JET Global Crossing Airlines Group Inc

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR RELEASE TO U.S. NEWSWIRE SERVICES

Canada Jetlines Ltd. (JET: TSX-V; JETMF: OTCQB) (the “Company” or “Jetlines”) is pleased to announce that it has entered into a letter of intent (the “LOI”) with a Korean special purpose fund led and established by InHarv Partners Ltd. (“InHarv”) for a financing of up to $14 million (the “Offering”). InHarv is a hybrid of venture capital and private equity based in Seoul, South Korea whose strategic stance is to raise capital in South Korea for investment in cutting edge start-ups overseas. InHarv will be acting as lead & general partner for the Korean special purpose fund, and also investing as principal. The Korean special purpose fund includes the investment divisions of a number of leading Korean manufacturing and financial institutions as its group of limited partners. A special purpose vehicle (the “SPV Fund”) will be created by InHarv to facilitate the investment into Jetlines.

“This financing transaction with the Korean SPV Fund is an important pillar of Jetlines’ financing plan. Combined with the SmartLynx financing completed at the end of 2018 and $8.8m in proceeds received through the exercise of previously issued share purchase warrants, Jetlines has raised a significant portion of the funds that it needs to launch airline operations. We intend to raise the balance of the proceeds through additional debt and equity financings in the near term and negotiations are well advanced in this regard” commented Mark Morabito, Executive Chairman of Jetlines.

Javier Suarez, CEO of Jetlines added “There is significant penetration of ULCC airlines in South Korea. They understand the value proposition associated with these types of airlines and the returns Korean local investors have obtained investing in these airlines. The extensive due diligence that the Korean SVP Fund have conducted to date provides further validation of the need for a true ULCC in Canada and Jetlines’ business plan.”

The Founder and Chairman of InHarv is Mr. Jong Chang. Mr. Chang was previously Lead Partner of Booz Allen Hamilton, a global general management consultancy in the U.S., and a Senior Vice President and founding member of KBRI (now Moody’s Korea Inc.), the first credit rating agency in Seoul. Jong used to be one of the Economic Council Members for the President of South Korea, He also held positions as an independent board member of LG Chemical Co. of the LG Group based in Seoul and as an independent board member of Saint-Gabain Korea, a leading flat glass maker. Presently, Jong is the Chairman of the Board of ToolGen, Inc. a world leading DNA editing company based in Seoul Korea, and a Board Director of Verseau Therapeutics Inc. a world leading macrophage company based in Lexington, MA, USA, and of Chromis Optical Fiber Company based in Warren, NJ, USA.

Details of the Offering

The Offering will consist of convertible debentures (each, a “Debenture”) and 1,785.71 variable voting share purchase warrants (each, a “Warrant”) for every $1,000 of principal of the Debentures for gross proceeds of an initial tranche of $7,000,000. The SPV has the option to increase the total gross proceeds to up to $14,000,000 by providing notice to Jetlines within 30 days of the date of this news release. Each Warrant is exercisable into one additional variable voting share (each, a “Warrant Share”) at an exercise price of $0.56 per Warrant Share for a period of 36 months from the date of closing.

The terms of the Debentures include:

• a maturity date of 36 months from the date of issuance (the “Maturity Date”) and the principal amount of the Debenture, together with any accrued and unpaid interest, will be payable on the Maturity Date, unless earlier converted in accordance with its terms;
• the Debentures bear interest (the “Interest”) at the rate of 10% per annum, which Interest will be payable in cash annually, unless earlier converted;
• the principal amount of the Debenture is convertible into variable voting common shares of the Company (each, a “Share”) at the option of the holder at a conversion price of $0.56 per Share;
• the Debentures are subject to an origination fee of 5%, payable in Shares based on a $0.56 Share price; and
• the funds will be available for drawdown once certain conditions have been satisfied.

Repayment by the Company of amounts owing under the Debentures will be secured by a charge over all of the assets of the Company. The SPV is an arm’s length party and it is expected that the SPV will become an insider of the Company on conversion of the Debentures. Finders’ fees may be payable in connection with the Financing in accordance with the policies of the TSX Venture Exchange.

The Company will also grant the SPV certain rights in connection with the closing of the Offering that will govern aspects of the relationship between the parties. These include the right of the SPV to appoint two Board members and the grant of a pro-rata right to the SPV to participate in future financings.

The net proceeds of the Offering will be used to further the business objectives of Jetlines in launching an ultra-low cost airline carrier in Canada, including advancing the licensing process, augmenting the leadership team with operations and commercial personnel, branding and marketing activities, as well as advance internet, digital media and IT systems initiatives.

The closing of the Offering is conditional on the execution of a definitive subscription agreement (the “Subscription Agreement”) and the satisfaction of conditions to closing that will be contained in the Subscription Agreement. These conditions will include, among other things, approval of the TSX Venture Exchange for the Offering and the receipt of all other necessary consents, approvals and authorizations required by either party.

