Mr. Kevin Bottomley reports

KING'S BAY RESOURCES CORP. AGREES TO ACQUIRE CANNABIS INDUSTRY S ELICIT LABS, ANNOUNCES CHANGE OF BUSINESS AND FINANCING

King's Bay Resources Corp. has entered into an arm's-length agreement, dated March 29, 2019, with Joshua Stimmel and others to acquire all of the issued and outstanding equity of S&S Company LLC, which owns and operates the licensed S&S California cannabis production and extraction lab, with immediate plans for expansion with high-capacity extraction and distillation under the brand name Elicit Labs.

The acquisition of S&S is being done in conjunction with a 1:5 consolidation of King's Bay share capital, a change of King's Bay name, a financing and changes to King's Bay management. The parties have agreed to co-operate reasonably and in good faith in finalizing the structure of the proposed transaction for optimal tax treatment of the parties and for operational purposes. On completion of the proposed transaction, S&S will carry on its business as an indirect subsidiary of King's Bay.

Among other closing conditions, the proposed transaction is subject to the approval of King's Bay shareholders, which will be sought at a general meeting expected to be scheduled for a date in June, 2019. King's Bay shares will remain halted until the closing of the proposed transaction. Further information respecting the proposed transaction will be contained in the management information circular to be prepared by the company and delivered to its shareholders prior to the meeting, a copy of which will be filed under the company's profile at SEDAR.

About S&S Company LLC

S&S Company, under the brand name Elicit Labs, is an innovative extraction and manufacturing private company doing business in California for over four years. Elicit Labs has established new, innovative methods to isolate cannabis compounds and to do so more efficiently, resulting in better, purer quality outputs. This proprietary product is marketed under the brand name Absolute Crumble. These methods are at the core of the S&S vision of a complete, seed-to-consumer sales company that leverages its expertise in the development and manufacturing of concentrate products. The Elicit Labs team comprises many industry veterans, experienced executives and operators. The financial results of S&S for the past two years are being audited and will be disclosed in a future news release.

S&S has received a temporary permit for a new 10,000-square-foot facility located in Merced, Calif. The company has completed engineering plans and construction permits, including power upgrades. This new facility is projected to have the capacity to increase historical production capacity from 15,000 grams per month to a potential 150,000 grams per month to meet demand in the State of California and allow the company to expand its proprietary process into additional new concentrate products, including oil cartridges for reusable pens, live resin, wax and distillate, all under the Elicit Labs brand name. These expansion costs are estimated at $750,000 (U.S.) and plans are to start construction once financing is in place from the closing of the proposed transaction and the King's Bay financing discussed below.

According to a report produced by BD Analytics and Arcview Research, "Concentrates is the fastest-growing big cannabis category, far outpacing flower, topicals and edibles in terms of sales expansion." Furthermore, the report forecasts, "By 2022, U.S. concentrate product sales are estimated to hit $8.4-billion and nearly match the $8.5-billion in flower sales forecasted."

"We determined that focusing in on the concentrate category within the California market provided our shareholders the best growth opportunity within the cannabis industry. Elicit Labs is an established brand within this high-growth category, building upon award-winning success of their Absolute Crumble, and expanding their proprietary process into other recreational and medicinal concentrate products," stated Kevin Bottomley, president of King's Bay Resources.

"We have worked closely with King's Bay and their consultants over the last few months and are pleased to provide an attractive investment opportunity to the public while bringing in the necessary capital to build and grow our business," stated Mr. Stimmel, co-founder and president of S&S.

Acquisition of S&S

The proposed transaction is a change of business and a fundamental acquisition under TSX Venture Exchange policies. The March 29 agreement between King's Bay and S&S includes the following terms:

• In conjunction with a 1:5 consolidation of its share capital, King's Bay shall raise funds pursuant to a private placement offering, which on closing will be invested through a King's Bay subsidiary in the S&S business.
• King's Bay will reserve an aggregate of up to 23 million common shares of King's Bay for issuance to the members of S&S upon the exercise of the redemption exchange right described below and in exchange for all the issued and outstanding securities of S&S. The value of the consideration shares for the purpose of the proposed transaction is four cents per share. The 23 million shares are expected to represent 46.27 per cent of the total issued and outstanding share capital of King's Bay after completion of the proposed transaction, including the King's Bay financing discussed below. In order to ensure that the S&S members do not have adverse tax consequences prior to taking possession of their consideration shares, King's Bay's wholly owned United States subsidiary (SubCo), which is purchasing S&S will create new share class non-economic, non-voting preferred shares, each of which shares will be convertible into 1,000 consideration shares.
• Members of S&S shall purchase special voting shares in King's Bay for a nominal price, each of which shall entitle the holder to exercise 1,000 voting rights as compared with a King's Bay common share. The number of these special voting shares are reduced in the same proportion as the redemption exchange right is exercised, so that 1,000 consideration shares are issued whenever one SubCo preferred share and one special voting share are cancelled.

