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File: Attachment NR - Feb. 21, '20 re QT with Santa Marta104479 final.pdf
Jinhua Capital Corporation JINHUA CAPITAL CORPORATION
303 - 570 Granville Street
JHC.H:TSX.V Vancouver, British Columbia
V6C 3P1
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
Jinhua Capital Corporation to acquire Santa Marta Life Sciences Corp. in Proposed Qualifying
Transaction
February 21, 2020 TSX Venture Exchange
Trading Symbol: JHC.H
Vancouver, B.C., February 21, 2020 Jinhua Capital Corporation (TSXV: JHC.H) (the "Company" or
"Jinhua") is pleased to announce that the Company has entered into a definitive business combination
agreement dated effective February 19, 2020 (the "Agreement") with Santa Marta Life Sciences Corp.
("Santa Marta") and a wholly-owned subsidiary of the Company, 1240618 B.C. Ltd. ("Newco"), whereby
the Company has agreed to acquire all of the issued and outstanding securities of Santa Marta
(the "Transaction"). Santa Marta is an arm's length company incorporated under the Business
Corporations Act (British Columbia) (the "BCBCA").
Jinhua is a "Capital Pool Company" under the policies of the TSX Venture Exchange (the "TSXV"). It is
anticipated that the proposed Transaction will constitute a Qualifying Transaction pursuant to Policy 2.4
of the TSXV. Following the completion of the proposed Transaction, the resulting entity (the "Resulting
Issuer") will hold all of the outstanding securities of Santa Marta and will continue the business of Santa
Marta.
About Santa Marta
Santa Marta will specialize in developing, manufacturing and commercializing high-quality CBD & THC
oils for distribution to the global medical marketplace. The company has already secured three licenses
from the Colombian government, including: (1) Cultivation, Extraction, Export and Sale of Non-
psychoactive Cannabis; (2) Cultivation and Sale of Psychoactive Cannabis; and (3) Manufacture of THC
Cannabis Derivatives. Santa Marta has a 25-year lease on 34.5 hectares of agricultural land in the Santa
Marta region of Colombia. The lease includes a right of first refusal to purchase the land and can be
extended to include an adjacent 600 hectare parcel. In addition, Santa Marta has already constructed
one 10,000 square foot (1,000 square meter) greenhouse and a laboratory on the cultivation land, and
will be building its planned 7,000 square foot (700 square meter) cannabinoid extraction, processing and
final products manufacturing facility in the Colombian free trade zone near Santa Marta, providing the
company with significant tax advantages. The approximate costs associated with construction of this
facility are estimated to be between $1,200,000 and $1,500,000, including equipment and construction
expenses.
Santa Marta has identified two primary revenue streams: (a) cultivation of its own flower and hemp
biomass; and (b) extraction, processing and packaging of biomass from its cultivation facility and from
the facilities operated by its contract farmers. Santa Marta has negotiated with local farm owners who,
collectively, control 2,000+ hectares of prime agricultural land in the Santa Marta area. With these farm
owners, Santa Marta has agreed to apply its cultivation licenses to their respective farmlands and
provide cultivation training and support. In exchange, the farm owners will cover all infrastructure,
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labour and other operational costs, pay Santa Marta a monthly management fee and offer Santa Marta
a right-of-first-refusal to purchase all biomass cultivated on such lands. Among other things, it is a
condition of these agreements that all crops are produced under Good Agricultural & Collection Practice
guidelines (GACP) developed by the World Health Organization. It is anticipated that these revenue
streams will commence 15-18 months from completion of the Transaction.
Nick Standish, a resident of British Columbia, is the sole control person of Santa Marta. As of the date
hereof, Stamatis Ventures Ltd, a company controlled by Mr. Standish, owns and controls approximately
5,700,100 Class A common voting shares of Santa Marta (each, a "Santa Marta Share"), representing
approximately 28.8% of Santa Marta's currently outstanding share capital.
