Mr. David Pidduck reports

MEDIPHARM LABS SETTLES AN OUTSTANDING CLAIM FOR $9M

Medipharm Labs Corp. has entered into a settlement agreement on Sept. 29, 2023, to resolve a claim in connection with a commercial agreement dispute, for a total consideration value of $9-million.

On Jan. 24, 2020, Medipharm Labs filed a statement of claim in the Ontario Superior Court of Justice against one of its long-term customers, Hexo Corp., regarding a long-term supply agreement for cannabis concentrates. The claim related to the payment of outstanding amounts due to the company for products shipped to and received by the customer, and deposits owed to the company for committed amounts not yet shipped. Medipharm was awarded a favourable summary judgment in the Ontario Court of Justice in July of 2022. The summary judgment was appealed by Hexo and a hearing at the Court of Appeal was scheduled for Oct. 12, 2023. In connection with the settlement agreement, Hexo will abandon its appeal as against Medipharm.

Upon the acquisition of Hexo by Tilray Brands Inc., Medipharm and Tilray sought a resolution that was favourable to each party, and establish a long-term supply relationship in connection with the settlement agreement. Under the settlement agreement, Medipharm will receive a total value consideration of $9-million, including:

• $3-million immediate cash payment;
• $4.5-million in common shares of Tilray;
• $1-million in Tilray cannabis products, including high-quality flower and extractable bio-mass; and
• $500,000 supply agreement to provide Tilray with Medipharm products and services over four years.

This long-term supply agreement will allow Medipharm to establish a positive continuing business relationship with a global leader in the cannabis industry. This supply agreement is expected to benefit Tilray through access to Medipharm's unique pharmaceutical products and services, both domestically and internationally, including products produced under the company's United States Food and Drug Administration (FDA) foreign drug site registration and Canadian pharmaceutical drug establishment licence.

Once completed, this arrangement will settle a current aged receivable of $8.5-million on the company's balance sheet. The additional $3-million cash and $4.5-million anticipated proceeds from the Tilray shares further strengthens the company's balance sheet. Medipharm's Q2 2023 reported cash balance was $14.7-million, which does not include the August, 2023, surplus land sale for $1.9-million. This settlement agreement solidifies the company's position as having one of the strongest cash positions amongst its cannabis industry peers with similar market capitalizations. In addition, with less than $3-million of debt, no overdue excise tax exposure and full ownership of its assets, Medipharm also enjoys a very favourable debt position versus the same peer group. Management believes this puts the company in a very strong position to continue to invest in the pharmaceutical and clinical pipelines, and to thoughtfully consider approaches to the many available consolidation opportunities in the industry.

Management commentary

David Pidduck, chief executive officer of Medipharm Labs, commented: "This settlement will allow us to receive $9-million in value, which will dramatically strengthen our balance sheet, and allow us to invest in many organic and inorganic growth opportunities. We are also excited to establish a long-term relationship with Tilray, a global leader in the cannabis space. This agreement builds on Medipharm's many customers across multiple channels, multiple geographies, B2B [business-to-business] segments and pharma. I would like to thank the Tilray management team for their professional and pragmatic approach to this mutually beneficial settlement, and we look forward to working with them in the future."

About Medipharm Labs Corp.

Founded in 2015, Medipharm Labs specializes in the development and manufacture of purified, pharmaceutical-quality cannabis concentrates, active pharmaceutical ingredients (API) and advanced derivative products utilizing a good manufacturing practices certified facility with ISO standard-built clean rooms. Medipharm Labs has invested in an expert, research-driven team, state-of-the-art technology, downstream purification methodologies, and purpose-built facilities for delivery of pure, trusted and precision-dosed cannabis products for its customers. Medipharm Labs develops, formulates, processes, packages and distributes cannabis and advanced cannabinoid-based products to domestic and international medical markets.

In 2021, Medipharm Labs received a pharmaceutical drug establishment licence from Health Canada, becoming the only company in North America to hold a commercial-scale domestic good manufacturing licence for the extraction of multiple natural cannabinoids. The company carries out its operations in compliance with all applicable laws in the countries in which it operates.

In 2023, Medipharm acquired VIVO Cannabis Inc., which expanded Medipharm's reach to medical patients in Canada via Canna Farms medical e-commerce platform, and in Australia and Germany through Beacon Medical Pty. and Beacon Medical GmbH. This acquisition also included Harvest Medical Clinics in Canada, which provide medical cannabis patients with physician consultations for medical cannabis education and prescriptions.

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