Mr. Don Baxter reports

AUDREY CAPITAL CORPORATION AND APPLIED GRAPHITE TECHNOLOGIES CORPORATION ENTER INTO DEFINITIVE AGREEMENT

Audrey Capital Corp. has entered into a qualifying transaction agreement dated June 23, 2023, with Applied Graphite Technologies Corp. (AGT), a private company incorporated under the Business Corporations Act (British Columbia), pursuant to which the corporation will acquire all of the issued and outstanding securities of AGT by way of a three-cornered amalgamation with a wholly owned subsidiary of the corporation (Subco) to be incorporated under the laws of British Columbia, with such acquisition constituting a reverse takeover of the corporation, subject to the terms and conditions outlined below. The corporation, as the resulting issuer following the completion of the proposed transaction, will continue the business of AGT. The corporation intends that the proposed transaction will constitute its qualifying transaction, as such term is defined in TSX Venture Exchange Policy 2.4 (Capital Pool Companies). In connection with the proposed transaction, AGT and the corporation will issue subsequent news releases setting out further information contemplated in Policy 2.4. On closing of the proposed transaction, it is anticipated that the common shares of the resulting issuer will be listed for trading on the TSX-V.

About Applied Graphite Technologies Corp.

Applied Graphite Technologies is a private company which owns a 90-per-cent ownership interest in C-Tech Ceylon (Private) Ltd., a corporation incorporated pursuant to the laws of Sri Lanka, which in turn will own a 100-per-cent ownership interest in the Dodangaslanda properties in Sri Lanka. Applied Graphite Technologies was incorporated on July 12, 2019, under the laws of British Columbia.

The Dodangaslanda properties are on private land in the heart of the vein graphite district, with historical workings and vein graphite outcrops. Vein graphite is naturally high grade (over 95 per cent carbon content in the ground) and does not require primary processing. Testing of vein graphite in lithium-ion battery anodes has shown very high capacities and can be a very good substitute for synthetic graphite.

The technical information in this news release has been prepared by Don Baxter, PEng, a qualified person as defined in National Instrument 43-101 (Standards of Disclosure for Mineral Projects). AGT has commissioned an NI 43-101-compliant technical report on the Dodangaslanda properties, which it expects will be finalized within 60 days.

Summary of the qualifying transaction

The qualifying transaction agreement contemplates the corporation and AGT completing an arm's-length three-cornered amalgamation, pursuant to which resulting issuer shares will be issued to holders of common shares in the capital of AGT.

The corporation currently has 20 million common shares issued and outstanding. Additionally, the corporation has two million options to purchase Audrey shares granted and outstanding and 500,000 warrants to purchase Audrey shares issued and outstanding. There are currently 3,232,250 AGT shares outstanding.

Prior to the closing of the proposed transaction, the corporation shall undertake a consolidation of the Audrey shares on the basis of 1.5 preconsolidation common shares for one postconsolidation share.

In accordance with the terms of the amalgamation agreement, the proposed transaction will be structured as a three-cornered amalgamation involving the corporation, Subco and AGT. In connection with closing of the proposed transaction, it is expected that, among other things:

• AGT and Subco will be amalgamated under the provisions of the Business Corporations Act (British Columbia) and the resulting amalgamated entity will become a wholly owned subsidiary of the corporation (Amalco).
• Each AGT share will be cancelled and the former holders of AGT shares (including the AGT shares issued under the offering (as defined below)) will receive one resulting issuer share for each AGT Share held by them.
• Each issued and outstanding common share in the capital of Subco shall be exchanged for, and the corporation shall be entitled to receive, one fully paid and non-assessable common share in the capital of Amalco and, upon the completion of the amalgamation, all of the issued and outstanding Subco shares shall be cancelled.
• Audrey options will be adjusted to be exercisable into 1,333,333 resulting issuer shares at an exercise price of 15 cents per adjusted Audrey option.
• Audrey warrants will be adjusted to be exercisable into 333,333 resulting issuer shares at an exercise price of 15 cents per adjusted Audrey warrant.
• The resulting issuer will have obtained conditional approval of the TSX-V for the listing on the TSX-V of the resulting issuer shares, as required by the policies of the TSX-V.

It is expected that, following the completion of the proposed transaction, the non-diluted common shares of the resulting issuer shall be held as follows: 3,232,250 resulting issuer shares (16.75 per cent) held by former AGT shareholders; 13,333,333 resulting issuer shares (69.11 per cent) held by existing Audrey shareholders; and 2,727,273 resulting issuer shares (14.14 per cent) held by purchasers under the offering.

The proposed transaction is conditional upon the completion of the offering, as further described below.

The parties to the proposed transaction are at arm's length. It is anticipated that the proposed transaction and amalgamation agreement will be put before the shareholders of AGT for their approval.

