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Myconic Capital To Acquire KGK Science From Auxly Cannabis Group

May 27, 2021

$12.5 MILLION INVESTMENT IN CLINICAL RESEARCH TRIAL BUSINESS  ADDS A KEY PILLAR TO MYCONIC’S COMPETITIVE STRATEGY

Vancouver, British Columbia, May 27th, 2021 / Globe Newswire / – Myconic Capital Corp. (NEO: MEDI) (the “Company” or “Myconic”) is pleased to announce that the Company has entered into a definitive share purchase agreement (the “Agreement”), dated May 26, 2021, pursuant to which it will acquire 100% of each class of the issued and outstanding shares of KGK Science Inc. (“KGK”) from Auxly Cannabis Group Inc. (TSX: XLY) (“Auxly”) as an investment (the “Transaction”). As consideration for KGK, Myconic will pay a base amount of $12.5 million in aggregate to Auxly over time in the form of $1.5 million in cash payable on closing of the Transaction (the “Closing Date”), $1.0 million in cash payable six months after the Closing Date, and $10.0 million in common shares of the Company (the “Consideration Shares”) based on the 30-day volume weighted average price per share immediately prior to the entering into of the Agreement. The Consideration Shares issued in connection with the Transaction will become tradeable in four equal installments within the first year of the Closing Date.

Founded in 1997, KGK is a leading North American contract research organization based in London, Ontario that primarily provides high-quality clinical research trials with a focus on the nutraceutical, cannabis and emerging psychedelic industries. For over 23 years, the business has successfully helped hundreds of companies with custom designed clinical trials and claim substantiation strategies to move products into global markets. KGK’s other existing service lines include expert regulatory support and compliance solutions, participant recruitment, research support services and consulting services. On an approximate basis, the business to date has produced 150 publications, executed over 400 clinical trials across more than 40 indications, amassed 25,000 participants in its database and collected 10 million data points.

In 2020, KGK generated approximately $4.4 million in revenues for Auxly, which is expected to grow in 2021. Myconic’s vision is to expand KGK’s scope of services to also include special and compassionate access trials using ketamine and other psychedelic drugs as well as patient monitoring services, among others, which is in alignment with its vision of becoming a North American leader in mental health. Should KGK achieve $8 million in revenue in any 12-month period during the two years following the Closing Date, then Myconic will make an extra milestone payment of $1.5 million to Auxly in either cash or its common shares, at its option.

“The investment that Myconic is making to acquire KGK is very exciting and I look forward to welcoming the KGK team and their valuable expertise to our company”, said Robert Meister, Chief Executive Officer of Myconic. “On behalf of the Board of Directors, I would like to commend Auxly on their professionalism and transparency throughout the Transaction thus far and look forward to our companies working together for many years into the future, long after the Closing Date,” added Mr. Meister.

“This agreement with Myconic is a win-win for Auxly and its shareholders in both the short and long-term, as the additional capital can be deployed into our core business and accelerates Auxly’s path to profitability, while continuing our long-standing relationship with KGK to leverage their deep clinical expertise as we continue to bring innovative cannabis products to market that meet our consumer promise of quality, safety and efficacy,” said Hugo Alves, CEO, Auxly. “KGK is an outstanding CRO that knows how to unlock value in emerging industries through clinical work and will be an excellent fit with the team at Myconic.”

Pursuant to the terms of the Agreement, Myconic has also agreed to extend to Auxly a service credit (“KGK Service Credit”) valued at $2.5 million, for a term of 10 years, towards any services that Auxly engages KGK to perform. The KGK Service Credit incentivizes Auxly to continue its relationship with Myconic for the long term, while ensuring a strong foundation for the demand for KGK’s services in the marketplace.

The Company is at arm’s length from Auxly. The Transaction may constitute a significant acquisition pursuant to National Instrument 51-102 (Continuous Disclosure Obligations), so the Company will file a business acquisition report within 75 days from the Closing Date if and as required.  The Transaction remains subject to approval of the NEO Exchange and is expected to close during the week of June 7, 2021.

The Company also announces that subject to acceptance by the NEO Exchange, it has granted an aggregate of 1,950,000 stock options (the “Options”) to certain directors, officers and consultants to purchase up to 1,950,000 common shares of the Company at a price of $1.70 per common share for a period of five years from the date of grant, pursuant to its Stock Option Plan that was approved by shareholders on February 21, 2021. 50% of the Options vest six months from the date of grant with the remaining 50% of the Options vesting twelve months after the date of the grant.

ABOUT AUXLY CANNABIS GROUP INC. (TSX: XLY)

Auxly is a vertically integrated cannabis company dedicated to bringing branded cannabis products to market that consumers love and trust. Our team of professionals and cannabis enthusiasts are united by a shared commitment to quality and our consumers. We build powerful value propositions with brands that connect and products that deliver on our consumer promise of quality, safety and efficacy.
Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.

ABOUT MYCONIC

Myconic Capital Corp. is an investment issuer with a diversified portfolio that is focused on emerging companies active in the high-tech, real estate, cannabis, mining and health & wellness sectors.

On behalf of:

MYCONIC CAPITAL CORP.

“Robert Meister”
Robert Meister
CEO and Director

For further information, please contact:

Nick Kuzyk, Investor Relations
Tel: 403-978-3801
Email: nick@mdwbnk.com
https://myconiccapital.com/

The Canadian Securities Exchange (the “CSE”) has not reviewed and does not accept responsibility for the accuracy or adequacy of this release.

Notice Regarding Forward Looking Information:

This news release contains forward-looking statements including statements regarding any of the Myconic holdings or investments, as well other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things, the state of the economy in general and capital markets in particular, investor interest in the business, and future prospects of the Company.

The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made, by third parties in respect of the matters discussed above.