Mr. Benoit Chotard reports

CONCLUSION OF AN AGREEMENT IN PRINCIPLE WITH RESPECT TO A QUALIFYING TRANSACTION BETWEEN ORLETTO CAPITAL INC. AND DEVONIAN HEALTH GROUP INC.

On May 15, 2015, Orletto Capital Inc. and Devonian Health Group Inc. initially signed an agreement in principle, as amended on April 7, 2016, pursuant to which the parties intend to complete a business combination by way of an amalgamation which will constitute the qualifying transaction (as defined in Policy 2.4) of Orletto pursuant to Policy 2.4 of the TSX Venture Exchange found in the exchange corporate finance manual. The resulting issuer will be involved in the industry segment of life sciences. The completion of the qualifying transaction will be subject to a number of conditions including the completion of a concurrent public financing by way of a prospectus of a minimum amount of $6-million and a maximum amount of $10-million as more fully described below.

About Devonian

Devonian Health Group is a corporation resulting from a long-form amalgamation under the Business Corporation Act (Quebec) (QBCA) on March 27, 2015, of Devonian Technologies Inc., Devonian Pharmaceutical Inc., Devonian Cosmetics Inc. and Consultant Go Contact Inc. Devonian's head office is located at 360 Entrepreneurs St. Montmagny, Que., G5V 4T1. On April 28, 2015, Devonian entered into an asset-purchase-and-sale agreement with Lemieux Nolet Inc., in its capacity as trustee of PurGenesis Technologies Inc., in connection with the purchase of the assets of PurGenesis. Pursuant to the assets purchase agreement, Devonian acquired all of the assets of PurGenesis including the property titles on an immovable within the registration division of Montmagny. Since April 28, 2015, Devonian has assumed the development of products previously owned by PurGenesis.

PurGenesis was a corporation specialized in the development of botanical drugs, as well as dermo-cosmetic products. Until 2013, the corporation raised more than $36-million in financing from private investors and from government agencies. PurGenesis completed a full preclinical program on an anti-inflammatory drug and successfully completed a phase I clinical study in healthy volunteers, as well as a phase 2a clinical study in patients with left-sided ulcerative colitis. The corporation also completed the development of dermo-cosmetic products for women. PurGenesis built a state-of-the-art, pharmaceutical-grade, 1,625-square-metre extraction facility. Several patents and trademarks were filed prior its acquisition by Devonian.

Devonian is a late-stage botanical pharmaceutical company with novel therapeutic approaches targeting unmet medical needs. Devonian's core strategy is to develop prescription botanical drugs. This strategy is supported by the U.S. Food and Drug Administration's set of regulatory guidelines favouring a more-efficient drug development pathway versus traditional prescription medicines. Devonian is based on a broad-based platform originating from over 10 years of research. This platform provides a unique process of extraction, purification, stabilization and conditioning of a molecular complex responsible for the photosynthetic process in plants and algae: the supra molecular complex extraction and stabilization technology (SUPREX). Thykamine is the first product issued from this platform. The potent anti-inflammatory and anti-oxidative activities of Thykamine have been demonstrated in several preclinical experiments, as well as in a phase 2a proof-of-concept clinical study in patients with mild-to-moderate distal ulcerative colitis. The product is now moving into large phase 2 clinical trials in two therapeutic areas: ulcerative colitis and atopic dermatitis. While the development of prescription botanical drugs is its core business, Devonian is also involved in the development of high-value derma-cosmeceutical products as part of a secondary strategy to generate short-term revenues and optimize manufacturing efficiency. Devonian owns a state-of-the-art, 1,625-square-metre facility, located in Montmagny, Que. Devonian plans to seek the FDA's current good manufacturing practice (cGMP) qualification, in due time, for its facility.

