Auxly Furthers Manufacturing Optimization Plan and Related Cost Savings Initiatives

TORONTO, May 30, 2023 /PRNewswire/ - Auxly Cannabis Group Inc. (TSX: XLY) (OTCQB: CBWTF) ("Auxly" or the "Company"), a leading consumer packaged goods company in the cannabis products market, announced today that it has transitioned all remaining dried flower and pre-roll cannabis product manufacturing, processing and distribution activities from its Auxly Ottawa facility to Auxly Leamington, where these activities are already taking place. Auxly will continue to wind-down its Auxly Ottawa facility in an orderly manner and intends to sell Auxly Ottawa's assets in due course and apply the proceeds from any such sale to support its ongoing operations.   

Auxly continues to focus its efforts on streamlining assets, simplifying operations, reducing costs, and achieving its 2023 goals of:

• increasing net revenues by 15% with a focus on key product categories;
• continuing to leverage Auxly Leamington's large-scale, low-cost cultivation facility and its manufacturing automation to improve blended Cost of Finished Cannabis Inventory Sold Margin to an average of 35-40%;
• vigorously managing SG&A as a percentage of net revenues to keep it below 40%; and
• prudently managing the Company's balance sheet.

This strategic decision comes after careful consideration in identifying opportunities to optimize operations and effectively reduce operating costs, while increasing product quality and ensuring no material impact on the Company's manufacturing capabilities and forecasted sales revenue.

In 2020, the Company ceased cultivation at Auxly Ottawa's 10,000 sq. ft. facility and shifted its focus to the manufacturing, processing and distribution of dried flower and pre-roll cannabis products. Since acquiring Auxly Leamington in November 2021, Auxly has scaled up cultivation and post-harvest operations and fully built out manufacturing, processing and distribution capabilities to be able to handle the activities previously conducted at Auxly Ottawa. This allows Auxly to be more effective and efficient in conducting its manufacturing, processing and distribution activities for its dried flower and pre-roll cannabis products.

Auxly Leamington is a 1.1 million sq. ft. greenhouse and processing facility cultivating Auxly's award-winning cannabis strains, including popular Back Forty strains and high-quality value strains under the newly launched brand Parcel, all of which are sold to and used by Auxly in its full suite of branded cannabis products.

"While we believe that taking these steps ultimately makes Auxly a more focused company that is better positioned to achieve its strategic goals, it was an extremely difficult decision because of the impact on our talented and hard-working Auxly Ottawa employees who have been with us for many years. We are grateful for all of their efforts and will do our best to help support them through this period of transition," said Hugo Alves, CEO of Auxly. "We are diligently working to ensure that we achieve our goals of simplifying our operations, reducing costs and continuing to leverage the competitive advantage provided through our Auxly Leamington facility. The decision to undergo this transition was made with our strategic goals in mind, and we do not anticipate that this transition will have a material impact on the Company's manufacturing capabilities and forecasted sales revenue."

ON BEHALF OF THE BOARD

"Hugo Alves" CEO

Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. Our focus is on developing, manufacturing and distributing branded cannabis products that delight our consumers.

Our vision is to be a leader in branded cannabis products that deliver on our consumer promise of quality, safety and efficacy.

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

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 the Company and its subsidiaries; the Company's efforts to streamline its operations and reduce operating costs; the intention of the Company to sell the Auxly Ottawa assets and the proposed use of any proceeds; the Company's execution of its product development, commercialization strategy and expansion plans; the relevance of the Company's current and proposed products; the expectation, timing and quantum of future revenues, Cost of Finished Cannabis Inventory Sold Margin and SG&A; 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: the Company is able to execute on its business strategy and/or achieve its goals; the Company is able to sell the Auxly Ottawa assets; the Company is able to achieve the anticipated cost savings from the closure of the facility; the Company's subsidiaries are able to maintain the necessary regulatory authorizations to conduct business; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; 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 annual information form of the Company for the financial year ended December 31, 2022 dated March 30, 2023.

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 forward-looking information is being provided for the purposes of assisting the reader in understanding the Company's financial performance, financial position and cash flows as at and for periods ended on certain dates and to present information about management's current expectations and plans relating to the future, and the reader is cautioned that 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 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. 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 Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Auxly Cannabis Group Inc.