Mr. David Eto reports

HAKKEN CAPITAL CORP. ANNOUNCES PROPOSED QUALIFYING TRANSACTION WITH ADVANCED EXTRACTION SYSTEMS INC.

Hakken Capital Corp. has entered into a non-binding letter of intent (the LOI) dated June 28, 2022, with Advanced Extraction Systems Inc. (AESI), a private company incorporated under the laws of the Province of Prince Edward Island, pursuant to which Hakken and AESI propose to complete an arrangement, amalgamation, share exchange or similar transaction. The transaction is expected to constitute Hakken's qualifying transaction pursuant to Policy 2.4 -- Capital Pool Companies of the exchange. Following the completion of the transaction, the resulting entity will hold all of the assets and continue the business of AESI and intends to list as a Tier 2 industrial issuer on the exchange.

Description of AESI

AESI was founded by Peter Toombs and David Campbell in the spring of 2015 with the goal of designing and manufacturing total extraction solutions for the cannabis, psilocybin, agriculture, aquatic and other emerging high-value bioactive industries across the globe. These range from small bench-scale units to large industrial applications. As a direct result of AESI's comprehensive research and development work, AESI executed a sales contract in 2016 with one of the largest cannabis companies in the world, deploying one of the largest CO2 (carbon dioxide) extraction systems in North America. This innovative equipment has since had three capacity expansions and is still operating continuously 24/seven.

AESI has since launched a number of other systems of different configurations to meet a variety of strict region/application-specific regulations and codes globally (for example, CRN, ASME, PED, CE, CSA, CSAus, cGMP, euGMP, pharma). AESI also provides consulting, project management, design/engineering, equipment provision, training, and other industry specific advice and services. AESI offers high-quality, industry leading, clean and green hardware, and associated software from its manufacturing facility in Prince Edward Island, Canada, utilizing an engineering and fabrication team that has extensive experience in the real-world operation of extraction equipment.

The transaction

Pursuant to the LOI, Hakken will acquire all of the issued and outstanding shares of AESI in consideration for common shares of Hakken. The definitive agreement would provide that on closing, Hakken will issue to shareholders of AESI an aggregate of 32 million Hakken shares at a deemed price of 25 cents per Hakken share. The consideration shares will be issued to the shareholders of AESI on a pro rata basis in exchange for 100 per cent of the issued and outstanding shares of AESI. Some or all of the consideration shares issued as part of the transaction will be subject to escrow provisions pursuant to exchange policies. Subject to exchange approval, Hakken will issue an additional 24 million Hakken shares if the resulting issuer achieves the following milestones within 60 months of the closing of the transaction:

• Thirty per cent of the performance shares will be released upon the resulting issuer attainting gross sales of $10-million with earnings before taxes and appreciation (EBTA) of a minimum of 5 per cent;
• Thirty-five per cent of the performance shares will be released upon the resulting issuer attainting gross sales of $18-million with EBTA of a minimum of 8 per cent;
• Thirty-five per cent of the performance shares will be released upon the resulting issuer attainting gross sales of $22-million with EBTA of a minimum of 10 per cent.

In connection with the transaction, either Hakken or AESI will undertake financing for minimum gross proceeds of $1,125,000. It is anticipated that the securities issuable or convertible into common shares of either Hakken or AESI will be issued at a price of 25 cents per common share or unit. Upon closing of the transaction, in the event the concurrent private placement results in the issuance of securities of AESI, all such securities of AESI issued in connection with the concurrent financing will automatically be exchanged for Hakken shares and other securities of Hakken in accordance with the terms of the transaction. Proceeds of the concurrent financing may be used primarily to finance expansion into various markets, potential acquisitions, working capital and for general corporate purposes related to this transaction.

Effective upon completion the transaction, the resulting issuer will change its name to Advanced Extraction Systems Inc. or such other name as determined by AESI.

