RE:RE:VFF 100% OF PSFFrom EMH quarterly report “Readily available sources of capital for the Company include a loan facility with Sciences which was increased from $6 million to $15 million on July 5, 2019. As at November 29, 2019, the balance on such facility is $0.6 million.”
EMS just raised $5.5M at the end of Nov by selling EMH shares and could be to secure extra $ to support the increase in this loan facility. For EMH and EMS this is non-dilutive access to cash as those shares are already issued and outstanding.
Sources of Cash:
1/ EMS Loan available = $14.4M (market is missing?). EMS just raised $5.5M selling EMH shares.
2/ PSF Demand Loan Called = $13M (assume available over next 2 quarters given PSF cash position).
3/ Working Capital on BS as of Sept 20th = $5.5M.
4/ Delta 2 payment (Nov) default = $5.94M (Assume PSF value of $250M = 2-3% - conservative).
5/ Delta 2 payment (Dec) = $.940M (≈ 0.4%).
6/ Delta 2 payment (Jan – Final) = $.710M (≈ 0.3%).
7/ CS sale in November = $2.5M.
Total source of cash = $43M and this would dilute them by a maximum of 4%. It is far better for EMH to raise funds based on PSF valuation (default on Delta 2 payment) vs trying to raise those $ at current EMH valuation. It seems like this source of cash is lost on the market.
Uses of Cash:
1/ Delta 2 payments = $0.0M assume they accept the full dilution.
2/ PSF invoice to EMH (take or buy) Q3 ($7.2M) + Q4 ($8.0M assumed) = $15M but they get back ½ through PSF so really only $7.5M hit.
3/ Metro Vancouver = $2.6M (cap X to year end).
4/ Verdilite outstanding payments (100% ownership) = $7.4M (timing may be renegotiated).
5/ Emerald Natural Health outstanding payments (51% ownership) = $5M (timing may be renegotiated).
6/ Working capital for 2 quarters (≈ $3.5M / Q) to get to mid - 2020 = $8M.
Total uses of Cash = $38M max.
Opportunity to secure cash back from PSF of $7.5M and re-negotiate timing of payments to Verdilite and ENH of $12.4M = $20M. Possible to track to $18M over the next 2 quarters.