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Emerald Health Therapeutics Inc. (OTCMKTS:EMHTF) Enters Purchases Agreement For Sale Of Its Verdalite Subsidiaries

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Emerald Health Therapeutics Inc. (OTCMKTS:EMHTF) and Quinto Resources Inc. have signed a share purchase agreement dated July 30, 2020. Under the agreement, Emerald will sell its wholly-owned subsidiaries Verdelite Property Holdings, Verdelite Sciences Inc.

Quinto to acquire emerald subsidiaries for $21 million

The Verdelite subsidiaries own and run a premium 88,000 sq. ft. craft cannabis production facility in St Eustache Quebec. According to the share purchase agreement, Quinto will acquire all outstanding and issued shares of these subsidiaries in a cash purchase consideration of $21 million. This will include the total amount of cash for each subsidiary as at the closing date minus the number of long-term debts at closing date subject to post-closing working capital adjustment. The companies negotiated the deal at arm’s length, and closing is subject to regulatory approval.

Most importantly, the purchase price consideration will be subject to a holdback of $750,000 for working capital adjustment and also as indemnity for specific pre-existing litigation. Also, this agreement contains warrants, covenant conditions, representations, and indemnities for both parties’ benefit as it is common for such transactions.

Quinto to continue operations of the subsidiaries

After the finalization of the transaction, the subsidiaries will become Quinto’s whole-owned subsidiaries, with Quinto continuing the subsidiaries’ business. Despite the subsidiaries’ sale, Emerald will continue selling its products in the Quebec market subject to some limited restrictions and will retain exclusive rights of the recently launched Souvenir™ brand. Considering Quinto is a listed company on the TSXV, this transaction will constitute a change in the company’s business as per the TSXV rules. This implies that Quinto will need stockholder approval to finalize the transaction.

Verdalite Sciences is an incorporated company in Canada that received its license on January 12, 2018. On the other hand, Verdalite Property was incorporated by Quebec’s Business Corporations Act and acquired Facility in 2017. Emerald acquired 100% of the subsidiaries’ outstanding and issued shares in May 2018. Cultivation at the Facility commenced in 2019, and now the Facility has reached full production.

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