Mighty Craft : MCL announces Whisky funding initiative

Mighty Craft announces Whisky Development Syndicate Initiative

30 March 2022

ASX Announcement

Mighty Craft Limited (ASX: MCL) (Mighty Craft or the Company) is pleased to announce participation in a funding initiative that will allow the Company to accelerate whisky production and the spirits growth agenda in a capital efficient manner.

The Whisky Development Syndicate (WDS), is a separate legal entity to MCL and will seek to raise up to $10 million, which will be used to accelerate the production of whisky using Mighty Craft's industry leading capability and production capacity. Participation in this initiative helps mitigate the working capital challenge that whisky presents, due to the three to five year maturation period before inventory can be realised via eventual sale to the consumer. Additionally, WDS will allow Mighty Craft to increase its asset utilisation, recover overheads and build its whisky bank.

Whisky is a significant category globally and the #1 spirits category in Australia, representing 43% of total value share. The whisky category in Australia is currently growing at 6.9%1, with Australian produced whisky representing a relatively insignificant portion of the category, therefore providing significant further headroom for growth. Furthermore, the premiumisation trend remains evident in both Australia and globally, with 'premium plus' priced whisky growing ahead of the category average2. Mighty Craft will continue to target this growing part of the market with its unique stable of brands, including 78 Degrees, Kangaroo Island Spirits, Seven Seasons and soon to be launched Hidden Lake brand.

Due to its longer maturation period, whisky typically presents a material working capital commitment to build whisky inventory levels to scale. The WDS funding initiative will release capital for the Company, provide WDS investors with the opportunity to invest in a tangible, globally recognised and appreciating asset class, while allowing Mighty Craft to accelerate whisky production, build brand awareness and retain a significant amount of the value created for Mighty Craft shareholders. This will facilitate Mighty Craft's ambition to achieve 1.5 million litres of whisky under maturation by 2025.3

• 1 Past 5 year compound annual growth rate (CAGR) 2016 to 2020, Source: IWSR Drinks Market Analysis 2021 Release

• 2 The 'Premium plus' priced whisky segment grew 8.7% CAGR in the past 5 years 2016 to 2020 inclusive compared with 6.9% CAGAR (for the same period) for the total whisky category In Australia. 'Premium plus' priced whisky has a price point of $47++ per bottle. Source: IWSR Drinks Market Analysis 2021 Release.

3 43% alcohol by volume equivalent.

As part of the agreements to be entered into between WDS (and its investors) and Mighty Craft, Mighty Craft will issue warrants to investors as follows:

• • The Offer: For every 5 fully paid ordinary Share that an investor purchases in WDS, Mighty Craft will offer 3 warrants (option) to purchase 1 fully paid ordinary share in Mighty Craft Limited.

• • Warrant Pricing and exercise timing: The price for exercising the warrants is fixed at 35c and must be exercised before 30 September 2024.

• • Total MCL Warrants on offer: up to 6 million warrants.

The terms of the warrants are set out in Attachment A.

Spearheading the WDS is a globally and locally renowned team of experts, led by Chris Malcolm, providing extensive and diverse distiller and innovation expertise. WDS will be run independently of Mighty Craft with costs and pricing to be determined on arms-length commercial terms. Importantly, there is a joint commitment to sell all WDS inventory to Mighty Craft.

Further details of the terms and conditions of investment in the Whisky Development Syndicate can be found in an Information Memorandum to be issued by WDS in due course.

Managing Director, Mark Haysman, said: "This is an exciting and unique opportunity for Mighty Craft. Whisky is a unique asset class that appreciates significantly in value over the maturation cycle - the issue the industry has always faced is locking up capital for the maturation period which can be three to five years or more. This collaboration will allow Mighty Craft to build its whisky inventory without using current cash reserves whilst retaining a significant portion of the value created through the cycle for MCL shareholders. Whilst this is a proven funding mechanism globally, to our knowledge this is the first time this has been used at this scale in whisky in Australia and represents an efficient way to build value for

MCL while utilising its world class capability and production capacity".

