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Auxly Cannabis Group Inc
Symbol XLY
Shares Issued 773,593,288
Close 2021-05-27 C$ 0.425
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Myconic to acquire KGK Science from Auxly

2021-05-27 10:27 ET - News Release

See News Release (C-MEDI) Myconic Capital Corp

Mr. Robert Meister of Myconic reports

MYCONIC CAPITAL TO ACQUIRE KGK SCIENCE FROM AUXLY CANNABIS GROUP

Myconic Capital Corp. has entered into a definitive share purchase agreement, dated May 26, 2021, pursuant to which it will acquire 100 per cent of each class of the issued and outstanding shares of KGK Science Inc. from Auxly Cannabis Group Inc. as an investment. 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, $1-million in cash payable six months after the closing date and $10-million in common shares of the company 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 instalments within the first year of the closing date.

Founded in 1997, KGK is a leading North American contract research organization based in London, Ont., 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."

"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 of 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 valued at $2.5-million, for a term of 10 years, toward any services that Auxly engages KGK to perform. The KGK service credit provides incentive for 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.

Also, subject to acceptance by the NEO Exchange, the company has granted an aggregate of 1.95 million stock options to certain directors, officers and consultants to purchase up to 1.95 million 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 Feb. 21, 2021. Half of the options vest six months from the date of grant with the remaining 50 per cent of the options vesting 12 months after the date of the grant.

About Auxly Cannabis Group Inc.

Auxly is a vertically integrated cannabis company dedicated to bringing branded cannabis products to market that consumers love and trust. Its team of professionals and cannabis enthusiasts are united by a shared commitment to quality and its consumers. The company builds powerful value propositions with brands that connect and products that deliver on its consumer promise of quality, safety and efficacy.

About Myconic Capital Corp.

Myconic 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 and wellness sectors.

We seek Safe Harbor.

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