Panda and ABcann Medicinals Provide Update on Qualifying Transaction and Announce $8 Million Brokered Financing and $15 Million Non-Brokered Financing

OTTAWA, ON / ACCESSWIRE / March 23, 2017 / Panda Capital Inc. (TSX-V: PDA.H) (the “Company” or the “Resulting Issuer”) is pleased to provide an update with respect to the proposed amalgamation (the “Transaction”) between ABcann Medicinals Inc. (“ABcann”), the Company and a wholly-owned subsidiary of the Company formed for the purposes of completion of the amalgamation, which will result in the reverse takeover of the Company by ABcann and will constitute the Company’s Qualifying Transaction (as defined in the policies of the TSX Venture Exchange (the “TSXV”)), as initially announced by news release dated December 2, 2016. The Company and ABcann continue to work towards completion of the Transaction. Initial submissions, including submission of a draft filing statement with respect to the Transaction (the “Filing Statement”), have been made to the TSXV and are currently under review.

The Company is also pleased to announce that, in connection with the Transaction, it intends to undertake two concurrent financings:

a non-brokered private placement of secured convertible debentures (the “Debentures”) in the aggregate principal amount of $15 million (the “Debenture Financing”) with two industry leading institutions, having a conversion price equal to a 30% premium to the price ascribed to the Subscription Receipts issued pursuant to the Subscription Receipt Financing (each as defined below), subject to adjustment; and

a brokered private placement of subscription receipts (each, a “Subscription Receipt”) at a price of $0.80 per Subscription Receipt (the “Issue Price”) for gross proceeds of $8,000,000 (the “Subscription
Receipt Financing” and, together with the Debenture Financing, the “Concurrent Financings”).

Additional details with respect to the Concurrent Financings are provided below.

“We look forward to closing the Qualifying Transaction and the Concurrent Financings, following which the Company will commence an immediate expansion of ABcann’s existing Vanluven facility to double production capacity and break ground at the new 150,000 square foot purpose built Kimmett facility,” stated Aaron Keay, a director of the Company. “The closing of the Qualifying Transaction is a significant step forward for the Company, and will provide us the growth capital to expand ABcann’s footprint in Canada and take advantage of potential international opportunities.”

Ken Clement, founder of ABcann, commented, “We are very excited about bringing ABcann public and the opportunities it offers to both increase the scale and capacity of our facilities and to provide increased liquidity for our shareholders. We look forward to working with Aaron Keay, in his new role as CEO following the closing, as ABcann progresses to this next step in its expansion and development.”

Concurrent Financings

Debenture Financing

In connection with, and subject to, the closing of the Transaction, it is also expected that the Debenture Financing will be completed, pursuant to which the Resulting Issuer is expected to issue Debentures in the aggregate principal amount of $15,000,000.

The Debentures will:

bear interest at the rate of 10% per annum, commencing on the issue date of the Debentures, and payable semi-annually on the last day of June and December of each year;

mature 36 months following the closing of the Debenture Financing and be secured by a security interest over all of the assets of the Resulting Issuer and each of its subsidiaries. Any outstanding indebtedness of the Resulting Issuer (other than existing debentures of ABcann in the aggregate principal amount of $5,000,000 held by the lead subscribers in the Debenture Financing) shall be subordinated to the Debentures as of the closing of the Debenture Financing; and

be convertible at the option of the holder into common shares of the Resulting Issuer (each, a “Share”) at any time prior to the close of business on the maturity date at a conversion price (the “Conversion Price”) equal to an amount which represents a 30% premium to the Issue Price per Subscription Receipt. Given that the Issue Price per Subscription Receipt is expected to be $0.80, it is expected that the Conversion Price will be $1.04 per Share. In the event that the Resulting Issuer completes a subsequent equity financing at a price below the Conversion Price, the Conversion Price will be adjusted downward to the price per share of any subsequent equity financing, subject to a floor price equal to the Issue Price per Subscription Receipt; and

if at any time prior to the maturity date, the volume weighted average price of the Shares on the TSXV (or such other stock exchange or quotation system as the Shares are then principally listed or quoted) for any consecutive 10 day trading period is greater than $1.80, the Company, at its sole option, may, at any time thereafter, force a conversion of the Debentures.

At the closing of the Debenture Financing, the Resulting Issuer will also issue certain warrants to the holders of the Debentures, which will vest and become exercisable on July 1, 2018 if the Resulting Issuer has not completed, on or before that date, one or more financings for aggregate proceeds of at least $18 million through: (i) the exercise of outstanding warrants or a new equity issuance from treasury (or a combination of both); (ii) a debt facility acceptable to the lead subscribers in the Debenture Financing, or (iii) a combination of both. Additional details regarding the terms of these warrants and the Debentures, including certain adjustment and acceleration provisions in connection therewith, will be included in the Filing Statement.

