Auxly Announces Completion Of Conversion Of Over $123 Million Of Principal And Interest Under Imperial Debenture
- 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.
