Auxly Cannabis Group Set to Expand Out East

In this market news, Auxly Cannabis Group Inc. (TSXV:XLY), one of the Canadian marijuana stocks, said it will collaborate on the development of an indoor cultivation facility in St. John’s

SmallCapPower | October 26, 2018: Auxly Cannabis Group Inc. (TSXV:XLY), one of the Canadian cannabis stocks, announced recently that it has signed an agreement with Atlantic Cultivation Inc. to collaborate on the development of a 110,000 sq. ft. indoor cultivation facility in St. John’s, Newfoundland and Labrador and to develop retail locations in the province. Atlantic Cultivation is a vertically-integrated company, utilizing hydroponic agricultural technology to produce premium cannabis products.

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Under the terms of the agreement, Auxly Cannabis will invest $2.5 million into Atlantic in exchange for a 50% equity stake in Atlantic and a long-term right to purchase up to 30% of dried cannabis and cannabis trim produced at the facility. Atlantic will contribute an additional $2.5 million in funding to the entity. The net proceeds will be used for the development of retail locations, subject to approvals from the government of Newfoundland and Labrador, and for general working capital purposes.

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Auxly Cannabis and Atlantic will work with the Government of Newfoundland and Labrador to obtain all required regulatory approvals to open and operate up to five cannabis retail locations within the province, one of which is expected to be located onsite at the Atlantic Facility. The parties will enter into a management services agreement whereby Auxly will oversee the operation of the retail stores.

Additionally, Auxly Cannabis and Atlantic have agreed to enter into a supply agreement for the development and supply of value-added cannabis products using cannabis cultivated at the facility and developed and manufactured by Dosecann Inc., Auxly’s wholly-owned licensed dealer in Prince Edward Island.

Hugo Alves, President and Director of Auxly Cannabis, said, “We are excited to have entered into this partnership with Atlantic Cultivation, a company led by an excellent management team with deep roots in Newfoundland and Labrador. This strategic partnership adds significant depth to our operations in Atlantic Canada. This partnership with Atlantic, coupled with our premium craft producer Robinson’s Cannabis in Nova Scotia and our world class innovation and extraction hub at Dosecann in PEI demonstrates Auxly’s commitment to Atlantic Canada where we are building meaningful cannabis businesses that have a positive impact on the region.”

Auxly Cannabis also announces that it has granted 6,725,000 options to purchase common shares to certain officers, employees and consultants of the Company pursuant to the Company’s stock option plan. The Options granted to certain officers will vest in equal portions over the following two years. All of the Options are exercisable at a price of 1.24 per common share. The Options have a term of 10 years and are subject in all respects to the terms of the Plan and the requirements of the TSX Venture Exchange.

Auxly Cannabis Group trades at a market capitalization of C$575.6 million with a price-to-book multiple of 1.5x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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