Devonian currently has 24,989,973 Class A shares outstanding, 8,833,333 warrants giving the right to its holder to subscribe for 8,833,333 Class A shares of Devonian, and 1,261,407 warrants giving the rights to its holder to subscribe for 1,576,758 Class A shares of Devonian, as well as convertible debentures totalling $1,155,000. Devonian has no other common shares or other securities outstanding, and is not a party to any agreement requiring it to issue options, share purchase warrants or other securities convertible into shares. Dr. Andre P. Boulet, president and chief executive officer of Devonian and 9099-3452 Quebec Inc., domiciled or having a place of business at 38 rue des Tournois Blainville (Quebec), J7C4Y3, controlled by Dr. Boulet, own 13,130,602 Class A shares of Devonian, which represents 52.54 per cent of the issued and outstanding Class A shares of Devonian. Dr. Boulet, through ownership of or control or direction over the securities of 9099-3452 Quebec, is a principal securityholder of Devonian and holds, directly or indirectly, 52.54 per cent of the Devonian shares. Dr. Boulet holds 649 Devonian shares personally, and 13,129,953 Devonian shares are held by 9099-3452 Quebec, a corporation affiliated to Fiducie Andre Boulet, which is controlled by Dr. Boulet.

Devonian financial information

Based on audited financial statements for the year ended July 31, 2015, Devonian had no revenue, operating expenses of $761,754 and a net profit of $1,922,555. In addition, as at July 31, 2015, Devonian had assets of $11,733,839, current assets of $2,184,639 and liabilities of $6,545,356.

Summary of the proposed qualifying transaction

Amalgamation

According to the terms of the agreement in principle, Orletto proposes to merge with Devonian on a premoney valuation of $30-million for both corporations, and at an exchange ratio of 5 per cent for the shareholders of Orletto and 95 per cent for the shareholders of Devonian, calculated on a non-diluted basis prior to any issue of securities issuable upon the exercise of the Orletto's options, the Devonian warrants, the conversion of the debentures, and the public offering. Following the amalgamation, on a non-diluted basis, the shareholders of Orletto will hold two million voting shares of the resulting issuer, and the shareholders of Devonian will hold 38 million voting shares of the resulting issuer at a deemed price of 75 cents per share. Each outstanding Orletto common share will be exchanged for approximately 0.3641 of a voting share of the resulting issuer, and each outstanding Devonian Class A share will be exchanged for approximately 1.5206 voting shares of the resulting issuer. Following the amalgamation, the resulting issuer will be named Devonian Health Group Inc. Dr. Boulet, who will be the proposed president, chief executive officer, secretary and director of the resulting issuer, will hold an aggregate of 19,966,523 voting shares of the resulting issuer, some of which will be held by 9099-3452 Quebec, a corporation affiliated to Fiducie Andre Boulet, which is controlled by Dr. Boulet. Matthew Peppler, who will be a proposed director of the resulting issuer, will hold approximately 1,267,174 voting shares of the resulting issuer and approximately 1,267,174 share purchase warrants of the resulting issuer, each share purchase warrant giving the right to its holder to subscribe for one voting share of the resulting issuer at a price of 20 cents per voting share. Pierre Colas, who will be a proposed director of the resulting issuer, will hold approximately 32,155 voting shares of the resulting issuer assuming conversion of the debentures held by Mr. Colas, in principal and interest, as at June 30, 2016. It is anticipated that Dr. Boulet, Mr. Peppler and Mr. Colas will constitute the only insiders of the resulting issuer, and will respectively hold 47.58 per cent, 3.02 per cent and 0.08 per cent of the voting shares of the resulting issuer calculated on a partially diluted basis prior to any issue of securities issuable upon exercise of Orletto's options and the Devonian warrants but after the conversion of the debentures in principal and interest due as at June 30, 2016, and prior to the public offering (as defined herein), and assuming that no subscriber will become an insider through the subscription of more than 10 per cent of the voting shares of the resulting issuer under the public offering.

