Press Release

Psyched Wellness Closes Tranche 2A of Non-Brokered Private Placement, Amends and Restates Investor Rights Agreement, Provides Corporate Update and Announces Director Change

Toronto, Ontario--(September 1, 2023) - Psyched Wellness Ltd. (CSE: PSYC) (OTCQB: PSYCF) (FSE: 5U9) (the "Company" or "Psyched Wellness"), a life sciences company focused on the production and distribution of health and wellness products derived from the Amanita Muscaria mushroom, is pleased to announce, further to its press releases dated May 30, 2023 (the "May 30 Release") and June 12, 2023 (the "June 12 Release"), that it has closed a second tranche of its previously announced non-brokered private placement (the "Offering") effective August 31, 2023 (the "Tranche 2A Closing Date") for gross proceeds of US$4,500,000 ("Tranche 2A") upon satisfying the Tranche 2A closing conditions and receiving a closing notice. Capitalized terms not otherwise defined herein have the meanings attributed to them in the May 30 Release.

Pursuant to Tranche 2A, the Company has issued 87,402,855 Units at a price of C$0.07 per Unit for gross proceeds of US$4,500,000, approximately C$6,118,200, based on an exchange rate of US$1.00 = C$1.3596 as at August 28, 2023, as published on the website of the Bank of Canada.

Each Unit consists of one (1) Common Share and one (1) Warrant. Each Warrant entitles the holder thereof to acquire one (1) Additional Share at a price of C$0.10 per Additional Share at any time for a period of sixty (60) months from the date of issuance, exercisable on a cashless basis, subject to acceleration and compliance with the policies of the CSE, as further outlined in the May 30 Release.

All securities issued under Tranche 2A are subject to: (i) a four (4) month and one (1) day hold period from the date of issuance and (ii) applicable legends as required pursuant to the U.S. Securities Act. The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes.

Shareholder Meeting

At the annual general and special meeting of Shareholders held on Tuesday, July 11, 2023 (the "Meeting"), the Shareholders voted overwhelmingly in favour of each resolution put forth at the Meeting at a passing rate of over 99%, including approval of the Transaction Resolution (as defined in the June 12 Release) by a majority of minority Shareholders.

Jeffrey Stevens, Chief Executive Officer of the Company, commented, "I appreciate the support and patience of our Shareholders as we have been working behind the scenes with Gotham Green Partners to close this tranche of financing. This is a transformative investment that will allow the Company to maintain its first-mover advantage in bringing legal and safe products derived from the Amanita Muscaria mushroom to consumers in the United States. I am pleased to also share that both sides have been working together on additional product development, while working to close the financing, to ensure we can hit the ground running post-closing."

Amended and Restated Investor Rights Agreement

In connection with closing Tranche 2A, the Company and Gotham (as defined in the June 12 Release) entered into an amended and restated investor rights agreement dated August 30, 2023 (the "Amended and Restated Investor Rights Agreement") which amends the original Investor Rights Agreement dated June 12, 2023 to provide for the closing of Tranche 2 in two instalments, Tranche 2A, and tranche 2B for gross proceeds of US$2,500,000 ("Tranche 2B"), and provides, among other things, that:

1. on the Tranche 2A Closing Date and for a period of twelve (12) months following the closing of Tranche 2A (the "Nomination Period"), Gotham will have the right to:
   1. designate one (1) additional individual to become a member of the Board (who shall not be the Initial Nominee (as defined in the June 12 Release)), who would replace an existing Board member (the "Second Nominee"), bringing the total Board representation of Gotham to two (2) members, and maintaining the size of the Board at seven (7);
   2. jointly designate, with the Company, one (1) individual for election to the Board, who will initially be Nick Kadysh, an existing Board member (the "Joint Nominee"); and
   3. designate for election to the audit committee of the Company, provided that any of the following individuals satisfy the eligibility criteria for such committee, one (1) of either: (x) the Gotham Nominees (as defined herein), or (y) the Joint Nominee;
2. in addition, upon closing Tranche 2B, and during the remainder of the Nomination Period, Gotham shall be entitled to designate up to one (1) additional individual to become a member of the Board (the "Third Nominee" and together with the First Nominee and Second Nominee, the "Gotham Nominees"), replacing one existing member of the Board (who shall not be the First Nominee or Second Nominee), bringing the total Board representation of Gotham to three (3) members, and maintaining the board size at seven (7), provided that no more than three (3) Board members, at any time, will be employees or partners of the Investors (as defined in the June 12 Release) or their affiliates.

