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 Tranche
In 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" CEO
About 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.comPhone: 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
Information
This 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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