Psygen Industries Ltd. and Larose Ventures Ltd. Announce Reverse Takeover Transaction

Psygen Industries Ltd. (“Psygen“) and Larose Ventures Ltd. (“Larose Ventures” or the “Company“) are pleased to announce they have entered into a binding letter agreement (the “Letter Agreement“) dated March 23, 2021, to complete a business combination by way of a transaction that will constitute a reverse takeover of a wholly-owned subsidiary of the Company, being 1290442 B.C. Ltd. (“SpinCo“), by Psygen (the “Transaction“). The Transaction is conditional on, and will be effected after, the closing of the Company’s previously announced strategic reorganization, whereby the Company intends to spin out its interest in SpinCo, along with six other wholly-owned subsidiaries, to the Company’s shareholders by way of a statutory plan of arrangement (the “Spin-Out“) pursuant to the Business Corporations Act (British Columbia). It is the intention of the parties that the resulting issuer from the Transaction (the “Resulting Issuer“) will carry on the current business of Psygen. The parties to the Transaction are not related and act at arms’ length.

Psygen intends to be a leading provider of psychedelics for healing and wellness. Psygen will be a manufacturer of pharmaceutical-grade psychedelic drug substances for clinical research and therapeutic applications. Psygen consists of a team of industry and business experts with over 25 years of direct experience manufacturing psychedelics. Psygen is building Canada’s first dedicated psychedelics manufacturing facility, which will be dedicated to the synthesis of psychedelic drugs for clinical research and approved therapeutic applications. Psygen has worked in partnership with an existing Licensed Dealer to develop manufacturing protocols for psychedelic drug products.

Psygen intends to conduct a drug develop program, studying the application of lysergic acid diethylamide (“LSD“). The intention of this program is to obtain a market authorization for both a microdose LSD product and a macrodose LSD product. The macrodose product will be intended for use as an adjunct to psychotherapy, with the use protocols focusing on group therapy and dynamics. The microdose product is intended to improve the stability of recovery for patients following their group therapy sessions.

Under the terms of the Letter Agreement, it is currently anticipated that the Transaction will be effected by way of a three-cornered amalgamation, share exchange, merger, amalgamation, arrangement or other similar form of transaction as is acceptable to the parties. The final structure of the Transaction is subject to receipt by the parties of tax, corporate, and securities law advice and will be agreed to pursuant to definitive transaction documents expected to be executed by the parties in the short term.

Pursuant to the terms of the Letter Agreement, SpinCo will effect a stock split or consolidation (the “Adjustment“) of its issued and outstanding common shares (“SpinCo Shares“) prior to completion of the Transaction (the “Closing“), that results in the shareholders of SpinCo receiving shares that have a value of $1.25 million based on the Issue Price (as defined below). The SpinCo Shares upon completion of the Adjustment are referred to herein as the “Adjusted SpinCo Shares“. In accordance with the terms of the Letter Agreement, it is expected that the holders of the issued and outstanding common shares in the capital of Psygen (the “Psygen Shares“) will be issued one (1) Adjusted SpinCo Share in exchange for every one (1) Psygen Share (the “Exchange Ratio“) held immediately prior to the Closing.

The Letter Agreement includes a number of conditions to the Closing, including but not limited to, the conditional approval of the TSX Venture Exchange (“TSXV“), a reconstitution of SpinCo’s board of directors and management such that they are comprised of Psygen’s nominees, a change in SpinCo’s name to a name requested by Psygen (the “Name Change“), requisite shareholder approvals including the approval of the shareholders of Psygen and SpinCo, the completion of the Adjustment, the completion of the Spin-Out, approvals of all regulatory bodies having jurisdiction in connection with the Transaction, the completion of the Psygen Financings (as defined below), that SpinCo will have no outstanding liabilities, and other closing conditions customary to transactions of the nature of the Transaction. SpinCo intends to call an annual general and special meeting of its shareholders (the “Meeting“) in due course, and its shareholders will be asked to approve the following matters, among others, at the Meeting: the reconstitution of SpinCo’s board of directors, the Name Change, the Adjustment, and the Transaction or a component thereof (as may be required by the TSXV). There can be no assurance that the Transaction will be completed as proposed or at all.

SpinCo is a private company that will, following the completion of the Spin-Out, become a “reporting issuer” under the securities laws of the Provinces of British Columbia and Alberta. SpinCo intends to apply to list its common shares on the TSXV and, if and upon the satisfaction of the TSXV’s initial listing requirements, the Adjusted SpinCo Shares are expected to begin trading on the TSXV following the Closing. There can be no assurance that the Adjusted SpinCo Shares will begin trading as contemplated, or at all.

