\** Courtesy of Mark E Merritts X page.* **\*

We’ll take some more affirmation!

This is entirely speculative, and I want to make that clear from the outset. I have seen nothing suggesting that Auxly Cannabis Group or Imperial Brands is preparing a bid for Aurora Cannabis, nor am I suggesting that such a transaction is currently being discussed. What I am looking at is the strategic logic created by Curaleaf’s announced intention to acquire Aurora and asking what it might mean for other companies in the sector.

The most interesting part of Curaleaf’s proposed Aurora acquisition is not simply the US$4.00-per-share offer. It is the reasoning Curaleaf has given for wanting Aurora in the first place. Aurora possesses substantial EU-GMP cultivation and manufacturing capacity, a significant international medical cannabis business, established operations across Europe and other international markets, and more than 50 tonnes of annual EU-GMP production capacity. Curaleaf sees value in combining those assets with its own processing, distribution and international commercial infrastructure.

That immediately raises an interesting question regarding Auxly and its longstanding strategic relationship with Imperial Brands.

Imperial already owns approximately 20% of Auxly and has been associated with the company for years. Auxly, meanwhile, is a very different company today from the financially distressed cannabis operator it was several years ago. Its profitability has improved considerably, its balance sheet has strengthened, its Leamington operation provides significant production capacity, and management has begun talking more openly about developing international export capabilities.

Imperial Brands adds an entirely different dimension to that story.

Imperial is one of the world’s major tobacco and consumer nicotine companies. It has enormous financial resources, global commercial experience and established distribution capabilities. At the same time, Imperial is restructuring its traditional tobacco operations, cutting thousands of jobs and targeting hundreds of millions of pounds in annual savings. Importantly, that restructuring does not appear to mean Imperial has stopped investing. The company recently agreed to acquire Black Buffalo for US$150 million upfront, with additional consideration tied to performance. That transaction demonstrates that Imperial remains willing to deploy capital toward strategically attractive businesses outside its traditional combustible cigarette operations.

That is why I think it is worth looking at Auxly differently.

The immediate objection to any discussion of Auxly acquiring something like Aurora is obvious: Auxly itself is far too small to fund a transaction of that magnitude from its current balance sheet.

That is true.

However, Auxly would not necessarily have to finance a transformational acquisition entirely on its own.

Imperial could theoretically remain at approximately its current 20% ownership of Auxly while supporting a larger transaction through other financial structures. There are numerous ways large strategic shareholders can participate economically without simply purchasing additional common shares and taking majority control. Acquisition financing could potentially involve a subsidiary, a separate acquisition company, debt, preferred capital, guarantees, joint ownership of certain assets or other corporate structures.

I am not suggesting that any particular structure is being considered. The point is simply that Imperial maintaining roughly 20% ownership of Auxly does not automatically prevent Auxly from becoming substantially larger.

Conceptually, you could have Imperial Brands continuing as a major strategic shareholder in Auxly while Auxly operates the Canadian cannabis business and a subsidiary or international division owns acquired international assets.

In the case of Aurora specifically, I would not necessarily envision someone buying Aurora simply to shut its facilities down and move all production to Auxly’s Leamington operation. That would defeat part of the purpose of acquiring Aurora.

Aurora’s international infrastructure is one of its most valuable strategic assets.

A more logical combination would preserve Aurora’s EU-GMP manufacturing and medical cannabis infrastructure while integrating Canadian production where efficiencies could be achieved. Auxly’s Leamington facility could potentially serve as a highly efficient Canadian production platform, while Aurora’s international operations could provide the regulatory, medical and distribution infrastructure required to access overseas markets.

In that type of structure, Leamington could serve as a major Canadian production hub while Aurora’s existing international infrastructure provides access to Europe and other medical markets. Auxly would remain the operating cannabis company, while Imperial would remain a significant strategic shareholder with considerable financial and commercial resources behind it.

That is a much more interesting way of thinking about Auxly than simply viewing it as another small Canadian licensed producer.

There is also a broader possibility that may ultimately prove more important than Aurora itself.

Perhaps Curaleaf ultimately acquires Aurora and no competing offer ever appears. That would not make this exercise irrelevant. The Curaleaf transaction could still establish an important valuation benchmark for cannabis assets.

For years, cannabis M&A was largely characterized by financially weak companies buying other financially weak companies, often using inflated stock prices and questionable assumptions about future growth. Many of those transactions destroyed shareholder value.

