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Auxly Cannabis shares rocket as it advances $4mln to Lotus Ventures to complete growing facility

Auxly has invested C$4mln to help fund Lotus’ 22,500 sq/ft facility in Armstrong, British Columbia
Auxly Cannabis shares rocket as it advances $4mln to Lotus Ventures to complete growing facility
Lotus says its indoor growing facility should be completed by the end of September 2018

Shares of Auxly Cannabis Group Inc (CVE:XLY, OTCQX:CBWTF) and Lotus Ventures Inc (CSE:J) soared on Tuesday after it announced it had finalized an additional investment by Auxly of C$4mln to help fund Lotus’ 22,500 sq/ft facility in Armstrong, British Columbia. The company announced it had signed a definitive long-term purchase and sale agreement. 

Shares of Vancouver-based Auxly jumped 17.2% at US$1.02 in New York and 13.8% at C$1.32 in Toronto.

Shares of Lotus were up 16% at C$0.29. 

"Lotus is a partner that we value deeply, having been part of the original cohort of streaming partners at the inception of Auxly. We are incredibly pleased to be making this subsequent investment into Lotus to complete the buildout of the first phase of their current facility in Armstrong, British Columbia. We continue to look forward to working closely with Lotus’ team to design and build out additional phases of this asset," said Hugo Alves, president of Auxly.

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In addition to the C$4mln advanced to Lotus to partially finance the completion of the facility, Auxly also made a C$1mln subscription of common shares of Lotus, which was completed in January 2018.

Lotus is a late stage applicant pursuant to the Access to Cannabis for Medical Purposes Regulations. The company says the facility should be completed by the end of September 2018.

In the latest deal, Auxly was issued an additional 3,755,868 common shares of Lotus and will be entitled to purchase or otherwise direct the sale of 50% of the facility's total production which is expected to be 2,000kg of cannabis each year.

Auxly will have the right of first offer to purchase the remaining 50% of cultivation output as well as a right of first refusal to finance a prescribed portion of the first expansion to the facility and all or a portion of any further expansions. 

“Auxly is emerging as a large player in the distribution and marketing of cannabis in Canada. Lotus Ventures benefits in several ways from the Auxly streaming relationship, in addition to access to equity, the relationship provides us with assured offtake of at least half of our production as well as access to their market and industry expertise," said Dale McClanaghan, president and chief executive officer of Lotus.

"This will enable Lotus to grow more rapidly than it otherwise would while working towards establishing a reputation as a top-tier Licensed Producer."

When Lotus receives its cultivation license at the facility, Auxly can designate one nominee to Lotus' board of directors for as long as Auxly holds at least 25% of the purchased Lotus shares. 

The purchased Lotus shares have a statutory hold period of four months and one day.

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