Public offering between $6-million and $10-million

In order to meet the minimum listing requirements of the exchange, Orletto will complete the public offering concurrent with the qualifying transaction. The public offering will be made by Orletto through Richardson GMP Ltd. acting as lead agent, and including Industrial Alliance Securities Inc. and Mackie Research Capital Corp. as co-leads, on a commercially reasonable efforts basis, for a minimum of eight million units for total gross proceeds to Orletto of $6-million and a maximum of 13,333,333 units for total gross proceeds of $10-million at a price of 75 cents per unit. Each unit consists of one common share of Orletto and one-half of one common share purchase warrant of Orletto. Each warrant entitles its holder to purchase one common share of Orletto at a price of $1.10 per common share for a period of 24 months from the listing date of the resulting issuer. The units will be sold pursuant to the terms and conditions of an agency agreement to be entered into between Orletto, Devonian and the agents. The offering price was determined based upon arm's-length negotiations between Orletto, Devonian and the lead agent.

Agents' compensation in connection with the public offering

In consideration for the services to be rendered by the agents in connection with the public offering, Orletto has agreed to pay the agents a fee equal to 10 per cent of the gross proceeds of the public offering, including the gross proceeds from the sale of any additional units (as defined herein) acquired upon exercise of the overallotment option (as defined herein). As additional compensation, the agents will be granted an option that will entitle the agents to purchase that number of common shares of Orletto equal to 10 per cent of the total number of common shares comprising the units sold pursuant to the public offering (including pursuant to the overallotment option), at a price of 75 cents per agent's share, for a period of 24 months from the closing of the public offering. In order to cover for overallotments, if any, Orletto will grant the agents an overallotment option, exercisable for a period of 30 days from the closing date, to purchase an additional number of units equal to 15 per cent of the number of units sold pursuant to the public offering. Orletto has also agreed to pay a corporate finance fee of $45,000 (plus government sales tax) to the lead agent and reasonable out-of-pocket expenses.

Use of proceeds of the public offering

In the case of the minimum offering and after giving effect to the qualifying transaction, the resulting issuer will achieve the following:

• Complete a large phase 2 clinical trial of Thykamine in patients with atopic dermatitis;
• Carry out business development activities related to Thykamine licensing;
• Meet general and administrative expenses.

In the case of the maximum offering, the following additional developments will be undertaken:

• Complete cGMP extraction qualification;
• Development of the oral and suppository formulations;
• Structural characterization/mechanism of action;
• Research and development of potential pharmaco-kinetic markers.

Summary of proposed directors and officers of the resulting issuer

After the closing of the amalgamation, the board of directors of the resulting issuer will consist of five directors, all of whom will be nominees of Devonian, namely, Dr. Boulet, president, chief executive officer and secretary, Francois Michaud, chief financial officer, Mr. Peppler, director, Dr. Jean Bourgoin, director, and Mr. Colas, director, provided the exchange does not object to such nominations, and such persons are eligible to act as directors pursuant to the requirements of the Canada Business Corporation Act (CBCA).

Dr. Boulet -- president and chief executive officer

Dr. Boulet, has extensive experience in drug development, regulatory affairs, market access, financing and restructuring in the pharmaceutical and biotech industries. A seasoned entrepreneur, he stands out for his combined strengths in applied science, business and finance.

He had a successful career as entrepreneur, as well as partner of the venture capital firm BioCapital LP. Dr. Boulet has developed international expertise in drug development and health economics, working with Hoechst Marion Roussel, Marion Merrell Dow Canada and Laboratoires Nordic Inc. (now Sanofi).

Dr. Boulet holds a bachelor's degree in medical biology from the University of Quebec at Trois-Rivieres and a master's degree in experimental medicine/immunology-immunochemistry, and a PhD in physiology/endocrinology from Laval University in Quebec City. He also completed a postdoctoral fellowship in biochemistry and biophysics at the University of Pennsylvania, in the United States, and a training program in health economics at York University, in the United Kingdom.

Mr. Michaud -- chief financial officer

Mr. Michaud has over 24 years of financial experience in a wide range of industries with public and private corporations in Canada and Europe. Before joining Devonian, he was CFO at Devcore Group, a construction and property development company, CFO at Biosyntech Inc., a Toronto Stock Exchange-listed biotechnology corporation, CFO at Hemera Technologies Inc., a software business, and CFO at Ekco Group, a U.K.-based manufacturing corporation. He also held senior positions in corporate finance with DS Smith PLC, Quebecor Inc., JP Morgan and KPMG.

