Vancouver, B.C., February 20, 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, 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.

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 (each, 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 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

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.

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.