In addition, pursuant to the terms of the Amended and Restated Investor Rights Agreement:

1. the Company extended Gotham's exclusivity until November 8, 2023, during which time the Company and its directors, officers, and representatives are prohibited from directly or indirectly discussing, negotiating, or entering into any agreement or arrangement with respect to any potential financing transaction, sale transaction or other strategic transaction with any third party;

1. the Tranche 2A Investors entered into lock-up agreements with the Company to refrain from selling any Units acquired in Tranche 2A (and any securities underlying such Units acquired in Tranche 2A) for a period of twelve (12) months following the Tranche 2A Closing Date;

1. the Company entered into an amended executive employment agreement with its Chief Executive Officer, Jeffrey Stevens, pursuant to which Mr. Stevens will be reengaged as Chief Executive Officer of the Company, with such employment agreement to supersede the employment agreement dated April 20, 2021 entered into between the parties (the "Employment Agreement");
2. the Company entered into an amended independent contractor agreement with The Shisel, pursuant to which David Shisel, as principal of The Shisel, shall be reengaged to perform Chief Operating Officer services for the Company, with such consulting agreement to supersede the consulting agreement dated June 8, 2022 entered into between the parties (the "Consulting Agreement");
3. the Company reimbursed Gotham for reasonable and documented out-of-pocket expenses incurred in connection with the Offering in the amount of C$15,000; and
4. within five (5) business days following the satisfaction and/or waiver of the Tranche 2B Closing Conditions (as defined herein), the Company anticipates closing Tranche 2B. Closing of Tranche 2B is conditional upon the completion of the following (the "Tranche 2B Closing Conditions"):
   1. Gotham shall, in their sole discretion, be satisfied with their legal, tax, business and other due diligence with respect to the Company and its business, assets, liabilities, current and future operations, condition and prospects (financial or otherwise);
   2. Gotham shall have delivered to the Company a notice in writing (the "Tranche 2B Closing Notice"), in accordance with the terms of the Amended and Restated Investor Rights Agreement, which shall include certain information, including confirmation from Gotham that the Tranche 2B Closing Conditions have been satisfied or waived, and confirmation of the identity of the Investors and Units issuable in Tranche 2B that each Investor will acquire;
   3. the Investors in Tranche 2B shall have entered into lock-up agreements with the Company to refrain from selling any Units acquired in Tranche 2B (and any securities underlying such Units acquired in Tranche 2B) for a period of twelve (12) months following closing of Tranche 2B; and
   4. satisfaction of certain other closing conditions customary for a transaction of this nature.

The Amended and Restated Investor Rights Agreement will terminate on the earliest of: (i) the written agreement of Gotham and the Company; (ii) the date on which Gotham ceases to hold any securities of the Company; (iii) if Gotham provides a notice to the Company that closing of Tranche 2B will not occur; and (iv) by the Company by written notice to Gotham, if Gotham has not delivered a Tranche 2B Closing Notice to the Company by November 8, 2023, or such other date as the parties may agree in writing.

Gotham has no obligation to acquire any Units under Tranche 2B. The Units issuable in connection with Tranche 2B shall be issued to the Investors within five (5) business days following the satisfaction and/or waiver of the Tranche 2B Closing Conditions, subject to the terms and conditions of the Amended and Restated Investor Rights Agreement. Accordingly, as a result of the Offering, Gotham may be considered to have beneficial ownership over the Units issuable in connection with Tranche 2B in addition to the Units issued in the Initial Tranche and Tranche 2A.

The Company will make the Amended and Restated Investor Rights Agreement available on its SEDAR+ profile at www.sedarplus.ca.

