Trichome Financial Corp. Announces Completion of Amalgamation and Releases Letter to Shareholders

• Trichome Financial expects common shares to begin trading on TSX Venture Exchange on or about October 10, 2019 under the trading symbol "TFC"
• Closing of non-brokered private placement to be used to fund robust pipeline of cannabis credit opportunities
• Near term launch of Trichome Financial Cannabis Private Credit LP will provide scale and launch asset management platform

TORONTO, Oct. 7, 2019 /CNW/ - On October 4, 2019, Trichome Financial Corp. (the "Corporation" or "Trichome Financial") and 22 Capital Corp. ("22 Capital") completed a business combination transaction by way of an amalgamation (the "Amalgamation") of Trichome Financial with 22 Capital to form the Corporation. At a shareholder meeting for 22 Capital on July 4, 2019 and a shareholder meeting for Trichome Financial held on July 8, 2019, the Amalgamation and related matters were approved by the shareholders of each of 22 Capital and Trichome Financial. The Amalgamation constituted the Qualifying Transaction for 22 Capital under Policy 2.4 of the TSXV Corporate Finance Manual. Following receipt of final TSX Venture Exchange ("TSXV") acceptance of its Qualifying Transaction, it is expected that the Corporation's common shares will trade on the TSXV on or about October 10, 2019 under the trading symbol "TFC".

In connection with the Amalgamation, former Trichome Financial and 22 Capital shareholders approved the election of a new board of directors of the Corporation consisting of Timothy Diamond, Marissa Lauder, Marc Lustig, Jonathan Page, Michael Ruscetta, Christian Sinclair and Howard Steinberg. Biographies of each of the new directors and officers of the Corporation, together with information on the Qualifying Transaction and the Corporation, can be found in the joint information circular of Trichome Financial and 22 Capital dated May 29, 2019 and is available on the Corporation's SEDAR profile at www.sedar.com.

Pursuant to the Amalgamation, each outstanding common share of 22 Capital was exchanged for 0.0702 common shares in the capital of the Corporation.

As a condition to closing the Amalgamation, Trichome Financial completed a non-brokered private placement financing of 7,849,707 subscription receipts at $2.10 per subscription receipt and raised gross proceeds of approximately $16.5 million. Upon completion of the Amalgamation, the subscription receipts converted into 7,849,707 common shares of the Corporation. On a fully diluted basis, the Corporation has 27,415,343 issued and outstanding common shares, restricted share awards and options upon completion of the Amalgamation.

Message from Marc Lustig, Chairman and Co-Founder

Marc Lustig, Chairman of the Board and Co-Founder of Trichome Financial, commented, "This day marks an important milestone for Trichome Financial, its shareholders and for me personally as we bring to investors a cannabis focused specialty finance business that I have long thought was of critical importance to this industry. Having experienced firsthand the complex capital needs of the cannabis sector and difficulty accessing credit alternatives, I believe that Trichome Financial is a unique investment opportunity given its defensive nature and long runway for growth. Given the challenging market environment, it is exceptionally well positioned to capitalize on opportunities in the marketplace today."

"With the closing of the private placement and the near-term launch of Trichome Private Credit, we have met our immediate funding objectives. I am excited by the opportunity for Trichome Financial globally and look forward to working with the team to advance the business and generate meaningful returns for all shareholders."

CEO Letter to Shareholders

Dear fellow shareholders,

Trichome Financial was established a year and a half ago to address the lack of credit availability in the high growth and rapidly evolving global cannabis sector. That vision stemmed from a view that capital flows into the sector were volatile in nature and as a result, capital would flow to the largest and most liquid opportunities. In addition, with few lenders having the desire, mandate and expertise to underwrite the cannabis sector, the amount of non-equity funding alternatives would also be very limited. With the increasing demands for capital across the value chain combined with the limited supply of flexible capital required to address the unique needs of the industry, Trichome Financial identified an opportunity to address an unmet market need that would provide its shareholders with highly attractive returns on both an absolute and risk-adjusted basis.

I am excited to share a brief update on our business, opportunity set and plans for the future.

Trichome Financial's Business Model: Trichome Financial's business model is premised on originating and underwriting secured credit transactions for companies in the cannabis industry to support expansion, working capital, capital projects and M&A. We are providers of solution capital, helping clients to capitalize on opportunities and meet the challenges of this evolving industry. We earn returns on our capital in the form of interest, fees, bonus payments and premiums. We refer to these as contractual returns, as they are owed to us under terms of credit and security agreements. In addition, we often receive shares, warrants or other forms of performance-based payments as additional consideration to provide our shareholders with the potential for equity upside in the companies that we underwrite.

