Auxly Buys 80% of CBD Producer in Uruguay for US$15 Million

Auxly Buys 80% of CBD Producer in Uruguay for US$15 Million
Auxly Buys 80% of CBD Producer in Uruguay for US$15 Million

Auxly Cannabis Group Inc. (TSX.V: XLY) (OTCQX: CBWTF) is pleased to announce that, further to the binding interim agreement announced on January 30th, 2018, the Company has received approval from the Secretaría Nacional para la Lucha contra el Lavado de Activos y el Financiamiento del Terrorismo, the government body overseeing foreign direct investments in Uruguay, for the Company’s acquisition of 80% of the issued and outstanding common shares of Inverell S.A. The SENACLAFT approval represents the final Uruguayan regulatory milestone required for the closing of the Transaction.

Strategic Rationale


Inverell is a federally licensed Cannabis Operator based in Montevideo, Uruguay. Led by Dr. Raúl Urbina, Inverell is a large-scale outdoor producer of hemp plants for CBD extraction operating on an initial footprint of approximately 300 hectares. Inverell has recently commenced the planting of its feminized seeds on 150 hectares (approximately 16.1 million square feet) which it expects to complete by early December and harvest in mid-April of 2019. 


Dr. Urbina completed his post-graduate studies in Molecular Biology at Princeton University and obtained his PhD in Agronics and Rural Development at the University of Almeria in Spain. Dr. Urbina was previously the Founder and Chief Executive Officer of Stevia One, where under his leadership, the company operated a 1,000 hectare cultivation operation in Peru. During this time, Dr. Urbina and his team developed superior strains of stevia which allowed Stevia One to achieve the highest yielding and lowest cost production of stevia in the world. Dr. Urbina has significant experience managing high-tech, large-scale agricultural projects with a strong focus on innovation having previously designed and managed the fully mechanised stevia plantation and high throughput extraction facility at Stevia One. Dr. Urbina’s track record of innovation has continued at Inverell where his breeding program has continually improved Inverell’s genetic library and his engineering team has recently completed the design of its proprietary, commercial scale, GMP compliant extraction facility using cold ethanol and chromatography purification.


Inverell provides the Company with a highly efficient, low-cost source of cannabinoids to address expanding global demand for cannabinoid-based products. The Company’s ownership of Inverell gives it a cornerstone asset through which to effectively exploit emerging international distribution channels, including through the Company's strategic partnership with ICC International Cannabis Corporation Inc. (CSE: WRLD) which provides the Company access to 16 markets through a network of 35,000 pharmacies. Importantly, the low cost, high purity CBD produced by Inverell gives the Company a long-term and stable supply of CBD to support the research, development and manufacturing of cannabis-derived products at Dosecann Inc., the Company's wholly-owned Licensed Processor facility located in Prince Edward Island, Canada.


The Company, through its wholly owned subsidiary Kolab Project, a Licenced Cultivator pursuant to the Cannabis Act, has also applied for a permit to import proprietary cannabis genetics from Inverell for use in the Company’s Canadian operations. The Company expects that, upon receipt of the permit to import, the Company will be able to import proprietary high CBD yielding genetics from Uruguay created through the breeding program at Inverell. The ability to import unique cannabis genetics will provide the Company with a competitive advantage for its Canadian operations through differentiated product offerings and efficiencies related to the Company’s cultivation and extraction efforts, particularly as the Company looks to ramp up its larger scale facilities and outdoor cultivation projects.


Management Commentary


Hugo Alves, President of Auxly commented: “I couldn't be more excited to announce the closing of the Inverell transaction. Not only is Auxly acquiring an incredible project, but we are welcoming one of the world's foremost experts in large scale outdoor cultivation and the extraction of high value molecules from plants into the Auxly family. I speak for myself and everyone at Auxly in saying that we are thrilled and honored to have Raul and the whole Inverell team as our friends and business partners. Inverell is a hugely important asset for Auxly and our strategic vision. Through Inverell, Auxly is perfectly poised to play a leading role in the global CBD economy and establish itself as a leading manufacturer of value-added cannabinoid-based products for domestic and international markets. Our ability to exercise strict QA/QC controls along every point of the supply chain from cultivation to extraction to product manufacturing, all within jurisdictions where cannabis is federally legal, ensures that we will be able to meet the quality assurance and supply chain demands of increasingly sophisticated and institutional purchasers. I love it when a plan starts to come together and the acquisition of Inverell is a big piece of our plans so today is a very exciting day for our company."


Dr. Raúl Urbina, Founder and Chief Executive Officer of Inverell commented: “We could not be more pleased to have reached this historic milestone and to formally join the Auxly family. We are very excited to partner with a company that shares our core values and vision and one that will allow us to better deliver cannabis products under our 3 'P' philosophy: People, Planet, Profit.”

Transaction Overview

Under the terms of the Transaction, the shareholders of Inverell are entitled to receive aggregate consideration of approximately USD$15,000,000, to be paid as follows:
  • USD$2,000,000 in cash on the date of the Closing;
  • USD$3,562,500 which will be paid via the issuance of 1,562,500 common shares of the Company at a price of CDN$2.28 on the date of the Closing; and
  • USD$9,437,500, which will be paid via the issuance of 4,139,253 common shares of the Company at a price per share of CDN$2.28 per share, to be held in escrow pending the achievement of certain milestones following Closing, including the successful registration of Inverell’s cannabis genetics and the successful exportation of CBD products.             

In connection with the Transaction, the Company has agreed to extend to Inverell up to an additional USD$5,000,000 by way of a secured loan repayable through cash flows generated by Inverell’s cultivation operations.

Closing of the Transaction remains subject to the approval of the TSX Venture Exchange.

ON BEHALF OF THE AUXLY BOARD


"Chuck Rifici" Chairman & CEO


About Auxly Cannabis Group Inc. (TSX.V: XLY) (OTCQX: CBWTF)

Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our 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.

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