Subscription Receipt Financing

The Company and ABcann have entered into an engagement letter with Canaccord Genuity Corp. (“Canaccord Genuity”) and PI Financial Corp. (“PI Financial”) pursuant to which Canaccord Genuity and PI Financial (together, the “Agents”) have agreed to act as co-lead agents in respect of the Subscription Receipt Financing, under which the Company is expected to issue an aggregate of 10,000,000 Subscription Receipts at a price of $0.80 per Subscription Receipt (the “Issue Price”) for gross proceeds of $8,000,000. Each Subscription Receipt shall be deemed to be exercised immediately prior to the completion of the Transaction, without payment of any additional consideration and without further action on the part of the holder thereof, into one Share. The Agents will also be granted an over-allotment option to acquire such number of additional Subscription Receipts as is equal to 15% of the Subscription Receipts sold under the Subscription Receipt Financing. The additional Subscription Receipts will have the same terms as the Subscription Receipts. The over-allotment option will be exercisable until closing of the Subscription Receipt Financing (the “Subscription Receipt Closing”).

Upon the Subscription Receipt Closing, the gross proceeds of the Subscription Receipt Financing will be held by an escrow agent acceptable to the Company, ABcann and the Agents. If the Agents have not received a notice from the Company and ABcann that all the conditions precedent to the release of the escrowed proceeds have been satisfied or waived to the satisfaction of the Company, ABcann and the Agents by 5:00 p.m. (Vancouver time) on the date that is 60 days following the Subscription Receipt Closing (or such other date as may be determined by the Company, ABcann and the Agents), all of the Subscription Receipts will be cancelled by the escrow agent and holders thereof will have no rights thereunder except to receive, and the escrow agent shall pay to such holders from the escrowed funds, an amount equal to the aggregate purchase price of the Subscription Receipts then held.

The Company has agreed to: (i) pay the Agents a commission equal to 7% of the gross proceeds raised from subscribers identified by the Agents, and 3.5% of the gross proceeds raised from subscribers identified by the Company and ABcann (who will be permitted to subscribe for up to 20% of the Subscription Receipt Financing), and (ii) issue the Agents compensation options to acquire such number of Shares as is equal to 7% of the Subscription Receipts issued to subscribers identified by the Agents and 3.5% of the Subscription Receipts issued to subscribers identified by the Company and ABcann. Each of the compensation options will be exercisable to acquire one Share at the Issue Price for a period of two years following the Subscription Receipt Closing. The Agents will also be reimbursed for their reasonable expenses in connection with the Subscription Receipt Financing.

Completion of the Concurrent Financings will be subject to various conditions, including receipt of the approval of the TSXV, the approval of the boards of directors of the Company and ABcann, and other conditions as will be set out in the definitive agreements with respect to the Concurrent Financings. The proceeds of the Concurrent Financings will be primarily be used for expansion of the existing ABcann Vanluven facility, development and construction of the proposed ABcann Kimmett facility, research and development, negotiation of international licensing and distribution agreements, and general working capital purposes.

Any securities issued in connection with the Concurrent Financings (including, for greater certainty, the Shares), will be subject to a statutory hold period of four months and one day from the applicable Concurrent Financing closing date.

Proposed Directors and Officers of Resulting Issuer

As will be further described in the Filing Statement, the following individuals have been identified as proposed directors and officers of the Company following completion of the Transaction:

Ken Clement – Napanee, Ontario – Executive Chairman and Director

Mr. Clement is the founder of ABcann and has served as its general manager since June 2012. He began investigation into the potential for medical marijuana in 2009 and has been the driving force behind ABcann’s development.

Aaron Keay – Vancouver, British Columbia – CEO
and Director

Mr. Keay has been a director of the Company since November 2015. He has spent more than a decade working in the capital markets across a broad spectrum of sectors, including life sciences, food and beverages, and natural resources, in varied roles, including corporate finance, senior management and as a director of a number of public companies. He has helped many companies move from the private to the public markets.

