VANCOUVER, Nov. 19, 2019 /CNW/ – PRESS RELEASE – Village Farms International, Inc. has announced that, following an equity payment default by Emerald Overall health Therapeutics, Inc. pursuant to the Delta two alternative agreement involving Pure Sunfarms Corp., Village Farms notified Pure Sunfarms that it has exercised its rights beneath the Pure Sunfarms shareholders agreement to enhance Village Farms’ ownership position in Pure Sunfarms and sophisticated an equity payment to Pure Sunfarms of $five,940,000.
In accordance with these agreements, Emerald was obligated to spend $five,940,000 to Pure Sunfarms on Nov. 1, 2019. Following Emerald’s failure to make this equity payment, Pure Sunfarms issued a default notice to Emerald. Emerald nonetheless remained in default following the expiration of the contractual remedy period earlier now.
Assuming the VF Extra Equity Contribution is accepted by Pure Sunfarms, Village Farms will acquire an elevated equity interest in Pure Sunfarms productive as of Nov. 19, 2019. The calculation of the precise elevated equity interest calls for a determination of the fair market place worth of Pure Sunfarms pursuant to an appraisal course of action. Accordingly, Village Farms’ precise elevated equity interest in Pure Sunfarms is not ascertainable at this time. Having said that, the aggregate impact of the VF Extra Equity Contribution and the possible cancellation of Emerald’s escrowed shares of Pure Sunfarms (described under) is not anticipated to have an effect on the voting manage of Pure Sunfarms (which would take place if Emerald have been to hold significantly less than 35% of the equity of Pure Sunfarms).
In light of Emerald’s current pattern of initiating disputes relating to Pure Sunfarms, no assurance can be offered that Emerald will not similarly initiate a dispute in respect of the VF Extra Equity Contribution.
Cancellation of Emerald’s Escrowed Shares in Pure Sunfarms
In conjunction with getting into into the Delta two alternative agreement, particular shares of Pure Sunfarms have been placed in escrow pursuant to an escrow agreement and have been to be released to Emerald as soon as it had produced particular equity contributions to Pure Sunfarms.
As a outcome of the above-described $five,940,000 payment default by Emerald, Village Farms has delivered written notice to the escrow agent pursuant to the escrow agreement to release for cancellation five,940,000 shares in Pure Sunfarms that have been becoming held in escrow for Emerald. Emerald, nonetheless, has delivered a written notice to the escrow agent which disputes any release from escrow of such Pure Sunfarms shares. Pending the resolution of Emerald’s dispute beneath the escrow agreement, these five,940,000 shares in Pure Sunfarms stay held in escrow. If these shares are in the end cancelled by Pure Sunfarms, there will be a additional enhance in Village Farms’ equity interest in Pure Sunfarms and a corresponding reduce in Emerald’s equity interest.
Update on Pure Sunfarms’ Provide Agreement with Emerald Overall health
As previously announced, pursuant to the terms of a provide agreement that Pure Sunfarms has with Emerald, Emerald has an obligation to acquire 40% of Pure Sunfarms’ cannabis production at a fixed value, topic to the terms and circumstances of the provide agreement. To the extent that Emerald does not fulfill its acquire obligation, Pure Sunfarms is in a position to sell that excess production to other parties in the open market place. The provide agreement stipulates that Emerald is expected to spend Pure Sunfarms the distinction in between the fixed value and the promoting value realized from other parties. For the duration of the quarter ended Sept. 30, 2019, Emerald did not fulfill its acquire obligations and Pure Sunfarms sold the solution on the open market place to arm’s length parties at rates reduce than the fixed value in the provide agreement. As a outcome, beneath the terms of the Provide Agreement, Pure Sunfarms billed Emerald for the distinction which amounted to roughly C$7.two million. On Oct. 15, 2019, Emerald issued a press release that indicated they do not agree that they have any liability with respect to these amounts.
Village Farms understands that Emerald is in the course of action of investigating its provide agreement liability to Pure Sunfarms. If Emerald does not agree to the liability, Pure Sunfarms has reserved the proper to take such actions as it considers important and acceptable to recover its losses from Emerald for non-payment of amounts owing by Emerald beneath the provide agreement.
Village Farms understands from Pure Sunfarms that, as of the close of business enterprise now, Emerald has not produced any payments to Pure Sunfarms in respect to the C$7.two million that Pure Sunfarms is searching for from Emerald beneath the provide agreement.
For higher certainty, Village Farms is not a celebration to the provide agreement and any amounts owing thereunder are payable by Emerald to Pure Sunfarms.