Auxly Closes $2 Million Tranche of Financing

Published: September 10, 2020

Auxly Closes $2 Million Tranche of Financing

Auxly Cannabis Group Inc. has issued an additional $2 million worth of unsecured convertible debentures (the “Tranche”) under its $25 million unsecured convertible debenture standby facility with an institutional investor (the “Investor”) as previously announced on April 28, 2020 (the “Original Offering”).

Under the Tranche, the convertible debentures issued to the Investor have a conversion price of $0.18 per common share of the Company (each a “Common Share”), and the Investor received warrants to purchase 6,111,111 Common Shares until September 8, 2022 at an exercise price of $0.216 per Common Share. Each convertible debenture will mature on September 8, 2022 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 and has the same terms and conditions as described in the Original Offering and the transaction documents filed on the Company’s SEDAR profile.

In connection with the completion of the 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 investment 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 Original Offering, the completion of the 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 Tranche. The Company did not file the material change report more than 21 days before the expected closing date of the Tranche as the details of the Tranche and the terms of the Indemnity were not settled until shortly prior to the closing of the Tranche, and the Company wished to complete the Tranche on an expedited basis for sound business reasons.

All securities issued by the Company under the Tranche are subject to a statutory four-month hold period in accordance with applicable securities legislation and final approval of the TSX Venture Exchange.

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.

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