Paul Lucas – Oakville, Ontario – Director

Mr. Lucas is a director of ABcann. He served as President and CEO of GlaxoSmithKline Canada from 1994 until he retired in 2012. He also served as Chairman of the Board of Directors for TM Bioscience, and as a director of Biochem Pharma, the Toronto Regional Research Alliance, Montreal inVivo, and AllerGen. In addition, he was a member of the Principal’s Advisory Council of the University of Toronto at Mississauga, and a member of the Board of Trustees of Queen’s University. He also served as Chairman of the Board of Directors of Canada’s Research-Based Pharmaceutical Companies (Rx&D) for three terms. Currently, Mr. Lucas is a member of the Board of Directors of RnA Diagnostics Inc. and the Ontario Genomics Institute. He is also Chair of the Board of EcoSynthetix Inc., Induran Ventures Inc. and Life Sciences Ontario. He received his BSc (Honours) in Biology and Chemistry from Queen’s University in 1972, and obtained his Chartered Directors designation (CDir) from the Directors College, a joint venture of McMaster University and the Conference Board of Canada, in 2009.

John Easson – Oakville, Ontario – Director

Mr. Easson has over 23 years of experience advising companies with respect to corporate finance matters and mergers and acquisitions. Prior to founding BE Capital Advisors in 2008, he was Managing Director, Head of Media, Communications & Technology Group, Investment & Corporate Banking, at BMO Capital Markets. Mr. Easson joined BMO in April of 2001, having spent the previous five years focusing on Communications & Technology investment banking at RBC Dominion Securities. He has been involved in a variety of financial advisory and corporate finance transactions for a wide range of clients, including RIM, Macdonald Dettwiler, Clearnet, Evertz and Sierra Wireless. He also acted as an M&A advisor to numerous companies, including Rogers, BCE, Clearnet, Filogix and FMC. More recently, through BE Capital Advisors, Mr. Easson has worked with smaller cap companies, delivering expertise to drive successful corporate transactions in a variety of industries, including insurance, distribution, event marketing, logistics, mortgage finance, technology services and healthcare. Mr. Easson obtained an MBA from the University of Toronto in 1994 and a B.Sc in Mechanical Engineering from Queen’s University in 1989.

Daryl Kramp – Madoc, Ontario – Director

Mr. Kramp was the Member of Parliament for the riding of Prince Edward-Hastings from 2004 to October 2015. While an MP, Mr. Kramp was honoured to be appointed by the Prime Minister as Chair of the Standing Committee on Public Safety and National Security (SECU). He also served on the Finance Committee and the Treasury Board Advisory Caucus, and acted as Vice-Chair of the Steering Committees and Standing Committees of Public Accounts and Government Operations and Estimates. Mr. Kramp has been elected as Co-Chair of the Canada-China Legislative Association and was a Member of the Executive of the Canada-Ireland Friendship Group and the Canada-Australia/New Zealand Group. Mr. Kramp was an active member of the Parliamentary Associations of the Commonwealth, NATO, and ParlAmericas, Canada-Europe, including the Inter-Parliamentary Associations of Canada-France, Canada-Japan, Canada-United Kingdom and Canada-United States, and the Inter-Parliamentary Union. In addition, Mr. Kramp was elected by his peers as the Canadian President of the Global Organization of Parliamentarians Against Corruption (GOPAC). He recently completed his studies at the Institute of Corporate Directors (Teflor School of Management). In addition to his political appointments, Mr. Kramp has created and operated several successful business ventures in the fields of retail, wholesale and hospitality. He also has experience as a trade consultant and as a sports promoter, having organized some of the largest international junior ice hockey tours in North America.

Andrew LaCroix – Duncan, British Columbia – Director and Vice-President of Business Development

Mr. LaCroix has been the principal of A. LaCroix Law Corp. since 2008. He oversaw ABcann’s initial successful Health Canada application to obtain its production license, and has provided general counsel to ABcann since inception. Mr. LaCroix obtained a Bachelor of Arts degree from the University of British Columbia in 1991 and a Bachelor of Laws from the University of Saskatchewan in 2001. He has been a member of the Law Society of British Columbia since 2002.

Neil Kapp – London, Ontario – Chief Operating
Officer

Mr. Kapp has been the Vice-President of Business Development of ABcann since August 2014. He has also worked as a self-employed business consultant, through his company, Pent-Land Holdings Inc., since January 1989. Mr. Kapp obtained a Bachelor of Business Administration, Honours, from York University in 1978.

Ying (Jenny) Guan – Napanee, Ontario – CFO
and Secretary

Ms. Guan joined ABcann in January 2013 and has held a variety of progressively more senior roles, most recently being appointed as CFO in January 2015. As a member of ABcann’s executive management team, she is responsible for corporate financial reporting, operations, treasury, tax, budget planning, corporate policies, internal controls and ABcann’s relationship with external auditors. Ms. Guan has over 15 years of experience in various key leadership roles in business operations, finance, and program management. She ran her family business from early 2000 until its sale in 2015.

