TORONTO, June 23, 2022 /PRNewswire/ - Auxly Cannabis Group Inc. (TSX: XLY) ("Auxly" or the "Company"), a leading consumer packaged goods company in the cannabis products market, is pleased to announce that it has amended and restated the unsecured convertible debentures in the capital of the Company ("Original Convertible Debentures") issued under its standby facility (the "Standby Facility") with an institutional investor (the "Investor"), which was previously announced on April 28, 2020.
The Standby Facility allowed the Corporation to sell, on a private placement basis, Original Convertible Debentures in tranches for an aggregate principal amount of up to $25 million. Under the Standby Facility, the Company sold $11.25 million in Original Convertible Debentures over five tranches throughout 2020. As of the date hereof, the Company has repaid $2.5 million of principal owing under such Original Convertible Debentures.
The Investor and the Company have agreed to amend and restate the remaining Original Convertible Debentures (the "2022 Convertible Debentures") on the following terms:
- $8.75 million aggregate principal amount will remain outstanding until July 15, 2022, where on such date the Company will repay $1.25 million thereby reducing the aggregate principal amount to $7.5 million;
- extended maturity date for the balance of the $7.5 million principal amount until August 15, 2024 (the "Maturity Date");
- guaranteed interest rate of 7.5% per annum, payable semi-annually;
- reduced conversion price of $0.1380 being convertible at the option of the holder into common shares in the capital of the Company ("Common Shares") at any time prior to the Maturity Date;
- removal of the Company's previous conversion rights; and
- inclusion of certain repayment conditions should the Company raise additional capital prior to the Maturity Date.
As consideration for amending 2022 Convertible Debentures, the Company has paid the Investor an amendment fee of $500,000 through the issuance of 4,347,826 Common Shares and issued the Investor warrants to purchase 20,000,000 Common Shares, with each warrant being exercisable for a period of 36 months following the date of issuance at a price per share of $0.1495. All securities issued by the Company as consideration for the amendment are subject to a statutory four-month hold period in accordance with applicable securities legislation. The TSX has provided its notice of conditional acceptance to the proposed amendments and the issuance of the securities to the Investor, subject to the Company filing the necessary documents in the ordinary course pursuant to the notice.
Under the Standby Facility, the Company issued the Investor an aggregate of 20,031,747 Common Share purchase warrants ("Warrants") throughout 2020, of which 8,510,800 Warrants have expired unexercised; 5,409,836 Warrants with an exercise price of $0.366 will expire on June 26, 2022; and 6,111,111 Warrants with an exercise price of $0.216 will expire on September 8, 2022.
In connection with the amendment of the 2022 Convertible Debentures, 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 transaction. 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 amendment of the 2022 Convertible Debentures 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.
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
About Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF)
Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. The Company's focus is on developing, manufacturing and distributing branded cannabis products that delight wellness and recreational consumers and deliver on its consumer promise of quality, safety and efficacy.
Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.
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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 timing of any future payments under the 2022 Convertible Debentures; 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 in this release including, but not limited to, whether: the Company can complete any further payments under the 2022 Convertible Debentures on the anticipated terms and timeline; ; and general economic, financial market, legislative, regulatory, competitive and political conditions in which the Company and its subsidiaries and partners operate will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2021 dated March 30, 2022.
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 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 the reader is cautioned that 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. 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 Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.
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SOURCE Auxly Cannabis Group Inc.