SpeakEasy Announces Proposed Strategic Acquisition of Karolos Research Inc.

Published: June 28, 2021

SpeakEasy Announces Proposed Strategic Acquisition of Karolos Research Inc.

SpeakEasy Cannabis Club Ltd., 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. and each of the security holders of Karolos (the “Definitive Agreement”) in connection with the proposed acquisition of all of the issued and outstanding securities of Karolos.

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.


Market Opportunity

Anxiety already plagues over 40 million Americansand 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 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.