Auxly Extends BMO Credit Facility, Outlines Plan to Eliminate $21M in Debt

*TORONTO –* Auxly Cannabis Group Inc., a leading consumer packaged goods
company in the cannabis products market, has entered into two agreements
the company believes will strengthen its balance sheet, reduce debt, and
support long-term growth:

A non-binding agreement to amend and restate the Company’s existing
syndicated credit facility led by the Bank of Montreal (BMO).

An exchange agreement with Imperial Brands plc pursuant to which all
amounts owing by the Company under the outstanding convertible debenture
held by Imperial Brands will be settled in common shares of the Company and
pre-funded warrants to purchase shares.

These transactions represent meaningful progress in the company’s ongoing
efforts to strengthen its balance sheet, the company stated in a formal
statement. The restatement of the credit facility will enhance the
company’s liquidity and provide increased flexibility to allocate capital
toward strategic growth initiatives. Concurrently, the settlement of the
Imperial Brands convertible debenture through the issuance of equity
instruments will eliminate more than $21 million of debt from the company’s
balance sheet. This deleveraging will improve the Company’s capital
structure, reduce interest obligations and reinforce the company’s
financial stability and long-term viability.

“This refinancing marks a significant milestone for Auxly, resulting in a
stronger, more resilient company,” said Hugo Alves, CEO. “These
transactions will significantly reduce our debt, strengthen our balance
sheet and give us the flexibility to invest in innovation and growth. The
actions support our objective of achieving sustainable, profitable growth
and creating long-term value for all of our stakeholders.”

Travis Wong, CFO, added, “These transactions materially improve and
simplify our capital structure. As a result of the refinancing, we
anticipate the removal of the going concern uncertainty disclosure from our
financial statements, which is a clear reflection of our strengthened
financial position and the growing stability of our operations.”

Amended credit facility

The company has entered into a non-binding agreement providing indicative
terms for an amendment and restatement of Auxly Leamington’s existing
credit facility agreement with a syndicate of lenders led by BMO. The key
modifications to be provided under the amended credit facility include:

Borrower: The company will replace 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, 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).

The company and the lenders are working toward a definitive binding
amendment and restatement agreement for the amended credit facility,
although there can be no assurance that a definitive amendment and
restatement agreement with the lenders will be reached.

Imperial Brands convertible debenture settlement

The company and Imperial Brands have entered into the exchange agreement
pursuant to which, and subject to the execution of the amended credit
facility on the terms provided in the term sheet:

Imperial Brands will convert the remaining $1 million principal amount owed
under the Debenture into 1,234,568 Shares at a conversion price of $0.81
per share in accordance with the terms of the Debenture;

Imperial Brands will convert approximately $1.39 million of accrued
interest under the Debenture into 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 (TSX).

the Company will issue to Imperial Brands pre-funded warrants to acquire up
to 90,883,618 Shares in exchange for a certain amount of additional
interest, and all remaining accrued interest owed under the Debenture will
be forgiven. Each Warrant will entitle an affiliate of Imperial Brands to
purchase one Share for a nominal exercise price at any time prior to
December 31, 2028, provided 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.

Upon the completion of the Principal Conversion and the Interest Conversion
(assuming such completion occurs), the Debenture will be cancelled and
there will be no further amounts owing thereunder, and Imperial Brands will
own and control approximately 19.9% of all issued and outstanding Shares.

The execution of the Amended Credit Facility and the completion of the
transactions contemplated by the Exchange Agreement are expected to occur
on or about June 30, 2025, subject to the satisfaction of certain
conditions precedent, including (in the case of the transactions
contemplated by the Exchange Agreement) the receipt of the required
approval from the TSX.
About Auxly Cannabis Group Inc.

Auxly (TSX: XLY) is a leading Canadian consumer packaged goods company in
the cannabis products market, headquartered in Toronto, Canada.