Auxly Cannabis Makes a Curative Acquisition

Auxly Cannabis Group Inc. (TSXV:XLY), one of the Canadian marijuana stocks, said it will take a big stake in Curative Cannabis

SmallCapPower | January 28, 2019: Auxly Cannabis Group Inc. (TSXV:XLY), one of the Canadian cannabis stocks, Thursday announced that it has entered into a share purchase agreement with Curative Cannabis, whereby the Company will acquire 46% of the common shares of Curative, in exchange for the issuance of 5.06 million common shares of Auxly. Auxly Cannabis will also enter into a long-term cannabis purchase and sale agreement with Curative, to fund the construction and development costs of the Chatham-Kent, Ontario facility in exchange for the right to purchase 50% of the cannabis products and cannabis trim produced at the facility at an offtake price equal to Curative’s direct cost of cultivation plus 10%.

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The 30,000 sq. ft. indoor facility will be used for the production of an ultra-premium cannabis product, with the first phase anticipated to have a yield of 2,900 kg of cannabis per annum. Adhering to EU GMP standards, the first phase of construction is expected to be completed by March 2019 along with Health Canada evidence package submission. Curative’s facility rests on a 33-acre land parcel, thereby providing ample room for facility expansion. Additionally, Curative has already received municipal approval for the expansion of the facility for up to an additional 120,000 sq. ft. of indoor cultivation space.

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Auxly Cannabis Group President and Director Hugo Alves said, “Curative is a highly valued partner to Auxly, having been a part of the Auxly family since the inception of the Company. That being said, we could not be more pleased to have reached this stage of the project and to be signing a definitive agreement with Curative. Curative’s optimization of indoor cultivation combined with their unique genetics will provide a highly desirable product offering to the Canadian recreational cannabis markets and to the Auxly platform as a whole.”

Additionally, Auxly Cannabis shall be granted: a right of first refusal over any future expansion of the facility and/or the proposed construction of any new cannabis production facility by Curative and if the Company exercises such right of refusal it shall be entitled to receive a comparable offtake purchase arrangement as it received under the Transaction; and the unfettered access and control to Curative’s Genetic Library, which can be transferred (at the Company’s discretion), used and cultivated by the Company’s properly licensed subsidiaries, affiliates or commercial partners.

Auxly Cannabis stock trades at a market capitalization of C$567 million with a price-to-book multiple of 1.36x.

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

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