Mr. Harry Chew reports

DRAGONFLY CAPITAL CORP. ENTERS INTO A NEW LETTER OF INTENT TO ACQUIRE OLEAVICIN LLC

Dragonfly Capital Corp. has entered into a new letter of intent to acquire all of the membership interests in Oleavicin LLC, a privately held California-based manufacturer and distributor of 100-per-cent all-natural treatments for skin ailments, including cold sores, canker sores, fever blisters, psoriasis, shingles and dry itchy skin. The new LOI supersedes and replaces the letter of intent entered into in respect of the transaction on July 1, 2015.

Dragonfly's proposed acquisition of Oleavicin is intended to serve as the basis for Dragonfly's qualifying transaction under the policies of the TSX Venture Exchange and is subject to TSX-V acceptance. The resulting issuer will be classified as a Tier 2 issuer in accordance with TSX-V policies in the biotech/pharmaceutical sector.

There are currently 970,000 membership units issued in Oleavicin, of which Craig Makela and Cindy Makela (the founders of Oleavicin), through The Makela Living Trust, a U.S. resident trust, control 460,530 membership units, representing 47.48 per cent of the issued membership units in Oleavicin. Since the date of the initial LOI, Harry Chew, the president, chief executive officer, chief financial officer and a director of Dragonfly, has acquired 307,020 membership units through private agreements, representing 31.65 per cent of the issued membership units in Oleavicin. All other holders of Oleavicin membership units are residents of the United States. Given Harry Chew's holdings of membership units, the transaction is now a non-arm's-length qualifying transaction and will require majority of the minority shareholder approval in accordance with the policies of the TSX-V.

About Oleavicin LLC

Oleavicin's business was founded in 2012 by Mr. Makela and Ms. Makela, and is headquartered in Goleta, Calif. Oleavicin is the first brand to deliver a 100-per-cent all-natural olive leaf botanical gel in a patented proprietary formula to instantly treat cold sores, canker sores, fever blisters, and a variety of other painful and unsightly skin conditions. Since the date of the initial LOI, Oleavicin has added a medicinal lip balm and plans on extending its product line to include caplets, shingles kit, eczema cream, shampoos and conditioner, and other related products incorporating its patented formula. Oleavicin has received FDA (U.S. Food and Drug Administration) approval to sell its product in the U.S., and has recently received its NPN (natural product number) licence to sell its product in Canada. The gel and lip balm are currently available for purchase on-line and in approximately 1,000 grocery, natural products and independent stores in the U.S.

When the company first entered into the initial LOI in July, 2015, Oleavicin was in the initial marketing stage with distribution of its products in only 100 stores. Since then, Oleavicin has now increased its national distribution to over 1,000 locations with two product lines currently available. More products are currently being developed, and Oleavicin expects new products to be ready for distribution before the end of 2017.

Given these developments, the parties are of the view that Oleavicin's enterprise value has significantly increased from the date of the initial LOI, and therefore, the parties have agreed to amend the terms of the transaction.

Amended terms of the transaction

The amended terms of the transaction, as set out in the new LOI, are as follows:

1. Dragonfly will issue to Oleavicin's members an aggregate of 25 million common shares (increased from 15 million) of Dragonfly in exchange for all of the membership interests of Oleavicin.
2. Dragonfly will raise additional funds by way of a private placement of a minimum of four million units of the company and a maximum of seven million units at a price of 15 cents per unit, each unit consisting of one common share of Dragonfly and one share purchase warrant. Each warrant will entitle the holder to purchase an additional common share of Dragonfly at a price of 20 cents per common share for a period of two years from the date of issuance. The concurrent financing will close concurrently with the closing of the transaction. On closing, the members of Oleavicin will together hold approximately 71 per cent of the total issued and outstanding common shares of Dragonfly, assuming completion of the minimum amount of the concurrent financing.
3. Upon completion of the transaction, the new five-person board of directors of Dragonfly will comprise Harry Chew, Sonny Chew, Trent Hunter, Mr. Makela and Ms. Makela. Before co-founding Oleavicin, Mr. Makela and Ms. Makela started Santa Barbara Olive Company and ran the business for 28 years from a local start-up to a world-recognized national brand, when it was eventually sold to a large international food company in 2009. Mr. Makela has held a number of high-profile leadership positions within the specialty food and natural products marketplace, including founder of the California Specialty Food Group, founder and board member of the South California Culinary Guild, and committee member with the American Institute of Wine and Food. Ms. Makela was a founder of the Bank of Santa Barbara and the California Specialty Trade Association. Her deep knowledge and passion for natural and gourmet products led her to the role of founder of the Santa Barbara Vintners' Association and as one of the first members of the American Institute of Wine and Food. The parties intend that the senior officers of Dragonfly upon completion of the transaction will be: Mr. Makela, president and CEO; Harry Chew, CFO; Ms. Makela, vice-president, marketing; and Sonny Chew, secretary.

Harry Chew and Pacific Paragon, a private company controlled by him (collectively, Paragon), have loaned the sum of $150,000 (U.S.) to Oleavicin in connection with the transaction. Paragon intends to seek repayment of the loan from the proceeds the concurrent financing or through the conversion of the outstanding loan amount into common shares of the resulting issuer. The transaction is subject to the approval of the TSX-V. The parties will negotiate a definitive share exchange agreement to reflect the terms of the new LOI.

Conditions for closing

The closing of the transaction with Oleavicin will be subject to a number of conditions, including, but not limited to, the following:

1. Completion by Dragonfly of its due diligence reviews of Oleavicin prior to April 30, 2017;
2. Receipt of historical audited financial statements of Oleavicin and such other valuations or assessments reasonably required to establish the value of the Oleavicin interests, and the number of exchanged shares to be issued in exchange therefore, all in a form satisfactory to Dragonfly;
3. Execution of the share exchange agreement;
4. Receipt of regulatory approval, including acceptance of the share exchange agreement by the NEX and TSX-V and Dragonfly establishing to the TSX-V that it will meet all required minimum listing requirements of the TSX-V as a Tier 2 issuer, postclosing;
5. Shareholder approval of Dragonfly, if required by the TSX-V;
6. Closing of the concurrent financing of a minimum of $600,000;
7. The entering into employment and management agreements, including non-competition terms, with Mr. Makela, Ms. Makela and Harry Chew.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSX-V unless an exemption from the sponsorship requirement is available. Dragonfly intends to either engage a member firm to act as the sponsor for this qualifying transaction or rely upon an exemption from the sponsorship requirement, if available.

Trading halt

As required by the policies of the TSX-V and the NEX, trading of Dragonfly's common shares has been halted in connection with the announcement of the qualifying transaction. Trading will remain halted pending the satisfaction of the TSX-V's initial filing requirements in respect of the qualifying transaction and the TSX-V's initial assessment of the transaction and related matters. Shareholders are advised that trading may remain halted until the TSX-V provides its final acceptance to 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.

We seek Safe Harbor.