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Auxly Provides Corporate Update and Highlights 2018 Milestones
VANCOUVER, British Columbia, Sept. 10, 2018 (GLOBE NEWSWIRE) -- Auxly Cannabis Group Inc. (TSX.V - XLY) (OTCQX: CBWTF) ("Auxly" or the "Company") is pleased to provide a corporate update in respect of its key milestones in 2018. The Company continues to move forward and execute its business plan of building a vertically integrated global cannabis company. Originally founded with the primary intent of providing financing solutions to licensed producers and licensed producer applicants, the Company has since evolved into a global cannabis company with assets in each key segment of the cannabis value chain.
The Company remains confident in its business strategy as the Canadian market enters legalization of recreational cannabis on October 17, 2018. Auxly’s business is divided into three distinct verticals and management has prioritized the following objectives for each of the Company’s business segments:
- Upstream: The Company has continued to acquire cultivation capacity by developing cannabis cultivation facilities in Canada and internationally. Auxly remains focused on building a diverse cultivation platform comprised of wholly-owned assets, streaming partnerships, joint venture partnerships and commercial offtake arrangements. The development of a robust supply pipeline is the cornerstone of the Auxly platform, providing the Company with a secure and diverse source of cannabis thereby allowing it to participate in the entire cannabis value chain.
- Midstream: The most notable progress in the Company's evolution over the past 12 months has been the development of its midstream business. The strategic focus of Auxly's midstream business segment is to add value to the cannabis produced in the upstream business segment through the application of intellectual property. The Company continuously evaluates a broad range of applicable intellectual property including extraction and purification methodologies, trademark and know-how licensing, patent acquisition and technology and product licensing. In addition, through its wholly-owned subsidiaries, the Company intends to develop its own proprietary cannabis-derived products and related intellectual property.
- Downstream: The Company identified the need for a robust downstream distribution platform early in its corporate history and has continued to focus on the development of high value medical and non-medical channels. The Company has made strategic decisions on which distribution channels to prioritize based on its production ramp-up, choosing to focus on higher margin medical channels and those non-medical channels that are owned by Auxly or where Auxly holds an equity interest in the retailer.
Debt and Equity Financings
In order to fund the execution of its business plan, the Company successfully raised in excess of $215,000,000 by way of the two separate financing transactions described below as well as $94,039,000 from the exercise of warrants. The proceeds of the financings and warrant exercises help ensure that Auxly has sufficient capital to fund its business in the short term and gives the Company the flexibility to consider new opportunities as they arise.
- $100,000,000 Financing: Auxly completed a $100,000,000 financing by way of 6% convertible debenture.
- $115,100,000 Bought Deal Financing: Auxly completed a “bought-deal” financing led by BMO Capital Markets, pursuant to which the Company issued 82,225,000 units for aggregate gross proceeds of $115,100,000.
- $94,039,000 in Warrant Exercises: Auxly received $94,039,000 from the exercise of warrants and broker warrants.
Since the Company’s inception, Auxly has made tremendous strides in building out its upstream architecture. This has included both the consummation of transactions with members of the original cohort of "streaming partners" as well as entering into a number of transactions with premiere partners on favorable economic terms which the Company believes reflects the value which it brings to the table. The Company continues to strive for a diversified cultivation platform that includes a variety of cultivation methodologies and philosophies.
- Peter Quiring Joint Venture: Auxly entered into a definitive joint venture agreement with Peter Quiring, Canada’s largest greenhouse manufacturer and the largest independent owner/operator of greenhouse in Canada. The Auxly/Quiring project is being developed via a newly formed subsidiary and will entail the construction and operation of a fully-automated, state-of-the-art, purpose-built greenhouse for cannabis cultivation in Leamington, Ontario. Construction of this project is currently underway and the Company expects that upon completion of the 1,400,000 square foot greenhouse, - representing the first phase of the project - the joint venture will be a major contributor to the overall supply and production capacity of Auxly’s upstream cultivation segment. The project is situated on 300 acres of land and can be expandable in additional phases in response to market conditions.