Subject to applicable laws and TSX-V policies (including required escrow), it is anticipated that all resulting issuer shares issued in exchange for the AGT shares on closing of the proposed transaction will be freely tradable pursuant to applicable securities laws in Canada.

Conditions to closing

The completion of the proposed transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including, but not limited to (i), receipt of all requisite regulatory, stock exchange, court or governmental approvals, authorizations and consents; (ii) the absence of any material change or a change in a material fact or a new material fact affecting the corporation or AGT; (iii) the completion of the consolidation; (iv) if applicable, the corporation having received appropriate approvals from its shareholders; (v) AGT having received appropriate approvals from its shareholders; (vi) the completion of the offering for gross proceeds of $300,000 (U.S.); (vii) the completion of an NI 43-101-compliant technical report in respect of the Dodangaslanda properties; (viii) the Audrey options having been adjusted to be exercisable into 1,333,333 resulting issuer shares at an exercise price of 15 cents per adjusted audrey option; (ix) the Audrey warrants having been adjusted to be exercisable into 333,333 resulting issuer shares at an exercise price of 15 cents per adjusted Audrey warrant. There can be no assurance that the proposed transaction will be completed on the terms proposed above or at all.

Financing

In connection with the proposed transaction, AGT proposes to issue and sell, on a non-brokered private placement basis, AGT shares for gross proceeds of $300,000 (U.S.), issuing 2,727,273 AGT shares at an issue price of 11 U.S. cents per AGT share. Completion of the proposed offering is a condition to the closing of the proposed transaction.

The resulting issuer

Upon completion of the proposed transaction, the resulting issuer is expected to change its name to Applied Graphite Technologies or such other name as determined by AGT. It is expected that the resulting issuer will be a Tier 2 mining issuer under the policies of the TSX-V.

Concurrently with the completion of the proposed transaction, it is expected that all directors and officers of the corporation will resign and be replaced by nominees put forth by AGT. The directors of the resulting issuer are anticipated to be Don Baxter, Ian Harris, Rodney Stevens, James Ruane and Chaanaka Abeyratne. These directors shall hold office until the first annual meeting of the shareholders of the resulting issuer following closing, or until their successors are duly appointed or elected. The officers of the resulting issuer are anticipated to be Mr. Baxter as chief executive officer, Sunil Sharma as chief financial officer and Melissa Martensen as corporate secretary. Biographies of the proposed directors and officers of the resulting issuer are included below.

Mr. Baxter -- chief executive officer and director: Mr. Baxter is a mining engineer and one of the premier graphite experts outside of China, having built one of only two producing graphite mines in North America. He has extensive Sri Lankan experience.

Mr. Harris -- director: Mr. Harris is mining engineer and executive with 25 years experience, including 10 years in coal. He has experience in project development, construction, restart and operations.

Mr. Stevens -- director: Mr. Stevens is a CFA charterholder with over a decade of experience in the capital markets.

Mr. Ruane -- director: Mr. Ruane has 31 years as a managing director with leading advisory firms such as PwC, KPMG and Huron Consulting and currently as managing member of Whitney Hill Partners. He is chief operating officer of a coal mining, coal processing and coking manufacturing company.

Mr. Abeyratne -- director: Mr. Abeyratne is an attorney at law in Sri Lanka, with nearly 25 years experience. He has been involved with the graphite mining industry in Sri Lanka for the last eight years and is an expert in permitting and compliance.

Mr. Sharma -- chief financial officer: Mr. Sharma is a CPA with over 20 years of experience with public and private mining companies.

Ms. Martensen -- corporate secretary: Ms. Martensen is an experienced administrator with over 12 years as a corporate secretary, primarily in junior mining companies. Prior to transitioning to junior mining, she worked in private banking at RBC. Ms. Martensen graduated with a degree in finance from UNBC in Prince George. She is a member of the Governance Professionals of Canada.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSX-V unless exempt in accordance with TSX-V policies. The corporation intends to apply for an exemption from the sponsorship requirements.

Trading halt

Trading in the common shares of the corporation is currently halted in accordance with the policies of the TSX-V and the trading of the corporation's common shares is expected to remain halted pending completion of the proposed transaction.

Filing statement

In connection with the proposed transaction and pursuant to the requirements of the TSX-V, the corporation will file a filing statement on its issuer profile on SEDAR, which will contain details regarding the proposed transaction, any financing completed prior to closing of the proposed transaction, the corporation, AGT and the resulting issuer following completion of the proposed transaction.

About Audrey Capital Corp.

Audrey is a capital pool company governed by the policies of the TSX-V. Audrey's principal business is the identification and evaluation of assets or businesses with a view to complete a qualifying transaction. Investors are cautioned that trading in the securities of a capital pool company should be considered highly speculative.

We seek Safe Harbor.