Mark Haysman Managing [e-mail] Morell Investor [e-mail]

[phone]

About Mighty Craft

Mighty Craft (ASX:MCL) is a craft beverage accelerator with a nationally diversified portfolio of craft beverages. It has built a unique infrastructure and distribution offering that enables the company to scale production, distribution and sales as it seeks to become Australia's leading premium craft beverage company. Mighty Craft is achieving its vision by strategically investing in craft beverage producers, with celebrated local brands, and providing them with leadership, growth capital and industry solutions to maximise brand awareness and accelerate growth, whilst achieving scale. Mighty Craft is proud to be taking local Australian craft beer and spirits brands to customers Australia wide and abroad.

ATTACHMENT A: WARRANT TERMS AND CONDITIONS

1

Definitions

In these terms and conditions:

ASX means ASX Limited ABN 98 008 624 691 or, as the context requires, the securities market operated by it.

Board means the board of directors of the Company from time to time.

Business Day means a day which is a "business day" under the Listing Rules.

cleansing statement has the meaning given in clause 5(a)(i).

Company means Mighty Craft Limited (ACN 622 810 897).

Completion Date means:

• (a) Where the Company is able to lawfully give a cleansing statement under sections 708A(5) and (6) of the Corporations Act, and subject to the Company not being in possession of Excluded Information as at the date of the issue of the cleansing statement, 5 Business Days after the Exercise Date; or

• (b) Where the Company is not able to lawfully give a cleansing statement under sections 708A(5) and (6) of the Corporations Act, or if the directors of the Company determine that:

  • (i) the Company is in possession of Excluded Information; and

  • (ii) the immediate disclosure of that Excluded Information would materially prejudice the interests of the Company or its shareholders,

  then the Completion Date will be the later of:

  • (iii) such date notified by the Company to the Warrantholder in writing which may be no more than 40 Business Days after the Exercise Date; and

  • (iv) such date agreed between the Warrantholder and the Company in writing.

Constitution means the constitution of the Company, as amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Excluded Information has the meaning ascribed to it by section 708A(7) of the Corporations Act.

Exercise Date means the date a Notice of Exercise is given to the Company, or such other date agreed between the Company and the exercising Warrantholder.

Exercise Price means $0.35 per Warrant, subject to any adjustment required by these terms and conditions.

Government Agency means any governmental, semi-governmental, municipal or statutory authority, instrumentality, organisation, body or delegate or administrative, monetary or financial authority, or self-regulatory organisation or stock exchange.

Initial Warrantholder means the person who whom the Warrant was initially issued by the Company.

A person is Insolvent if:

(a) the person is (or states that it is) an insolvent under administration or insolvent (each as defined in the Corporations Act);

• (b) the person is in liquidation, in provisional liquidation, under administration or wound up or has had a controller (as defined in the Corporations Act) appointed to any part of its property;

• (c) the person is subject to any arrangement, assignment, moratorium or composition, protected from creditors under any statute or dissolved (in each case, other than to carry out a reconstruction or amalgamation while solvent);

• (d) an application or order has been made (and in the case of any application, it is not stayed withdrawn or dismissed within 30 days), resolution passed, proposal put forward, or any other action taken, in each case in connection with that person, which is preparatory to or could result in any of paragraph (a), (b) or (c) above;

• (e) the person is taken (under section 459F(1) of the Corporations Act) to have failed to comply with a statutory demand;

• (f) the person is subject of an event described in section 459C(2)(b) or section 585 of the Corporations Act; or

• (g) the person is otherwise unable to pay its debts when they fall due.

Issue Date means, in relation to a Warrant, the date on which it was issued by the Company.

Listing Rules means the listing rules of ASX.

Maturity Date means, in relation to a Warrant, 30 September 2024.

Notice of Exercise means a notice in the form, or substantially in the form, set out in Annexure 2.

Ordinary Share means an ordinary share in the capital of the Company.

Person means a natural person or a body corporate as may be appropriate in the circumstances.

Register means the register of entitlement to the Warrants referred to in clause 8(a).

Registered Office means the registered office of the Company from time to time.

Related Body Corporate has the meaning given in the Corporations Act.

Syndicate means Whisky Development Syndicate Pty Ltd (ACN 635 023 862).