British Columbia-based medical cannabis producer Emerald Health Therapeutics, Inc. (TSXV: EMH; OTCQX: EMHTF) and Pure Sunfarms (PSF) revealed their third-quarter 2019 financial results. During this time, Emerald net sales doubled to $9.3 million from the prior quarter while Pure Sunfarms net sales were $24 million. Pure Sunfarms also reached its annualized full production run rate of 75,000 kg.
Emerald Health Therapeutics, Inc. (“Emerald”) (TSXV: EMH; OTCQX: EMHTF) and Pure Sunfarms (PSF) reported their financial results ending on Sept. 30, 2019.
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Emerald Health highlights
- Net sales doubled to $9.3 million from the prior quarter
- Net loss of $17.5 million impacted by a $2.8 million inventory write-down and a decrease of $9.1 million in fair value adjustments of biological assets
- Total SG&A expenses of $10.1 million which is lower than the Q2 expenses of $12.4 million
- A second consecutive quarter of positive adjusted EBITDA at $2.4 million in Q3 2019
- $5.5 million positive working capital shows an improvement from the working capital in the previous quarter ($4.2 million
Pure Sunfarms highlights
- Net sales were $24 million. The sales volume was almost 50% higher than the previous quarter
- Gross margin before non-cash adjustments to the fair value of inventory and biological assets was 69%
- EBITDA was $18.2 million, an EBITDA margin of 73%
- Net cash and cash equivalents as of Sept. 30 were $16.1 million, up from $2.4 million as of Dec. 31, 2018.
- Net loss of $2.4 million reflects a non-cash adjustment to the fair value of inventory and biological assets
- The total production cost of $0.63 per gram, compared to $0.65 per gram in Q2
- Emerald Health recognized a loss of $1.2 million from its 50% share of the Pure Sunfarms joint venture, compared to $14.5 million in Q2
Financing and capital resources
During 1Q19, Emerald filed a short-form prospectus in each of the provinces of Canada that qualifies for the issuing and secondary sale of $150 million of common shares or other specified securities.
It also initiated an at-the-market (ATM) equity program, under which it has raised gross proceeds of $18.8 million as of Nov. 29, 2019.
On Sept. 10, 2019, the company closed a secured convertible debenture offering of 2,500 units at a price of $10,000 per convertible debenture unit for gross proceeds of $25 million to a single Canadian institutional accredited investor.
Pure Sunfarms and Emerald’s 50% joint venture
Pure Sunfarms (PSF) reached its annualized full production run rate of 75,000 kg in its 1.1 million square foot Delta 3 facility and is now converting its nearly identical 1.1 million square foot Delta 2 facility to cannabis production.
PSF aims to complete its first harvest at Delta 2 in Q2 2020 and achieve full run-rate production in the fourth quarter of 2020, subject to completion of construction and the receipt of Health Canada licenses.
Pure Sunfarms continues to work toward additional provincial supply agreements for its high-quality dried flower cannabis product across Canada and plans to roll out other products such as pre-rolls, oils, and vapes in the coming months.
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