Mr. Hugo Alves reports

IMPERIAL BRANDS PLC EXTENDS $123 MILLION CONVERTIBLE DEBENTURE AND AUXLY IMPLEMENTS BOARD AND MANAGEMENT CHANGES

Auxly Cannabis Group Inc. has entered an agreement with its strategic partner, Imperial Brands PLC, to amend certain provisions of its previously issued $123-million debenture dated Sept. 25, 2019, as amended on July 6, 2021. Pursuant to the amendment, Imperial Brands and Auxly have agreed to extend the maturity date of the debenture by 24 months from Sept. 25, 2024, to Sept. 25, 2026. The parties anticipate the amendment to come into effect on Aug. 16, 2023.

The debentures are convertible into common shares at a price of 81 cents per share at any time prior to the close of business on the business day immediately preceding maturity. Auxly remains Imperial Brands' exclusive global partner for any future development, manufacture, commercialization, sale and distribution of cannabis products.

In connection with the initial investment by Imperial Brands, the parties entered into an investor rights agreement which provides, among other things, that for so long as Imperial Brands holds a partially diluted percentage of outstanding common shares in the capital of Auxly of not less than 15 per cent, it is eligible to nominate one individual designated by Imperial Brands for election as a director to Auxly's board. As Imperial Brands no longer holds the required percentage under the investor rights agreement, its nominee, Murray McGowan, has resigned from Auxly's board, effective immediately.

"On behalf of myself, and the rest of the board of directors, I would like to thank Mr. McGowan for his valuable guidance and support over the past two years," said Hugo Alves, chief executive officer of Auxly. "The extension of the debenture will further our goal of prudently managing and strengthening our balance sheet and I would like to thank our partners at Imperial Brands for their ongoing commitment to our company and I look forward to our continued relationship."

Related party transaction

Imperial Brands is considered a related party of the company, and the amendment constitutes a related party transaction, as such terms are defined by Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. The company is relying on an exemption from the shareholder approval and formal valuation requirements of MI 61-101 available on the basis of financial hardship which provides an exemption where the financial hardship criteria set out in Subsection 5.5(g) of MI 61-101 are met and where there is no other requirement, corporate or otherwise, to hold a meeting to obtain any approval of the holders of any class of affected securities.

Further details have been provided in the corresponding material change report related to the amendment.

Resignation of chief financial officer and appointment of interim CFO

Auxly announces the resignation of Brian Schmitt from his position as chief financial officer of Auxly, effective July 26, 2023. Mr. Schmitt is leaving for an opportunity outside of the cannabis industry at a non-reporting issuer. Travis Wong, Auxly's senior vice-president of finance, has been appointed interim CFO of Auxly, effective immediately.

Mr. Wong joined Auxly in 2017 and currently holds the position of senior vice-president of finance where he has been responsible for managing Auxly's day-to-day finance activities. Mr. Wong has more than 15 years of corporate finance, accounting and capital markets experience. Prior to joining Auxly, he worked as a natural resources investment banker at Nomura Securities based in London, England. He has advised on over $5-billion of public and private merger and acquisition transactions and has been involved in capital raising transactions for a broad range of European corporations. Earlier in his career, he held positions at KPMG LLP in its audit and deal advisory teams. He is a chartered professional accountant (CPA Canada), and holds a bachelor of business administration from Simon Fraser University and an MBA from the University of Oxford.

"On behalf of myself, the board of directors and the entire Auxly team, I would like to thank Mr. Schmitt for his contributions and dedication to Auxly since joining in early 2019, and we wish him the best of luck with all of his future endeavors," said Mr. Alves, CEO of Auxly. "Travis has been with Auxly since it was founded in 2017 he is a talented finance professional and has a deep understanding of Auxly's business and the cannabis industry in general. We are delighted to welcome Travis to our senior executive team and have every confidence that is going to do an exceptional job for Auxly."

Warrant amendments

The company has received all necessary approvals required to implement the warrant amendments that were previously announced on Feb. 10, 2023, and such warrant amendments are now effective. The company amended the terms of 27,381,500 common share purchase warrants which were issued pursuant to a bought deal financing completed on June 14, 2021, to (i) reduce the exercise price to 4.5 cents per common share, and (ii) extend the expiry date to June 14, 2026. None of the warrants are held, directly or indirectly, by insiders.

About 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 its consumers.

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