Vancouver, British Columbia--(Newsfile Corp. - July 31, 2020) - Emerald Health Therapeutics, Inc. (TSXV: EMH) ("Emerald") and Quinto Resources Inc. ("Quinto") (TSXV: QIT) today announced that they have entered into a share purchase agreement dated July 30, 2020 (the "Agreement") in respect of the sale of Emerald's wholly-owned subsidiaries, Verdlite Sciences, Inc. ("Verdlite Sciences") and Verdlite Property Holdings, Inc. ("Verdlite Property" and, together with Verdlite Sciences, the "Subsidiaries"). The Subsidiaries together own and operate a premium 88,000 square foot craft cannabis production indoor facility (the "Facility") in St. Eustache, Qubec.
Pursuant to the Agreement, Quinto will purchase all of the issued and outstanding shares of the Subsidiaries in consideration for a cash purchase price of $21,000,000, subject to a 90-day working capital adjustment and certain other adjustments (the "Transaction"). The Agreement was negotiated at arm's-length. Closing of the Transaction is anticipated to occur on or before August 31, 2020.
As a result of the Transaction, the Subsidiaries will become wholly-owned subsidiaries of Quinto and Quinto will continue the business of the Subsidiaries. Following closing of the Transaction, Emerald will continue to sell its own products into the Qubec market, subject to certain limited restrictions, and retains exclusive rights to its recently launched SouvenirTMbrand.
"We are proud of what we built in Qubec, which is a sophisticated cannabis growing operation with a competent and motivated team. However, in alignment with our strategic plan, we see benefits in consolidating our asset base and are pleased to have the opportunity to sell this facility and to see a continuing opportunity for our staff at Verdlite," said Riaz Bandali, CEO, Emerald Health Therapeutics. "Upon closing this transaction, the resulting capital will significantly improve our balance sheet and still leave us with a British Columbia operational base with an excellent premium growing facility in Richmond, which recently completed its first full quarter of full production and sales, our R&D, processing and medical focused facility in Victoria, and a 41.3% stake in our Delta-based Pure Sunfarms joint venture, one of the best performing cannabis production assets in Canada."
Quinto is a Canadian public company with its common shares listed for trading on the TSX Venture Exchange (the "TSXV") under the symbol "QIT". The Transaction will constitute a change of business for Quinto under the rules of the TSXV - please see "The Transaction", below. As a result, Quinto will require the approval of its shareholders to complete the Transaction, and has called a shareholder meeting for August 31, 2020.
The Subsidiaries
Verdlite Sciences is a company incorporated under the CanadaBusiness Corporations Act. Verdlite Sciences became a licensed producer on January 12, 2018. Verdlite Property is a company incorporated under the Qubec Business Corporations Act, which acquired the Facility on February 9, 2017. On May 1, 2018, Emerald acquired 100% of the issued and outstanding shares of the Subsidiaries from the founding group.
Verdlite Sciences holds a standard processing licence from Health Canada with respect to the complete growing and processing area at the Facility permitting it to sell and distribute packaged, branded dried cannabis products directly to provincial/territorial wholesalers and authorized private retailers. Cultivation commenced at the Facility in late 2019 and the Facility is now in full production.
The Agreement
Pursuant to the Agreement, Quinto will purchase all of the issued and outstanding shares of the Subsidiaries at closing in consideration for a cash purchase price of $21,000,000. The purchase price will be adjusted for cash and long-term debt of the Subsidiaries and for working capital of the Subsidiaries at closing above or below a target amount. The purchase price will be subject to a $750,000 holdback for the working capital adjustment and as an indemnity for certain pre-existing litigation. The Agreement contains representations and warranties, covenants, conditions and indemnities for the benefit of each of the parties as are customary for transactions of this nature. A copy of the Agreement will be posted on the parties' respective profiles at www.sedar.com.
The Transaction
The Transaction, if completed, will constitute a "Change of Business" of Quinto pursuant to Policy 5.2 - Changes of Business and Reverse Takeovers of the TSXV. Trading in the common shares of Quinto will be halted as a result of this announcement and will remain halted until the resumption of trading is approved by the TSXV. Completion of the Transaction is subject to completion of a number of conditions, including obtaining applicable consents and approval of Quinto's shareholders.
Quinto expects to finance the acquisition through a combination of private placements and bridge financing.
A further press release will be disseminated upon closing of the Transaction in accordance with the policies of the TSXV.