Emerald Health Therapeutics, Inc. (“Emerald”) (TSXV: EMH; OTCQX:
EMHTF) today reported financial results for the fourth quarter and
year ended December 31, 2018.
Highlights
- Emerald’s Q4 sales of $1.1 million was more than triple the
prior quarter and year-over year; Q1 2019 sales were $2.6
million.
- Quebec-based Verdélite subsidiary expected to be in full
production in 88,000 square foot indoor facility by mid-2019.
- Supply agreements announced with seven provinces and
territories representing over 90% of the Canadian population;
delivery fulfillment rates are close to 100%.
- 51%-owned Emerald Health Naturals to sell non-cannabis natural
health products for endocannabinoid system across Canada by
mid-2019
- BC-based Pure Sunfarms joint
venture:- 4Q18 Sales of $4.9 million; 1Q19 sales expected to
exceed $14 million- Emerald records $1.4 million in 4Q18 as
share of income from Pure Sunfarms- Targeting and approaching
all-in production costs below $1/gram- Fully planted in 1.1
million square foot greenhouse. On track to reach annualized
production run-rate in first greenhouse of 75,000 kg by
mid-year.- Advancing plans to convert a second, nearly
identical 1.1 million square foot greenhouse in the same complex.
This greenhouse is targeted to complete its first harvest by 2020
and annualized full run rate production of 75,000 kg in Q4
2020.
“In the past year we have worked closely with
our 50/50 venture partner to bring into full production one of the
single largest cannabis growing assets in the world. Pure Sunfarms’
1.1 million square foot facility is now rapidly increasing
production and sales. By leveraging our own technical expertise and
infrastructure with strong partners in 2018, we solidified key
building blocks with respect to production/supply, distribution,
processing in the form of large-scale extraction, softgel
encapsulation, and product innovation,” said Avtar Dhillon, MD,
President and Executive Chairman of Emerald.
“By further building upon our intellectual
property and strategic partnerships, as well as our own internal
expertise, we are working hard to increase market penetration
through the development of new and differentiated ingestible and
non-combustible products if, as expected, they become allowable
before the end of 2019. This will coincide with the ongoing and
substantial expansion of the adult-use retail system – creating
significant opportunity for the Company in 2019 and what we
anticipate to be a year of extraordinary sales growth for
Emerald.”
Financials Results & Capital Resources
Selected Quarterly Financial Information
The following table summarizes 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 |
December 31($) |
September 30($) |
June 30($) |
March 31 ($) |
Revenue |
1,131,853 |
321,070 |
284,262 |
373,218 |
Share-based payments |
1,296,891 |
2,165,851 |
2,081,661 |
1,954,047 |
Interest revenue |
438,974 |
222,740 |
274,436 |
250,064 |
Share of income (loss) from JV |
1,432,771 |
3,940,373 |
682,431 |
(301,793) |
Net loss |
(13,900,360) |
(6,426,658) |
(5,610,970) |
(5,045,420) |
Net loss per share (basic and diluted) |
(0.10) |
(0.05) |
(0.04) |
(0.04) |
|
|
2017 |
December 31($) |
September 30($) |
June 30($) |
March 31($) |
Revenue |
279,362 |
211,316 |
245,708 |
201,268 |
Share-based payments |
1,979,553 |
271,968 |
369,788 |
201,186 |
Interest revenue |
43,024 |
60,997 |
57,497 |
- |
Share of loss from JV |
(44,562) |
(278,016) |
- |
- |
Net loss |
(4,027,569) |
(1,939,371) |
(1,669,026) |
(1,205,858) |
Net loss per share (basic and diluted) |
(0.04) |
(0.02) |
(0.02) |
(0.02) |
The Company’s audited consolidated financial
statements can be found on SEDAR. The Company errantly filed an
incomplete set of its consolidated financial statements on SEDAR at
22:33:59 ET on April 30, 2019. A new submission was made the
following morning containing the complete audited financial
statements for the years ended December 31, 2018 and 2017.