- FSD Pharma Inc.: Auxly entered into a definitive agreement with FSD Pharma Inc. (formerly FV Pharma Inc.) (“FSD”), to develop FSD’s cannabis cultivation facility at the former KRAFT® food manufacturing facility in Cobourg, Ontario. The design and construction budget and timeline for the retrofit of the first 220,000 square foot phase of the facility was presented by Auxly and approved by FSD and construction is currently underway. Auxly retains the right to offtake 49.9% of the product produced at any portion of the FSD facility that is developed in partnership with Auxly. The Company expects FSD to be a key contributor to the overall supply of high quality indoor cannabis in Auxly’s upstream segment.
- Inverell S.A.: Auxly entered into a definitive agreement to acquire 80% of all the issued and outstanding shares of Inverell S.A. (“Inverell”), a federally licensed cannabis operator in Montevideo, Uruguay founded by Dr. Raul Urbina, a renowned expert in plant breeding, micro-propagation, high density outdoor cultivation and the extraction of high value molecules from plants. Prior to founding Inverell, Dr. Urbina was the Founder and CEO of Stevia One. Phase I of the Inverell project entails the cultivation of CBD-rich hemp on 150 hectares in Uruguay and subsequent extraction of CBD for export to international markets. Inverell gives the Company access to a high efficiency, low-cost source of cannabinoids for on-sale to third parties or use in Auxly’s midstream business segment. The transaction remains subject to final ordinary course regulatory approvals in Uruguay.
- Robinson’s Cannabis Inc.: Auxly completed the acquisition of its former streaming partner Robinson’s Cannabis Inc. (“Robinson’s”). Robinson’s is a late-stage licensed producer applicant located in Kentville, Nova Scotia. Led by Master Grower Andrew Robinson, Robinson’s is currently completing the buildout of its 27,700 square foot purpose-built facility for the production of high quality craft cannabis. The Company expects that Robinson’s will be the cornerstone asset in the Company’s cultivation activities in Atlantic Canada and will provide the Company with a leading player in the premium flower market.
- Kolab Project Sales Licence: Kolab Project Inc. ("Kolab Project") received its sales licence from Health Canada, pursuant to the Access to Cannabis for Medical Purposes Regulations (“ACMPR”). The sales licence authorizes Kolab Project to sell dried cannabis to registered Canadian medical patients across the country through its online portal at www.kolabproject.com. The issuance of the sales licence to Kolab Project marks a significant milestone for the Company in that it provides Kolab Project with the regulatory tool needed to allow it to directly participate in the sale of cannabis. KoLab Project will source a diverse range of cannabis through Auxly’s cultivation platform and industry network and provide patients with access to curated cannabis cultivated by select licensed producers and acclaimed guest growers from around the globe. Kolab Project recently completed the second phase of its construction, adding an additional 10,000 square feet of production capacity, which is expected to be licensed in the coming months.
- CannTx Life Sciences Inc.: Auxly’s streaming partner, CannTx Life Sciences Inc. (“CannTx”), successfully obtained a cultivation licence from Health Canada for its facility in Puslinch, Ontario and has commenced cultivation. Auxly holds a minority interest in CannTx and an entitlement to purchase 33% of all cannabis (or cannabis-derived products including any cannabis trim) produced at the CannTx facility for a period of 10 years from the date of first sale at a fixed cost. CannTx is focused on evidence-based technologies that combine the power of micropropagation with the efficiency of vertical farming.
- Sundial Growers Inc.: Auxly entered into a definitive agreement to advance $7,000,000 to Sundial Growers Inc. (“Sundial”) in the form of a 6-month promissory note repayable in cash or cannabis equivalents. Sundial is a licensed producer currently operating a 32,000 square foot facility in Rocky View, Alberta. Sundial is currently in the process of developing a 545,400 square foot facility in Olds, Alberta. The transaction allowed the Company to strategically deploy capital in a manner that meets the Company’s return parameters while providing for optionality on the supply of cannabis from a strong operator.
