Mr. Hugo Alves reports

AUXLY FURTHERS MANUFACTURING OPTIMIZATION PLAN AND RELATED COST SAVINGS INITIATIVES

Auxly Cannabis Group Inc. has transitioned all remaining dried flower and preroll cannabis product manufacturing, processing and distribution activities from its Auxly Ottawa facility to Auxly Leamington, where these activities are already taking place. Auxly will continue to wind down its Auxly Ottawa facility in an orderly manner and intends to sell Auxly Ottawa's assets in due course and apply the proceeds from any such sale to support its continuing operations.

Auxly continues to focus its efforts on streamlining assets, simplifying operations, reducing costs and achieving its 2023 goals of:

• Increasing net revenues by 15 per cent with a focus on key product categories;

• Continuing to leverage Auxly Leamington's large-scale, low-cost cultivation facility and its manufacturing automation to improve blended cost of finished cannabis inventory sold margin to an average of 35 per cent to 40 per cent;

• Vigorously managing SG&A (selling, general and administrative expenses) as a percentage of net revenues to keep it below 40 per cent;

• Prudently managing the company's balance sheet.

This strategic decision comes after careful consideration in identifying opportunities to optimize operations and effectively reduce operating costs, while increasing product quality and ensuring no material impact on the company's manufacturing capabilities and forecasted sales revenue.

In 2020, the company ceased cultivation at Auxly Ottawa's 10,000-square-foot facility and shifted its focus to the manufacturing, processing and distribution of dried flower and preroll cannabis products. Since acquiring Auxly Leamington in November, 2021, Auxly has scaled up cultivation and postharvest operations and fully built out manufacturing, processing and distribution capabilities to be able to handle the activities previously conducted at Auxly Ottawa. This allows Auxly to be more effective and efficient in conducting its manufacturing, processing and distribution activities for its dried flower and preroll cannabis products.

Auxly Leamington is a 1.1-million-square-foot greenhouse and processing facility cultivating Auxly's award-winning cannabis strains, including popular Back Forty strains and high-quality value strains under the newly launched brand Parcel, all of which are sold to and used by Auxly in its full suite of branded cannabis products.

"While we believe that taking these steps ultimately makes Auxly a more focused company that is better positioned to achieve its strategic goals, it was an extremely difficult decision because of the impact on our talented and hard-working Auxly Ottawa employees who have been with us for many years. We are grateful for all of their efforts and will do our best to help support them through this period of transition," said Hugo Alves, chief executive officer of Auxly. "We are diligently working to ensure that we achieve our goals of simplifying our operations, reducing costs and continuing to leverage the competitive advantage provided through our Auxly Leamington facility. The decision to undergo this transition was made with our strategic goals in mind, and we do not anticipate that this transition will have a material impact on the company's manufacturing capabilities and forecasted sales revenue."

Auxly Cannabis Group Inc.

Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. Its focus is on developing, manufacturing and distributing branded cannabis products that delight consumers.

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