Broadway Gold Mining Ltd Announces Proposed Acquisition of Medcolcanna (BVI) Corp. and Related Financing Transactions

Broadway Gold Mining Ltd Announces Proposed Acquisition of Medcolcanna (BVI) Corp. and Related Financing Transactions

10/23/2018

Not for distribution to United States newswire services or for release publication, distribution or dissemination directly, or indirectly, in whole or in part, in or into the United States.

Oakville, ON October 23, 2018 – Broadway Gold Mining Ltd (“Broadway” or the “Company”) (TSXV-BRD OTCQB:BDWYF) is pleased to announce that it has entered into a binding letter agreement (the “Letter Agreement”) with Medcolcanna (BVI) Corp., a privately held issuer existing under the laws of the British Virgin Islands (“Medcolcanna”), which outlines the general terms and conditions pursuant to which Broadway and Medcolcanna have agreed to complete a transaction (the “Transaction”) that will result in a reverse take-over of Broadway by the current shareholders of Medcolcanna. The Letter Agreement was negotiated at arm’s length and is effective as of October 18, 2018.

Medcolcanna’s wholly-owned Colombian subsidiary, Medcolcanna S.A.S. (the “Medcolcanna SAS”) is in the process of establishing operations in Colombia as a producer of both THC and cannabidiol medical cannabis. Medcolcanna intends to combine its scientific expertise and Colombia’s inherent agricultural advantages of cost and high quality cannabis that arise from consistent 12 hours of daylight year-round, minor seasonal temperature fluctuations, a strong history of agricultural exports, fertile soil and an available, low cost and experienced labour force. Its business plan forecasts leveraging its team’s international business expertise, particularly in trading, sales and marketing, its agronomic knowledge and Colombia’s agricultural advantages.

Medcolcanna SAS has received three licenses for the: (1) cultivation of psychoactive (high THC) medical cannabis, (2) cultivation of non-psychoactive (THC<1%) medical cannabis, (3) production, domestic distribution and international export of both THC and cannabidiol medical cannabis. Medcolcanna SAS has 4 hectares of land approved for the planting of medical cannabis crops, located in a very secure area close to Bogota, upon which it plans to immediately start construction of facilities and greenhouses, which ultimately may include cornerstone public facilities. Medcolcanna SAS also has options on an additional 120 hectares of land, allowing it to rapidly expand as the business grows.

Mr. Duane Parnham, Chairman of Broadway, commented “We are extremely pleased to have reached agreement with Medcolcanna and look forward to closing the transaction and bringing value to Broadway’s and Medcolcanna’s shareholders. We have every confidence in Felipe and his team, all of whom will be based in Colombia, and in their abilities and business plan.”

Terms of the Transaction and Financing Matters

It is currently anticipated that the proposed Transaction will be effected by way of a share exchange or other similar form of transaction as is acceptable to the parties. There are currently outstanding an aggregate of 42,459,204 common shares in the capital of Broadway (each, a “Broadway Common Share”) and 39,362,659 common shares in the capital of Medcolcanna (each, a “Medcolcanna Share”). Additionally, Broadway has outstanding approximately 20,559,000 share purchase warrants exercisable at prices ranging from $0.10 to $1.60 (the “Broadway Warrants”) and 3,765,000 stock options exercisable at prices ranging from $0.05 to $0.43 (the “Broadway Options”), and Medcolcanna has 3,681,330 share purchase warrants outstanding (the “Medcolcanna Warrants”), with each Medcolcanna Warrant being exercisable into one Medcolcanna Share at an exercise price of $0.25 for a period of 12 months from the date of issuance thereof.

Pursuant to the proposed Transaction, the holders of the issued and outstanding Medcolcanna Shares shall receive one post-Consolidation (as defined below) Broadway common share for each Medcolcanna common share held. As well, Broadway has agreed to seek shareholder approval for, among other things: (i) the consolidation of its outstanding shares, warrants and options on a 9 old share for 1 new share basis (the “Consolidation”); and (ii) subject to TSX Venture Exchange approval, the spin-out to Broadway’s existing shareholders of all of the mining assets related to its Broadway and Madison mine (the “Spin-out”).

On or immediately prior to the completion of the proposed Transaction, it is anticipated that Broadway will effect; (i) the Consolidation, (ii) the Spin-out, and (iii) the Name Change (as defined herein). Additionally, the board of directors of Broadway shall be reconstituted to consist of nominees of Medcolcanna and all existing officers of Broadway shall resign and be replaced by nominees of Medcolcanna, as further described below.

Medcolcanna completed in September 2018 a non-brokered private placement of 7,362,659 units (“Medcolcanna Units”) at a price of $0.09 per Medcolcanna Unit for aggregate gross proceeds of $662,639. Each Medcolcanna Unit consisted of one Medcolcanna Share and one-half of one Medcolcanna Warrant, with each whole Medcolcanna Warrant being exercisable into one Medcolcanna Share at an exercise price of $0.25 for a period of 12 months following issuance. The proceeds of such financing are being used for working capital purposes and to pay for costs associated with acquiring Medcolcanna SAS.