Financings
During 2018 the Company completed equity
financings that resulted in total proceeds from unit issuances and
warrant exercises of $82.0 million (net of $0.5 million transaction
costs). The Company has intended or 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.
Emerald’s financial statements are provided
below. The financial statements, management discussion and
analysis, and additional information on Emerald are available on
SEDAR at www.sedar.com or on the Company’s website.
CORPORATED UPDATE
Production & Sourcing
Pure Sunfarms
Pure Sunfarms (PSF), Emerald’s 50%-owned joint
venture, completed conversion of its 1.1 million square foot Delta
3 greenhouse operation in Delta, BC, and secured the full
cultivation license for the 1.03 million square feet growing area
of this facility. It has completed planting of this growing area
and is on track to reach its annualized full production run-rate of
75,000 kilograms by mid-2019.
Subsequent to year end, PSF exercised its option
to acquire the nearly identical 1.1 million square foot Delta 2
‘sister’ facility. It is now moving forward on its plan to convert
this facility with the goal of at least doubling annual cannabis
production and support its goal to be a high-quality, low-cost
producer in Canada. PSF aims to complete its first harvest at the
Delta 2 facility mid-2020 and achieve full run-rate production in
the fourth quarter of 2020, subject to the receipt of Health Canada
licenses.
Emerald entered into supply agreements with Pure
Sunfarms to purchase 40% of production in 2018 and 2019 as well as
25% of total production in 2020 through 2022.
PSF also entered into a supply agreement with
the Ontario Cannabis Retail Corporation to supply Pure
Sunfarms-branded products to the Ontario adult-use market.
PSF entered into a credit agreement with Bank of
Montréal and Farm Credit Canada in respect of a CAD $20 million
secured non-revolving term loan with the intent to use the proceeds
to fund the final cost of converting its 1.1 million square foot
greenhouse as well as for general corporate purposes.
Verdélite
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”). Emerald subsequently changed Agro-Biotech’s name
to Verdélite.
Verdélite is an 88,000 s.f. indoor grow facility
in Quebec with a capacity of 5,000 kg. It is licensed to cultivate
and sell cannabis flower as well as extract, manufacture,
synthesize, test and sell next-generation cannabis products. The
license also allows Verdélite to build and operate a laboratory for
research and development of cannabis-based products. Verdélite aims
to be at full production capacity mid-2019.
Hemp
On September 26, 2018, the Company entered into
a long-term supply agreement to obtain harvested hemp 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 initial supply agreement will continue to December 31,
2022, with an option to extend for an additional two 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.
Cannabis Sales Agreements – Adult-use
Markets
The Company completed its first shipments of
adult-use cannabis during the fourth quarter of 2018, fulfilling
its initial supply scheduling, product and volume commitments in
British Columbia as well as Newfoundland and Labrador following the
legalization of adult-use cannabis, and in 2019 has delivered its
first shipments to Ontario, Prince Edward Island, Alberta and
Yukon. Emerald has achieved fulfillment rates close to 100%. The
Company has also announced supply agreements with Saskatchewan and
Quebec and expects recreational sales Canada-wide in 2019. The
Company completed its first shipment of CBD oils for the
recreational market in April 2019 and expects cannabis oils to be a
significant source of revenue in 2019.
Value-Added Processing
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, large-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.
Phase 1 of the Health Canada review of the
application process has been successfully completed and the
licensing process is expected to be completed later in 2019.
MedipharmEmerald entered into a
cannabis concentrate program agreement with Medipharm Labs Corp. on
Oct. 5, 2018, for an initial term of three years. Medipharm
currently operates one of the largest cannabis concentrate
manufacturing facilities in Canada and is built to cGMP (current
Good Manufacturing Practices) and ISO standards. Emerald ships
dried cannabis to Medipharm which Medipharm uses to produce
purified cannabis oil for the recreational market. Product
Innovation
Emerald is pursuing research and product
development focused on improving the bioavailability of
cannabinoids, developing new dosage formats, and targeting core
disease states including sleep, anxiety, pain and mood. This
product development is also focused on delivering new products with
the anticipated expansion of allowable products to include edibles
in the recreational market.