- Lotus Ventures Inc.: Auxly subscribed for $1,000,000 of units of its streaming partner, Lotus Ventures Inc. (“Lotus”), with the proceeds of the subscription being used by Lotus to further the construction of its cultivation facility in Armstrong, British Columbia. Lotus is expecting to complete construction of its 22,500 square foot facility in September 2018. The Company continues to finalize its broader streaming agreement with Lotus which contemplates additional funding and entitles Auxly to offtake 50% of all cannabis (or cannabis-derived products including any cannabis trim) produced by Lotus at its facility.
- Delta 9 Cannabis Inc.: Auxly entered into a definitive strategic alliance agreement (the “Delta 9 Agreement”) with Delta 9 Cannabis Inc. (“Delta 9”) to fund the build out of additional grow pods at their Winnipeg, Manitoba facility. Delta 9 is a licensed producer with sales authorization granted under the ACMPR currently operating an 80,000 square foot indoor facility using hydroponic grow pods as a differentiated and risk mitigated approach to cultivation. As part of the Delta 9 Agreement, Auxly invested $16,250,000 in exchange for 5,909,090 shares of Delta 9 and received the right to purchase a fixed amount of cannabis at preferential pricing from two expansion phases of the Delta 9 facility for a period of 10 years. Beginning in January 2019, Auxly will receive the right to purchase 1,000 kilograms of dried cannabis per annum from Delta 9, expanding to a total of 5,000 kilograms per annum beginning in July 2020. The transaction with Delta 9 represents a low risk deployment of capital into a licensed producer with an impressive track record of execution and provides the Company with a source of high-quality near and medium-term supply as well as significant ownership stake in a licensed producer that the Company believes is well positioned for success.
- Aphria Inc.: Auxly entered into a definitive supply agreement with Aphria Inc. (“Aphria”) pursuant to which Auxly, through its wholly owned subsidiary Dosecann Inc. (“Dosecann”), will have the option to purchase cannabis flower and cannabis oil for distribution to certain international markets, including Mexico, Portugal, and Serbia, as well as a limited amount for distribution into the Canadian market. Subject to Aphria receiving the necessary regulatory approvals for expansion of its cultivation facilities, Dosecann will have the option to purchase up to 20,000 kilograms of cannabis products on an annual basis. Prior to Aphria's receipt of such regulatory approvals, Dosecann will have the option to purchase up to 100 kilograms of cannabis products on a monthly basis. The Agreement extends until January 31st, 2022 and may be renewed for additional 12-month terms. The Aphria supply agreement provides the Company with a significant source of supply thereby enabling Auxly to execute on international distribution opportunities as they materialize while its own supply infrastructure continues to develop.
While the short-term goal of the Company has been to develop its upstream cultivation platform so as to ensure that it has access to a secure, diverse and low-cost source of supply, the Company is increasingly focusing on the midstream segment of its business with the goal of being a leading player in the higher margin cannabis products market vertical.
- Dosecann Inc.: Auxly completed the acquisition of Dosecann. At the time of acquisition, Dosecann was a licensed dealer applicant pursuant to the Narcotic Control Regulations (“NCR”). Dosecann operates out of a 42,000 square foot facility, purpose-built for extraction and the research development and manufacturing of cannabis products. Dosecann is located in the BioCommons Research Park in Charlottetown, PEI where it benefits from the thriving biotech community that PEI has attracted over the past decade. Dosecann will serve as the Company's hub of cannabis research and innovation and has assembled an all-star team of talent including Dr. Christina Woollard (formerly with GW Pharmaceuticals) serving as the Chief Scientific Officer; Dr. Bob Chapman (formerly with the National Research Council of Canada) serving as the Chief Operating Officer; and Peter Crooks (formerly the Executive Director of Canada’s Smartest Kitchen) serving as the Chief of Product Innovation.
- Dosecann Dealer’s Licence: Since being acquired by the Company, Dosecann received its dealer’s licence for controlled drugs and substances from Health Canada pursuant to the NCR. This licence authorizes Dosecann to engage in various activities related to the manufacturing of cannabis oils and resins through extraction of dried cannabis flower, production of authorized cannabis products, product formulation, research and development and quality testing. Securing the dealer’s licence marked another important milestone for the Company in that it gives Auxly a fully functioning hub for its midstream business segment through which it can begin its research and development activities, provide value-added services to its upstream cultivation partners and execute on its licensing arrangement with Dixie Brands Inc. ("Dixie") as described below.