Mr. Michaud is a CPA, CA, and holds a bachelor's degree in business administration from the Universite du Quebec en Outaouais.

Mr. Peppler -- director

Mr. Peppler is the founder and president of Popgun Trading Co. Inc., a private equity firm founded in 2002 in California and currently incorporated in Florida. Popgun specializes in finding and investing in early-stage disruptive-technology companies focused in the areas of biotechnology, pharmaceuticals and medical instruments. Popgun's team includes a cardiologist, who is head of medical study analysis, an equity analyst with 15 years of experience, and a head trader with 10 years of experience in finance and economics.

Every year, Mr. Peppler travels across Europe, North America and Asia looking for new opportunities. This year, he has taken large positions in promising new companies in Australia, Canada and the United Kingdom.

Mr. Peppler was born in Chappaqua, N.Y. He attended the University of Pennsylvania where he studied at the Wharton School of Business and graduated cum laude from the School of Liberal Arts. In 1981, Mr. Peppler also completed the producer program of the American Film Institute in Beverly Hills, Calif. From 1983 to 1997, Mr. Peppler was under contract, first as a development executive and then as a producer, at studios including Warner Brothers, Disney and Twentieth Century Fox.

After earning his Series 7 and Series 63 securities licences, Mr. Peppler transitioned to a career in finance. He built a large clientele of movie-industry executives and artists, which he brought with him to Paine Webber Group Inc., an American stock brokerage and asset management firm. There he earned a well-deserved reputation as a reliable, successful money manager and broker, specializing in disruptive technology and biotech stocks.

In 2002, Mr. Peppler incorporated the Popgun Trading in Santa Monica, Calif. By 2012, the corporation had grown to the point that, for economic reasons, he moved it to and reincorporated in Boca Raton, Fla., where it is now located.

Dr. Bourgoin -- director

Dr. Bourgouin has over 25 years of global clinical drug development experience in the pharmaceutical industry. He joined Rhone-Poulenc Rorer Canada (now Sanofi Canada) in 1982, and held positions of increasing responsibility serving as vice-president of scientific affairs at Aventis for eight years. In this role, he had responsibility for all activities related to clinical research, health economics and professional education. After leaving Aventis in 2004, he served as chief medical officer of WEX Pharmaceuticals Inc. from 2005 to 2006 and vice-president of medical affairs at Bradmer Pharmaceuticals Inc. from 2006 to 2007. Dr. Bourgouin earned his bachelor's degree at College Jean de Brebeuf in Montreal, an MSc in pharmacology from the University of Montreal and his MD from the same university. He is a licensed member of the Medical Council of Canada and was associate professor in the pharmacology department of the University of Montreal from 1989 to 2006.

Mr. Colas -- director

Mr. Colas has over 30 years of experience in the field of corporate finance. Retired Quebec-based investment banker Mr. Colas was the vice-president and managing director of investment banking at Industrial Alliance Securities from March, 2009, to February, 2014, and senior vice-president of investment banking at Desjardins Securities from April, 2005, to March, 2009. Mr. Colas earned a bachelor's degree in commerce from Concordia University in 1981.

Other matters concerning the amalgamation

The completion of the amalgamation is subject to the approval of the exchange and all other necessary regulatory approvals. The completion of the amalgamation is also subject to additional conditions, including completion of the public offering, various shareholders' approvals, and board of directors approvals of Orletto and Devonian, on the amalgamation, the continuance of Devonian from the QBCA to the CBCA, as well as satisfactory completion of due diligence review by the lead agent, and certain other usual conditions. Orletto does not intend to provide Devonian with any deposit or any advance or loan as permitted by the Policy 2.4. The qualifying transaction will not be a non-arm's-length transaction as none of the directors, officers or insiders of Orletto own any interest in Devonian. The qualifying transaction is exempt of the sponsorship requirements.

Trading of the Orletto common shares will not resume until the closing of the qualifying transaction.

Completion of the transaction is subject to a number of conditions, including, but not limited to, exchange acceptance and, if applicable pursuant to exchange 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.

We seek Safe Harbor.