About Jinhua
As a Capital Pool Company under the policies of the TSXV, Jinhua's principal business is the identification
and evaluation of assets or businesses with a view to completing a Qualifying Transaction. Jinhua has
not commenced commercial operations and has no assets other than a minimum amount of cash.
Effective May 16, 2012, Jinhua was transferred to the NEX Board of the TSXV.
The Transaction
Santa Marta Financing
Santa Marta is conducting a private placement offering of units of Santa Marta (each, a "Santa Marta
Unit") at a price of $0.68 per Santa Marta Unit to raise aggregate gross proceeds up to $2,000,000
(the "Santa Marta Financing"), with each Santa Marta Unit is comprised of one Santa Marta Share and
one common share purchase warrant, with each warrant being exercisable to purchase one additional
Santa Marta Share for a period of two years at an exercise price of $1.39, subject to acceleration in
certain circumstances. The Santa Marta Financing will be completed on or prior to completion of the
Transaction, and is not dependent on the closing of the proposed Transaction.
Proceeds from the Santa Marta Financing will be used by Santa Marta and the Resulting Issuer
(assuming completion of the Transaction) for strategic growth initiatives and general corporate
purposes. Santa Marta may pay finder's fees in accordance with applicable laws in connection with the
Santa Marta Financing.
Jinhua Financing
In connection with the completion of the proposed Transaction, Jinhua seeks to complete a private
placement offering of subscription receipts of Jinhua (each, a "Subscription Receipt") at a price of $0.22
per Subscription Receipt (the "Jinhua Financing"). On the satisfaction of certain escrow release
conditions immediately prior to the completion of the Transaction, each Subscription Receipt will be
automatically converted into units of Jinhua (each, a "Jinhua Unit"), with each Jinhua Unit comprised of
one post-Consolidation (as defined below) common share of Jinhua (each, a "Jinhua Share") and one
common share purchase warrant, with each warrant being exercisable to purchase one additional post-
Consolidation Jinhua Share for a period of two years at an exercise price of $0.45, subject to
acceleration in certain circumstances.
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Proceeds from the Jinhua Financing will be used by the Resulting Issuer for strategic growth initiatives
and general corporate purposes. Jinhua may pay finder's fees in accordance with applicable laws in
connection with the Jinhua Financing.
The Transaction
Pursuant to the Agreement, the Company has agreed to acquire all of the issued and outstanding
securities of Santa Marta by way of a three-cornered amalgamation (the "Amalgamation") between the
Company, Santa Marta and Newco pursuant to the provisions of the BCBCA. The Amalgamation will
result in a reverse takeover of the Company by the security holders of Santa Marta and the business of
the Company will become the business of Santa Marta. The Amalgamation will result in a change of
control of the Company and together with the Jinhua Financing is expected to constitute Jinhua's
Qualifying Transaction under the policies of the TSXV.
As at the date hereof, Jinhua has 4,266,667 Jinhua Shares (on a pre-Consolidation basis) issued and
outstanding, excluding any Jinhua Shares to be issued pursuant to the Jinhua Financing. Santa Marta has
19,808,933 Santa Marta Shares issued and outstanding. Prior to the completion of the Amalgamation
and the Jinhua Financing, the Company will complete a consolidation (the "Consolidation") of the Jinhua
Shares on the basis of five (5) pre-Consolidation Jinhua Shares for each one (1) post-Consolidation
Jinhua Share.
As consideration for the proposed Transaction, holders of the issued and outstanding Santa Marta
Shares (the "Santa Marta Shareholders") will receive 3.098 post-Consolidation Jinhua Shares
(collectively, the "Consideration Shares") for each Santa Marta Share held immediately prior to the
effective time (the "Exchange Ratio") at a deemed price of $0.22 per post-Consolidation Jinhua Share.
The Resulting Issuer will change its name to "Santa Marta Life Sciences Inc." or such other name as
agreed to by the parties. Any issued and outstanding convertible series of Santa Marta immediately
before the effective time will be exchanged for equivalent securities of the Resulting Issuer, adjusted in
accordance with the Exchange Ratio.
