- Imperial Brands plc converts over $123 million in
total debt to shares resulting in 19.8% ownership
TORONTO, April 1, 2024 /PRNewswire/ - 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
completion of the conversion of $123.4 million of principal and accrued
interest under the 4.00% unsecured convertible debenture of the
Company due September 25, 2026 (the "Debenture") and
the amendment to the amended and restated investor rights agreement
dated July 6, 2021 (the "Investor
Rights Agreement") with 1213509 B.C. Ltd., a
wholly-owned subsidiary of Imperial Brands plc ("Imperial"),
pursuant to the terms previously announced on March 25,
2024.
Imperial has converted (the "Conversion") (i) $121.9
million of the principal amount outstanding under the Debenture at
an exercise price of $0.81 for
150,433,450 common shares in the capital of the Company
("Shares"), and (ii) $1.56 million of accrued interest
under the Debenture into 90,882,667 Shares at a price of
$0.017 (the "Interest Conversion
Price"), resulting in Imperial holding an equity position in
the Company of approximately 19.8%.
Imperial and Auxly entered into a second amended and restated
Investor Rights Agreement dated March 28, 2024 (the
"A&R Investor Rights Agreement") to, among other things,
remove the existing requirement that Imperial will use the Company
as its exclusive cannabis partner.
"We appreciate the continued support of our strategic partner
Imperial who we now also welcome as our largest shareholder", said
Hugo Alves, CEO Auxly. "The
conversion improves the financial position of the Company by
eliminating $123 million in debt and is expected to reduce our
proforma 2024 annual interest and accretion expense by
approximately $14 million. This is fantastic news for Auxly;
we will continue to look for ways to strengthen our balance sheet
and remain focused on delivering profitable growth with quality
products and incredible teamwork."
ON BEHALF OF THE BOARD
"Hugo Alves" CEO
About Auxly Cannabis 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 quality cannabis
products.
Learn more at www.auxly.com and stay up to date at
Twitter: @AuxlyGroup; Instagram: @auxlygroup;
Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.
Additional Required Early Warning Disclosure
Prior to the Conversion, Imperial held 6,315,574 Shares (0.63%
of the issued and outstanding Shares (calculated on a non-diluted
basis)), and approximately $122.85
million principal amount of the Debenture. Following the
Conversion, Imperial held 247,631,691 Shares (the "Conversion
Shares") (19.8% of the issued and outstanding Shares
(calculated on a non-diluted basis)), and $1,000,000 principal amount of the Debenture (the
"Principal Amount"). The aggregate consideration paid by
Imperial for the Conversion Shares was $123.4 million. The Interest Conversion Price was
derived from the five-day volume weighted average price of the
Shares on the Toronto Stock Exchange (the "TSX") for the
five trading days prior to Imperial's delivery of its notice to
convert, as specified by the terms of the Debenture.
In addition to the Principal Amount, $20.6 million of accrued interest as of
March 28, 2024 remains outstanding
under the Debenture following the Conversion, which remain
convertible into Shares provided that the exercise of Imperial's
conversion rights with respect to accrued and unpaid interest under
the Debenture (the "Interest Conversion Election") may not
result in Imperial, together with its affiliates, beneficially
owning more than 19.9% of the Shares (assuming the conversion of
the principal amount of the Debenture in full and calculated on a
non-diluted basis).
Assuming the remainder of the principal amount under the
Debenture is converted in full on the date hereof (which excludes
the exercise of the Interest Conversion Election by Imperial),
Imperial would have beneficial ownership of 248,866,259 Shares or
approximately 19.9% of the issued and outstanding Shares
(calculated on a non-diluted basis).
Imperial intends to review its investment in the Company on a
continuing basis and may, subject to the terms of the A&R
Investor Rights Agreement, purchase or sell Shares, either on the
open market or in private transactions, or further exercise its
conversion rights under the Debenture in the future, in each case,
depending on a number of factors, including general market and
economic conditions and other factors and conditions Imperial deems
appropriate. Imperial may formulate other purposes, plans or
proposals regarding the Company or any of its securities or may
change its intention with respect to any of the foregoing.
In connection with the Conversion, the Company and Imperial also
entered into the A&R Investor Rights Agreement amending the
Investor Rights Agreement. While Imperial will continue to
have the right to nominate one director to serve on the board of
directors of the Company, in addition to certain other governance
rights so long as Imperial and its affiliates (collectively, the
"Imperial Group"), collectively, meet certain specified
beneficial ownership thresholds of Shares, the A&R Investor
Rights Agreement was amended to remove certain provisions which,
previously, (i) conferred on Auxly certain exclusivity rights
with respect to the development, manufacture, commercialization,
sale and distribution of Cannabis products by Imperial, and
(ii) certain provisions relating to commercial cooperation
among the parties.
An early warning report will be filed by Imperial with
applicable Canadian securities regulatory authorities. To obtain a
copy of the early warning report, please contact Matthew Brace at +44 (0)117 963 6636.
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 Imperial debt conversion; the Company's
execution of its product development and commercialization
strategy; consumer preferences; Imperial's intentions to review its
investment in the Company on an ongoing basis; 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 Imperial
debt conversion 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, 2023 dated
March 24, 2024.
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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SOURCE Auxly Cannabis Group Inc.
