TORONTO, Ontario, July 8, 2025 – Auxly Cannabis Group Inc. (TSX – XLY) (OTCQB: CBWTF) (“Auxly” or the “Company”), a leading consumer packaged goods company in the cannabis products market, is pleased to announce the successful closing of two transformative financial transactions previously announced on June 19, 2025: the amendment and extension of its credit facility led by the Bank of Montreal (“BMO”), and the full settlement of all amounts owing to Imperial Brands plc (“Imperial Brands”).
These transactions represent an important milestone in the execution of Auxly’s strategy, delivering a materially stronger balance sheet and providing the financial flexibility to invest in future growth. They reflect the culmination of a focused effort to streamline Auxly’s capital structure and reinforce the long-term sustainability of our business.
With these transactions now complete, Auxly has achieved the following:
• Eliminated approximately $21 million in debt from the balance sheet;
• Reduced debt service obligations by approximately $700,000 per annum;
• Access to a new $10 million revolving facility, providing financial flexibility to support continued growth, adding Farm Credit Canada to the syndicate; and
• Removal of the going concern uncertainty disclosure from the Company’s financial statements, a clear signal of renewed financial strength and stability.
“The closing of these transaction marks a turning point for Auxly,” said Hugo Alves, CEO of Auxly. “We emerge from these transactions with a transformed balance sheet and the financial strength to fuel future growth. It is an exciting time to be an Auxly stakeholder. We are profitable, we are growing, we have brands and products that people trust and love, and now, with the continuing support of our capital and strategic partners, we have the financial fortitude to continue building on our success in the Canadian cannabis market and beyond.”
“This is a significant milestone in Auxly’s financial evolution,” said Travis Wong, CFO of Auxly. “We’ve reduced debt, extended the term of our senior facility, and secured a new working capital facility. These improvements provide us with the financial flexibility to execute our strategy with confidence.”
The following provides an overview of the finalized terms and structure of the amended credit facility and the Imperial Brands debt settlement.
Amended Credit Facility
The Company has amended and restated Auxly Leamington’s existing credit facility agreement with a syndicate of lenders led by BMO (the “Amended Credit Facility”). The key modifications under the Amended Credit Facility include the following:
• Borrower: The Company replaced Auxly Leamington as the borrower.
• Facility Structure: Credit facility of $50.7 million consisting of: o Term loan of $36.2 million
o Revolving facility of $10.0 million to be used for working capital and corporate requirements
o Existing equipment leases of $4.5 million
• Term: Two years with an option to extend for an additional year for $100,000.
• Updated Financial Covenants: Revised covenants which provide the Company with the flexibility to support its long-term growth strategy.
• Security: The Amended Credit Facility will be secured by all, or substantially all, of the assets of the Company and its subsidiaries (rather than primarily the assets and equity of Auxly Leamington as is the case under Auxly Leamington’s existing credit facility).
Imperial Brands Convertible Debenture Settlement
Pursuant to the Company’s exchange agreement with Imperial Brands dated June 19, 2025 (the “Exchange Agreement”), the following occurred:
(a) Imperial Brands converted the remaining $1.0 million principal amount owed under the outstanding convertible debenture held by Imperial Brands (the “Debenture”) into 1,234,568 common shares of Auxly (“Shares”) at a conversion price of $0.81 per share in accordance with the terms of the Debenture (the “Principal Conversion”);
(b) Imperial Brands converted approximately $1.39 million of accrued interest under the Debenture into 17,101,921 Shares at a per-share conversion price of $0.0811, equal to the trailing 5-day volume-weighted average trading price of the Shares on the Toronto Stock Exchange (the “TSX”) as of the date hereof (the “Interest Conversion”); and
(c) the Company issued to Imperial Brands pre-funded warrants to acquire up to 90,883,618 Shares (the “Warrants”) in exchange for approximately $7.37 million of additional interest, with the remaining accrued interest owed under the Debenture in the amount of approximately $11.79 million forgiven. Each Warrant entitles an affiliate of Imperial Brands to purchase one Share for a nominal exercise price at any time prior to December 31, 2028 (the “Expiry Date”), provided that the number of Warrants exercisable for Shares (the “Underlying Shares”) that may be exercised at any time prior to the Expiry Date will be limited to such number of Warrants for which the issuance of corresponding Underlying Shares would not result in Imperial Brands owning more than 19.9% of all the then outstanding Shares.
Group Inc. (TSX: XLY)
Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. Our mission is to help consumers live happier lives through quality cannabis products that they trust and love.
Our vision is to be a global leader in quality cannabis products.
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
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 includes, but is not limited to: the anticipated benefits of the Amended Credit Facility and the timing thereof; the issuance of Underlying Shares in connection with the potential future exercise of Warrants; the anticipated benefits of the transaction contemplated by the Exchange Agreement and the timing thereof; the Company’s execution of its product development and commercialization strategy; consumer preferences; political change; future legislative and regulatory developments involving cannabis and cannabis products; and competition and other risks affecting the Company 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 expected benefits of the execution of the Amended Credit Facility and/or the Settlement (or any portion thereof) materialize in the manner expected, or at all; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; and general economic,
financial market, legislative, regulatory, competitive and political conditions in which the Company operates will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2024 dated March 20, 2025 and other documents that the Company files with Canadian securities regulatory authorities from time to time.
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 the Company’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 news 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. Readers should not place undue reliance on forward-looking information contained in this news 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. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
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