Emerald Health Therapeutics, Inc. (TSXV:EMH; OTCQX:EMHTF)
(“Emerald” or “the Company”) has filed its financial statements and
management discussion and analysis for the three and nine months
ended September 30, 2018. They are available for viewing on
www.sedar.com or on the Company’s website. All figures are
expressed in Canadian dollars unless otherwise stated.
“During the third quarter, we’ve fulfilled our
initial supply scheduling, product, and volume commitments to our
provincial cannabis distribution customers to participate in the
adult-use cannabis market – demonstrating our ability to provide
consistent and increasing contracted shipments of Emerald product,”
said Avtar Dhillon, MD, President of Emerald Health Therapeutics.
“As we move forward at this pivotal point of commercial production,
we expect our Pure Sunfarms joint venture, Quebec facility, and
hemp sourcing agreements to result in significant scaling of
production and sales from the fourth quarter onward. We also expect
these raw material inputs to serve our unique and expansive
emerging partnership with the Factors Group, which encompasses
industrial-scale extraction, softgel encapsulation, as well as
product development and distribution/sales.
“In addition, we have now filed multiple
provisional US patent applications covering Emerald’s Defined Dose™
cannabis dosage forms and formulations, which will enable both
medical and adult-use consumers to achieve measured outcomes with
well characterized, reliable product. These are just the first
steps in realizing our vision for product development and
positioning Emerald as an eminent player on the global stage backed
by differentiated science-based cannabinoid products.”
Selected Quarterly Financial
Information
The financial information in the following
tables summarize selected financial information for the Company for
the last eight quarters, which was derived from annual financial
statements prepared in accordance with IFRS or interim financial
statements prepared in accordance with IFRS applicable to the
preparation of interim financial statements, IAS 34, Interim
Financial Reporting:
|
2018
|
|
2017 |
|
|
September 30 ($) |
June 30 ($) |
March 31 ($) |
December 31 ($) |
Revenue |
321,070 |
|
284,262 |
|
373,218 |
|
279,362 |
|
Share-based payments |
2,165,851 |
|
2,081,661 |
|
1,954,047 |
|
1,979,553 |
|
Interest income |
222,740 |
|
274,436 |
|
250,064 |
|
43,024 |
|
Share of income (loss) from JV |
3,940,373 |
|
682,431 |
|
(301,793) |
|
(44,562) |
|
Net Loss |
(6,26,658) |
|
(5,610,970) |
|
(5,045,420) |
|
(4,027,569) |
|
Net Loss per share (basic and diluted) |
(0.05) |
|
(0.04) |
|
(0.04) |
|
(0.04) |
|
|
|
|
|
|
|
2017
|
|
2016 |
|
|
September 30 ($) |
June 30 ($) |
March 31 ($) |
December 31 ($) |
Revenue |
211,316 |
|
245,708 |
|
201,268 |
|
124,251 |
|
Share-based payments |
271,968 |
|
369,788 |
|
201,186 |
|
137,113 |
|
Share of income (loss) from JV |
(278,016) |
|
- |
|
- |
|
- |
|
Net Loss |
(1,939,371) |
|
(1,726,523) |
|
(1,205,858) |
|
(880,424) |
|
Net Loss per share (basic and diluted) |
(0.02) |
|
(0.02) |
|
(0.02) |
|
(0.01) |
|
BUSINESS UPDATE FOR AND
SUBSEQUENT TO THE REPORTING PERIOD
Cannabis Sales Agreements – Adult-use
Markets
The Company completed its first shipments of
adult-use cannabis during the months of October and November,
fulfilling its initial supply scheduling, product and volume
commitments in British Columbia, and Newfoundland and Labrador
following the legalization of adult-use cannabis.
On September 10, 2018 the Company was selected
as an authorized cannabis supplier by the Newfoundland Labrador
Liquor Corporation (“NLC”) to supply cannabis products to the NLC
to serve the adult use market in the province of Newfoundland and
Labrador.
On September 6, 2018, it was announced that the
Company had been selected as an approved supplier by the Ontario
Cannabis Retail Corporation, operating as the Cannabis Retail Store
(“OCS”) to supply OCS with its cannabis products.
On July 24, 2018 the Company signed a Memorandum
of Understanding (“MOU”) with the British Columbia Liquor
Distribution Branch (“BCLDB”) to supply the Company’s cannabis
products to the BCLDB to serve the adult-use market in British
Columbia.
Expansion Projects
The Company’s joint venture, Pure Sunfarms,
continues to move towards achieving its goal of large-scale,
high-quality, low-cost cannabis production. On July 27, 2018, Pure
Sunfarms received its cannabis sales licence from Health Canada.
