Village Farms International has responded to "the ongoing, inaccurate and misleading public disclosure by Emerald Health Therapeutics relating to Village Farms' majority ownership interest in Pure Sunfarms," the company explains.
"In its press release of November 27, 2019, Emerald asserted that it previously notified Pure Sunfarms that it claimed a set-off of the $5.94 million equity payment that Emerald was obligated to make to Pure Sunfarms by November 19, 2019 against an unrelated $13 million shareholder loan that Emerald previously advanced to Pure Sunfarms," they further explain. "However, Emerald has failed to disclose that its purported set-off claim was promptly rejected by management of Pure Sunfarms on November 15, 2019 because, among other reasons, Emerald is not entitled to unilaterally set-off unrelated obligations in a way that would prejudice or vary Village Farms' contractual rights and obligations; and was made on November 14, 2019, approximately two weeks after its initial Equity Payment default occurred on November 1, 2019."
"Pure Sunfarms' management previously advised Emerald that Village Farms may dilute Emerald's ownership interest in Pure Sunfarms in accordance with the related legal agreements if Emerald's default was not cured by November 19, 2019. Despite this warning, Emerald nonetheless failed to make the Equity Payment by November 19, 2019. As a result, following Village Farms' $5.94 million additional equity contribution on November 19, 2019, Pure Sunfarms notified both Village Farms and Emerald that Village Farms' share capital account in Pure Sunfarms had been formally increased by $5.94 million. The related issuance of additional Pure Sunfarms shares to Village Farms is solely a documentary formality, which is expected to occur following a valuation process in accordance with the Pure Sunfarms shareholders agreement. Notwithstanding the ongoing valuation process, the effective date of Village Farms' increased equity position in Pure Sunfarms was November 19, 2019, and the issuance of the related additional Pure Sunfarms shares to Village Farms will similarly be effective as of November 19, 2019."
Additional Emerald Equity Contribution Due on December 2, 2019
Village Farms continues to explain that ,in accordance with the applicable legal agreements, Emerald owes Pure Sunfarms an additional equity contribution of $940,000 on December 2, 2019. "If Emerald fails to pay this amount to Pure Sunfarms by December 16, 2019 (being the end of the contractual cure period for an equity payment default by Emerald), Village Farms will again elect to exercise its contractual right to fund any such payment default by Emerald and further increase Village Farms' majority ownership position in Pure Sunfarms."
Emerald's Shareholder Loan Repayment Demand Invalid; Rejected by Pure Sunfarms
"In its press release of November 20, 2019, Emerald indicated that it had formally demanded repayment from Pure Sunfarms of the entire $13 million principal amount of the Emerald Shareholder Loan. Pure Sunfarms' management has rejected this repayment demand as being invalid and non-compliant on numerous grounds," they further explain.
Conversion of Delta 2 Greenhouse Facility Remains on Schedule
"Notwithstanding the numerous matters that Emerald has elected to dispute relating to its financial obligations to Pure Sunfarms, Village Farms does not expect these matters to have an adverse impact on the ongoing conversion or future operations of Pure Sunfarms' Delta 2 greenhouse facility. Conversion of the Delta 2 greenhouse facility remains on its previously announced schedule, with cannabis production expected to commence during the second quarter of 2020. The Delta 2 greenhouse facility is expected to be operating at full run rate production by the end of 2020," they conclude.
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