Management of resulting issuer

Hakken and AESI anticipate that management of the resulting issuer will comprise the following individuals: Peter Toombs, PEng -- chief executive officer -- Charlottetown, PEI. Mr. Toombs is the co-founder of AESI. He is also the founder of Diversified Metal Engineering, which owned three manufacturing facilities across North America and employed 350-plus personnel. Mr. Toombs has over 35 years of experience in the design and construction of equipment for the biotech, bioenergy, brewery, industrial and marine industries and was awarded Atlantic Canada's Young Entrepreneur of the Year in 1997 and EY Entrepreneur of the Year in 2015.

Al Goodwin, CEng, PEng -- chief operating officer -- Charlottetown, PEI. Mr. Goodwin has over 39 years of experience as a military and civilian engineer with a specialization and experience in operations, management, leadership, team building and compliance.

Kyle MacDonald -- controller -- Charlottetown, PEI. Mr. MacDonald has been with AESI since July of 2018. He has close to 10 years of experience working in finance and accounting. Mr. MacDonald has a BBA from the University of Prince Edward Island with a focus in accounting. He has experience working in e-learning and manufacturing industries.

Dave Campbell, BBA, MBA -- director of strategic opportunities -- Charlottetown, PEI. Mr. Campbell has 25 years of professional sales, marketing and project management experience in the pharmaceutical industry and biotech manufacturing.

Michael MacDonald, director of sales -- Charlottetown, PEI. Mr. MacDonald has over 15 years of sales management and operational experience with eight years related directly to manufacturing in the biotech and food processing industry. He is also the owner of property management company on PEI.

Nick Desroches, PEng -- director of research and development -- Charlottetown, PEI. Mr. Desoches has 10 years of experience working as an engineer in highly regulated industries such as pharmaceuticals, aerospace and food processing equipment. He has been the CEO/owner of a health care company on PEI for five years.

Definitive agreement

The completion of the transaction is subject to the satisfaction of various conditions that are customary for a transaction of this nature, including but not limited to (i) execution of the definitive agreement, (ii) the completion of the concurrent financing; (iii) the approval by the directors and shareholders (if required) of Hakken and AESI, (iv) receipt of all requisite regulatory, stock exchange, or governmental authorizations and consents, including the exchange; (v) the completion of satisfactory due diligence by each of the parties, (vi) delivery of a sponsor report or an exemption from the requirement to deliver a sponsor report to the exchange, (vii) all requisite approval to enact the name change, and (viii) AESI have no long-term debt, other than outstanding loans from Atlantic Canada Opportunities Agency and the Economic Development and Tourism of Prince Edward Island, and having a positive working capital position. There can be no assurance that the transaction will be completed on the terms proposed above or at all.

Finders' fees

Hakken may pay finders' fees through the issuance of up to 1.12 million Hakken shares to arm's-length third parties in connection with the transaction. Any such finders' fees will only be payable in accordance with exchange policies.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the exchange unless exempt in accordance with exchange policies. Hakken is currently reviewing the requirements for sponsorship and if the transaction is not exempt from sponsorship requirements, Hakken may apply for a waiver from the sponsorship requirements pursuant to the policies of the exchange, however, there is no assurance that Hakken will ultimately obtain this exemption. Hakken intends to include any additional information regarding sponsorship in a subsequent press release.

Trading halt

Trading in Hakken shares on the TSX-V was halted on July 5, 2022, and is expected to remain so until closing of the transaction.

Additional information

This is an initial press release. Hakken plans to issue a further press release once it has entered into the definitive agreement to provide, among other things, selected financial information respecting AESI, the resulting issuer and the transaction. Additional information will be included in Hakken's filing statement to be filed in connection with the transaction, which will be available under Hakken's SEDAR profile. Under the terms of the LOI, the parties have agreed to use commercially reasonable efforts to negotiate and settle the definitive agreement by Aug. 31, 2022. The transaction will not constitute a non-arm's-length qualifying transaction (as such term is defined in the policies of the exchange). Accordingly, it is not anticipated that the transaction will be subject to the approval of Hakken's shareholders.

About Hakken Capital Corp.

The company is designated as a capital pool company under CPC policy. Prior to entering into the LOI (letter of intent), the company did not carry on any business other than the identification and evaluation of businesses or assets with a view to completing a proposed qualifying transaction.

We seek Safe Harbor.