Marchwell Ventures Ltd. Announces Letter of Intent to Combine With Private Cannabis Company

Vancouver, BC – December 1, 2017: Marchwell Ventures Ltd. (“Marchwell” or the “Company”) (NEX:MVE.H) and Santé Veritas Therapeutics Inc. (“SVT”) are pleased to announce that they have entered into a Letter of Intent dated November 24, 2017 (the “Letter of Intent”) whereby Marchwell will combine with SVT to create a medical and adult use cannabis cultivation company (the “Proposed Transaction”).

Santé Veritas Therapeutics Inc.

SVT is a privately-held company incorporated in British Columbia in 2012 for the purpose of obtaining a licence under Canada’s Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) and to thereafter operate as a medical cannabis cultivation company. Health Canada has recently issued SVT a “Confirmation of Readiness” for a licence under the ACMPR.

SVT is currently constructing its cultivation facilities in Powell River, British Columbia, on a site that was formerly a paper mill. SVT anticipates receipt of Licensed Producer status, permitting it to begin cultivation, in February 2018. SVT is also currently conducting a private placement of common shares of up to $17,500,000 (the “Private Placement”) to fund construction of its facilities. The Proposed Transaction is not a condition to the closing of the Private Placement.

All information provided in this press release related to SVT has been provided by management of SVT and has not been independently verified by management of Marchwell.

The Proposed Transaction

Pursuant to the terms of the Letter of Intent, Marchwell and SVT will negotiate and enter into a definitive agreement incorporating the principal terms of the Letter of Intent. The terms of the Proposed Transaction set out in the Letter of Intent are non-binding, and the Proposed Transaction is subject to the parties successfully negotiating and entering into a definitive agreement on or before December 31, 2017. The Proposed Transaction is subject to applicable exchange, regulatory, shareholder, director and other approvals that may be required; the completion of satisfactory due diligence by Marchwell and SVT; and the satisfaction of other conditions contained in the Letter of Intent.

As part of the Proposed Transaction, it is currently anticipated that Marchwell will:

  • consolidate its outstanding shares on a three into one basis (the “Consolidation”);
  • acquire all of the issued and outstanding shares of SVT pursuant to an amalgamation, arrangement or other similar form of transaction whereby Marchwell will issue common shares of Marchwell to the shareholders of SVT on a one-for-one basis;
  • de-list from the TSX Venture Exchange ("TSXV"), subject to TSXV approval, prior to the completion of the Proposed Transaction and list on the Canadian Securities Exchange (“CSE”).

There are currently 23,438,433 Marchwell common shares issued and outstanding. On closing, including completion of the Private Placement, there will be approximately 248.9 million SVT common shares outstanding. As a result of the Proposed Transaction, Marchwell expects to have approximately 256.8 million issued and outstanding common shares on an undiluted basis. Approximately 3% of those shares will be held by shareholders of Marchwell and 97% will be held by former shareholders of SVT. The only person that is expected to hold greater than 10% of the Marchwell common shares following the closing of the Proposed Transaction, is Michael Orr, the proposed Executive Chairman of Marchwell.

The shares held by new “principals” will be subject to such escrow requirements as may be imposed by the CSE. The Proposed Transaction will be carried out by parties dealing at arm's length to one another and therefore will not be considered to be a non-arm's-length transaction.

Financial Information Concerning Santé Veritas Therapeutics Inc.

The table below sets out certain selected financial information regarding SVT as at, and for the nine months ended, October 31, 2017. Such information is unaudited and was prepared in accordance with IFRS.

  As at October 31, 2017
(C$, millions)
  (unaudited)
Total assets 6.8
Total liabilities 1.2
 
  For the nine months ended
October 31, 2017
(C$, millions)
  (unaudited)
Revenue nil
Net income (loss) (2.3)
 

Change in Management

Following completion of the Proposed Transaction, the management and board of Marchwell will resign and a new board will be appointed.

It is anticipated that the new board of directors and senior management of Marchwell after the completion of the Proposed Transaction will be:

Michael Orr  – Executive Chairman

Mr. Orr is a former Managing Director at First Marathon Securities. He has also founded and grown several successful companies.