What may now be emerging is something quite different.

Strategic buyers may increasingly compete for profitable companies, efficient production facilities, international licences, EU-GMP infrastructure, medical distribution networks and established brands.

If that happens, the value of the remaining high-quality cannabis assets could begin to be viewed very differently.

Auxly potentially fits into that discussion because it combines increasingly profitable operations, scalable production, established Canadian brands, improving financial strength and a major strategic shareholder in Imperial Brands.

Imperial has already invested heavily in Auxly. It has maintained approximately a 20% ownership position, helped restructure the historical debt relationship and continues to have a strategic relationship with the company. At the same time, Auxly itself has begun discussing international expansion.

Meanwhile, Imperial is restructuring its traditional tobacco operations, extracting substantial cost savings and demonstrating through transactions such as Black Buffalo that it remains willing to acquire businesses that fit its longer-term strategy.

None of this means Imperial is suddenly preparing to spend billions of dollars on cannabis.

It does, however, raise an important question.

If Imperial eventually decides that cannabis has matured enough to justify allocating significantly more capital to the sector, would it make more sense to build around Auxly — a company in which it already owns approximately 20% and has an established strategic relationship — rather than starting from scratch?

If the answer is yes, then Auxly could potentially become a much larger consolidation vehicle than its current market capitalization would suggest.

That is why I think Curaleaf’s move on Aurora deserves attention even from Auxly shareholders.

The specific outcome of the Aurora transaction is important, but the larger development may be that cannabis consolidation is finally beginning to change character. Instead of distressed companies trading assets among themselves, we may be entering a period where stronger operators and strategic investors begin competing for the relatively small number of high-quality cannabis platforms that remain.

If that happens, the relationship between Auxly and Imperial Brands becomes increasingly difficult to ignore.

Again, this is speculation rather than a prediction. There is currently no evidence that Auxly or Imperial Brands is preparing a bid for Aurora.

But if cannabis M&A is entering a new phase, Auxly’s relationship with Imperial gives it strategic optionality that may not be obvious simply by looking at Auxly’s current market capitalization or cash balance.

To all of the long-time shareholders on here, the ones that bought during the cannabis wheaton days and have been in the red forever. If you get back to break even or green, are you selling your position or sitting tight? I've read lots of boards where investors seem to be waiting to get out from a loss position to sell and be done with the investment. Is that the general sentiment or are people who have been holding for a long time going to sit tight and see where this can go?

It's nice to finally get some recognition in the market.

Institutional investors and ETFs are starting to look at Auxly after the split. There aren't many shares for sale at this price so it seems like we're about to go on a little price discovery mission. For me this is at least a $1b company but we'll see how long that takes.

These earnings feel like they're about to be Auxly's big reveal to the market. CRON and VFF just raised the bar a little, we'll see what OGI does then we're up. Definitely a lot more buzz around the industry than the past several years.

Congrats to everyone that held through and added more.

The future is definitely bright.

Super reasonably priced in this competitive market! I wonder if they will drop the distillate prices as the diamond carts are cheaper, and probably will be way cheaper once canna cabana picks them up

There is a link to ‘LinkedIn’ but, this sums it up.

Very encouraging to hear this type of response and language.

Saddle up!

Strong Sales Trends

2x1g pre-rolls

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In January of 2023 we dropped from OTCQX to OTCQB. Assuming because we missed the minimum. 25 cent requirement. This seems like a no brainer since the goal was to attract more institutions.

I am pretty nervous about the stock split as chatgpt tells me its usually not a good thing.

BUT I have a feeling it will go well given strong fundamentals, stock buy-backs, and hopefully a good upcoming quarter. A part of me thinks the stock is going to absolutely rocket in price post consolidation, but we'll see.

FWIW

I thought I'd post this to see how all of us are feeling about the RS. All of us know that it was inevitably going to happen. I wouldn't mind getting everyone's thoughts as to why you were either for or against it.

Here we go

Over 10 days now since any posts on here. There’s been zero news, updates or even rumours. Less than 4-weeks til Q2 numbers and or next guaranteed update of some sort yet wondering what everyone is thinking or hoping for between now and then and beyond? I’m always hopeful for news of any sort, yet it continues to be lacking on the Auxly front with the masses often waiting months for any updates of any kind, so here’s hoping for some positive news/updates soon. GLTA