Mr. Zachary Stadnyk reports

DC ACQUISITION CORP. UPDATES QUALIFYING TRANSACTION WITH KIARO BRANDS INC.

DC Acquisition Corp. has provided the following update to its news release dated May 11, 2020. The company has entered into a definitive agreement dated June 9, 2020, with Kiaro Brands Inc. to combine the businesses of the two companies. The proposed transaction will be an arm's-length transaction and, if completed, will constitute the company's qualifying transaction (as such term is defined in Policy 2.4 of the TSX Venture Exchange). Upon completion of the proposed transaction, the resulting issuer will carry on the business of Kiaro.

Proposed transaction summary

The proposed transaction is expected to be structured by way of a three-cornered amalgamation, with Kiaro amalgamating with a wholly owned subsidiary of the company incorporated solely for that purpose. The parties anticipate completing the proposed transaction on or about Aug. 17, 2020, or as otherwise agreed to by the parties.

The merger agreement provides that the shares of the company will first be consolidated on the basis of 1.7142857143 old shares for each new share, then an additional approximately 107,993,707 shares of the company will be issued to the current shareholders of Kiaro at a deemed price per share of 18 cents, resulting in a total of approximately 128,410,374 shares to be outstanding posttransaction. Current shareholders of the company will hold approximately 15.9 per cent of the issued and outstanding shares upon completion of the proposed transaction. There will also be an additional approximately 73,440,585 shares reserved for issuance upon the exercise of conversion rights contained in various debentures, warrants and options, at exercise prices ranging from 14.4 cents to 60 cents. In conjunction with the merger, the name of the company is expected to be changed to Kiaro Holdings Corp. The proposed transaction is conditional on the approval of the exchange, the shareholders of Kiaro, and the usual terms and conditions customary to transactions of this nature.

The company has provided Kiaro with a loan of $25,000, and upon receipt of approval from the exchange, an additional loan of $200,000 will be advanced on commercial terms for a one-year term with an interest rate at 4 per cent.

Daniel Petrov, director and chief executive officer of Kiaro, residing in Vancouver, B.C., may be considered a control person of Kiaro (as such term is defined in Policy 1.1 of the exchange).

Additional information regarding the proposed transaction will be set out in a filing statement, which will be filed with the exchange and posted on the company's profile on SEDAR.

About Kiaro Brands Inc.

Kiaro Brands is the resulting company of an amalgamation under the Business Corporations Act (British Columbia) of Aura Cannabis Inc. and Elora Capital Ltd. on Sept. 9, 2019.

Kiaro Brands operates Kiaro, an independent Canadian cannabis retailer based in Vancouver, B.C., as well as a wholesale subsidiary based in Saskatchewan. Kiaro currently operates four storefronts in British Columbia and two in Saskatchewan. It is currently developing another store in Nanaimo. It has plans to open several new cannabis stores nationwide within the next year, subject to availability of both capital and regulatory approvals. Kiaro has established wholesale and on-line sales. Collectively, Kiaro's leadership team has a proven record of expanding retail brands across North America, with significant bricks and mortar retail and on-line experience.

Select financial results for Kiaro

Kiaro has prepared audited financial statements for the 13-month period ended Jan. 31, 2020. During the period, Kiaro's revenues were largely progressive, given the increase in retail locations and acquisition of a wholesale cannabis business. For the period, revenues totalled $5,171,836, compared with nil revenues for the fiscal year ended Dec. 31, 2018. In addition, Kiaro opened the following retail cannabis stores during the period: Saskatoon in January, 2019, LaRonge in May, 2019, Vancouver in August, 2019, and Victoria in January, 2020. Subsequently, its Port Moody location opened in March, 2020, and its second Vancouver location in July, 2020, and Kiaro is scheduled to open its Nanaimo location in late August, 2020. At the end of the period, Kiaro had a current ratio of 1.87, total assets of $13,992,304 and a cash balance of $1,418,764. Subsequent to the period, Kiaro closed a non-brokered financing of $1-million in May, 2020. For additional information, please refer to the full audited financial statements for the period, a copy of which will be included in the filing statement.

About DC Acquisition Corp.

The company was incorporated under the Business Corporations Act (British Columbia) on Nov. 28, 2017, and is a capital pool company (as defined in the policies of the exchange) listed on the exchange. The company has no commercial operations and no assets other than cash.

Shareholder approval

Since the proposed transaction is not a non-arm's-length qualifying transaction (as such term is defined in Policy 2.4 of the exchange), the company will not be required to obtain shareholder approval of the proposed transaction. In addition, the proposed transaction is not a related-party transaction as such term is defined by Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions) and is not subject to Policy 5.9 of the exchange. As a result, no meeting of the shareholders of the company is required pursuant to corporate law, Policy 2.4 of the exchange or securities laws.

Directors, officers and other insiders of the resulting issuer

The directors and officers of the resulting issuer will be as follows.

Daniel Petrov, 39, chief executive officer and director

Mr. Petrov is an accomplished cannabis industry leader with a decade of experience working with a number of successful cannabis ventures and acting as a consultant to industry-related companies worldwide. He is the current chief executive officer of Kiaro, co-founder of Aurora Cannabis and former executive vice-president from 2014 to 2016.

