Mr. Hugo Alves reports

AUXLY ANNOUNCES COMPLETION OF CONVERSION OF OVER $123 MILLION OF PRINCIPAL AND INTEREST UNDER IMPERIAL DEBENTURE

Auxly Cannabis Group Inc. has completed the conversion of $123.4-million of principal and accrued interest under the 4.00 per cent unsecured convertible debenture of the company due Sept. 25, 2026, and the amendment to the amended and restated investor rights agreement dated July 6, 2021, with 1213509 B.C. Ltd., a wholly owned subsidiary of Imperial Brands PLC, pursuant to the terms previously announced on March 25, 2024.

Imperial has converted: (i) $121.9-million of the principal amount outstanding under the debenture at an exercise price of 81 cents for 150,433,450 common shares in the capital of the company; and (ii) $1.56-million of accrued interest under the debenture into 90,882,667 shares at a price of 1.7 cents (the interest conversion price), resulting in Imperial holding an equity position in the company of approximately 19.8 per cent.

Imperial and Auxly entered into a second amended and restated investor rights agreement dated March 28, 2024, to, among other things, remove the existing requirement that Imperial will use the company as its exclusive cannabis partner.

"We appreciate the continued support of our strategic partner Imperial who we now also welcome as our largest shareholder," said Hugo Alves, chief executive officer of Auxly. "The conversion improves the financial position of the company by eliminating $123-million in debt and is expected to reduce our pro forma 2024 annual interest and accretion expense by approximately $14-million. This is fantastic news for Auxly; we will continue to look for ways to strengthen our balance sheet and remain focused on delivering profitable growth with quality products and incredible teamwork."

About Auxly Cannabis Group Inc.

Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. The company's mission is to help consumers live happier lives through quality cannabis products that they trust and love.

The company's vision is to be a global leader in quality cannabis products.

Additional required early warning disclosure

Prior to the conversion, Imperial held 6,315,574 shares (0.63 per cent of the issued and outstanding shares (calculated on a non-diluted basis)) and approximately $122.85-million principal amount of the debenture. Following the conversion, Imperial held 247,631,691 shares (19.8 per cent of the issued and outstanding shares (calculated on a non-diluted basis)) and $1-million principal amount of the debenture. The aggregate consideration paid by Imperial for the conversion shares was $123.4-million. The interest conversion price was derived from the five-day volume-weighted average price of the shares on the Toronto Stock Exchange for the five trading days prior to Imperial's delivery of its notice to convert, as specified by the terms of the debenture.

In addition to the principal amount, $20.6-million of accrued interest as of March 28, 2024, remains outstanding under the debenture following the conversion, which remain convertible into shares provided that the exercise of Imperial's conversion rights with respect to accrued and unpaid interest under the debenture may not result in Imperial, together with its affiliates, beneficially owning more than 19.9 per cent of the shares (assuming the conversion of the principal amount of the debenture in full and calculated on a non-diluted basis).

Assuming the remainder of the principal amount under the debenture is converted in full on the date hereof (which excludes the exercise of the interest conversion election by Imperial), Imperial would have beneficial ownership of 248,866,259 shares, or approximately 19.9 per cent of the issued and outstanding shares (calculated on a non-diluted basis).

Imperial intends to review its investment in the company on a continuing basis and may, subject to the terms of the amended and restated investor rights agreement, purchase or sell shares, either on the open market or in private transactions or further exercise its conversion rights under the debenture in the future, in each case, depending on a number of factors, including general market and economic conditions and other factors and conditions Imperial deems appropriate. Imperial may formulate other purposes, plans or proposals regarding the company or any of its securities or may change its intention with respect to any of the foregoing.

In connection with the conversion, the company and Imperial also entered into the amended and restated investor rights agreement amending the investor rights agreement. While Imperial will continue to have the right to nominate one director to serve on the board of directors of the company, in addition to certain other governance rights so long as Imperial and its affiliates, collectively, meet certain specified beneficial ownership thresholds of shares, the amended and restated investor rights agreement was amended to remove certain provisions that previously: (i) conferred on Auxly certain exclusivity rights with respect to the development, manufacture, commercialization, sale and distribution of cannabis products by Imperial; and (ii) certain provisions relating to commercial co-operation among the parties.

An early warning report will be filed by Imperial with applicable Canadian securities regulatory authorities. To obtain a copy of the early warning report, please contact Matthew Brace at 44-0-117-963-6636.

We seek Safe Harbor.