2018-06-19 13:14 ET - News Release

Mr. Navin Varshney reports

EARNY ENTERS US CANNABIS SECTOR - LETTER OF INTENT SIGNED WITH ORCHID ESSENTIALS.

Earny Resources Ltd. has entered into a letter of intent dated June 15, 2018, with CR International Inc., doing business as Orchid Essentials, a United States corporation headquartered in Southern California. Pursuant to the LOI, Earny is proposing to complete a business combination with Orchid by way of share exchange, merger, amalgamation, arrangement or similar form of transaction, whereby the securityholders of Orchid will become securityholders of the combined entity. Upon completion of the proposed transaction, the resulting issuer will continue to carry on the business of Orchid as currently constituted, under the new name Orchid Essentials or such other name as may be approved by the board of directors of the resulting issuer. The proposed transaction is an arm's-length transaction and will constitute a reverse takeover of Earny by Orchid pursuant to policies of the TSX Venture Exchange. In connection with the proposed transaction, the resulting issuer will apply to list its common shares on the Canadian Securities Exchange.

Proposed management and directors

The parties anticipate that in conjunction with and upon closing of the proposed transaction, the board of directors of the resulting issuer shall consist of five directors, all of whom will be nominated by Orchid. It is anticipated that Orchid will nominate Corey Mangold and Rene Suarez as directors. Additional directors will be disclosed in future news releases as they are identified.

All current directors and officers of Earny shall resign at or prior to the closing of the proposed transaction. Mr. Mangold will be appointed director and chief executive officer of the resulting issuer. Mr. Suarez will be appointed director, president and chief operating officer of the resulting issuer

Mr. Suarez

As the president and COO of Orchid Essentials, Mr. Suarez brings his five years of experience in manufacturing vape products and a proven record of developing products. Mr. Suarez was the former chief scientific officer/partner at Space Jam, a pioneer in the nicotine/vape juice industry.

Mr. Mangold

As the CEO of Orchid Essentials, Mr. Mangold brings 20 years of start-up experience and a knack for developing successful companies. Mr. Mangold's vision and extensive experience in marketing/advertising, branding, design, sales and product development have already established Orchid as the brand to beat in the market. Mr. Mangold is the principal and co-founder of Gigasavvy, a leading Southern California creative marketing agency.

Transaction summary

Pursuant to the LOI, the existing securityholders of Orchid will receive common shares of the resulting issuer in exchange for their securities of Orchid. The exchange ratio is currently expected to be one Earny common share for each one share of Orchid. The final form of the transaction will be set forth in a definitive agreement to be entered into among the parties that will replace and supersede the LOI.

An aggregate of 6,444,998 common shares of Earny are currently issued and outstanding. Assuming the completion of certain contemplated financings by Orchid, it is expected that 95,197,859 shares of Earny will be issued to the shareholders of Orchid as consideration for 100 per cent of the issued and outstanding shares of Orchid. Orchid may issue up to 9 per cent of the issued stock as employee stock options in connection with this transaction. Upon completion of the proposed transaction, there will be 101,197,857 common shares issued and outstanding in the resulting issuer (excluding securities issued pursuant to the concurrent private placement described in this news release), of which securityholders of Orchid will own 95,197,859 (94 per cent) and securityholders of Earny (excluding securities issued pursuant to the concurrent private placement described herein) will own 6,444,998 (6 per cent) of the shares.

Completion of the proposed transaction is subject to a number of conditions, including, but not limited to, exchange and shareholder approval of the delisting of the Earny common shares, and shareholder approval of the proposed transaction, if required pursuant to exchange, securities regulatory or corporate law requirements. In addition, completion of the proposed transaction is subject to certain standard closing conditions, including the completion of due diligence investigations to the satisfaction of each of Earny and Orchid, execution of a definitive agreement, the conditional approval of the Canadian Securities Exchange to the listing of the common shares of the resulting issuer, and there being no material adverse change in the business of Earny or Orchid prior to completion of the proposed transaction.

No advances have been made by Earny nor are any planned before the completion of the transaction.

All amounts are in Canadian currency unless otherwise specified.

Earny has agreed to undertake a private placement offering of 15,151,515 shares at a price of 33 cents per subscription receipt for gross proceeds of $5-million. Closing of the proposed transaction is subject to completion of the offering under the concurrent private placement.

The company intends to hold a special meeting of its shareholders or obtain shareholder approval by consent with respect to the proposed transaction if required under securities laws, corporate laws or exchange requirements.

Trading of the common shares of the company has been halted and will remain halted in accordance with exchange policies until all required documentation with respect to the proposed transaction has been received, and the CSE and securities regulatory authorities are otherwise satisfied that the halt should be lifted.

A finder's fee of two million shares will be issued at the completion of the proposed transaction.

A press release setting out further particulars relating to the proposed transaction will follow in accordance with the policies of the exchange, which will include a summary of the definitive agreement and transaction consideration, summary financial information of Orchid, biographical information on the proposed directors and officers of the resulting issuer, and other relevant information regarding the proposed transaction and related financings.

Sponsorship of a reverse takeover may be required by the exchange unless a waiver from the sponsorship requirement is available. Earny intends to apply for a waiver from sponsorship for the proposed transaction.

"We are gratified to be working with the Orchid management on this California-based recreational Cannabis project," says Navin Varshney, director of Earny. "Given Orchid's current traction in this sector and the wide distribution of Orchid products, we are enthusiastic about the potential for the growth of the company in both the U.S. and globally. We are excited about in the immense opportunity Orchid's business offers all our shareholders."

About Orchid Essentials

Orchid is a leading cannabis product development, branding and manufacturing company. Orchid's award-winning premium tetrahydrocannabinol and cannabidiol product lines are sold across over 250 dispensaries across California and Oregon with distribution growing in those markets. Orchid is focused on developing, manufacturing, branding and distribution of premium cannabis products within those states, with plans to expand to new markets such as Canada, Nevada, Arizona, Washington and Colorado.

We seek Safe Harbor.

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