VANCOUVER, Nov. 19, 2019 /CNW/ - Village Farms
International, Inc. ("Village Farms") (TSX:VFF; Nasdaq:VFF)
today announced that, following an equity payment default by
Emerald Health Therapeutics, Inc. ("Emerald") (TSV:EMH)
pursuant to the Delta 2 option agreement involving Pure Sunfarms
Corp. ("Pure Sunfarms"), Village Farms notified Pure
Sunfarms that it has exercised its rights under the Pure Sunfarms
shareholders agreement to increase Village Farms' ownership
position in Pure Sunfarms and advanced an equity payment to Pure
Sunfarms of $5,940,000 (the "VF
Additional Equity Contribution").
In accordance with these agreements, Emerald was obligated to
pay $5,940,000 to Pure Sunfarms on
November 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 cure period earlier
today.
Assuming the VF Additional Equity Contribution is accepted by
Pure Sunfarms, Village Farms will receive an increased equity
interest in Pure Sunfarms effective as of November 19, 2019. The calculation of the precise
increased equity interest requires a determination of the fair
market value of Pure Sunfarms pursuant to an appraisal process.
Accordingly, Village Farms' precise increased equity interest in
Pure Sunfarms is not ascertainable at this time. However, the
aggregate effect of the VF Additional Equity Contribution and the
potential cancellation of Emerald's escrowed shares of Pure
Sunfarms (described below) is not expected to have an impact on the
voting control of Pure Sunfarms (which would occur if Emerald were
to hold less than 35% of the equity of Pure Sunfarms).
In light of Emerald's recent pattern of initiating disputes
relating to Pure Sunfarms, no assurance can be given that Emerald
will not similarly initiate a dispute in respect of the VF
Additional Equity Contribution.
Cancellation of Emerald's Escrowed Shares in Pure
Sunfarms
In conjunction with entering into the Delta 2 option agreement,
certain shares of Pure Sunfarms were placed in escrow pursuant to
an escrow agreement and were to be released to Emerald once it had
made certain equity contributions to Pure Sunfarms.
As a result of the above-described $5,940,000 payment default by Emerald, Village
Farms has delivered written notice to the escrow agent pursuant to
the escrow agreement to release for cancellation 5,940,000 shares
in Pure Sunfarms that were being held in escrow for Emerald.
Emerald, however, 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 under the
escrow agreement, these 5,940,000 shares in Pure Sunfarms remain
held in escrow. If these shares are ultimately cancelled by
Pure Sunfarms, there will be a further increase in Village Farms'
equity interest in Pure Sunfarms and a corresponding decrease in
Emerald's equity interest.
Update on Pure Sunfarms' Supply Agreement with Emerald
Health
As previously announced, pursuant to the terms of a supply
agreement that Pure Sunfarms has with Emerald, Emerald has an
obligation to purchase 40% of Pure Sunfarms' cannabis production at
a fixed price, subject to the terms and conditions of the supply
agreement. To the extent that Emerald does not fulfill its purchase
obligation, Pure Sunfarms is able to sell that excess production to
other parties in the open market. The supply agreement stipulates
that Emerald is required to pay Pure Sunfarms the difference
between the fixed price and the selling price realized from other
parties. During the quarter ended September
30, 2019, Emerald did not fulfill its purchase obligations
and Pure Sunfarms sold the product on the open market to arm's
length parties at prices lower than the fixed price in the supply
agreement. As a result, under the terms of the Supply Agreement,
Pure Sunfarms billed Emerald for the difference which amounted to
approximately C$7.2 million. On
October 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 process of
investigating its supply agreement liability to Pure
Sunfarms. If Emerald does not agree to the liability, Pure
Sunfarms has reserved the right to take such actions as it
considers necessary and appropriate to recover its losses from
Emerald for non-payment of amounts owing by Emerald under the
supply agreement.
Village Farms understands from Pure Sunfarms that, as of the
close of business today, Emerald has not made any payments to Pure
Sunfarms in respect to the C$7.2
million that Pure Sunfarms is seeking from Emerald under the
supply agreement.
For greater certainty, Village Farms is not a party to the
supply agreement and any amounts owing thereunder are payable by
Emerald to Pure Sunfarms.
Forward-Looking Statements
Certain statements contained in this press release constitute
forward-looking information within the meaning of applicable
securities laws ("forward-looking statements"). Forward-looking
statements may relate to Village Farms' future outlook or financial
position and anticipated events or results and may include
statements regarding the financial position, business strategy,
budgets, litigation, projected production, projected costs, capital
expenditures, financial results, taxes, plans and objectives of or
involving Village Farms and its equity position in Pure Sunfarms.
Particularly, statements regarding future results, performance,
achievements, prospects or opportunities for Village Farms
(including its equity position in Pure Sunfarms), Pure Sunfarms,
the greenhouse vegetable industry or the cannabis and hemp
industries are forward-looking statements. In some cases,
forward-looking information can be identified by such terms as
"outlook", "may", "might", "will", "could", "should", "would",
"occur", "expect", "plan", "anticipate", "believe", "intend",
"estimate", "predict", "potential", "continue", "likely",
"schedule", "objectives", or the negative or grammatical variation
thereof or other similar expressions concerning matters that are
not historical facts.
Although the forward-looking statements contained in this press
release are based upon assumptions that management believes are
reasonable based on information currently available to management,
there can be no assurance that actual results or events will be
consistent with these forward-looking statements. Forward-looking
statements necessarily involve known and unknown risks and
uncertainties, many of which are beyond Village Farms' control,
that may cause Village Farms' or the industry's actual results,
performance, achievements, prospects and opportunities in future
periods to differ materially from those expressed or implied by
such forward-looking statements. These risks and uncertainties
include, among other things, the factors contained in Village
Farms' filings with U.S. and Canadian securities regulators,
including as detailed in Village Farms' annual information form and
management's discussion and analysis for the year-ended
December 31, 2018 and for the three
and nine-month periods ended September 30,
2019.
When relying on forward-looking statements to make decisions,
Village Farms cautions readers not to place undue reliance on these
statements, as forward-looking statements involve significant risks
and uncertainties and should not be read as guarantees of future
results, events, performance, achievements, prospects and
opportunities. The forward-looking statements made in this press
release only relate to events or information as of the date on
which the statements are made in this press release. Except as
required by law, Village Farms undertakes no obligation to update
or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
About Village Farms International, Inc.
Village Farms is one of the largest and longest-operating
vertically integrated greenhouse growers in North America and the only publicly traded
greenhouse produce company in Canada. Village Farms produces and distributes
fresh, premium-quality produce with consistency 365 days a year to
national grocers in the U.S. and Canada from more than nine million square feet
of Controlled Environment Agriculture (CEA) greenhouses in
British Columbia and Texas, as well as from its partner greenhouses
in British Columbia, Ontario and Mexico. Village Farms is now leveraging its 30
years of experience as a vertically integrated grower for the
rapidly emerging global cannabis opportunity through its equity
ownership position in British
Columbia-based Pure Sunfarms, one of the single largest
cannabis growing operations in the world. Village Farms also
intends to pursue opportunities to become a vertically integrated
leader in the U.S. hemp-derived CBD market, subject to compliance
with all applicable U.S. federal and state laws, Village Farms has
established two joint ventures, Village Fields Hemp USA, LLC, and Arkansas Valley Green and Gold
Hemp LLC, for multi-state outdoor hemp cultivation and CBD
extraction and plans to pursue controlled environment hemp
production at its Texas greenhouse
operations, which total 5.7 million square feet of production area,
subject to legalization of hemp in Texas.
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SOURCE Village Farms International, Inc.