XLY Auxly Cannabis Group Inc

Auxly Cannabis Group Inc. (TSX.V - XLY) ("Auxly" or the “Company”) today announces changes to its Board of Directors and management team and a Company-wide operational update on its path to profitability.

Board and Leadership Changes

Mr. Chuck Rifici will be stepping down as Chair of the Board of Directors and Ms. Genevieve Young, a current Independent Director on the Board and Chair of Auxly’s Audit Committee, will be assuming the role of Chair, effective immediately. Ms. Young is the President and Chief Operating Officer of Global Public Affairs, Canada’s leading privately held strategic communications and government advocacy consultancy, representing some of Canada’s largest and most dynamic organizations. Her strong communications and government relations experience will continue to be instrumental to the Company in this new role, as Auxly looks to achieve its goal of becoming a global leader in branded cannabis products.

“The entire Auxly family would like to thank Chuck for his contributions to the Company and wish him the best in his future endeavors,” said Hugo Alves, Chief Executive Officer. “As a founder and former CEO, Chuck helped build Auxly from the ground up and we thank him for his hard work and dedication in getting Auxly to where it is today.”

Mr. Rifici added: “I have never been more confident in Auxly’s positioning in the market. As an investor and ambassador of the Company, I truly believe the management team is one of the best in the industry and I am confident in their ability to make incredible products and build unrivalled brands. Although I am resigning as Chair, I continue to support the Company as it enters this new chapter of growth.”

Auxly’s Board of Directors will also be welcoming a new Independent Director, Mr. Vikram Bawa. Mr. Bawa is a senior global marketing leader with an extensive record of delivering results with first-hand experience in both mature and emerging markets with a single-minded focus on the consumer. He has lived and worked across North America, Asia and Europe with top-tier fast-moving consumer goods, electronics and advertising companies. Mr. Bawa has led multifunctional and diverse organizations across categories (Health and Beauty, Food and Consumer Electronics) and has developed long term business strategy at both the local and global levels, helping execute with excellence. Mr. Bawa brings decades of experience in consumer insights, brand building and marketing to Auxly’s Board, having served most recently as the Vice President and Head of Marketing – Asia Pacific, Europe, Middle East and Africa (EAMEA) for Logitech S.A. (based out of China and Switzerland).  Prior to that, Mr. Bawa was Vice President Marketing at McCain Foods Canada, where he was responsible for all marketing functions including Retail, Food Service, Innovation and Consumer Insights. He has also held senior roles with Nestle (Switzerland and Canada), Wrigley and Colgate Palmolive (Philippines and USA).

Ms. Young, newly appointed Chair of the Board, commented: “As we continue to focus on the long term growth of our organization and our branded cannabis products, Mr. Bawa’s proven CPG experience will help us drive Auxly’s business and achieve our goals and objectives. He is a results-driven, experienced executive who brings extensive knowledge and resources that will assist in taking Auxly to the next level and beyond.  Mr. Bawa is a solid addition to the Auxly Board and I’m thrilled to be working with him.”

Additionally, in order to best support the continued growth and execution of Auxly’s strategic vision, the Company announces that Mr. Michael Lickver, Auxly’s current Senior Vice President of Strategy, has been named President of Auxly. Mr. Lickver has played a key role in developing and executing on the Company’s corporate strategy, while ensuring operational excellence across the Company’s key assets. In his new role, Mr. Lickver will have oversight of the Company’s commercial, operational and regulatory affairs functions.

Mr. Hugo Alves will continue in his position as Director and CEO of the Company and remain responsible for setting the corporate strategy and directing the Company’s overall growth.

Path to Profitability

The Company is dedicated to executing on its corporate strategy and increasing its market share, while also improving its margins and reducing corporate overhead, with a target of achieving positive adjusted EBITDA during the first half of 2021.

Auxly has established itself as a leader in Cannabis 2.0, with its current product offering achieving leading national market share; most notably, owning the #2 spot in national vape sales, which represented more than 60% of the Company’s cannabis revenues in the first half of 2020. In addition to its Cannabis 2.0 products, the Company has seen success with its recent launches of the Robinsons brand, a unique, ultra-premium dried flower product for the cannabis connoisseur, and Kolab Project’s dried flower and pre-roll products, both of which have been incredibly well received by consumers. Despite recent market challenges brought on by COVID-19 and other industry related obstacles, such as slower than expected national retail expansion, the Company has maintained this leadership position and expects to see stronger sales in the remainder of 2020 and into 2021.