Business of the Resulting Issuer

ABcann, a company incorporated under the laws of the Province of Ontario, was one of the first companies to obtain a production license under the Marihuana for Medical Purposes Regulations (Canada), which it received on March 21, 2014. It also obtained a sales license on December 31, 2015. Situated in Napanee, Ontario, ABcann has spent the last two years focused on changing the face of medical cannabis. ABcann’s current GPP (Good Production Practice) manufacturing Vanluven facility contains proprietary plant growing technology, combining the concepts, systems and components to produce industry leading, high yielding plants, which, in turn, generate high quality products that are consistent from batch to batch.

ABcann grows its plants without the use of chemicals and pesticides in controlled environmental chambers, where its technology allows it to optimize every key variable in the growing process to achieve the consistency that is needed for a standardized product. ABcann is able to control environmental and nutrient demands, tailor made for a particular strain of cannabis, without the variation that is typical when producing large quantities in less-controlled, larger rooms and greenhouse-type structures, giving ABcann the ability to produce pharmaceutical grade, plant-based medicine that can be prescribed with confidence.

The following table sets out selected financial information of ABcann as at and for the periods indicated:

9 months ended

September 30, 2016

($)

(unaudited)

Year ended
December 31, 2015

($)

(audited)

Year ended
December 31, 2014

($)

(audited)

Revenue

210,750

–

–

Other income

128,175

73,680

853

Net loss

2,962,828

4,401,748

3,975,940

Net loss per share

0.05

0.07

0.09

Total assets

7,504,765

7,416,677

1,364,772

Long-term liabilities

1,512,970

–

350,000

Dividends per share

–

–

–

ABcann has invested $20.8 million in its current operations and international expansion plans, which include:

the developed and skillfully managed 14,500 square foot Vanluven facility in Napanee, where ABcann currently carries out its primary activities;

the acquisition of approximately 66 acres on four adjoining parcels of land (all of which are wholly-owned, directly or indirectly, by ABcann); and

the plan to commence construction for Phase 1 development of a new 952,000 square foot facility on these new properties, being the Kimmett facility, with the initial buildout comprising approximately 150,000 square feet.

Since the initial announcement of the Transaction on December 2, 2016, ABcann has settled approximately $1,600,000 dollars of outstanding debt by way of the issuance of units and common shares of ABcann, such that there are expected to be approximately 78.6 million ABcann shares outstanding which will be exchanged for Shares on a one for one basis at the closing of the Transaction. The Company also completed the issuance of debentures in the principal amount of $600,000. As a result of the foregoing, it is expected that the Resulting Issuer will have working capital of approximately $24,000,000 following completion of the Transaction, assuming completion of both of the Concurrent Financings.

The current directors of ABcann are John Molloy, Ying (Jenny) Guan, Timothy Humberstone, Dennis Chadwick and Paul Lucas, all of whom are residents of Ontario. Mr. Molloy and Ms. Guan are also officers of ABcann. The controlling shareholder of ABcann is the Linda Smith Family Trust, a trust formed under the laws of the Province of Ontario, the trustee of which is Ken Clement, also a resident of Ontario.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSXV has in no way passed on the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

ON BEHALF OF THE BOARD OF DIRECTORS OF PANDA CAPITAL INC.

“Aaron Keay”

Aaron Keay

Director

For further information, please contact Aaron Keay by phone at (604) 323-6911 or by email at aaron@informcapital.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Disclaimer for Forward-Looking Information

Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the proposed Qualifying Transaction, the Concurrent Financings and ABcann’s future business plans. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Forward looking statements in this news release include statements relating to: the terms of the Transaction; the terms of the Concurrent Financings and the use of proceeds thereof; the consistency of ABcann’s product; and ABcann’s future site development and expansion plans. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including that: the TSXV may not approve the Transaction; the Transaction may not be completed for any other reason; the Concurrent Financings may not be completed on the terms contemplated or at all; the proceeds of the Concurrent Financings may not be allocated as currently contemplated; or factors may occur which cause ABcann’s currently contemplated expansion and development plans to cease or otherwise change. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company or the Resulting Issuer will obtain from them. Readers are urged to consider these factors carefully in evaluating the forward-looking statements contained in this news release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.

PANDA CAPITAL INC.
Suite 2600 – 160 Elgin Street
Ottawa, Ontario K1P 1C3

SOURCE: Panda Capital Inc.

ReleaseID: 458067