In the next months, Emerald is planning the
launch through its joint venture, Emerald Health Naturals, the Endo
natural health product line with its non-cannabinoid Phytocann
ingredients that support the endocannabinoid system.
Emerald is conducting animal studies in
preparation for planned clinical trials that may be initiated by
year end. These studies are intended to target specific disease
indications using Emerald products and will be carried out to
support the use of Emerald products for medical use.
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 consistent delivery,
dosage and formulations.
Indena
On February 5, 2019, Emerald entered into a
license with Indena S.p.A. of Milan, Italy, bearing certain
exclusivity rights in Canada to use Indena’s cannabidiol (“CBD”)
extraction technology and contract manufacturing services for CBD
extraction. In addition, Emerald obtained exclusive use of Indena’s
proprietary Phytosome® technology for the purpose of developing
novel cannabinoid-based products with superior utility.
Other Strategic
Transactions
On August 15, 2018 the Company increased its
ownership in Northern Vine to 100%. Renamed Avalite, this
subsidiary possesses a Dealer License and is able to undertake
analytical testing and certain importing/exporting not permitted
under a Producer License.
On November 19, 2018, the Company announced it
received conditional approval from the TSXV regarding its 51:49
joint venture, Emerald Health Naturals (“EHN”), with Emerald Health
Bioceuticals Inc., subject to the finalization of definitive
documentation.
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. The Company agreed to invest $5.0 million
for 51% ownership of EHN and EHB granted EHN the exclusive Canadian
distribution rights to EHB’s product line for 49% ownership of
EHN.
Conference Call
Emerald Health Therapeutics will host its fiscal
fourth quarter and 2018 year-end financial results conference call
on Wednesday, May 1, 2019 at 8:30 a.m. ET.
To access the audio broadcast, please dial (866)
652-5200, or via the Internet at:
https://services.choruscall.com/links/emhtf190501.html. An archived
version of the presentation will be available for 90 days on the
"Investors" section of Emerald's website:
https://ir.emeraldhealth.ca/events-and-presentations.
About Emerald Health Therapeutics,
Inc. Emerald Health Therapeutics, Inc. is a Canadian
licensed producer of cannabis. Its 50%-owned Pure Sunfarms joint
venture in BC is licensed and in full production in 1.03 million
square feet of the first of its two 1.1 million square foot
greenhouses. The capacity of each greenhouse is estimated to exceed
75,000 kg of cannabis annually. Emerald’s Verdélite operation in
Québec is completing the build-out of its 88,000 square foot indoor
cultivation facility and is scaling up production. Emerald secured
over 500 acres of hemp harvest in 2018 and has contracted for
approximately 1000 acres in 2019 to 2022, with the objective of
extracting low-cost cannabidiol. Emerald has secured exclusive
strategic partnerships for large scale extraction and softgel
encapsulation, as well as for proprietary technology to enhance
cannabinoid bioavailability. Its 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 represents a broad array of companies focused on developing
pharmaceutical, botanical, and nutraceutical products aimed at
providing 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, Chief Financial Officer (800) 757 3536 Ext.
#5
Emerald Investor Relations (800) 757 3536 Ext.
#5invest@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. Such statements
include production and processing capacity of various facilities;
expansion of facilities; legalization of broader spectrum cannabis
products; sale of such products; construction and operation of a
laboratory; receipt of hemp deliveries; and anticipated production
costs.
We cannot guarantee that any forward-looking
statement will materialize, and readers are cautioned not to place
undue reliance on these forward-looking statements. These
forward-looking statements involve risks and uncertainties related
to, among other things, changes of law and regulations; changes of
government; failure to obtain regulatory approvals; failure to
obtain necessary financing; results of production and sale
activities; results of scientific research; regulatory changes;
changes in prices and costs of inputs; demand for labour; demand
for products; failure of counter-parties to perform contractual
obligations; as well as the risk factors described in the Company’s
annual information form and other regulatory filings. The
forward-looking statements contained in this press release
represent our expectations as of the date hereof. 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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