The consideration shares may be required to be escrowed pursuant to applicable stock exchange requirements. A finder's fee of three million shares is payable in connection with the acquisition of S&S to an unrelated party.

The proposed transaction is expected to close in July, 2019, and is subject to the conditions set out in the purchase agreement between the company and the S&S members, including the completion of the King's Bay financing (described below). It is also the intention of the parties that King's Bay delist its common shares from trading on TSX Venture Exchange and list on the Canadian Securities Exchange.

The King's Bay financing

Prior to closing the acquisition of S&S, King's Bay will complete a financing to raise proceeds to finance the operation of the purchased business and its further growth and development, including the capitalization of SubCo and S&S. The King's Bay financing shall be in an amount and at a price to be determined by the parties, acting reasonably and having regard to market conditions and the anticipated capital requirements of King's Bay and its business after closing. The King's Bay financing will be affected by the issuance of King's Bay common shares or shares and warrants. Finders' fees may be payable in connection with the King's Bay financing.

The common shares of King's Bay issued pursuant to the King's Bay financing will be subject to resale hold periods under applicable Canadian and United States securities laws.

New management

On closing, the existing board and management of King's Bay shall resign and, subject to their acceptability to the CSE, the board of directors of King's Bay shall include four of Mr. Stimmel, Joshua Hartsel, Tage Stimmel, David Hwang and other persons to be determined prior to closing. Mr. Stimmel shall also serve as the company's president and chief executive officer. Current directors of King's Bay will be entitled to nominate one director to the board on behalf of current King's Bay shareholders.

Mr. Stimmel is the lead force behind the business development, strategic partnerships, team building and organizational structure of S&S Company and Elicit Labs. He is a seasoned expert in organic land management and the commercial operation of sustainable outdoor and mixed light cultivation and retail dispensaries with a focus on original heritage strains alongside the newest, best-in-class genetics available and hemp cultivation. An experienced cultivator of 12 years, he has nurtured key industry relationships and assembled a powerful team capable of propelling it to be the most innovative, respected and competitive vertically integrated cannabis company in California.

Ms. Stimmel is the chief operating officer for S&S Company. She is a seasoned operation manager with 20 years in food and beverage management. She has a bachelor of science in business administration with focus in entrepreneurship and general management from Sacramento State University. Ms. Stimmel also has over 18 years of cannabis experience, including managing trimming employees for outdoor harvests and cultivating indoor cannabis. Starting in 2014, Ms. Stimmel worked as the CEO for Golden Hills Collective, the Prop 215 legal medical cannabis business which sold concentrate products under the brand Elicit Labs.

Mr. Hwang is classically trained as a physicist. Recruited by Bell Labs immediately after graduation, Mr. Hwang has had an eclectic career, including hedge fund quant, management consultant and angel investor. In 2013, Mr. Hwang set out to build his domain expertise in cannabis and has now extensive experience assisting cannabis business with business process optimization, demand planning and logistics. Mr. Hwang will assist the company in designing and building out best-of-breed information technology solutions that maximize yield and efficiency.

Dr. Hartsel is S&S's CEO and is the co-founder of Delta-9 Technologies and Blue Sky Processing. Dr. Hartsel has pioneered large-scale extraction techniques for many leading companies in the space (Privateer Holdings, CV Sciences, Ananda Hemp and Speakeasy) for the past decade. As a scientist, first and foremost, Dr. Hartsel is a leading authority on cannabis chemistry. As the director of research and development at CV Sciences, his large-scale extraction expertise earned six High-Times Cannabis Cup awards for concentrates, pioneering the crystallization of CBD (cannabidiol). Over his career, he has co-authored several peer-reviewed journals, two book chapters on CBD and terpenes, and served as an inventor on key patent applications.

Name change

In conjunction with the King's Bay consolidation, the company intends to change its name from King's Bay Resources to Merced Holdings Corp. or such other name as may be selected by the King's Bay board of directors.

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