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Auxly Cannabis Group Inc
Symbol XLY
Shares Issued 569,090,308
Close 2018-08-30 C$ 1.07
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Auxly Cannabis closes acquisition of KGK Science

2018-08-31 07:07 ET - News Release

Mr. Chuck Rifici reports


Further to its press release issued on Aug. 21, 2018, Auxly Cannabis Group Inc. has completed its previously announced acquisition of all of the outstanding shares of KGK Science Inc.

KGK is a leading health- and wellness-focused private contract research organization based in London, Ont., having provided a variety of clinical services to many of North America's leading nutraceutical, natural health product and consumer packaged goods companies. The company expects to leverage KGK's expertise and research abilities to further the company's cannabinoid-based product development efforts through collaboration with the company's wholly owned subsidiary, Dosecann Inc.

The total purchase price for the acquisition was approximately $12.3-million, of which $5-million was paid through the issuance of 4,132,231 common shares of the company at a price per Auxly share of $1.21, with the remaining $7.3-million paid in cash, a portion of which was used to repay certain indebtedness of KGK on closing.

The share-based payment is subject to a conditional combined lock-up and make-whole payment. The former shareholders of KGK have entered into lock-up agreements in favour of the company restricting their ability to transfer their Auxly shares until six months from the closing date of the acquisition. If no former shareholder of KGK sells any of the Auxly shares during the lock-up period, the former KGK shareholders may be eligible for a payment equal to the difference between the market price of the Auxly shares on the date that is six months from the closing date and $5-million (up to a maximum of $2.66-million). The make-whole payment will only be made if the share price of the company is below $1.21 on the date that is six months following the closing date.

The Auxly shares are also subject to a statutory hold period expiring four months and one day after the closing date.

As a result of Jeffrey Tung, the chief financial officer of Auxly, being a director of KGK, the acquisition constitutes a related-party transaction under Canadian Multilateral Instrument 61-101 but is otherwise exempt from the formal valuation and minority approval requirements of MI 61-101. Mr. Tung held a de minimis equity ownership interest in KGK of less than 2 per cent.

Issuance of warrants

Pursuant to the terms of the exclusive data licensing agreement with a prominent Canadian cannabis testing, analysis and rating company, the licensor has completed 4,000 tests on Canadian cannabis samples, triggering the issuance of 100,000 common share purchase warrants of the company. The milestone warrants will be exercisable at the greater of: (i) the closing market price on the day of issuance plus 10 per cent; and (ii) $1. The issuance of the milestone warrants remains subject to approval by the TSX Venture Exchange.

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 the company's partners by providing them with financial support and sharing its collective industry experience. The company's partners all have different visions, voices and brand values, and all share a common goal -- to build a world-class industry based on ethics, diversity, quality and innovation.

We seek Safe Harbor.

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