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Auxly Announces Termination of FSD Pharma Joint Venture

VANCOUVER, British Columbia, Feb. 07, 2019 (GLOBE NEWSWIRE) -- Auxly Cannabis Group Inc. (TSX.V - XLY) ("Auxly" or the "Company") today announced the termination of the definitive agreement dated March 3, 2018 (the “Agreement”) between the Company and FV Pharma Inc., a wholly-owned subsidiary of FSD Pharma Inc. (“FSD Pharma”) (CSE:HUGE) governing the joint venture between the parties.

The joint venture was formed with the intention of developing a portion of FSD Pharma's cannabis cultivation facility located in Cobourg, Ontario (the “JV Facility”) in mutually agreed staged phases (the “JV Facility Development”). Pursuant to the Agreement, the Company was to receive a 49.9% stream of all cannabis produced at the JV Facility; the first phase of the JV Facility Development was to be the construction of an approximately 220,000 square foot self-contained cultivation facility. To date, the Company has invested $7.5 million in the development and construction of the JV Facility. That amount was invested into the project pursuant to a private placement dated September 20, 2018, pursuant to which the Company received 7.5 million Class B Subordinate Voting Shares of FSD Pharma.

In the course of the Company’s efforts to advance the JV Facility Development, it identified contractual breaches relating to FSD Pharma’s management and staffing obligations of the JV Facility, as well as significant concerns regarding certain aspects of the buildings’ infrastructure. On January 17, 2019, the Company provided notice to FSD Pharma of such breaches in the hopes that FSD Pharma would work with the Company toward a resolution. To the Company’s disappointment, FSD Pharma failed to remedy its breaches and instead purported to terminate the Agreement effective February 6, 2019. The Company subsequently terminated the Agreement effective February 7, 2019. The Company reserves all of its rights under the Agreement.

The termination of the joint venture arrangement with FSD Pharma does not materially impact the Company’s strategy nor its supply pipeline. The Company has a robust supply pipeline comprised of a combination of wholly owned assets, streaming partnerships, joint venture partnerships and commercial offtake arrangements, and will quickly evaluate where to most effectively redeploy its capital.

Chuck Rifici, Chairman and Chief Executive Officer of Auxly, commented: “We are disappointed by FSD Pharma’s response to our significant concerns. We remain committed to working with all of our partners and are surprised by FSD Pharma’s chosen course of action. We will explore strategic alternatives for the approximately $50 million in capital that was earmarked for FSD Pharma that is now available for deployment. We take our responsibility as stewards of shareholder capital very seriously and remain committed to delivering on our strategy.”

About Auxly Cannabis Group Inc. (XLY.V) (CBWTF)

Auxly is a vertically integrated cannabis company with diverse operations across Canada and Uruguay. The company was formed with the primary intent of providing financing solutions to cannabis licence applicants, and has evolved into a platform spanning the entire cannabis value chain. Auxly’s management believes that a vertically integrated model, adapted for the cannabis space, allows for substantive control over its operations through increased operational flexibility, economic resiliency and improved product margin dynamics in an effort to create long term shareholder value. Auxly currently operates three distinct, yet synergistic, segments:

• Upstream – Auxly’s diverse cannabis cultivation platform across its streaming partners, joint ventures and wholly-owned subsidiaries;

• Midstream – Auxly’s processing and development platform focused on the development of proprietary cannabis-derived products and related intellectual property to address consumer needs through its wholly-owned subsidiary, Dosecann; and

• Downstream – Auxly’s medical, recreational and international distribution platform.

Investor Relations:

For more information about investing in Auxly Cannabis Group Inc., please visit: http://www.auxly.com or contact our Investor Relations Team:
Email: IR@auxly.com
Phone: 1.833.695.2414

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Media Enquiries (only):

For media enquiries or to set up an interview please contact:
Sarah Bain, VP External Affairs
Email: sarah@auxly.com
Phone: 613.230.5869

Notice Regarding Forward Looking Information:

This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities law. Forward-looking information is frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or information that certain events or conditions "may" or "will" occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking information throughout this news release. Forward-looking information includes, but is not limited to: the proposed operation of Auxly, its subsidiaries and streaming partners, any actions taken or proposed to be taken by Auxly in response to termination of the joint venture arrangement by FSD Pharma, the re-deployment of capital that had otherwise been allocated by Auxly to the FSD Pharma joint venture, future legislative and regulatory developments involving cannabis and cannabis products, political change, competition and other risks affecting the Company in particular and the cannabis industry generally.

A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information in this release including, but not limited to, whether: Auxly’s subsidiaries and partners are able to obtain and maintain the necessary regulatory authorizations to conduct business and general economic, financial market, regulatory and political conditions in which the Company operates will remain the same. Additional risk factors are disclosed in the revised annual information form of the Company for the financial year ended December 31, 2017 dated May 24, 2018.

New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information. The forward-looking information in this release is based on information currently available and what management believes are reasonable assumptions. Forward-looking information speaks only to such assumptions as of the date of this release. In addition, this release may contain forward-looking information attributed to third party industry sources, the accuracy of which has not been verified by the Company. The purpose of forward-looking information is to provide the reader with a description of management's expectations, and such forward-looking information may not be appropriate for any other purpose. Readers should not place undue reliance on forward-looking information contained in this release.

The forward-looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.