Auxly Provides Update on Cultivation Strategy

Published: July 6, 2020

Auxly Provides Update on Cultivation Strategy

Auxly Cannabis Group Inc., a consumer packaged goods company in the cannabis products market, provided an update on the Company’s national and international cultivation strategy. The Company is pleased by the progress of its cultivation portfolio, which is instrumental in supplying a secure, cost-efficient and consistent source of input material for the Company’s growing portfolio of cannabis products. In order to sharpen the Company’s near-term focus on Cannabis 2.0 dominance in Canada, the Company has decided to rationalize its cultivation portfolio by focusing on its domestic cultivation, while maintaining optionality in Uruguay.

Sunens Farms Inc.

On June 15, 2020, the Company announced that Sunens Farms Inc., the Company’s organic cultivation joint-venture with legendary greenhouse operator Peter Quiring, secured a standard cultivation licence from Health Canada for the first phase of its fully automated, purpose-built, 1.1 million sq. ft. greenhouse facility in Leamington, Ontario. The first phase of the licensed area includes approximately 360,000 sq. ft. of cultivation, processing, and storage space, with the additional licence amendments for the remaining phases being submitted throughout the course of 2020.

Since announcing receipt of the cultivation licence, the Sunens team has already commenced cultivation of organic cannabis within the licensed area. Cannabis harvested from the Sunens facility will provide Auxly with a consistent, traceable source of low-cost, organic dried flower to support Auxly’s commercial strategy, including the manufacturing of Auxly’s branded cannabis products at its Dosecann facility in Prince Edward Island and continued product innovation.

The Company believes that the Sunens facility will be the cornerstone of its cultivation portfolio and, when fully operational, will produce approximately 100,000 kg of organic cannabis annually.

Robinsons Cannabis Inc.

On May 20, 2020, the Company announced that its wholly owned subsidiary, Robinsons Cannabis Inc. (“Robinsons”), received its sales licence from Health Canada, expanding Auxly’s product portfolio to include hand-crafted cannabis flower for the connoisseur market.

Since receipt of its cultivation licence, Robinsons has been growing small-batch cannabis at its 27,700 sq. ft. state-of-the-art facility in Kentville, Nova Scotia. Robinsons will release a selection of its favorite genetics in select Canadian provinces in July of 2020, each grown with an uncompromising commitment to quality, flavor and craftsmanship.

Robinsons Outdoor Grow Incorporated

On November 15, 2019, the Company announced the launch of Robinsons Outdoor Grow (“Robinsons OG”), a large-scale outdoor cultivation project located in Hortonville, Nova Scotia, with over 158 acres of land available for development. Robinsons OG will provide the Company with access to organic, sun grown cannabis flower to help support the Company’s ongoing development of Robinsons branded cannabis products.

The Company is pleased to announce that Robinsons OG has secured a standard cultivation licence from Health Canada. However, given timing for the optimal outdoor planting season and the operational challenges posed by COVID-19, the Company has made the strategic decision to delay the commencement of cultivation activities at the Robinsons OG site and, instead, focus its efforts on the continued development of the Robinsons OG land and facility in preparation for the 2021 cultivation season.

Kolab Project Inc.

During 2019, the Kolab Project Inc. facility located in Carleton Place, Ontario, was focused on providing quality cannabis flower and pre-rolls to registered medical patients across Canada. In 2020, the Company made the strategic decision to cease cultivation at the Kolab facility and fully focus Kolab’s operations on pre-roll manufacturing and innovation activities to support the Company’s branded pre-roll product offering.

Inverell S.A.

Inverell S.A. (“Inverell”) is the Company’s 80%-owned subsidiary located in Montevideo. Inverell has completed its 2019-2020 harvest which resulted in approximately 43,000 kilograms of packed hemp biomass. However, due to the slower than anticipated pace of cannabis-specific regulatory development in Latin America (“LATAM”) and, consequently, the slower development of viable near-term commercial channels in the region, the Company has chosen not to proceed with planting for the 2020-2021 growing season nor with the development of extraction capabilities with a view to reducing headcount and keeping operating expenditures to a minimum. This strategy will reduce future operating expenses by approximately $6-7 million annually, which can be redirected into the Canadian market with a view to driving more immediate revenue to Auxly. Auxly will maintain the optionality Inverell provides and continue to monitor the regulatory landscape in LATAM, while exploring extraction opportunities as well as sales channel opportunities for the current stored biomass into legally permissible jurisdictions.

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 have secured a diversified supply of raw cannabis, strong clinical, scientific and operating capabilities and leading research and development infrastructure in order to create trusted products and brands in an expanding global market.