Subject to TSXV approval and the availability of applicable exemptions from prospectus and registration
requirements, and in addition to finders fees payable in connection with the Jinhua Financing and the
Santa Marta Financing, Fairchild Consulting Corp. and Tonto Investments Inc. will receive finder's fees
equal to $250,000 each for introducing Santa Marta to the Company in connection with the Transaction,
and payable in units of the Resulting Issuer (each, a "Resulting Issuer Unit") issuable at a value of $0.22
per Resulting Issuer Unit and to be issued on the completion of the Transaction. Each Resulting Issuer
Unit shall be comprised of one common share in the capital of the Resulting Issuer (ea ch, a "Resulting
Issuer Share"), and one common share purchase warrant, with each warrant being exercisable to
purchase one additional Resulting Issuer Share for a period of two years at an exercise price of $0.45.
The Company deals with each of Fairchild Consulting Corp. and Tonto Investments Inc. on an arm's
length basis.
Completion of the Transaction will be subject to a number of other conditions, including the completion
of the Jinhua Financing and the Santa Marta Financing for combined proceeds of no less than $4.2
million, completion of the Consolidation, the receipt of all required shareholder and regulatory
approvals, including the approval of the TSXV, satisfaction of all initial listing requirements of the TSXV
and all requirements under the policies of the TSXV relating to the completion of the proposed
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Transaction. The Transaction is expected to be completed by June 1, 2020, or such other date as
mutually agreed to by Jinhua and Santa Marta.
Certain of the post-Consolidation Jinhua Shares issuable to new Principals of the Resulting Issuer
pursuant to the Transaction may be subject to the escrow requirements of the TSXV or hold periods as
required by applicable securities laws. It is not expected that approval of the shareholders of Jinhua will
be required for the Transaction under the policies of the TSXV. A summary of financial information with
respect to Santa Marta will be included in a subsequent news release and the filing statement which will
be prepared and filed in accordance with the policies of the TSXV.
The Transaction is not a Non-Arm's Length Qualifying Transaction.
Directors, Officers and Insiders of the Resulting Issuer
Upon completion of the Transaction, it is expected that Negar Adam will resign as CEO, CFO, corporate
secretary and a director of the Company, and Graeme Sewell and Spencer Smyl will resign as directors of
the Company. The board of directors of the Resulting Issuer is expected to initially consist of four
directors, being Nick Standish, Blair Lowther, Derek Boyd and an additional nominee to be determined
at a later date. Nick Standish is expected to be appointed as the CEO of the Resulting Issuer, Kelsey Chin
is expected to be appointed as the CFO of the Resulting Issuer, and Blair Lowther is expected to be
appointed as the Chief Strategy Officer of the Resulting Issuer. It is expected that Nick Standish will own
or control more than 10% of the Resulting Issuer Shares following completion of the Transaction.
Additional information about the currently known proposed directors and officers of the Resulting Issuer
is provided below, and further information will be provided in the filing statement to be filed with the
TSXV in connection with the Transaction.
Nick Standish Chief Executive Officer and Director
Mr. Standish is the founder of Santa Marta. He has spent the past 15 years developing his business skills
as an active investor, project manager and advisor in a wide variety of industries including financial
services, technology, natural resources, and the medical cannabis industry. Mr. Standish is the President
of Stamatis Ventures Ltd., through which he has been involved in and/or co-founded a number of
cannabis-related projects. He is a director of Veritas Pharma Inc. (CSE: VRT), Integro Management
Solutions, and an advisor for Envio Systems Inc., Miracle Valley Medicinal Alternatives and Blocpal
International.
Blair Lowther Chief Strategy Officer and Director
Mr. Lowther was formerly a securities and corporate lawyer at Miller Thomson LLP, where he advised
companies listed on the New York Stock Exchange, Toronto Stock Exchange, TSXV and Canadian
Securities Exchange. Mr. Lowther is an expert in structuring financial and legal strategies for early-stage
businesses seeking to expand their operations and maximize shareholder value. His legal practice
focused on advising companies in emerging industries, such as biosciences, cannabis and blockchain. Mr.