- Kolab Project Genetics Facility: The Company has completed the design of the third phase of the Kolab Project facility. This phase of the facility's development will be used exclusively as a cannabis genetics center dedicated to housing the Company's genetics, genetic breeding, tissue culture, phenotyping and seed breeding initiatives. The development of a genetics focused facility at Kolab Project will ensure that the Company is able to effectively develop and store a wide array of healthy cannabis genetics that it can provide to its operating subsidiaries and streaming partners thereby helping ensure a diverse and high-quality supply of cannabis for the Company's platform.
- KGK Science Inc: Auxly entered into a definitive agreement to acquire all of the issued and outstanding shares of KGK, a leading health and wellness focused private contract research organization based in London, Ontario specializing in natural health products and nutraceuticals. KGK will continue to operate its current business in the ordinary course, thereby giving the Company a healthy operating subsidiary generating material revenues. In addition, KGK will work closely with the team at Dosecann in order to ensure that the safety and efficacy of the cannabis products developed at Dosecann are backed by industry leading research and science.
- Province Brands: Auxly entered into a definitive strategic alliance agreement with Honest Inc. (d/b/a Province Brands of Canada) ("Province"), a cannabis company focused on the development of unique cannabis-based beverages with a dose-response curve similar to comparable alcohol beverages. In connection with the strategic alliance agreement, Auxly acquired a 10% equity interest in Province thereby giving the Company a material ownership interest in a leading player in the cannabis beverages market vertical.
- Dixie Brands Inc.: Auxly entered into a definitive licensing agreement with Dixie, a leading Colorado based cannabis products company. Pursuant to the licensing arrangement, Auxly obtained the exclusive right to use Dixie’s intellectual property in Canada and Mexico. The licensed product portfolio includes all of Dixie's product trademarks and product formulation methodologies related to over 100 cannabinoid-infused products including, beverages, edibles, topicals, tinctures and oils. The acquisition of the Dixie license allows the Company to hit the ground running with established product formulations and a recognizable consumer brand as and when the sale of such products becomes legally permitted in Canada.
- Cannabis OneFive Inc.: Auxly entered into a definitive strategic partnership with Cannabis One Five Inc. (“C15”), a provider of quality management and document control software systems for the cannabis industry. The C15 software, powered by Veeva QualityOne, the leading quality management and document control application in the pharmaceutical industry, allows for cannabis operators to simplify and optimize their quality management and document control processes to streamline operations and reduce overall operating costs. The Company entered into the partnership with C15 as a result of the quality assurance team at Dosecann vetting of all of the leading quality management applications and determining that C15 provided the most feature-rich, user-friendly solution. In connection with the strategic partnership, Dosecann became a cornerstone customer of C15 and Auxly issued 429,507 common shares and made a cash payment of $50,000 to C15 and received units of C15 representing a 30% ownership interest on a fully-diluted basis.
- Delta 9 Cannabis Inc.: Pursuant to the Delta 9 Agreement, the parties have agreed to enter into a non-exclusive supply agreement pursuant to which Delta 9 will purchase at least 1,000 kilograms of value-added cannabis products from Dosecann on an annual basis. This aspect of the Delta 9 Agreement provides the Company with a cornerstone customer for the Dosecann facility while giving Delta 9 access to the world-class product development team at Dosecann for the purposes of creating differentiated cannabis products for sale through Delta 9's distribution network.
The Company has remained focused on developing downstream distribution channels for its cannabis and cannabis derived products. The Company has started to build out its internal sales and marketing team and continues to make progress towards finalizing a number of medical and non-medical distribution channels as its cultivation and production capacity matures.
