Investment creates additional platform on which to build portfolio of premium West Coast cannabis products

 

Leamington, Ontario and Kelowna, British Columbia – December 21, 2017 – As part of the proposed combination of TS BrandCo. Holdings Inc. (operating as “Tokyo Smoke”) and DOJA Cannabis Company Limited (“DOJA”) (CSE: DOJA) announced earlier today, Aphria Inc. (“Aphria” or the “Company”) (TSX: APH and US OTC: APHQF) is pleased to announce that it has committed to make a $10 million equity investment in the combined company, which is expected to be renamed Hiku Brand Company Ltd. (“Hiku”). The combination of Tokyo Smoke and British Columbia based DOJA would bring together two premium lifestyle brands to serve the anticipated recreational cannabis market. Aphria’s investment represents an advancement of the Company’s strategy to be a leader in the recreational market, once legalized in Canada.

“This exciting announcement marks a major step forward in Aphria’s recreational cannabis strategy and represents Aphria’s first venture into the lucrative British Columbia premium cannabis market.” said Vic Neufeld, CEO of Aphria. “In Hiku, we are investing in refined, up-market brands that align with our commitment to encouraging a more dignified positioning of recreational cannabis use, something we expect will be an important and valuable differentiator for Aphria as Canada moves closer to legalizing recreational cannabis. We look forward to working closely with Hiku to support its success and brand leadership in the recreational market.”

“This strategic partnership and investment from Aphria represents the ultimate validation of Hiku’s vision to offer the leading cannabis consumer experience. We are ecstatic to be partnering again with Aphria, a proven operator and greenhouse cannabis cultivator, to bring our products to the Canadian medical and future recreational markets,” said Alan Gertner, Chief Executive Officer of Hiku. “With this landmark partnership, we have the opportunity to offer Canadians a compelling combination of craft British Columbia product, top notch branding, greenhouse supply and owned retail that will allow Hiku to have a distinct business with high quality control, high demand and high margin.”

The equity investment in Hiku builds on Aphria’s existing investment in Tokyo Smoke. On June 30, 2017, Aphria entered into a subscription agreement with Tokyo Smoke for the purchase of 140,845 common shares, for a total cost of $1,000,000. As part of an existing licensing agreement signed in September 2016, Aphria also produces and ships Tokyo Smoke branded cannabis in Canada to registered patients through the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) system. The existing licensing agreement also contains provisions for the agreement to apply to the anticipated adult recreational use market.

Aphria’s equity investment remains conditional on (i) completion of the combination; (ii) regulatory approval; (iii) Tokyo Smoke shareholder approval; and, (iv) standard closing conditions, including the approval of definitive agreement by the boards of Tokyo Smoke and DOJA and completion of due diligence investigations to the satisfaction of each of the parties. The legal structure for the combination will be confirmed after the parties have considered all applicable tax, securities law, and accounting efficiencies. Tokyo Smoke and DOJA expect to complete the definitive agreements by January 15, 2018.

In addition to the contemplated equity investment in Hiku, Aphria will establish an agreement with Hiku that includes:

  • A supply agreement that builds on the existing supply agreement for the dried flower between Aphria and Tokyo Smoke that adds high-quality cannabis oil to the list of products Aphria will white label for the Tokyo Smoke brand; and,
  • The issuance of 0.8 million units in Hiku, on the same terms as the equity investment, to Aphria in exchange for entering the supply agreement.