Auxly enters financing, supply deal with Delta 9

AUXLY AND DELTA 9 ANNOUNCE STRATEGIC INVESTMENT AND SUPPLY AGREEMENT

Auxly Cannabis Group Inc. and Delta 9 Cannabis Inc. have entered into a definitive agreement whereby Auxly will make a strategic investment to finance the expansion of Delta 9’s licensed cannabis cultivation facility in Winnipeg, Man., and provide general working capital to Delta 9.

Pursuant to the agreement, Auxly has subscribed for 5,909,090 common shares of Delta 9 at a price of $2.75 per Delta 9 share, representing a total investment of $16.25-million. In exchange, Auxly will receive the right to purchase a fixed amount of dried cannabis and cannabis trim from the facility and its expansion for a period of 10 years. Effective Jan. 1, 2019, and until Jan. 1, 2029, Auxly will have the right to purchase 1,000 kilograms of dried cannabis per annum as well as 100 kilograms of cannabis trim. In addition, effective July 1, 2020, and until July 1, 2030, Auxly will have the right to purchase an additional 4,000 kilograms per annum as well as 400 kilograms of cannabis trim.

Auxly and Delta 9 will jointly work to negotiate and enter into a supply agreement for the creation and supply of certain value-added cannabis products from Auxly’s wholly owned subsidiary, Dosecann Inc., as well as a retail collaboration agreement whereby the parties will pursue various retail collaboration opportunities.

Hugo Alves, president of Auxly, commented: “As the Auxly platform has matured, so have the depth of our relationships and the calibre of our partnerships. Today, we are incredibly pleased to be announcing this strategic partnership with Delta 9, a high-quality cannabis operator we have admired since the early days of medical cannabis legalization. We believe this partnership provides an incredible opportunity for us to collaborate to affirm our commitments to our medical patients but also to work together to develop a robust retail platform for the recreational market across Canada. We look forward to working with John and his team at Delta 9 as we move into legalization.”

John Arbuthnot, chief executive officer of Delta 9, commented: “This financing and strategic agreement is one more piece of the puzzle for our company as we prepare for legalization in Canada, and our upcoming expansion into Canadian and international markets. The Auxly subscription follows the recent Delta 9 announcement of a loan agreement with a Tier 1 Canadian chartered bank for $12-million, and the $23-million prospectus financing in December, 2017. We are now well funded not only for our current phase of expansion through 2019 but have a war chest we can use to seize new opportunities that Delta 9 has been working on for several months. Our partners at Auxly are leaders in the global cannabis industry, and among the most knowledgeable and influential companies in the space. We feel the partnership will be of great benefit to Delta 9, to Auxly and to the subsidiaries that Auxly owns.”

About Auxly Cannabis Group Inc.

Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. The company’s mandate is to facilitate growth for its partners by providing them with financial support and sharing our collective industry experience.

About Delta 9 Cannabis Inc.

Delta 9’s wholly owned subsidiary, Delta 9 Bio-Tech Inc., is a licensed producer of medical marijuana pursuant to the ACMPR (Access to Cannabis for Medical Purposes Regulations) and operates an 80,000-square-foot production facility in Winnipeg, Man.