- Inner Spirit Holdings Inc.: Auxly acquired 15% of the outstanding shares of Inner Spirit Holdings Inc. (“Inner Spirit”) and entered into a definitive strategic alliance agreement Inner Spirt pursuant to which Axuly and Inner Spirit will collaborate on retail initiatives including product acquisition and in-store marketing and branding. Inner Spirit currently has over 100 franchise agreements in place for prospective retail cannabis stores in Western Canada and has recently listed on the Canadian Securities Exchange. This transaction gives Auxly a partner with strong retail experience who Auxly believes will be a major player in markets where privately owned cannabis retail stores are legally permitted.
- Saskatchewan Retail Store: Auxly, through Kolab Project, was selected to apply for a cannabis retail permit in Lloydminster, Saskatchewan. The permit, when granted by the Saskatchewan Liquor and Gaming Authority, will allow for Kolab to operate one physical location in addition to a province-wide e-commerce platform to serve the adult-use market following the legalization of recreational cannabis. In addition to enabling the Company to sell its cannabis and cannabis products (when permitted) directly to consumers in Saskatchewan, the acquisition of the Saskatchewan retail licence will also provide Kolab Project with its first branded store through which to further develop and enhance its own brand.
- Delta 9 Cannabis Inc.: Pursuant to the Delta 9 Agreement, the parties have agreed to enter into a retail collaboration agreement on mutually acceptable terms for the purposes of exploring and collaborating on future retail opportunities for the distribution and sale of cannabis. Delta 9 has been awarded retail licenses in Manitoba and, as such, this aspect of the Delta 9 Agreement provides the Company with a retail partner in Manitoba as well as a strategic partner in other jurisdictions where Delta 9 and/or the Company may choose to pursue retailing opportunities.
Chuck Rifici, CEO and Chairman of Auxly commented: “We are pleased with the tremendous progress Auxly has made in building a global platform across the entire cannabis value chain within one year of operations. Our diverse platform gives us the flexibility to create win-win partnerships and we believe we have been able to demonstrate this in another quarter of the company’s growth. Going forward we continue to look to partner with the best cannabis cultivators, product developers, researchers and innovators so that Auxly can best achieve its objective of becoming a leading cannabis company.”
Hugo Alves, President and Director of Auxly commented: “In 2018 we have invested and supported a wide range of cannabis companies from cultivation, product development and manufacturing to distribution, each of which have different visions, voices and brand values; however, they all share a common goal — to create a world class industry based on diversity, quality and innovation. We look forward to continuing to make strategic additions to our platform as we enter into recreational cannabis legalization in the Fall.”
Auxly’s operational and corporate update presentation and related investor materials are available on our Investor Relations website: https://auxly.com/investors/.
ON BEHALF OF THE BOARD
"Chuck Rifici" Chairman & CEO
About Auxly Cannabis Group Inc. (TSX.V: XLY)
Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.
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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 proposed operation of Auxly, its subsidiaries and streaming partners, future legislative and regulatory developments involving cannabis and cannabis products, the timing of proposed research and clinical trials, the timing and outcomes of regulatory or intellectual property decisions, the relevance of Auxly’s subsidiaries’ and partners’ proposed products, consumer preferences, political change, 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 in this release including, but not limited to, whether: Auxly’s subsidiaries and partners are able to obtain and maintain the necessary regulatory authorizations to conduct business, the Company is able to successfully manage the integration of its various business units with its own, the Company’s subsidiaries and partners obtain all necessary governmental and regulatory permits and approvals for the operation of their facilities and the development of its proposed products, and whether such permits and approvals can be obtained in a timely manner, the success of Dosecann’s and KGK’s research strategies, the applicability of the discoveries made therein, the successful and timely completion and uncertainties related to the regulatory process, the acceptance of future Dosecann product by consumer and medical professionals, and general economic, financial market, legislative, regulatory, competitive and political conditions in which the Company and Dosecann operate will remain the same. Additional risk factors are disclosed in the revised annual information form of the Company for the financial year ended December 31, 2017 dated May 24, 2018.
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. In addition, this release may contain forward-looking information attributed to third party industry sources, the accuracy of which has not been verified by the Company. The purpose of forward-looking information is to provide the reader with a description of management's expectations, and 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 TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.