Biosenta Inc. announced that it has come to an agreement with 19443391 Ontario Inc. and its shareholders to terminate the existing joint venture agreement between the Company and 194 and issue certain securities as consideration. As 194 is considered a “related party” to Biosenta (as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, the Transaction is considered a “related party transaction” within the meaning of MI 61-101. Business Rationale: The Company has initiated preliminary discussions with potential licensing partners about licensing its technology with the goal of commercialization.

It has also had discussions with its advisors about the potential for raising capital in the public markets. Feedback from such potential partners and advisors has consistently been that the current JV Agreement, including 194’s exclusive license in and to Biosenta’s technology pursuant to such agreement, presents a barrier to commercialization and to raising capital. Pursuant to the Agreement, the exclusive license in favour of 194 will be terminated thereby allowing Biosenta to license its technology to other potential licensees.

For certainty, while the Company has had initial conversations with potential licensees, these conversations are preliminary, and the Company has not entered into any definitive agreements with any such partners. Description of Agreement: Pursuant to the Agreement, the JV Agreement (which was originally announced on February 28, 2018) will be terminated, the security agreement granted thereunder to 194 will be amended to contemplate a release of the security in the circumstances described above, and all indebtedness owing to 194 and related persons from Biosenta will be extinguished. As consideration, Biosenta will issue to 194 (i) 3,000,000 common shares in the capital of Biosenta (“Common Shares”) at an aggregate subscription price equal to $1,200,000, being $0.40 per share; and (ii) a non-transferrable promissory note in the principal amount of $6,500,000 (the “Note”).

Interest on the Note will accrue at a rate of prime plus 3% per annum and will be payable quarterly, subject to a 120 day interest holiday. 194 may elect that any interest payment be satisfied in Common Shares at the then-current market price, however, no more than 500,000 Common Shares in the aggregate shall be issued to satisfy any interest. Unless otherwise agreed to as between the Company and 194, the amounts owing under the Note will be payable within 30 days of any public issuance by the Company of Common Shares for cash proceeds as follows: (a) until the Company has raised aggregate net proceeds of $5,000,000 from one or more of such Common Share issuances, 60% of the net proceeds of such issuance will be used to repay the Note; and (b) at and after the Company has raised aggregate net proceeds of $5,000,000 from one or more common share issuances, 50% of the net proceeds of any such issuance will be used to repay the Note.

The Note will mature on December 31, 2025. The Common Shares issued to 194 and the Note will carry substantially the following legend: “Unless permitted under securities legislation, the holder of this security must not trade the security before [the date that is 4 months and a day after the distribution date]. If the closing of the Transaction occurs, the Agreement provides that 194 will be granted the right to nominate two nominees to serve on the board of directors of Biosenta (the “Board”), subject to requirements of applicable law and the CSE, if 194 at any time holds not less than 25% of the outstanding Common Shares.

If at any time 194 holds between 15% and 25% of the Common Shares, it shall have the right to nominate one individual to the Board. In connection with these nomination rights, 194 and its shareholders have agreed to customary standstill and confidentiality provisions. The Agreement may be terminated by all parties on mutual agreement, or at any time by any party if the counterparty is in breach or closing conditions in favour of such party will not be satisfied by the outside date (August 30, 2023), so long as the party wishing to terminate is not then in breach of the Agreement.

The JV Agreement will be terminated on the closing date of the Transaction. Closing of the Transaction is subject to the satisfaction of certain customary closing conditions. Biosenta does not expect that any third party approvals are required to be obtained in order to close the Transaction.