Lowther is a director of Veritas Pharma Inc. (CSE: VRT) and Chair of Sport BC. Mr. Lowther has a BA (Dist)
and a JD from the University of British Columbia and is a member of the Canadian Bar Association and
the Law Society of BC.
Derek Boyd Director
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Mr. Boyd is the Director of Technology for Georgia Main Food Group (GMFG), a Canadian grocer with 30
locations in British Columbia, where he is leading a full digital transformation of their back office and
retail systems. Prior to GMFG, Mr. Boyd was the President and Chief Technology Officer of Miracle
Valley Medicinal Alternatives (MVMA), a Canadian cannabis producer located in Mission, BC. At MVMA,
Mr. Boyd was responsible for managing the company's overall corporate direction and strategy,
facilitating company activity in finance, technology, regulatory and security compliance, and human
resources. Mr. Boyd attended the University of Washington and holds an MBA from Simon Fraser
University.
Kelsey Chin Chief Financial Officer
Kelsey Chin, a Chartered Professional Accountant, has over 15 years of experience in audit, finance and
accounting within the mining, exploration, healthcare and technology industries. She has served as
director and executive officer for numerous publicly traded companies, where she was responsible for
all aspects of financial services, financial reporting, corporate governance, and has led numerous
financings, mergers and acquisitions to successful completion. As Chief Financial Officer of various
publicly-listed companies, Kelsey is intricately familiar with accounting principles and analyzing and
preparing financial statements within the industry which the Resulting Issuer will operate.
Sponsorship
Sponsorship of the proposed Transaction is required by the TSXV unless an exemption or waiver from
this requirement can be obtained in accordance with the policies of the TSXV. Jinhua intends to apply for
a waiver of the sponsorship requirement; however, there is no assurance that a waiver from this
requirement can or will be obtained.
Other Matters
Trading in the Jinhua Shares has been halted in accordance with the policies of the TSXV. Trading is
expected to resume upon a successful closing of the Transaction.
Santa Marta supplied all information contained in this news release with respect to Santa Marta for
inclusion herein, and Jinhua and its directors and officers have relied, without independent
investigation, on Santa Marta for any such information.
Completion of this Transaction is subject to a number of conditions, including shareholder approval, if
required, completion or waiver of sponsorship, receipt of all required regulatory approvals, including the
approval of the TSXV, completion of satisfactory due diligence reviews, satisfaction of all initial listing
requirements of the TSXV and all requirements under the policies of the TSXV relating to the completion
of the proposed Transaction. 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 filing statement or any management information
circular 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 Jinhua Capital Corporation. should be considered highly speculative.
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The TSXV has in no way passed upon the merits of the proposed Transaction and has neither approved
nor disapproved the contents of this news release.
Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV)
accepts responsibility for the adequacy or accuracy of this release.
The securities of Jinhua have not been and will not be registered under the United States Securities Act of
1933, as amended and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirement. This press release shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful.
For further information, please contact:
Negar Adam
Chief Executive Officer and Director
T: (604) 646-6906
E: negar@cococapital.ca
Disclaimer for Forward-Looking Information
Certain statements in this release are forward-looking statements, which reflect the expectations of
management regarding the Transaction and Santa Marta'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 Transaction; terms of the Transaction; terms of the Jinhua
Financing and the Santa Marta Financing; the proposed directors and officers of the Resulting Issuer;
insiders of the Resulting Issuer; and the ability of the Company to obtain a waiver from sponsorship from
the TSXV. 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 the
risk that the TSXV may not approve the Transaction; that the Transaction may not be completed for any
other reason; or that factors may occur which impede or prevent Santa Marta's future development
plans. 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 Jinhua 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 Jinhua 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.
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