Emerald Health Therapeutics
Emerald Health Therapeutics, Inc. (TBQBF) was incorporated pursuant to the Business Corporations Act (British Columbia) on July 31, 2007 as Firebird Capital Partners Inc. and changed its name to Firebird Energy Inc. in December 2012. On September 4, 2014, the Company completed the acquisition of all the issued and outstanding common shares of Thunderbird Biomedical Inc. (“Thunderbird”), by way of a reverse takeover (the “Transaction”) under the rules of the TSX Venture Exchange (the “TSXV”) and concurrently changed its name to T-Bird Pharma, Inc. At that time, Thunderbird became a wholly-owned subsidiary of T-Bird. In June 2015, the Company changed its name to Emerald Health Therapeutics, Inc. and Thunderbird changed its name to Emerald Health Botanicals Inc. (“Botanicals”).1
The Company is a publicly traded company with headquarters in Victoria, British Columbia, Canada. Common shares of the Company (the “Common Shares”) are listed on the TSXV under the trading symbol “EMH”. The Company is classified as a Tier 2 Venture Issuer on the TSXV. The Company also trades on the OTCQX® Best Market, operated by OTC Markets Group under the ticker symbol “EMHTF”. The Company is the parent of its wholly-owned subsidiary Botanicals.
Botanicals is a private, Victoria, British Columbia based company and was incorporated pursuant to the Business Corporations Act (British Columbia) on January 28, 2013. The principal business of Botanicals is the production and sale of medical marihuana pursuant to a licence (the “Current Licence”) issued to Botanicals under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”), formerly the Marihuana for Medical Purposes Regulations (“MMPR”). The Current Licence is valid until November 2019.
On June 6, 2017, the Company and Botanicals entered into a joint venture arrangement with respect to Botanicals’ 50% equity interest in Pure Sunfarms Corp., for the purpose to produce, cultivate and distribute wholesale cannabis and cannabis extracts for therapeutic and non-therapeutic use purposes, if permitted by applicable law. Botanicals also owns 100% of the shares of Emerald Health Farms Inc., a holding company incorporated pursuant to the Business Corporations Act (British Columbia) on September 7, 2017. Emerald is focused on four priorities to meet the current needs of the Canadian medical marijuana market and future demand in the therapeutic and non-therapeutic adult-use market:
- Significant production expansion;
- Research and development and clinical work;
- Extraction expertise and downstream product development; and
- Expanding nationwide distribution channels.
Recent Developments and Events
New CEO
On October 2, 2017, the company announced the appointment of Chris Wagner as Chief Executive Officer and as a director of Emerald. Mr. Wagner has spent more than 25 years in marketing pharmaceutical products and building biotechnology companies. Bin Huang, PhD, will continue to focus on the management of the Company’s operations and expansion as President of Botanicals.
Second Site License Granted by Health Canada
In early October 2017, Health Canada granted a sales license for Botanicals’ second site. The second site is primarily being used to house the Company’s customer service representatives and administration. The Company expects to expand the second site license to allow for additional cannabis related activities, pending receipt of municipal government approval. The Current Licence is valid until October 2020.
Expansion projects
Emerald is undergoing two major expansion projects that are expected to significantly increase the Company’s production capacity. Both projects will need to be licenced by Health Canada to produce cannabis. The applications for licences at both project sites have been filed with Health Canada.
In June 2017, the Company announced a transaction with Village Farms International, Inc. (“Village Farms”) to form the joint venture Pure Sunfarms, for large-scale, high-quality, low-cost cannabis production. Botanicals and Village Farms each own a 50% equity interest in Pure Sunfarms. Under the terms of the agreement, Village Farms has contributed a 1.1 million-square foot (25-acre) greenhouse facility located on a 50-acre parcel of land in Delta, British Columbia. The Company was required to initially contribute an aggregate of $20 million in cash, of which $2 million was advanced at closing, $10 million has been deposited into an escrow account, and the remaining $8 million will be advanced in tranches upon satisfaction of certain milestones to fund conversion of the initial greenhouse. The combination of Botanicals’ cannabis experience with a leading North American greenhouse produce grower is expected to optimize the path to rapidly and cost effectively accelerate large scale, high quality, low cost Canadian cannabis production. It is estimated that the initial greenhouse could yield more than 75,000 kg of dried cannabis annually upon completion of full licencing and conversion.
Pure Sunfarms also entered into an agreement with Village Farms for options to lease or purchase from Village Farms a second 1.1 million square foot greenhouse (25 acre) and a 2.6 million square foot (60 acre) greenhouse, both located adjacent to the initial greenhouse. Combined, these three greenhouse assets could provide the joint venture with total potential aggregate production capacity of approximately 4.8 million square feet (110 acres).
The Pure Sunfarms greenhouse retro-fit and the Health Canada license application are priorities for the Company and for Village Farms. Both companies have allocated staff to assist with this project and expect to make significant progress on both by the end of the fiscal year. In September, Emerald filed an application to Health Canada to produce cannabis at the Pure Sunfarms Delta, BC facility. Pure Sunfarms has commenced physical conversion of the initial 1.1 million square foot Delta 3 greenhouse. Completion of conversion of the first 250,000 square feet of the greenhouse facility and submission of the confirmation of readiness documentation to Health Canada are expected in February 2018.
The Company entered into a thirty-year agreement in May 2017 to lease 32 acres of lands in Metro Vancouver, British Columbia at a market rate of $320,000 per year. The land was leased for the purpose of building a Health Canada licensed production facility to expand growing capability. The landlord is a corporation controlled by Dr. Avtar Dhillon, the Executive Chairman of the Company.
Site prep and construction at the Metro Vancouver location began in April 2017 and $1 million in costs were incurred from April 1 to September 30, 2017. The Company has completed a significant amount of construction and in October submitted an application to Health Canada to produce cannabis at this facility. The undertaking of the Pure Sunfarms facility retro-fit caused the original Metro Vancouver site construction schedule to be extended and construction costs of up to $20 million for the first two modular greenhouses that were anticipated in 2017 are expected to be incurred throughout the remainder of 2017 and into 2018.
Acquisitions
On October 26, 2017, the Company announced it signed a definitive agreement with Norther Vine Canada Inc (“Northern Vine”) and Abattis Bioceuticals (“Abbatis”) Corp to invest $2.5 million into Northern Vine to acquire 53% of the company and appoint three of its four directors. Abattis will continue to hold the remaining 47% of the shares. Pending receipt of all necessary regulatory approvals and certain other conditions customary in transactions of this nature as set forth in the agreement, the Company expects this proposed transaction to close in November 2017.
Northern Vine is a Licensed Dealer under the provisions of the Canadian Controlled Drugs and Substances Act, which permits Northern Vine to carry out a broader range of cannabis research and development and pursue international business opportunities. The Licensed Dealer status allows Northern Vine to export and import not only cannabis, but also to export and import cannabis oils. Currently Licensed Producers such as Botanicals, are not permitted to export or import cannabis oils under the ACMPR.
The acquisition of Northern Vine significantly expands Emerald’s ability to carry out research and development, as Northern Vine is authorized under ACMPR to prepare any manipulation, formulation, dosage from, strength or package size of cannabis which can be mixed with additives and other controlled drugs.
Northern Vine will also provide Emerald with preferred customer access to complete microbiology and chemical analysis, with testing of product potency as well as testing for the presence of pesticides, microbes, and environmental toxins in dried plant products and extracts.