Subsequently, Pure Sunfarms has received amendments to its
cultivation license to expand cannabis production to 550,000 square
feet at its 1.1 million-square foot (25-acre) greenhouse facility
located on a 50-acre parcel of land in Delta, British Columbia
(“Delta 3”). Additional space continues to be developed at
Delta 3, with the entire 1.1 million square foot site expected to
be in production in 2019.
On August 21, 2018, the Company announced the
appointment of Mandesh Dosanjh as President and Chief Executive
Officer of Pure Sunfarms.
Supply Agreements
On September 26, 2018 the Company entered into a
long-term supply agreement to obtain harvested hemp chaff, plant
material consisting of mainly flower and leaf. The supply agreement
was signed with Emerald Health Hemp Inc. to purchase CBD containing
hemp biomass for extraction into CBD oil. The supply agreement is
for 4 years (5 harvests) with an option to extend for an additional
2 years. Five hundred acres of hemp was harvested in October 2018
from farms located in Manitoba and Prince Edward Island and one
thousand acres is expected to be harvested in each subsequent year
of the agreement.
On April 30, 2018, the Company entered into a
supply agreement with Pure Sunfarms whereby the Company has agreed
to purchase 40% of Pure Sunfarms’ production in 2018 and 2019 at a
set price per gram.
Acquisitions and Strategic
Transactions
On May 2, 2018, the Company acquired 100% of the
issued and outstanding shares of Agro-Biotech Sciences Inc. and its
affiliate Agro-Biotech Property Holdings Inc. (together
“Agro-Biotech”), and the shareholder loans payable by Agro-Biotech,
for total consideration of $90.0 million, subject to adjustment,
payable 50% in cash and 50% in Common Shares.
Agro-Biotech is a Licenced Producer under the
ACMPR located in Saint-Eustache, Quebec. Agro-Biotech’s assets
include land and a 75,000 square foot indoor grow facility.
Agro-Biotech has built out 20,000 square feet of this facility to
date and Emerald expects to have the remainder of the 75,000 square
foot facility equipped to produce high quality dried cannabis
flower and be fully operational by early 2019.
Emerald Health Naturals
Inc.
On November 19, 2018, the Company announced that
it had received conditional approval from the TSXV regarding its
51:49 joint venture, to be called Emerald Health Naturals (“EHN”),
with Emerald Health Bioceuticals Inc. (“EHB,” a company related by
common ownership), subject to settlement of the definitive
documentation.
The binding agreement was entered into by the
Company with EHB, 1160305 BC Ltd., GAB Innovations, Inc. and Dr.
Gaetano Morello, a director of the Company’s parent company,
Emerald Health Sciences, with respect to the formation of the
business and operations of EHN (the “Formation Agreement”).
The Company agreed to invest $5.0 million for 51% ownership of EHN
and EHB will grant EHN the exclusive Canadian distribution rights
to EHB’s product line for 49% ownership of EHN. EHB’s product line
consists of nutritional supplements, which use non-cannabis,
non-psychoactive plant-based ingredients to provide potentially
beneficial support to the body’s endocannabinoid system.
Subsequent to this agreement, the Company signed
a non-binding term sheet to form a strategic alliance with Factors
R&D Technology, Inc. (“FTI”), described below, which includes a
provision for EHN to issue shares to FTI representing 25% of its
issued share capital. This share issue would reduce the Company’s
future ownership of EHN to 38%.
The Formation Agreement represents the Company’s
multi-pronged program to market and sell non-cannabis
endocannabinoid-supporting nutritional products in Canadian
grocery, natural health product, and pharmacy stores.
Factors R&D Technology,
Inc.
On August 27, 2018, the Company signed a term
sheet to form a strategic alliance with FTI, a division of Factors
Group of Nutritional Companies Inc., in which FTI will provide
pharmaceutical-grade, industrial-scale manufacturing capacity as
well as expertise in GMP-level extraction, softgel production, and
packaging. FTI will provide the Company with access to a facility
capable of processing up to 1 million kg of biomass annually and
softgel production capacity of up to 600 million capsules per year.
The Company will pay an initial $5 million fee to FTI to cover the
initial costs of transition to cannabis extraction.
The term sheet also provides that FTI will enter
into an exclusive agreement with EHN (described above). This will
enable the companies to collaborate on product innovation,
marketing, and distribution strategies to provide a range of
products containing cannabinoids, where legal, and other
herbal formulations to support the human endocannabinoid system to
the Canadian and global health products market. The collaboration
will initially focus on manufacturing, distribution, and sales of
EHN’s current product line. As part of this arrangement, EHN will
issue shares to FTI representing 25% of its issued share
capital.