Prior to the completion of the Transaction, it is anticipated that Medcolcanna will complete two additional securities offerings, as follows:

  • Medcolcanna intends to complete a non-brokered offering of 1,000,000 Medcolcanna Units at a price of $0.09 per unit (the “Non-Brokered Offering”) for gross proceeds of approximately $90,000. Each Medcolcanna Unit will consist of one Medcolcanna Share and one-half of one Medcolcanna Warrant, with each whole Medcolcanna Warrant being exercisable into one Medcolcanna Share at an exercise price of $0.25 for a period of 12 months following issuance.
  • Medcolcanna anticipates completing a brokered private placement of approximately 20,000,000 subscription receipts (the “Subscription Receipts”) at a price of C$0.25 per Subscription Receipt for gross proceeds of approximately $5,000,000 (the “Brokered Offering”). It is anticipated that each Subscription Receipt shall entitle the holder to receive, upon satisfaction of certain escrow release conditions, and without payment of additional consideration, one unit in the capital of Medcolcanna (a “Unit”). Each Unit shall consist of one Medcolcanna Share and one-half of one Medcolcanna Share purchase warrant (each whole warrant, a “Warrant”), which Units shall be exchanged, without further consideration, for one Unit in the capital of the Resulting Issuer (as defined herein), upon the completion of the proposed Transaction. Following the exchange for Units of the Resulting Issuer, each Warrant of the Resulting Issuer (a “Resulting Issuer Warrant”) shall entitle the holder thereof to acquire one common share of the Resulting Issuer (a “Resulting Issuer Share”) at a price of $0.40 per Resulting Issuer Share for a period of 24 months following issuance.

If and when completed, the net proceeds from the Non-Brokered and Brokered Offerings (collectively, the “Offerings”) will be used to expand the business of Medcolcanna, for working capital and for general corporate purposes. The proceeds of the Non-Brokered Offering will be immediately available to Medcolcanna for working capital purposes.

Further details regarding the Brokered Offering will be included in a subsequent news release once additional details become available.

Upon completion of the Transaction, and assuming the maximum gross proceeds in the Offerings are raised, there will be 65,080,348 post-Consolidation common shares of the combined entity (the “Resulting Issuer”) issued and outstanding, of which it is expected that the current shareholders of Broadway will hold approximately 7.2%, purchasers in the Offerings will hold approximately 32.3%, and the former shareholders of Medcolcanna will hold approximately 60.5%.

The proposed Transaction is subject to requisite regulatory approvals and standard closing conditions, including the approval of the directors of each of Broadway and Medcolcanna of a definitive agreement in respect of the Transaction (the “Definitive Agreement”), as well as the conditions described below. The obligations of Broadway and Medcolcanna pursuant to the Letter Agreement shall terminate in certain specified circumstances, including in the event that the Definitive Agreement is not executed by October 31, 2018.

Upon completion of the Transaction, it is the intention of the parties that the Resulting Issuer will continue to focus on the current business and affairs of Medcolcanna SAS.

Insiders, Officers and Board of Directors of the Resulting Issuer

It is expected that upon completion of the Transaction the Resulting Issuer will have a board of five individuals, all of whom shall be nominated by Medcolcanna. As of the date hereof, and subject to regulatory approval, Medcolcanna anticipates that the Resulting Issuer will have the following officers and directors (with additional board nominees to be named later):

Felipe de la Vega – President, CEO and Director

Mr. de la Vega was the founder of Trenaco Holdings Group (“Trenaco”), a major Latin American commodity trading company with revenues of US$800 million in 2014. As CEO of Trenaco for 10 years, he developed strong relationships with domestic and global commodities companies and vertically integrating the value chain through the acquisition of profitable assets such as coal mines, metcoke ovens, quality labs, stockyards, and transportation infrastructure. Under Mr. de la Vega, Trenaco became the second largest exporter of coking coal in Colombia, and was the 17th largest Colombian exporter and 76th largest Colombian company for 2013-2014, as well as being ranked first for growth prospects.

Chris Reid – Chief Financial Officer

Mr. Reid has served as the Chief Executive Officer and President of Petrodorado Energy Ltd., a petroleum company with operations in Colombia, since January 2016 and as the Chairman since May 2016. Mr. Reid also served as the Chief Financial Officer from February 2012 to January 2016, where he was involved in the successful turnaround of the company through a divestiture program. Mr. Reid is a Chartered Professional Accountant whose career includes 12 years of experience in industry and international business. Mr. Reid is currently a director SOPerior Fertilizer Corp. (TSX: SOP; formerly Potash Ridge Corp.), and Petrodorado (TSXV: PDQ). Mr. Reid is a member of the Institute of Chartered Accountants of Alberta and the Chartered Professional Accountants of Alberta. Mr. Reid holds a Bachelor of Business Administration from Saint Francis Xavier University.