John Walker – Chief Executive Officer, Director

Mr. Walker has spent over 25 years working in increasingly senior roles at Fortune 500 companies, including PepsiCo and Yum Brands, both in Canada and internationally.

Mark Herron – Chief Financial Officer

Mr. Herron is a CPA, CA with over 35 years of experience in financial services, banking, marketing and healthcare. Most recently, he was the COO of Sunnybrook Hospital University of Toronto Clinic and an Audit and Tax Partner at Grant Thornton LLP. Mr. Herron is a member of the Institute of Corporate Directors.

Ryan Lee – Chief Science Officer

Mr. Lee is a cannabis researcher and geneticist with experience in the development of rare cannaboid profiles.

Scott McKinley – Director

Dr. McKinley holds a PhD and is a recognized leader in peptide and transdermal delivery science. He is a Senior Canada Research Chair, Industrial Natural Science Chair and Engineering Chair in Biotechnology.

Two additional independent directors are expected to be added prior to the closing of the Proposed Transaction.

Intention to De-List from the TSXV and to Seek Listing on the CSE

The Company intends to take steps to de-list its common shares from the TSXV prior to the completion of the Proposed Transaction. De-listing is subject to TSXV approval.

As part of the Proposed Transaction, the Company intends to apply to list ("Listing") its common shares on the CSE. Listing is subject to CSE approval and meeting listing requirements. The Company is in the process of preparing the requisite documents for submission to the CSE and will seek written consent to the Proposed Transaction and the Listing from the majority of shareholders. There is no assurance that the CSE will provide conditional or final approval of the Company's application for Listing.

The Proposed 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. Investors are cautioned that, except as disclosed in the management information circular or filing statement or other disclosure document to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction, may not be accurate or complete and should not be relied upon. Trading in the securities of Marchwell should be considered highly speculative. In accordance with the policies of the TSXV, Marchwell’s shares are currently halted from trading and will remain halted until further notice.

For further information please contact:

Marchwell Ventures Ltd.

Donn Burchill                                                                             or                               Sandra Lee

President, Chief Executive Officer,                                                                     (604) 488-5427

Chief Financial Officer

(604) 689-1428

Forward-Looking Information

Certain portions of this press release contain “forward-looking information” within the meaning of applicable Canadian securities legislation, which is also referred to as “forward-looking statements”, which may not be based on historical fact. Wherever possible, words such as “will”, “plans,” “expects,” “targets,” “continues”, “estimates,” “scheduled,” “anticipates,” “believes,” “intends,” “may,” “could,” “would” or might, and the negative of such expressions or statements that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved, have been used to identify forward looking information. Such forward-looking statements include, without limitation, SVT’s receipt of Licensed Producer status and the timing thereof, entering into a definitive agreement with respect to the Proposed Transaction, receipt of exchange, regulatory, shareholder, director and other approvals, the completion of the Consolidation, the delisting from the TSXV and the Listing on the CSE, and other factors.

Forward looking statements should not be read as guarantees of future events, future performance or results, and will not necessarily be accurate indicators of the times at, or by which, such events, performance or results will be achieved, if achieved at all. Readers should not place undue reliance on such forward-looking statements, as they reflect Marchwell’s and, where applicable, management of SVT’s, current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Marchwell and, where applicable, management of SVT, are inherently subject to significant business, economic, regulatory, competitive, political and social uncertainties and contingencies. Many factors could cause Marchwell’s and, where applicable, SVT’s actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including among others, SVT’s failure to receive, or delay in receiving, Licensed Producer status, failure to enter into a definitive agreement with respect to the Proposed Transaction, failure to obtain any of the required exchange, regulatory, shareholder director or other approvals for the Proposed Transaction, failure to complete the Consolidation, failure to delist from the TSXV or complete the Listing on the CSE, and the Letter of Intent being terminated, modified or amended. The preceding list is not exhaustive of possible factors.

The Company disclaims any intent or obligation to update or revise publicly any forward-looking statements whether as a result of new information, estimates, future events or results, or otherwise, unless required to do so by applicable laws. The forward looking statements contained herein are expressly qualified in their entirety by this cautionary statement.

The TSX Venture Exchange Inc. 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 TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.