Psygen Debenture Financing

Prior to the completion of the Transaction, Psygen will complete a private placement of 8% unsecured subordinated convertible debentures (“Psygen Debentures“) to raise aggregate gross proceeds of a minimum of $4,000,000 up to a maximum of $5,000,000 (the “Psygen Debenture Financing“). Each Psygen Debenture will automatically convert: (i) immediately prior to Closing into Psygen Shares at a conversion price equal to 0.8 of the deemed price per Psygen Share in connection with the Psygen Concurrent Financing; or (ii) on the date that is 1 year from the date of issuance (the “Maturity Date“) at a price per Psygen Share equal to $30mm divided by the number of Psygen Shares issued and outstanding immediately prior to completion of the Psygen Debenture Financing. Psygen may redeem the Psygen Debentures at any time from the date that is 6 months following the closing of the Psygen Debenture Financing and prior to the Maturity Date, prior to conversion of the Psygen Debentures into Psygen Shares, upon providing 30 days prior notice to the holder.

Psygen Concurrent Financing

Psygen will also complete a brokered private placement offering (the “Psygen Concurrent Financing“; together with the Psygen Debenture Financing, the “Psygen Financings“) of subscription receipts (“Psygen Subscription Receipts“) to be led by Eight Capital and Canaccord Genuity Corp. (together with any additional appointed agents, the “Agents“) at a price per Psygen Subscription Receipt (the “Issue Price“) to be determined in the context of the market for gross proceeds of a minimum of $10,000,000. Pursuant to their terms, upon the conditions to conversion being met, each Psygen Subscription Receipt will be converted into one (1) Psygen Share. The Psygen Shares will be exchanged at the Exchange Ratio for Adjusted SpinCo Shares. Psygen will pay the Agents a cash commission equal to 7% of the aggregate gross proceeds of the Psygen Concurrent Financing and issue the Agents compensation warrants, expiring 24 months following the closing date of the Psygen Concurrent Financing, to purchase that number of Psygen Shares at the Issue Price that is equal to 7% of the Psygen Subscription Receipts sold. The Agents’ cash commission and number of compensation options shall be reduced to 3.5% of gross proceeds and number of units sold, respectively, for purchasers on the president’s list. The net proceeds of the Psygen Concurrent Financing, together with 50% of the cash commission payable to the Agents, will be placed in escrow pending completion of the Transaction and the satisfaction of the escrow release conditions of the Psygen Subscription Receipts and upon completion thereof and the release of the net proceeds, it is currently contemplated that they will be used for the execution of Psygen’s strategic plan.

Subject to applicable shareholder and TSXV approval, upon completion of the Transaction, the board of directors and management of the Resulting Issuer will be comprised of the following individuals:

Danny Motyka, Proposed Chief Executive Officer & Director

After graduating from the University of Victoria with an honours degree in chemistry, he began his rise through management at Aurora Cannabis. His career with Aurora included multiple years as General Manager of a cannabis cultivation and processing facility, providing foundational experience with the intricacies of good manufacturing practices, and a strong knowledge of the Controlled Drugs and Substances Act and the associated regulations. Mr. Motyka has built a GMP facility and scaled from 2 to 60 employees.

Peter van der Heyden, Proposed Chief Science Officer

Mr. van der Heyden is currently the Chief Science Officer of Psygen and has been leading Psygen’s research focused on the chemistry, synthesis, and luminescent properties of lysergamides and tryptamines and their potential therapeutic applications. Mr. van der Heyden is actively engaged in cGMP manufacture of several classical psychedelics for use in a wide range of clinical trials, and in biotechnical research that may lead to novel ways of assembling psychedelic drug molecules. Mr. van der Heyden was previously an Adjuct Professor in the Faculty of Pharmacy and Pharmaceutical Sciences at the University of Alberta, and was the Chief Executive Officer of a private bioanalytical company for 18 years. Mr. van der Heyden has a Ph.D. in Earth Sciences from the University of British Columbia.

Paul Mesburis, Proposed Chief Financial Officer

Mr. Mesburis joined Psygen as Chief Financial Officer in 2021. He has more than twenty-five years of international experience in financial and capital markets. He has over a decade of valuable experience as a public company board member of both TSX and TSXV listed companies and expertise in finance, risk management, strategy and governance through his service on board committees. His capital markets experience encompasses senior roles for both buy-side and sell-side firms. On the buy-side, he has managed portfolios for global investment strategies in both debt and equities. On the sell-side, his experience includes senior roles in mergers and acquisitions, investment banking, and institutional equity research at both global and domestic investment banks. In 2012, he was honoured with a Canadian Lipper Fund Award which recognizes funds that have excelled in delivering consistently strong risk-adjusted performance, relative to their peers. He received his Master of Business Administration degree from the Schulich School of Business at York University, his Bachelor of Arts degree from the University of Toronto, and has completed Executive Education at Harvard Business School. Mr. Mesburis holds the Chartered Professional Accountant (Ontario), Chartered Accountant (Ontario), Certified Public Accountant (Illinois), and Chartered Financial Analyst designations. Since 2016, Mr. Mesburis has been a member of the Board of Directors and Audit Committee Chair of Avivagen Inc. (TSXV: VIV).

