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SpeakEasy Announces Proposed Strategic Acquisition of Karolos Research Inc.

Ryan Allway

June 24th, 2021

News

ROCK CREEK, BC, June 24, 2021 /CNW/ – SpeakEasy Cannabis Club Ltd. (CSE: EASY) (Frankfurt: 39H) (the “Company” or “SpeakEasy“), a holder of a federal licence to cultivate, process and sell cannabis under the Cannabis Act, is pleased to announce that it has entered into a share purchase agreement dated June 24, 2021 among the Company, Karolos Research Inc. (“Karolos“) and each of the security holders of Karolos (the “Definitive Agreement“) in connection with the proposed acquisition (the “Acquisition“) of all of the issued and outstanding securities of Karolos (the “Karolos Securities“).

 

Pursuant to the Definitive Agreement, SpeakEasy would acquire all of the Karolos Securities in exchange for the issuance of 11,500,000 common shares in the capital of SpeakEasy (the “Consideration Shares“) and 3,000,000 common share purchase warrants (the “Consideration Warrants“). Each Consideration Warrant entitles the holder to acquire an additional common share of the Company at an exercise price of $0.59 per share for a period of 24 months following the date of issuance.  In accordance with the terms of the Definitive Agreement, 2,000,000 of the Consideration Shares will be subject to a contractual hold period of 4 months from the date of issuance and an additional 2,000,000 Consideration Shares will be subject to a hold period of 1 year from the date of issuance, with 25% of such shares being released to the holder every 3 months during such year.

 

Karolos is a British Columbia company operating in the psychedelics space. If completed as proposed, the Acquisition would include an existing cash balance of approximately $1,000,000, intellectual property associated with a digital psychedelic database known as “XCYBIN” and a natural health company, known as Genetico Research,  that expects to specialize in product development in the cannabis industry, with a main focus on bringing CBG/CBD products to market. These CBG/CBD products are not expected to contain any psychoactive ingredient, making them more accessible to potential clients who would like to receive the medicinal benefits of cannabis without the psychoactive ingredient of full spectrum cannabis products.

 

SpeakEasy believes that the legalization of the recreational use of psychedelic mushrooms will progress before any other substance in the psychedelic space.  SpeakEasy expects, upon receipt of a licence from Health Canada, to commence cultivating unique strains of magic mushrooms for lab testing and cataloging in order to receive an in-depth understanding of potency, yield and delivery metrics. Through extraction, research and development, it aims to create quality and consistency for specific dose types, so that users can reap the benefits of psilocybin without the hallucinogenic effects.

 

If the Acquisition is completed, SpeakEasy intends to use the XCYBIN platform to service medical users of psilocybin once it is licenced to do so and, if and when the recreational use of psilocybin is legalized in Canada, to generate cash flow through the low-cost of cultivation, selling highly effective, high margin products.

 

Geen states, “We believe in a world where everyone can experience the benefits of psilocybin. The company is focused on becoming the world‘s online destination to learn about psilocybin, find magic mushroom strains and help make decisions on what is best for each person. We’re committed to education and science-based information that unites communities across borders and propels our industry ahead. This project is nearing 3 years of development and optimization of the platform and we anticipate launching in the coming months.” 

 

The Company is at arms-length to Karolos and each of the holders of the Karolos securities.  If completed, the Acquisition would neither constitute a fundamental change for the Company, nor result in a change of control of the Company, within the meaning of applicable securities laws and the policies of the Canadian Securities Exchange.

 

The completion of the Acquisition is subject to a number of conditions; including, without limitation, the approval of the Canadian Securities Exchange and the approval of the Company’s minority shareholders.  The Company anticipates calling a special meeting of shareholders in the coming weeks with a view to seeking minority shareholder approval for the Acquisition.

 

Investing in the Future of Psilocybin

While research into the possible benefits of utilizing psilocybin for certain medical conditions increasing, general knowledge is still marginal with basic understandings of simple points like different potency of each magic mushroom strain or even the fact there are multiple strains. SpeakEasy has witnessed how an agile business model, such as those employed by Leafly or Weedmaps, which continually adapts to new legislation, can been rewarded handsomely in the markets for taking early risks.  It’s been reported that Weedmaps will list on the Nasdaq for $1.5 billion USD in the later part of 2021(4). The onset of the COVID-19 pandemic has refocused and propelled the need for all businesses to now have an online presence and be driven by data.

 

Founder Marc Geen, “We‘re excited for this new chapter in our business, my vision was never for us just to be a farm at SpeakEasy. Understanding the effort that has been put into this project for nearly 3 years while recognizing the competition that is coming into this red-hot sector, it has become easy to recognize that if you want to be a leader, time to market is critical. The expertise the company brings to us will help not only develop the psilocybin portion of our business but dovetails well with the cannabis side too, I’m thrilled to bring them into the family”.