Nicolas Rodrigues – Chief Operating Officer

Mr. Rodrigues is an agricultural engineer with more than 13 years of experience leading innovation and business development in the agricultural industry. He has strong leadership skills and technological knowledge in agricultural production. Mr. Rodrigues previously held the position of General Manager at The Clinton Giustra Enterprise Partnership, a social business builder that brings entrepreneurial solutions to agribusinesses, farmers and fishermen.

Robert James Metcalfe – Director

Mr. Metcalfe, a lawyer, was senior partner with the law firm Lang Michener, LLP for 20 years. He is the former President and Chief Executive Officer of Armadale Properties and Counsel to all of the Armadale Group of Companies, with significant holdings across numerous industries including finance, construction of office buildings, airport ownership, management and refurbishing, land development, automotive dealerships as well as newspaper, radio and television stations. Mr. Metcalfe has served as President, CEO, Lead Director, Chairman and Committee member on numerous publicly listed natural resource and industry company corporate boards in Canada, the USA, England, South America and Africa. As director and shareholder, Mr. Metcalfe has been engaged in numerous acquisitions, divestitures, corporate reorganizations, financings and corporate improvements, as well as serving on numerous special committees across many sectors. He is a member of the Institute of Corporate Directors and a member in good standing of the Law Society of Upper Canada.

Thor Borresen – Director

Mr. Borresen is an Industrial Engineer from the Javeriana University in Cali, Colombia and is currently the Marketing Vice-president of Bavaria, the Colombian operation of AB-InBev, the world’s leading brewer. In his current position, he is responsible for leading the development of a complete portfolio of local and international beer brands, boosting category growth and building the equity of the brands. His main challenge is to keep the category alive and relevant among young adults, through a strategy of brand renovation, innovation and digital connection with consumers and stakeholders. His professional career spans over 14 years in different commercial roles. Before joining Bavaria, he was part of the marketing team in Kraft Foods Colombia and Venezuela, overseeing local and regional markets. Recently, he led the development and launch of a new business unit: The High End Company, integrating the roles of Sales, Marketing, Finance and Logistics for a group of Global and Craft brands.

Conditions to the Transaction

Completion of the Transaction will be subject to a number of conditions of closing that are customary for a transaction of this nature, including, without limitation:

  • Broadway shall obtain receipt of requisite shareholder approvals in connection with the following matters: (i) the Consolidation; (ii) the Spin-out; (iii) a change of name to “Medcolcanna Organics Corp.” or such other name as may be requested by Medcolcanna and acceptable to applicable regulatory authorities (the “Name Change”); (iv) the election of the directors of the Resulting Issuer to replace the current directors of Broadway immediately following the completion of the proposed Transaction; and (v) the approval of the Transaction, if required by regulatory authorities.
  • Completion of the Offerings.
  • Broadway and Medcolcanna entering into the Definitive Agreement.
  • The common shares of the Resulting Issuer having been approved for listing on the TSX Venture Exchange or another recognized Canadian stock exchange.

The Definitive Agreement, once completed, will be filed under Broadway’s issuer profile on SEDAR at www.sedar.com.

Inter-Company Relationships

Officers, directors and principal shareholders of Broadway may subscribe for Subscription Receipts in the Offering.

About Broadway Gold Mining Ltd.

Until execution of the Letter Agreement, Broadway was focused on the exploration and development of the Broadway and Madison mine and the delineation of the porphyry source of their mineralization; the Company’s right, title and interest to the Broadway and Madison mine – 450 acres of land, a 192 acre ranch, buildings, mine equipment and fixtures, 6 patented, 35 unpatented mineral claims, and mineral rights to a four-square-mile property in the Butte-Anaconda region of Montana, a porphyry-based mining district – will be spun-out to Broadway’s current shareholders as a result of the Transaction. Assuming completion of the Transaction, Broadway will have acquired the business of Medcolcanna, will be a cultivator, manufacturer and distributor of medicinal cannabis based in Colombia, and is expected to be a Life Sciences Issuer under the policies of the TSX Venture Exchange.

Broadway anticipates it will be seeking to rely on an exemption, or a waiver, from the sponsorship requirements of the TSX Venture Exchange.

Further Information

All information contained in this news release with respect to Broadway and Medcolcanna was supplied by the parties respectively for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

For further information regarding the proposed Transaction, please contact:

Thomas A. Smeenk, BA
President and CEO
Broadway Gold Mining Ltd.
1-800-680-0661
IR@broadwaymining.com
www.broadwaymining.com

Media:

Adam Bello
Primoris Group Inc.
+1 416.489.0092
media@primorisgroup.com

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION:

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Offerings; receipt of all regulatory licenses required for the cultivation, production, domestic distribution and international export of cannabis and cannabis-related products; use of proceeds raised in the Offerings, the proposed officers and directors of the Resulting Issuer; and the business and operations of the Resulting Issuer after the consummation of the proposed Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.

Broadway and Medcolcanna assume no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

The securities to be offered in the Offering have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, United States persons absent registration or any applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Neither the TSX Venture Exchange Inc. 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 and neither of these entities has in any manner passed upon the merits of the Transaction or any associated transactions.

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