In addition to the actions already taken to reduce operating costs at two of Auxly’s cultivation assets, Inverell S.A. located in Uruguay and Robinsons Outdoor Grow located in Nova Scotia, the Company has taken added measures to reduce its workforce to further accelerate its path to profitability. The Company expects to generate approximately $3 million in quarterly SG&A savings through these cumulative reductions, resulting in an expected cash-based SG&A run-rate of approximately $10 million by the first quarter of 2021.

These reductions, coupled with the Company’s anticipated continued strong cannabis sales, will better position the Company to achieve its profitability goals and drive value for its shareholders. Auxly will continue to explore strategic alternatives for certain non-core assets as it looks to achieve its targeted positive adjusted EBITDA.

“Over the past quarter, we have been planning and implementing a number of changes to make Auxly a stronger and more focused company,” said Mr. Alves. “This includes making the difficult decision to part ways with some of our workforce. Saying goodbye to teammates is not a decision that was taken lightly, and we remain very grateful to everyone for their hard work and dedication to Auxly. These changes better position Auxly to achieve its vision of becoming a global leader in branded cannabis products by allowing our organization to be laser focused on executional excellence, customer service and strategic growth.”

Continued Executional Excellence

Auxly continues to focus on its vision of becoming a global leader in branded cannabis products that deliver on its consumer promise of quality, safety and efficacy.

With construction nearing completion at the Company’s Prince Edward Island-based manufacturing hub, Dosecann LD Inc., the ongoing commissioning of high-efficiency equipment will provide greater automation to streamline operations, significantly increasing product output and the ability to bring new product formats to market. Auxly has also undergone a rationalization of its current product portfolio to focus its resources and production on its most popular and profitable SKUs, allowing it to reduce operating costs and drive greater revenues by improving fill rates and in-stock positions.

Kolab Project Inc. (“Kolab”), the Company’s wholly owned subsidiary located in Carleton Place, Ontario, has fully focused its operations on pre-roll manufacturing and innovation activities to support the Company’s dried flower program and pre-roll product offering. With the dried flower market forecasted to be the largest cannabis category in Canada in 2020, Auxly is in a position to capture greater market share and drive revenue growth within the pre-roll segment by utilizing the operational strength at Kolab, the advanced technological capabilities and know-how of its strategic partner Imperial Brands PLC, and the organic cannabis input from its joint venture partner, Sunens Farms Inc., which received its cultivation licence for the first phase of its fully-automated, purpose-built facility from Health Canada in June 2020.  

The Company is continuously looking for opportunities to drive revenue growth and delight its consumers with new and compelling cannabis products and is excited to launch additional innovative SKUs before the end of 2020, such as the recently announced Foray Hard Maple Caramels and Kolab Project’s upcoming new chocolate flavour, Cherry Cola Pop.

ON BEHALF OF THE BOARD 

"Hugo Alves" CEO 

About Auxly Cannabis Group Inc. (TSX.V: XLY)Auxly is an international cannabis company dedicated to bringing innovative, effective, and high-quality cannabis products to the medical, wellness and adult-use markets. Auxly's experienced team of industry first-movers and enterprising visionaries have secured a diversified supply of raw cannabis, strong clinical, scientific and operating capabilities and leading research and development infrastructure in order to create trusted products and brands in an expanding global market.

Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.

Investor Relations:For investor enquiries please contact our Investor Relations Team: Email: IR@auxly.comPhone: 1.833.695.2414

Media Enquiries (only): For media enquiries or to set up an interview please contact:Email: press@auxly.com 

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. 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 Company’s organizational and strategic review and sales and demand forecasts; the Company’s focus on aligning its resources to meet the needs of consumers; the proposed operation of Auxly, its subsidiaries and partners; the Company’s execution of its product development and commercialization strategy; production capacity, including discussions of plans or potential for expansion of capacity at existing facilities; the expectation and timing of future revenues; consumer preferences; political change, future legislative and regulatory developments involving cannabis and cannabis products; and 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; Auxly’s subsidiaries and partners are able to obtain and maintain all necessary governmental and regulatory permits and approvals for the operation of their facilities and the development and sale of current and proposed products; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; there are changes in cannabis industry growth and trends, including changes in the Company’s forecasted demand for cannabis products; and general economic, financial market, regulatory and political conditions in which the Company and its subsidiaries operate will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2019 dated May 13, 2020.

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 Auxly’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 Auxly. 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, Auxly 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.