TORONTO – Auxly Cannabis Group Inc., a leading consumer packaged goods company in the cannabis products market, amended and extended its credit facility led by the Bank of Montreal (“BMO”) and fully settled all amounts owing to Imperial Brands plc.
The 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 the 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.
- Created access to a new $10-million revolving facility, providing financial flexibility to support continued growth.
- Removed the going concern uncertainty disclosure from the Company’s financial statements.
“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. “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.”
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 key modifications under the Amended Credit Facility include:
- Borrower: The Company replaced Auxly Leamington as the borrower.
- Facility Structure: Credit facility of $50.7 million consisting of:
- Term loan of $36.2 million
- Revolving facility of $10.0 million to be used for working capital and corporate requirements
- 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 following occurred:
(a) Imperial Brands converted the remaining $1.0 million principal amount owed under the outstanding convertible debenture held by Imperial Brands into 1,234,568 common shares of Auxly at a conversion price of $0.81 per share in accordance with the terms of the Debenture;
(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 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, provided that the number of Warrants exercisable for 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.
The 18,336,489 Shares issued under the Principal Conversion and the Interest Conversion is the only immediate dilution to shareholders. Imperial Brands now owns approximately 19.9% of all issued and outstanding Shares and there are no further amounts owing by the Company to Imperial Brands.
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 in quality cannabis products.
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