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XLY AIF-2020.Pdf AUXLY CANNABIS GROUP INC. ANNUAL INFORMATION FORM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020 April 23, 2021 TABLE OF CONTENTS NOTICE TO READER .............................................................................................................................. 1 FORWARD-LOOKING STATEMENTS ...................................................................................................... 1 CORPORATE STRUCTURE ...................................................................................................................... 4 GENERAL DEVELOPMENT OF THE BUSINESS ......................................................................................... 5 Three Year History..................................................................................................................................... 5 DESCRIPTION OF THE BUSINESS ......................................................................................................... 17 Overview ................................................................................................................................................. 17 Brand Portfolio ........................................................................................................................................ 17 Current Products ..................................................................................................................................... 18 Product Development ............................................................................................................................. 18 Current Services ...................................................................................................................................... 20 New Products .......................................................................................................................................... 20 Distribution ............................................................................................................................................. 21 Revenue .................................................................................................................................................. 21 Cannabis Input Materials and Supply ..................................................................................................... 21 Specialized Skill and Knowledge ............................................................................................................. 23 Competitive Conditions........................................................................................................................... 23 Cycles ...................................................................................................................................................... 24 Intangible Properties ............................................................................................................................... 24 Economic Dependence ........................................................................................................................... 24 Employees ............................................................................................................................................... 24 Foreign Operations ................................................................................................................................. 24 Bankruptcy and Similar Procedures ........................................................................................................ 25 Canadian Regulatory Environment ......................................................................................................... 25 RISK FACTORS .................................................................................................................................... 30 DIVIDENDS ......................................................................................................................................... 52 DESCRIPTION OF CAPITAL STRUCTURE ............................................................................................... 52 MARKET FOR SECURITIES ................................................................................................................... 53 PRIOR SALES ...................................................................................................................................... 54 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER .... 54 DIRECTORS AND OFFICERS ................................................................................................................. 55 LEGAL PROCEEDINGS AND REGULATORY ACTIONS ............................................................................. 60 INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS ...................................................... 60 TRANSFER AGENT AND REGISTRAR .................................................................................................... 61 MATERIAL CONTRACTS ...................................................................................................................... 61 AUDIT COMMITTEE INFORMATION .................................................................................................... 61 INTERESTS OF EXPERTS ...................................................................................................................... 62 - ii - ADDITIONAL INFORMATION .............................................................................................................. 62 GLOSSARY .......................................................................................................................................... 63 SCHEDULE “A” AUDIT COMMITTEE CHARTER………………………………………………………………………………. A-1 NOTICE TO READER In this annual information form (the “AIF”), unless otherwise noted or the context indicates otherwise, “Auxly”, the “Company”, “we”, “us” and “our” refer to Auxly Cannabis Group Inc. and its subsidiaries. All financial information in this AIF is prepared in Canadian dollars and using International Financial Reporting Standards as issued by the International Accounting Standards Board. Unless otherwise specified, in this AIF, all references to “dollars” or to “$” are to Canadian dollars and references to “US$” are to U.S. dollars. Unless otherwise specified, information contained in this AIF applies to the business activities and operations of the Company for the year ended December 31, 2020, as updated to April 23, 2021. Capitalized terms have meanings assigned to them in the “Glossary” on page 63. FORWARD-LOOKING STATEMENTS This AIF contains “forward-looking information” (“forward-looking information”) within the meaning of applicable Canadian securities legislation. All information, other than statements of historical fact, included in this AIF, including information that addresses activities, events or developments that the Company expects or anticipates will or may occur in the future, is forward-looking information. Forward-looking information is often identified by the words “plans”, “expects” or “does not expect”, “budgets”, “schedules”, “estimates”, “forecasts”, "proposes", "continues", “anticipates” or “does not anticipate”, “believes”, “intends”, and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might", "shall" or “will” be taken, occur or be achieved. Forward-looking information in this AIF may include, but is not limited to: • the competitive and business strategies of the Company; • the intention to grow the business, operations and existing and potential activities of the Company; • the sufficiency of the Company’s resources to fund continued operations; • the Company’s response to the COVID-19 pandemic; • the impact of the COVID-19 pandemic on the Company’s current and future operations; • the Company’s expectations regarding its future sales; • the success, and integration of operations, of the entities the Company acquires and the Company’s collaborations; • the ongoing construction and expansion of the Company's facilities, including Dosecann, Sunens, Kolab, Robinsons and Robinsons OG (as are all defined below), and its partners' facilities and the timing thereof; • inventory and production capacity, including discussions of plans or potential for expansion of capacity at existing or new facilities; • the market for the Company’s current and proposed product offerings, as well as the Company’s ability to capture market share; • the distribution methods expected to be used by the Company to deliver its products; 2 • the benefits and applications of the Company’s product offering and expected sales mix thereof; • development of affiliated brands, product diversification and future corporate development; • the competitive landscape in which the Company operates and the Company’s market expertise; • expectations regarding the Company’s ability to raise additional financing to further the Company’s investment in the business; • the applicable legislation, regulations and licensing related and any amendments thereof related to the cultivation, production, processing, distribution and sale of cannabis products by the Company’s subsidiaries and other business interests; • the ability of the Company, its subsidiaries and its cultivation partners to cultivate, produce, process, distribute or sell cannabis and cannabis products; • expectations regarding the Company’s licences, including in respect of the grant of Licences under the Cannabis Act, the Cannabis
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