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Aleafia Health settles dispute with Aphria

Cannabis
TSX:AH
26 June 2020 09:25 (EDT)
Aleafia Health Inc. - CEO, Geoffrey Banic

Source: SmallCap Power

Aleafia Health (TSX:AH) and its subsidiary, Emblem Cannabis, have reached a settlement agreement with Aphria over a terminated supply deal.

Under the terms of the deal, which was signed in September 2018, Aphria was to supply Emblem Cannabis with up to 175,000 kilogram equivalents of cannabis products over an initial five-year term, beginning on May 1, 2019.

However, the agreement was then terminated in early October last year after Aleafia claimed that Aphria had failed to meet its supply obligations.

While the exact details of the dispute were not disclosed, Aphria released a statement the same day, claiming that the company had every intention of fulfilling its obligations under the agreement.

It was also noted that the parties were contractually obligated to negotiate for a period of 30 days following the receipt of a termination notice, and that if Aleafia initiated a formal claim for damages, Aphria would vigorously defend itself.

According to today’s announcement, a settlement agreement has been formally reached. Aphria has agreed to issue a total consideration of C$29.1 million to Emblem. This amount will be comprised of $15.5 million in cash and $10 million in Aphria’s common shares.

The parties have also agreed to the release of any further existing or potential claims relating to the supply agreement, as well as the dismissal of arbitration proceedings that had previously begun.

Geoff Benic, CEO of Aleafia Health, said the settlement agreement is fair and satisfactory to all the parties concerned, and allows Aleafia to move forward with a significantly strengthened balance sheet.

“With a substantial injection of value into our business, we can focus on our continued growth,” he added.

Aleafia Health (AH) is up 12 per cent and is trading at 56 cents per share at 11:21am EDT.

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