The term sheet is non-binding and the strategic
alliance is subject to the negotiation and execution of definitive
agreements. The strategic alliance and related activities are also
subject to obtaining all necessary regulatory approvals.
Northern Vine Canada Inc.
On May 15, 2018, the Company exercised its right
to purchase additional common shares of Northern Vine Canada Inc.
“Northern Vine” issued from treasury, increasing its ownership of
Northern Vine to 65% for $2.75 million, paid in cash at
closing.
On August 15, 2018 the Company increased its
ownership in Northern Vine to 100% by purchasing all of the shares
of Northern Vine held by Abattis Bioceuticals Corp (“Abattis”). The
Company paid Abattis $2.0 million in cash and issued 1,093,938
common shares of the Company.
The Company has also agreed to pay Abattis a
milestone payment of common shares of the Company, valued at $4.0
million, if Northern Vine and/or the Company receive gross revenue
of $10 million from the sale of products or services introduced by
Abattis within thirty-six months ended August 2021.
Northern Vine continues to focus on developing
its laboratory services for the cannabis industry and expanding its
operations in oil extraction.
Research & Development
On October 16, 2018 the Company filed 12
provisional US patent applications covering Emerald’s unique
Defined Dose cannabis dosage forms and formulations bringing the
total number of provisional US patents filed by the Company to 17.
The products aim to provide more precise and constituent delivery,
dosage and formulations.
Financings
In January, February and May 2018, the Company
completed financings that resulted in total gross proceeds from
unit issuances and warrant exercises of $67.8 million (net proceeds
– $67.5 million) and has the potential to raise an additional $41.8
million if the remaining outstanding warrants from these financings
are exercised prior to expiry. The Company intends to use the
proceeds of the financings to fund the completion of capital
projects and potential future expansion and acquisitions, including
partnership transactions, for research and development, to expand
the Company’s existing extraction capabilities, and for working
capital and general corporate purposes.
Financial
Reports
Full details of the financial reports and
operating results for the third quarter of 2018 are described in
the Company’s consolidated financial statements with accompanying
notes and related Management’s Discussion and Analysis. These
documents and additional information on Emerald are available on
SEDAR at www.sedar.com.
About Emerald Health
Therapeutics
Emerald Health Therapeutics (TSXV: EMH; OTCQX:
EMHTF; Frankfurt: TBD) is a Canadian Licensed Producer of cannabis.
Its 50%-owned Pure Sunfarms joint venture in BC is completing a
sophisticated 1.1 million square feet greenhouse; its Agro-Biotech
operation in Québec is completing a 75,000 square feet indoor
facility. Commercial production is expanding in both facilities. It
secured approximately 500 acres of hemp harvest in 2018 and has
contracted for over 500 acres in 2019 to 2022 with the goal of
extracting low-cost cannabidiol (CBD). Emerald’s team is highly
experienced in life sciences, product development, large-scale
agri-business, and marketing, and is focused on developing
proprietary, value-added cannabis products for medical and
adult-use customers. Emerald is part of the Emerald Health group,
which is broadly focused on developing pharmaceutical, botanical
and nutraceutical products that may provide wellness and medical
benefits by interacting with the human body’s endocannabinoid
system.
Please visit www.emeraldhealth.ca for more
information or contact:
Rob Hill
Ray
LagaceCFO
Investor Relations Manager(800) 757 3536 Ext. #5
(800) 757 3536 Ext.
#5
invest@emeraldhealth.ca
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking
Statements: Certain statements made in this press release that are
not historical facts are forward-looking statements and are subject
to important risks, uncertainties and assumptions, both general and
specific, which give rise to the possibility that actual results or
events could differ materially from our expectations expressed in
or implied by such forward-looking statements. As a result, we
cannot guarantee that any forward-looking statement will
materialize and readers are cautioned not to place undue reliance
on these forward looking statements. For more exhaustive
information on these risks and uncertainties, the reader should
refer to the risk factors described in the management's discussion
and analysis for the year ended December 31, 2017. The
forward-looking statements contained in this press release
represent our expectations as of the date hereof. We disclaim any
intention and assume no obligation to update or revise any
forward-looking statements. Forward-looking statements are
presented for the purpose of providing information about
management's current expectations and plans and allowing investors
and others to obtain a better understanding of our anticipated
operating environment. Readers are cautioned that such information
may not be appropriate for other purposes. The Company undertakes
no obligations to update or revise such statements to reflect new
circumstances or unanticipated events as they occur, unless
required by applicable law.
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