.

[Operator Instructions] There appear to be no questions at this time. I would like to turn the conference back over to Mr. Dennis for any closing remarks.

Thank you. There being no further questions, I would like to conclude today's meeting. Thank you very much for participating, and have a good afternoon.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.