Market Opportunity & Pipeline: Since Trichome Financial closed its first external funding in September 2018, we have reviewed over 330 opportunities, representing in excess of $1 billion of funding requests. We estimate that approximately 20% of these opportunities have met, or may in the future meet, our underwriting criteria. As cannabis becomes legalized in progressively more new markets around the world and as existing players mature, we believe the market opportunity for Trichome Financial will grow to be many multiples higher of what it is today. We view our market opportunity as a global one, and are our infrastructure will enable us to seamlessly enter new markets.

Our team of professionals, drawing upon the market expertise of Origin House and Stoic Advisory as our founding shareholders, follow a rigorous due diligence process. Together with our proprietary deal flow, this results in a highly calibrated view on which companies across the value chain we believe are best positioned for success in the industry. Given the ongoing volatility in the cannabis sector of late, our work-in-progress pipeline is robust with some very compelling and unique opportunities.   

Track Record of Success: In our short history, we have already closed six transactions and have signed term sheets for three others. Our current portfolio has a weighted average contractual effective cash interest yield, including interest payments and fees, of approximately 14.5% per annum. Warrant and equity positions associated with these holdings have the potential to materially increase the overall returns on these transactions. Two companies that we have made loans to have been acquired, resulting in highly attractive IRRs of 82% in the case of 180 Smoke and 23% in the case of Blissco. Our loan to CGS Foods, the operator of retailer Ganjika House in Brampton, was repaid in full after just 5 months. We continue to own a warrant to acquire 10% of CGS at an attractive valuation for the next 4.5 years, along with a minimum return ratchet mechanism. These successful exits highlight our strategic approach to underwriting, the benefits of protecting our downside through secured loan structures and the ways in which we construct upside in our portfolio.

Trichome Private Credit:  Managing third-party capital will be fundamental to our strategy going forward. It will allow us to scale our business, generate consistent and recurring fee revenue, and minimize share dilution. Private credit is now an almost $800 billion asset class globally (according to Preqin link) and we know that family offices, high net-worth individuals and institutional investors are looking for higher returns in a world of low and negative interest rates. To that end, we expect to launch the Trichome Financial Cannabis Private Credit LP (or Trichome Private Credit) in the near term with an initial target of $50 million for the first vehicle. We have been meeting with numerous investors and expect to have a cornerstone investor for an initial $10 to $15 million commitment. We look forward to officially launching one of the first direct lending funds focused on the cannabis sector.

Unique Market Positioning: Trichome Financial is a uniquely positioned company. On the one hand, it is exposed to the structural growth of the cannabis industry through the evolving demand for capital across the value chain, touching everything from cultivation, processing, retail, distribution, consumer products and even technology. At the same time, it is a counter-cyclical business, as it earns contractual cash flows and constructs upside potential from expertly underwritten secured loans, the demand for which increases in volatile equity markets. I believe that these attributes provide investors with a compelling balance of growth and defense not otherwise available in the cannabis industry today.

In closing, we are only at the very beginning of our growth trajectory and our shareholders will have many positive developments to look forward to as we grow the business. On behalf of the team at Trichome Financial, we would like to thank you for your continued support and we look forward to keeping you apprised of our progress.

Sincerely,

Michael Ruscetta
Chief Executive Officer

About Trichome Financial Corp.

Trichome Financial is a specialty finance company focused on providing flexible and creative capital solutions to the global legal cannabis market. Trichome was created to address the lack of credit availability in the large, growing and increasingly complex cannabis market. Founded by industry leaders Origin House (CSE: OH) and Stoic Advisory, Trichome Financial's experienced management team has a unique edge to capitalize on proprietary deal flow and industry insight while developing a first mover advantage as a global cannabis focused specialty finance company. Trichome Financial provides customized financing solutions across the industry value chain to support growth, capital expenditures, mergers, acquisitions, working capital and other needs. Leveraging the combined resources and knowledge of its founders, it is able to offer significant value-added financial, product, market and operational support to its partner companies. Trichome Financial's current assets are all based in Canada and it has no operations or assets in the United States. Trichome Financial's common shares will commence trading on the TSX Venture Exchange under the symbol "TFC".

For further information about Trichome Financial please visit us at www.trichomefinancial.com or @trichomefinance on Twitter and refer to the joint information circular of Trichome Financial and 22 Capital dated May 29, 2019 which is available on the Corporation's SEDAR profile at www.sedar.com.

READER ADVISORY

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 press release.

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 to, among other things: the commencement of trading of Trichome Financial's common shares on the TSX Venture Exchange, the launch of Trichome Private Credit and investments in Trichome Private Credit, future secured lending and other transactions, contractual returns and additional consideration, the development of Trichome Financial's business, and future capital market conditions for the cannabis industry.. 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. Except as required by law, Trichome Financial assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

SOURCE Trichome Financial Corp.

Marc Charbin, LodeRock Advisors Inc., Telephone: [phone], Email: [email protected]