Emerald Health Therapeutics Reports 3rd Quarter 2018 Financial Results and Provides Corporate Update

VICTORIA, British Columbia, Nov. 30, 2018 (GLOBE NEWSWIRE) — 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

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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 Lagace
CFO 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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