 

Market Opportunity

Anxiety already plagues over 40 million Americans1 and more than 284 million people worldwide2, and we believe that the COVID-19 pandemic is only making things worse.  Psychedelics were once the subject of great controversy and negative stigma, but we believe they are quickly becoming legitimized as a treatment for a wide range of mental health and addiction issues. We are experiencing a revival of scientific and clinical research into alternative psychedelic therapies, which are emerging at the forefront of innovation in the treatment of mental health issues.  The substance abuse crisis that is affecting millions of Americans and has cost the US economy trillions of dollars so far. In fact, some sources estimate that the substance abuse crisis cost American society approximately $631 billion between 2015 and 20183 And just like anxiety and depression, the substance abuse crisis has only been getting worse during COVID19, especially with more people turning to meds to overcome COVID19-related stress(5).

About the Psychedelics Market

With projections of a $6.8 billion dollar industry by 2027, companies at the forefront of the psychedelic therapeutic drug market could see enormous benefits in the coming years. The psychedelic space’s promise is perhaps best illustrated by the sector’s largest-ever private financing round of $80 million for Compass Pathways (NASDAQ: CMPS), the first psychedelic company to IPO on the NASDAQ. Not to be outdone, Mind Med Inc. (OTCQB: MMEDF) is following suit; the company has recently exceeded a $2 billion dollar valuation. A new market study of the U.S. psychedelic drug space forecasts that the market is projected to grow at 16.3%. Factors such as increasing prevalence of depression and mental disorders drive that growth. The Data Bridge Market Research report notes that the market is expected to total approximately $6.8 billion by 2027, up from $2 billion in 2019(6).

 

About the Alternative Medicine Market

The global alternative medicine market size is projected to reach USD $296.3 billion by 2027 exhibiting a CAGR of 19.9% according to a new report by Grand View Research Inc.(7)   We believe that psilocybin is likely to fall under the alternative medicine classification and be consumed directly as magic mushrooms or from extracted concentrated forms rather than being synthetically produced. The cannabis industry is very similar and has settled into the naturally produced form rather than synthetic forms of cannabinoids for many reasons.

 

About SpeakEasy Cannabis Club Ltd.

SpeakEasy Cannabis Club Ltd. holds a cultivation, processing and sales licence issued by Health Canada under the Cannabis Act. SpeakEasy owns 290 acres of land in Rock Creek, British Columbia, and leverages five generations of farming experience in B.C. as well as its favourable location to grow and process high-quality cannabis products at low cost. SpeakEasy cultivates small batch, high quality craft cannabis at scale in a portion of its 63,200 square foot indoor cannabis complex and has completed its harvest of its 60-acre outdoor field. Total yearly production of cannabis flower and biomass is projected to be in excess of 70,000 kilograms per year once in full production.

On behalf of the Board of the Directors

Forward Looking Statements

This news release contains statements that constitute “forward-looking statements.” Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause SpeakEasy’s actual results, performance or achievements, or developments in the industry to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “potential” and similar expressions, or that events or conditions “will,” “would,” “may,” “could” or “should” occur.

 

Forward-looking statements in this document include statements concerning SpeakEasy’s expectations that it will complete the Acquisition on the terms proposed (or at all), its expectation that it will receive the requisite approvals for the Acquisition, that the recreational use of magic mushrooms, psilocybin and related products will be legalized or decriminalized in Canada and elsewhere, its expectations and projections concerning market demand and potential market size for magic mushrooms, psilocybin and related products; its expectation that psilocybin will be categorized as an alternative medicine, its expectations concerning the economic benefits of being an early participant in psilocybin industry, its belief that there is a growing global mental health crisis and that the COVID-19 pandemic is exacerbating that crisis, its intent to produce and sell high quality craft cannabis and all other statements that are not statements of historical fact.

 

Although SpeakEasy believes the forward-looking information contained in this news release is reasonable based on information available on the date hereof, by their nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements.

 

Examples of such assumptions, risks and uncertainties include, without limitation, assumptions, risks and uncertainties associated with general economic conditions; COVID-19, adverse industry events; future legislative and regulatory developments involving cannabis; the Company’s ability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favorable terms; the cannabis and hemp industries and markets in Canada and generally; the demand for CBD distillate, cannabis and cannabis related products, the ability of SpeakEasy to implement its business strategies; competition; the ability of SpeakEasy to obtain and retain all applicable licences from Health Canada, including, but not limited to those required under the Cannabis Act and other assumptions, risks and uncertainties.

 

In addition, psilocybin is currently a Schedule III drug under the Controlled Drugs and Substances Act (Canada) and it is a criminal offence to possess substances under the Controlled Drugs and Substances Act (Canada) without a prescription or authorization. Health Canada has not approved psilocybin as a drug for any indication. SpeakEasy does not have any direct or indirect involvement with illegal selling, production, or distribution of psychedelic substances in jurisdictions in which it operates. While SpeakEasy believes psychedelic substances can be used to treat certain medical conditions, it does not advocate for the legalization of psychedelics substances for recreational use. SpeakEasy does not currently deal with psychedelic substances in any manner.

 

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.

 

The Canadian Securities Exchange nor its Regulation Services accepts responsibility for the adequacy or accuracy of this release.

SOURCE Speakeasy Cannabis Club Ltd.

 

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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