Director Change

In connection with closing Tranche 2A and pursuant to the rights afforded under the Amended and Restated Investor Rights Agreement, Terry Booth has resigned as a director of the Company, effective August 31, 2023, to accommodate Gotham's nominee, Lauren Spikes being appointed to the Board.

The Company would like to thank Terry for his services as a director of the Company and wishes him all the best in his future endeavors.

"Psyched Wellness has built a solid foundation in the international psychedelic mushroom space. I wish Jeff, the Board and the Psyched Wellness team the very best in the future and I look forward to following their continued success," stated Mr. Booth.

Lauren Spikes

Lauren has been an Associate at Santa Monica-based investment firm Gotham Green Partners since September 2021. During her time at Gotham she has been active in all aspects of the investment process, including sourcing, business due diligence, industry review, documentation and portfolio management. Prior to joining Gotham, Lauren oversaw strategic finance for a fast-growing ecommerce business operating in the alternative beverage space. While there, she was deeply involved in the operational side of the business and subsequently helped lead the company through a fundraise. Lauren began her career at UBS Investment Bank in New York where she was involved in M&A and capital raising activities for clients in the industrial sector. Lauren graduated summa cum laude from Texas A&M University with a degree in Finance.

Option and RSU Grants

In connection with entering into the Employment Agreement, the Company granted Mr. Stevens 4,500,000 stock options (each, an "Option") pursuant to the terms and conditions of the Company's Option plan dated June 30, 2020 (the "Option Plan"). Each Option is exercisable into one Common Share at a price of $0.10 per Common Share, expires five years from the date of grant and vests upon the following terms: (i) 1,000,000 Options vest immediately; (ii) 500,000 Options vest on the six-month anniversary of the closing of Tranche 2A; and (iii) 3,000,000 Options vest in equal quarterly installments of 250,000 Options, beginning on the nine-month anniversary of the closing of Tranche 2A.

In connection with entering into the Consulting Agreement, the Company granted Mr. Shisel (x) 1,000,000 Options, pursuant to the terms and conditions of the Option Plan. Each Option is exercisable into one Common Share at a price of $0.10 per Common Share, expires five years from the date of grant, and vests in equal quarterly installments of 250,000 Options, beginning on May 26, 2026; and (y) 3,500,000 restricted share units (each, an "RSU") pursuant to the terms and conditions of the Company's RSU award plan dated May 11, 2021. The RSUs vest upon the following terms: (i) 1,000,000 RSUs vest immediately; (ii) 500,000 RSUs vest on the six-month anniversary of the closing of Tranche 2A; and (iii) 2,000,000 RSUs vest in equal quarterly installments of 250,000 RSUs, beginning on May 1, 2024.

All of the Options and RSUs (and any Common Shares issuable upon their exercise and redemption) are subject to a four (4) month and one (1) day hold period pursuant to the polices of the CSE and applicable securities laws.

Related Party Transaction

Harrison Aaron, a director of the Company (the "Participating Insider") participated in the Offering and acquired an aggregate of 3,884,571 Units pursuant to Tranche 2A. The participation of the Participating Insider in Tranche 2A constitutes a "related party transaction", as such term is defined in Multilateral Instrument 61-101 - Protection of Minority Shareholders in Special Transactions ("MI 61-101") and would require the Company to receive minority shareholder approval for and obtain a formal valuation for the subject matter of, the transaction in accordance with MI 61-101, prior to the completion of such transaction. However, in completing Tranche 2A, the Company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101, in each case on the basis that the fair market value of the Participating Insider's participation in Tranche 2A does not exceed 25% of the market capitalization of the Company, as determined in accordance with MI 61-101. Further details will be included in a material change report to be filed by the Company. While the Company filed a material change report in respect of the Offering on June 22, 2023, the Company did not file a material change report in respect of the participation of the Participating Insider more than 21 days before the closing date of Tranche 2A. The shorter period was necessary to permit the Company to close Tranche 2A in a timeframe consistent with usual market practice for a transaction of this nature.

 

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