Auxly Cannabis Group, a leading consumer packaged goods company in the cannabis products market, entered into two agreements that will strengthen its balance sheet, reduce debt, and support long-term growth:

• A non-binding agreement (the "Term Sheet") to amend and restate the Company's existing syndicated credit facility led by the Bank of Montreal ("BMO"), and
• An exchange agreement (the "Exchange Agreement") with Imperial Brands plc ("Imperial Brands") pursuant to which all amounts owing by the Company under the outstanding convertible debenture held by Imperial Brands (the "Debenture") will be settled in common shares of the Company ("Shares") and pre-funded warrants to purchase Shares.

These transactions represent meaningful progress in the Company's ongoing efforts to strengthen its balance sheet. The restatement of the credit facility will enhance the Company's liquidity and provide increased flexibility to allocate capital toward strategic growth initiatives. Concurrently, the settlement of the Imperial Brands convertible debenture through the issuance of equity instruments will eliminate over $21 million of debt from the Company's balance sheet. This deleveraging will improve the Company's capital structure, reduce interest obligations and reinforce the Company's financial stability and long-term viability.

"This refinancing marks a significant milestone for Auxly, resulting in a stronger, more resilient company," said Hugo Alves, CEO of Auxly. "These transactions will significantly reduce our debt, strengthen our balance sheet and give us the flexibility to invest in innovation and growth. The actions support our objective of achieving sustainable, profitable growth and creating long-term value for all of our stakeholders."

Travis Wong, CFO of Auxly, added: "These transactions materially improve and simplify our capital structure. As a result of the refinancing, we anticipate the removal of the going concern uncertainty disclosure from our financial statements which is a clear reflection of our strengthened financial position and the growing stability of our operations."

Amended Credit Facility

The Company has entered into a non-binding agreement providing indicative terms for an amendment and restatement of Auxly Leamington's existing credit facility agreement with a syndicate of lenders led by BMO (the "Amended Credit Facility"). The key modifications to be provided under the Amended Credit Facility will include the following:

Borrower: The Company will replace Auxly Leamington as the borrower.

Facility Structure: Credit facility of $50.7 million consisting of:Term loan of $36.2 million

• Revolving facility of $10.0 million to be used for working capital and corporate requirements

• Existing equipment leases of $4.5 million

Term: Two years with an option to extend for an additional year for $100,000.

Updated Financial Covenants: Revised covenants which provide the Company with the flexibility to support its long-term growth strategy.

Security: The Amended Credit Facility will be secured by all, or substantially all, of the assets of the Company and its subsidiaries (rather than primarily the assets and equity of Auxly Leamington as is the case under Auxly Leamington's existing credit facility).

The Company and the lenders are working towards a definitive binding amendment and restatement agreement for the Amended Credit Facility, although there can be no assurance that a definitive amendment and restatement agreement with the lenders will be reached.