Mr. Petrov held board positions with various cannabis companies and is part of a working group of Canadian experts who advise international governments on developing cannabis regulations.

Mr. Petrov is an employee of Kiaro and has entered into a non-competition/confidentiality agreement with Kiaro. It is expected that he will devote 100 per cent of his time to the business of the resulting issuer to effectively fulfill his duties as the chief executive officer and director of the resulting issuer.

Mr. Petrov will be the only shareholder holding more than 10 per cent of the issued and outstanding shares of the resulting issuer. His holdings immediately postclosing will be approximately 32.8 per cent on a non-diluted basis.

Herrick Lau, 54, director

Mr. Lau is an experienced investment banking professional who has conducted transactions in initial public offerings, reverse takeovers, financings, mergers and acquisitions, divestitures, and various advisory services. Through his over 20 years of experience in financial management and corporate finance, Mr. Lau is experienced in developing financing strategy, liaising with external parties, devising business development plans and maintaining compliance with corporate governance. Since 2007, Mr. Lau has been the managing director of Baron Global Financial Canada Ltd., a Vancouver-based financial advisory firm. He also has experience as a senior financial executive in public companies, having acted as chief financial officer and/or director for various public companies listed on the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian Securities Exchange. Mr. Lau currently sits on the B.C. local advisory committee of the TSX Venture Exchange.

Mr. Lau obtained his bachelor and master degrees in business and economics from Simon Fraser University in Vancouver, B.C., Canada, and is a charter holder of the chartered financial analyst designation.

It is expected that Mr. Lau will devote 10 per cent of his time to the business of the resulting issuer to effectively fulfill his duties as a director of the resulting issuer.

Janet Hoffar, 43, chief financial officer, corporate secretary and director

Ms. Hoffar is a seasoned finance professional with over 20 years of retail financial and operations experience. Having worked 15 years, as controller and director of finance and operations, through a seven- to 60-store growth period with Rocky Mountain Chocolate Factory Canada, she then launched her consulting firm Stonestreet Management, where she handled CFO duties for a number of Canadian retailers and technology companies. From 2014 to 2019, Ms. Hoffar held the positions of CFO and director of a wealth management firm, Fieldhouse Capital Management. She joined Kiaro in 2019 and brings a deep understanding of both retail and capital markets to her role as CFO.

Ms. Hoffar is an employee of Kiaro and has entered into a non-competition/confidentiality agreement with Kiaro. It is expected that she will devote 100 per cent of her time to the business of the resulting issuer to effectively fulfill her duties as the chief financial officer and director of the resulting issuer.

Shawn Graham, 52, director

Mr. Graham served as the 31st premier of the province of New Brunswick, chair of the Council of The Federation, co-chair of the Northeastern Governors and Eastern Canadian Premiers, and co-chair of a Pan-Canadian Trade Mission to China. Currently, Mr. Graham is president and chief executive officer of G&R Holdings Inc., a company that assists in the development and implementation of international projects and business alliance strategies.

Mr. Graham was awarded an honorary doctor of laws degree from the University of New Brunswick and was named visionary of the year by the Global Intelligent Community Forum in New York, N.Y.

It is expected that Mr. Graham will devote 5 per cent of his time to the business of the resulting issuer to effectively fulfill his duties as a director of the resulting issuer.

Eleanor Lynch, 41, president of operations

Ms. Lynch is a retail professional with over 10 years in senior leadership roles for various national brands. From 2014 to 2018, Ms. Lynch held the role of national director of operations for Lids Sports Group in Canada. She was responsible for overseeing store sales and operations that included a portfolio of 145 stores across all provinces.

Ms. Lynch is an employee of Kiaro and has entered into a non-competition/confidentiality agreement with Kiaro. It is expected that she will devote 100 per cent of her time to the business of the resulting issuer to effectively fulfill her duties as the president of operations of the resulting issuer.

Zachary Stadnyk, 28, director

Currently the chief executive officer and a director of the company, Mr. Stadnyk will remain a director after completion of the proposed transaction.

Mr. Stadnyk is a corporate finance and advisory professional. Mr. Stadnyk has acted as a consultant of FV Pharma Inc., an Ontario-based licensed cannabis producer, and previously served as a corporate finance employee for The Supreme Cannabis Company Inc., a publicly traded company currently listed on the Toronto Stock Exchange. Mr. Stadnyk has held various senior positions in both private and public companies.

Mr. Stadnyk holds a BComm in entrepreneurial management. It is expected that he will devote 5 per cent of his time to the business of the resulting issuer to effectively fulfill his duties as a director of the resulting issuer.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the exchange unless exempt in accordance with the exchange policies. The company has not retained a sponsor in respect of the proposed transaction and will be seeking an exemption from this requirement by the exchange.

Trading in the company's common shares

Trading in the company's common shares has been halted in compliance with the policies of the exchange. Trading in the company's common shares will remain halted pending the review of the proposed transaction by the exchange and satisfaction of the conditions of the exchange for resumption of trading.

We seek Safe Harbor.