Auxly Secures $25 Million Convertible Debenture Standby Financing and Closes Initial Tranche

Auxly Secures $25 Million Convertible Debenture Standby Financing and Closes Initial Tranche

TORONTO, April 28, 2020 (GLOBE NEWSWIRE) — Auxly Cannabis Group Inc. (TSX.V: XLY) (OTCQX: CBWTF) (“Auxly” or the “Company”) is pleased to announce that it has entered into an investment agreement (the “Agreement”) with an institutional investor (the “Investor”) as a standby facility to provide the Company with access to additional capital. This provides the Company with the opportunity to sell, on a private placement basis, unsecured convertible debentures of the Company (collectively, the “Convertible Debentures”) in the principal amount of up to $25,000,000 (the “Offering“). The Convertible Debentures will be issuable in tranches at the request of the Company, as described in greater detail below.
“Auxly’s focus on ‘Cannabis 2.0’ and our ability to execute on delivering a compelling portfolio of branded cannabis products that resonate with and delight their chosen consumer segments has attracted significant investment interest, even in a difficult market and during a time of general uncertainty,” said Hugo Alves, CEO of Auxly. “I’m proud that we are able to continue to support long-term growth via increased equity, while minimizing dilution for our shareholders by staggering the financing into tranches.”The Company intends to use the net proceeds from the Offering, as required, to build on the launch of its Cannabis 2.0 products through additional capacity and automation in 2020, at the Company’s manufacturing hub, Dosecann, and for general corporate and working capital purposes.Each Convertible Debenture will have a maturity date of 24 months from the date of issue (the “Maturity Date”) and will bear guaranteed interest from the date of issue at 7.5% per annum, payable semi-annually on June 30 and December 31 of each year.The Convertible Debentures will be convertible, at the option of the holder, into common shares of the Company (“Common Shares”) at any time prior to the close of business on the last day immediately preceding the applicable Maturity Date. The Convertible Debentures will have a conversion price (the “Conversion Price”) equal to the closing price of the Common Shares on the TSX Venture Exchange (the “TSXV”) on the trading day immediately prior to the closing date for such tranche.The Company may require the Investor, at any point after four months and one day after the date of issuance of a Convertible Debenture, to convert:up to 50% of the principal amount of such Convertible Debenture if for any five consecutive trading days the volume weighted average price (the “VWAP“) of the Common Shares on the TSXV is greater than 112% of the Conversion Price; or
 
up to 100% of the principal amount of such Convertible Debenture if for any five consecutive trading days the VWAP of the Common Shares on the TSXV is greater than 120% of the Conversion Price; and/or
 
100% of the principal amount of such Convertible Debenture at any time by paying a mutually agreeable make-whole payment to the Investor,plus in each case interest on the principal amount of such Convertible Debenture.In addition to an initial tranche of $1.25 million (the “Initial Tranche”), the Company may request that the Investor subscribe for subsequent tranches of Convertible Debentures at an amount per Convertible Debenture mutually agreeable to the Company and the Investor. Each tranche of additional Convertible Debentures will be issuable beginning the 30th day following the closing of the Initial Tranche (or the most recently issued tranche).Contemporaneously with the issuance of each Convertible Debenture, the Investor will also receive such number of Common Share purchase warrants of the Company (the “Warrants”) as is equal to 55% of the number of Common Shares into which the Convertible Debenture is convertible based on the applicable Conversion Price. Each Warrant will be exercisable to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price equal to 120% of the applicable Conversion Price.Closing of Initial TrancheIn connection with the execution of the Agreement, the Company also completed the Initial Tranche for gross proceeds of $1.25 million at a conversion price of $0.435 per Common Share, and issued the Investor Warrants to acquire up to 1,580,460 Common Shares until April 29, 2022 at an exercise price of $0.522 per Common Share.In connection with the completion of the Initial Tranche, the Company has agreed to indemnify (the “Indemnity”) certain of its directors and officers for any and all losses not otherwise recoverable from the collateral provided by the Investor for the Common Shares provided by such directors and officers to the Investor pursuant to the terms of the Agreement. The Indemnity may constitute a related party transaction under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“), but is otherwise exempt from the formal valuation and minority approval requirements of MI 61-101. The Indemnity has been approved by the independent directors of the Company. No special committee was established in connection with the Offering, the completion of the Initial Tranche or the granting of the Indemnity, and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto. Further details will be included in a material change report that will be filed by the Company in connection with the completion of the Initial Tranche. The Company did not file the material change report more than 21 days before the expected closing date of the Initial Tranche as the details of the Initial Tranche and the terms of the Indemnity were not settled until shortly prior to the closing of the Initial Tranche, and the Company wished to complete the Initial Tranche on an expedited basis for sound business reasons. All securities issued by the Company under the Initial Tranche are subject to a statutory four-month hold period in accordance with applicable securities legislation.AltaCorp Capital Inc. is acting as exclusive agent on the Offering.This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities referenced herein in the United States. The securities referenced herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.ON BEHALF OF THE BOARD“Hugo Alves” CEOAbout Auxly Cannabis Group Inc. (TSX.V: XLY) (OTCQX: CBWTF)Auxly is an international cannabis company dedicated to bringing innovative, effective, and high-quality cannabis products to the medical, wellness and adult-use markets. Auxly’s experienced team of industry first-movers and enterprising visionaries has secured a diversified supply of raw cannabis, strong clinical, scientific and operating capabilities and leading product research and development infrastructure in order to create trusted products and brands in an expanding global market.Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.Investor Relations:
For investor enquiries please contact our Investor Relations Team: 
Email: IR@auxly.com
Phone: 1.833.695.2414
Media Enquiries (only): 
For media enquiries or to set up an interview please contact:
Email: press@auxly.com 
Notice Regarding Forward Looking InformationThis news release contains certain “forward-looking information” within the meaning of applicable Canadian securities law. Forward-looking information is frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or information that certain events or conditions “may” or “will” occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking information throughout this news release. Forward-looking information in this press release includes, but is not limited to: the timing and proposed completion of the Convertible Debenture offering; the expected use of proceeds of the offering by the Company; obtaining the necessary regulatory approval for the offering; political change; future legislative and regulatory developments involving cannabis and cannabis products; and competition and other risks affecting Auxly in particular and the cannabis industry generally.A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information included in this release including, but not limited to: whether the Company can complete the offering on the anticipated terms and timeline; the ability to obtain regulatory approval of the offering on the proposed terms and timeline; and general economic, financial market, legislative, regulatory, competitive and political conditions in which Auxly operates will remain the same. Additional risk factors are disclosed in the revised annual information form of Auxly for the financial year ended December 31, 2017 dated May 24, 2018.New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on Auxly’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information. The forward-looking information in this release is based on information currently available and what management believes are reasonable assumptions. Forward-looking information speaks only to such assumptions as of the date of this release. The purpose of forward-looking information is to provide the reader with a description of management’s expectations, and such forward-looking information may not be appropriate for any other purpose. Readers should not place undue reliance on forward-looking information contained in this release.The forward-looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release.Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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