Emerald Health Therapeutics Inc TBQBF

VFF 100% OF PSF SOON!!

[Lazorsharp]

There is a major dispute ongoing between the JV partners VFF & EMH. One that competitors could take advantage of in a perceived time of weakness. Cracks in the glass throne first started appearing publicly on November 19th, 2019, with Emerald Health Therapeutics deciding not to pay $5,940,000 owed to PSF. Instead Village Farms advanced the $5,940,000 payment to Pure Sunfarms. There are 5,940,000 shares held in escrow for when Emerald Health Therapeutics would have paid Pure Sunfarms $5,940,000 but now that Village Farms has paid. Village Farms is trying to get the shares out of escrow so that they would have over 50% ownership in Pure Sunfarms. In addition, PSF claims that Emerald Health Therapeutics is liable to for an additional $7.2 million under the supply agreement terms. Emerald Health Therapeutics disputes that claim as it believes the basis for calculation of purchase price is incorrect. Emerald Health has taken legal action against Village for these claims. Emerald Healths claim is that they have contributed over $37.4 million in equity in Delta 3 and Delta 2 facilities combined and purchasing over $20.5 million of cannabis per the supply deal. The $5.9m owed to PSF was to be paid in part by an outstanding $13m Promissory Note given to PSF by EMH. Creating a difference of opinion regarding the funding. To date EMH has directly accounted for 28% of PSF sales in 2019. Contributing a significant of direct revenue to PSF in 2019. However, many legal pundits believe that EMH is in the wrong when breaching the supply agreement. Arguing PSF accounted for cannabis sales at lower number then was actualized. Is essentially accusing PSF of accounting fraud which is preposterous. The only other argument that could be feasible for EMH is that PSF wasnt at full capacity. Which is also easily disproven. PSF is operating at 100% of capacity, 75,000 kgs/yr or 17,500 kgs/qtr, as of July 2019. PSF sold 12,000 kgs in 3Q19 and it should increase in 4Q19 towards that 17,500 kgs figure. Therefore, EMH was required to purchase 18000kg at full production annually OR 7200 kg quarterly. Emerald ended up owing $7.2m so $1/gram for Q3. PSF Q3 price/gram was $2.00 so my assumption is the agreement is $3 CAD and PSF sold the cannabis flower at $2/gram. EMH therefore was given the first right of refusal to the 7200 kgs to the tune of $21.6m in which it refused at $3/gram. That cannabis was then sold by PSF for $2/gram therefore EMH per the supply agreement is responsible for the difference. Unless VFF & PSF has committed accounting fraud there should be no dispute about the supply agreement terms.