Michael Saliken, Proposed Corporate Secretary

Mr. Saliken is a corporate and securities lawyer and a partner at Borden Ladner Gervais LLP. He has over 10 years of experience providing business advisory, corporate governance and legal services to companies in the cannabis, psychedelics, technology and energy industries.

Dilek Dag, Proposed Director

Ms. Dag is currently the VP of Manufacturing with Aurora Cannabis. Ms. Dag is a values-based leader with extensive experience in engineering and manufacturing in highly regulated environments. Ms. Dag’s entrepreneurial spirit has helped establish sustainable business practices and opportunities for collaboration. Her focus on personal growth and learning has been recognized through various prestigious employer awards. Aurora River – Entrepreneurial Spirit Award (recognized by peers for living the values) and the Apotex – Global Award (for outstanding contribution in support of the business transformation).

Mitch Greenspoon, Proposed Director

Mr. Greenspoon is currently the Chairman and Co-Founder of Capcium. Mr. Greenspoon has been a key driver of Capcium’s vision since its inception, providing strategic leadership on financing and growth opportunities as well as fostering an entrepreneurial spirit in the Company. A lifelong entrepreneur, Mr. Greenspoon brings over 25 years of senior management experience in manufacturing industries related to that of Capcium, as well as capital markets expertise. Prior to co-founding Capcium, from December 2011 to December 2017, Mr. Greenspoon was President of GI Sportz, the largest global manufacturer and distributor of paintball products, where he spearheaded its growth strategy, culminating with its successful sale to private equity and spin out of its encapsulation expertise to Capcium. Prior to joining GI Sportz in 2011, Mr. Greenspoon was one of the leading healthcare bankers in Canada and acted as Head of Investment Banking at Orion Securities (which was acquired by Macquarie Capital Markets), where he led dozens of financings and provided mergers and acquisitions advice to entrepreneurial companies in the healthcare and technology sectors. Mr. Greenspoon also practiced law in Montreal from 1984 to 1993, where he specialized in securities law, mergers and acquisitions and corporate finance. Mr.Greenspoon holds civil and common law degrees from McGill University which he obtained in 1983. the pharmaceutical sector as founder and CEO of a private bioanalytical company.

Norma Beauchamp, Proposed Director

Ms. Beauchamp is a former pharmaceutical executive with Bayer/Sanofi and has been an independent consultant since 2009. She serves as a member of the board of directors of Aurora Cannabis Inc. since 2018, Extendicare Inc. since 2019 and Dialogue since 2020. Ms. Beauchamp currently chairs the Nominating and Governance Committee and serves on the HR and Compensation Committee at Aurora Cannabis Inc. since 2018. Previously, Ms. Beauchamp was President and CEO at Cystic Fibrosis Canada from 2014 to 2017 and was a member of the board of directors of Acerus Pharmaceuticals Corporation from 2015 to 2020 where she chaired the Nominating and Governance committee and served on the audit committee between 2015 and 2020 and MedReleaf Corp from 2017 to 2018 where she Chaired the Governance and Compensation Committee from 2017 to 2018. Norma gives back to her community as a board of director on the Ontario Caregivers Organization and ALS Canada. In addition, she is a council member of the National Research Council of Canada and an active regional ambassador and mentor with Women Get on Board. Norma was recognized in 2021 as a BMO Celebrating Women on Boards Honouree. Norma earned a Bachelor of Business Administration from Bishop’s University and has completed the Director’s Education Program at the Rotman School of Management at the University of Toronto.

Ryan Zurrer, Proposed Director

Mr. Zurrer is a venture investor and entrepreneur, an avid biohacker, and was an early contributing member to the Quantified Self Movement in the early 2000s. Ryan was a seed investor in some of the best performing venture investments of the 2010s including MakerDAO, Ethereum, and Polychain Capital. Ryan launched Polychain’s private investment activities, led Polychain Capital’s investment team, and was instrumental in delivering Polychain’s 2017 returns in excess of 28X net of fees to LPs. Ryan has built a reputation for being a hands-on, value-add venture investor with a uniquely global purview. Previously he was CEO of a large Brazilian renewables firm and is responsible for more than 1GW of wind and solar power development globally along with a range of innovations in contracting, financial instruments, and execution of utility-scale renewable energy projects. Ryan is an honours graduate of the Richard Ivey School of Business where he received the Certificate of Entrepreneurship as well as the Continuing Athletics Scholarship as a member of the Men’s varsity Rugby team.