The Company also announces the appointment of Mr. Jyri Strandman as a Special Operations Advisor, effective immediately. Mr. Strandman holds over 30 years of airline experience, most recently as Chief Operating Officer of Go Airlines (India) (“GoAir”). During his time with GoAir, Mr. Strandman was responsible for strengthening flight operations, engineering, airport services, security and airside operations (ASA), flight safety, inflight services and integrated operations control center. Mr. Strandman held progressively senior positions with US ULCC, Spirit Airlines from 2010 to 2017, from Director, Flight Training and Standards to most recently, Director of Operations and VP of Flight Operations. During his tenure, Spirit grew the Airbus fleet by 76 aircraft, adding three different A320 variants, maintained the flight operations and fuel budgets, and oversaw the regulatory and operational control of the airline. Prior to his role with Spirit Airlines, Mr. Strandman held the role of Manager, Flight Operations Training with Virgin America from 2008 to 2010 where he built the team to redesign all pilot training programs to a higher training standard, at a lower total cost. Mr. Strandman is a qualified Captain on the Airbus A320 family of aircraft, as well as four other aircraft, with over 12,400 hours of flight experience.

Jetlines announces the departure of Chief Operating Officer, Mr. Michael Bata. CEO, Javier Suarez commented, “Jetlines would like to thank Michael for his time in helping the Company advance towards commercial operations. We wish Michael the best in his future endeavours.”

About Canada Jetlines Ltd.

Canada Jetlines is set to become Canada’s first true Ultra-Low Cost Carrier (ULCC) airline, with plans to operate flights across Canada and provide non-stop service from Canada to the United States, Mexico and the Caribbean. The Company plans to commence operations with the Airbus A320 fleet, the most widely used aircraft for ultra-low cost carriers worldwide. Jetlines is led by a board and management team with extensive experience and expertise in low-cost airlines, start-ups and capital markets. The Company was granted an unprecedented exemption from the Government of Canada that will permit it to conduct domestic air services while having up to 49% foreign voting interests.

For more information on Jetlines, please visit our website at www.jetlines.ca.

ON BEHALF OF THE BOARD

"Mark J. Morabito"Executive Chairman

Canada Jetlines is part of the King & Bay group of companies. King & Bay is a merchant bank that specializes in identifying, funding, developing and supporting growth opportunities in the resource, aviation, and technology sectors.

For more information, please contact:Toll Free: 1-833-226-5387Email: investor.relations@jetlines.ca

Cautionary Note Regarding Forward-Looking Information

This news release contains "forward-looking information" concerning anticipated developments and events that may occur in the future. Forward-looking information contained in this news release includes, but is not limited to, statements with respect to (i) the commencement of operations and the success of expected future operations of the Company; (ii) the completion of the Offering; (iii) the satisfaction of the conditions to closing of the Offering; (iv) the potential to increase the size of the Offering; or (v) the use of proceeds from the Offering.

In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects" "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or " or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information contained in this news release is based on certain factors and assumptions regarding, among other things, the satisfaction of the conditions to closing of the Offering, the satisfaction of the escrow release conditions, the terms contained in the executed agreements to be entered into by the Company or its subsidiaries with the SPV, the receipt of financing to commence airline operations, the accuracy, reliability and success of the Jetlines’ business model; the timely receipt of governmental approvals; the timely commencement of operations by Jetlines and the success of such operations; the legislative and regulatory environments of the jurisdictions where the Jetlines will carry on business or have operations; the impact of competition and the competitive response to the Jetlines’ business strategy; and the availability of aircraft. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks related to, the ability to obtain financing at acceptable terms, the impact of general economic conditions, domestic and international airline industry conditions, future relations with the SPV, volatility of fuel prices, increases in operating costs, terrorism, pandemics, natural disasters, currency fluctuations, interest rates, risks specific to the airline industry, the ability of management to implement Jetlines’ operational strategy, the ability to attract qualified management and staff, labour disputes, regulatory risks, including risks relating to the acquisition of the necessary licenses and permits; risks related to disputes under the agreement with Boeing to acquire 737-Max aircraft, and the additional risks identified in the "Risk Factors" section of the Company's reports and filings with applicable Canadian securities regulators. There is no assurance that the closing of the Offering will occur. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this news release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) has reviewed or accepts responsibility for the adequacy or accuracy of this release. 

Cautionary Statements Regarding U.S. Securities Act

No securities regulatory authority has expressed an opinion about the securities described herein. No Company securities have been or will be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or the securities laws of any state, district or commonwealth of the United States (as defined in Regulation S under the U.S. Securities Act). Accordingly, these securities may not be offered or sold, directly or indirectly, within the United States or to or for the account or benefit of any "U.S. Person" (as defined in Regulation S under the U.S. Securities Act), absent an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described in this news release in the United States or any jurisdiction where such offer or sale would be unlawful, or for the account or benefit of any U.S. Person or person within the United States.