Emerald Health Therapeutics : 2021 - Q3

EMERALD HEALTH THERAPEUTICS, INC.

Condensed Interim Consolidated Financial Statements

(Unaudited)

For the three and nine months ended September 30, 2021 and 2020

(Expressed in Canadian Dollars)

NOTICE OF NON-REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed interim consolidated financial statements, they must be accompanied by a notice indicating that these condensed interim consolidated financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.

The attached condensed interim consolidated financial statements for the nine months ended September 30, 2021 have not been reviewed by the Company's auditors.

Effective November 15, 2021, the Company engaged MNP LLP ("MNP") as its auditors upon the resignation of Deloitte LLP, its former auditors. As part of its engagement, MNP will be reviewing the Company's interim financial statements on an ongoing basis. As the appointment of MNP occurred very close to the filing deadline for the Company's condensed interim consolidated financial statements for the three and nine months ended September 30, 2021 and 2020, MNP was able to commence but not complete its review of the condensed interim consolidated financial statements before the filing deadline. MNP will continue and complete its review of the condensed interim consolidated financial statements.

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Table of Contents

Condensed Interim Consolidated Statements of Financial Position …………………………………………………………..…………..	4
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss …………………………….…….………………	5
Condensed Interim Consolidated Statements of Changes in Equity …………………………………………………………………….…	6
Condensed Interim Consolidated Statements of Cash Flows ………..………………………………………………….………………..….	7

Notes to the Condensed Interim Consolidated Financial Statements
Note 1	Nature and Continuance of Operations……………….. 8	Note 11 Warrants…………………………………………………. 20
Note 2	Significant Accounting Policies and Judgements….. 8	Note 12 Long Term Investments…………………………… 21
Note 3	Biological Assets………………………………………………….. 11	Note 13 Promissory Note……………………………………… 21
Note 4	Inventory…………………………………………………………….. 12	Note 14 Leases……………………………………………………… 22
Note 5	Property, Plant and Equipment……….………………….. 13	Note 15 Revenue………………………………………………….. 24
Note 6	Intangible Assets…………………………………………………. 15	Note 16 General and Administrative Expenses…….. 24
Note 7	Deferred Payment…………….………………………………… 16	Note 17 Joint Venture Sale…………………………………… 24
Note 8	Related Party Transactions…………………………………. 16	Note 18	Segmented Information………………………….	25
Note 9	Share Capital…………………………………………………..….. 18	Note 19	Financial Instruments……………………………..	26
Note 10	Share-based Compensation ……………………………….. 18	Note 20	Capital Management………………………………	28
		Note 21	Subsequent Events…………………………………. 28

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EMERALD HEALTH THERAPEUTICS, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited ‐ Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

		September 30		December 31
		2021		2020
ASSETS
Current	$	21,981
Cash and cash equivalents (Note 2 (d))	$	25,998
Accounts receivable		1,766		1,992
Receivable from Joint Venture Sale (Note 17)		‐		20,286
Biological assets (Note 3)		563		969
Inventory (Note 4)		4,559		4,611
Prepaid expenses		999		1,135
Assets held‐for‐sale (Note 5)		3,087		‐
Due from related parties (Note 8)		‐		50
Total current assets		32,955		55,041
Plant and equipment (Note 5)		20,715		34,531
Plant under construction (Note 5)		‐		5,411
Deposits on materials and equipment (Note 5)		77		214
Refundable deposits		379		575
Intangible assets (Note 6)		1,100		1,859
Promissory note receivable (Note 13)		421		‐
Right‐of‐use assets (Note 14)		124		509
Long‐term investment (Note 12, 13)		537		134
Total non‐current assets		23,353		43,233
TOTAL ASSETS	$	56,308	$	98,274
LIABILITIES
Current liabilities	$	4,670
Accounts payable and accrued liabilities (Note 19 (d))	$	11,019
Deferred payment (Note 7)		‐		9,375
Due to related parties (Note 8)		70		1,619
Lease liability on held for sale assets (Note 14)		3,487		‐
Lease liability (Note 14)		141		651
Total current liabilities		8,368		22,664
Lease liability (Note 14)		58		3,464
CEBA loan (Note 2 (e))		40		40
TOTAL LIABILITIES	$	8,466	$	26,168
SHAREHOLDERS' EQUITY		252,717
Share capital (Note 9)			249,763
Warrants (Note 11)		823		1,718
Contributed surplus		28,835		29,126
Accumulated deficit		(234,533)		(207,148)
TOTAL SHAREHOLDERS' EQUITY		47,842		73,459
Non‐controlling interest (Note 2, 8)		‐		(1,353)
TOTAL LIABILITIES AND EQUITY	$	56,308	$	98,274
Nature and continuance of operations (Note 1)
Events after the reporting period (Note 21)
On behalf of the Board of Directors:
/s/ Jim Heppell	/s/ Punit Dhillon
Director	Director

The accompanying notes form an integral part of these condensed interim consolidated financial statements

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EMERALD HEALTH THERAPEUTICS, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited ‐ Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

	Three months		Three months		Nine months		Nine months
		ended		ended		ended		ended
	September 30		September 30	September 30	September 30
		2021		2020		2021		2020
Revenue	$	2,599			$	9,028
Revenue from sale of goods (Note 15)	$	4,311	$	10,750
Excise taxes		(494)		(938)		(1,624)		(2,007)
Net revenue		2,105		3,373		7,404		8,743
Cost of sales		1,045				3,508
Cost of goods sold			970			2,226
Production costs		1,373		2,177		4,150		3,596
Amortization of Health Canada license (Note 6)		1		29		4		458
Inventory write‐down (Note 4)		274		1,819		677		2,874
Realized fair value amounts on inventory sold		462		1,528		2,062		4,158
Unrealized (gain) loss on changes in fair value of biological assets (Note 3)		(521)		2,339		(1,156)		825
Gross (loss) profit		(529)		(5,489)		(1,841)		(5,394)
Expenses		2,356				6,839
General and administrative (Note 16)			2,732			7,410
Sales and marketing		579		287		1,573		1,222
Research and development		445		267		1,356		975
Depreciation and amortization (Note 5, 6, 14)		282		349		1,183		1,420
Share‐based payments (Note 10)		204		755		541		2,585
Loss on disposal of equipment		235		32		249		235
		4,101		4,422		11,741		13,847
Loss from operations		(4,630)		(9,911)		(13,582)		(19,241)
Other (expenses) income		‐				‐
Share of (loss) income from joint venture			(520)			4,497
Interest and other income		354		29		2,215		851
Finance costs and other expenses		(11)		(1,531)		(30)		(3,954)
Impairment of assets (Note 5, 6, 8)		(4,923)		(112)		(15,591)		(17,175)
Gain on settlement of deferred payment (Note 7)		‐		‐		293		‐
Gain (loss) on dilution of joint venture ownership		‐		‐		‐		(850)
Gain on sale of long term investment (Note 12)		‐		‐		249		‐
Fair value changes in long‐term investment (Note 13)		‐		‐		373		‐
Fair value changes in financial assets (Note 12)		‐		387		‐		392
Exchange gain (Note 12, 13)		66		‐		73		‐
Loss before income taxes		(9,144)		(11,658)		(26,000)		(35,480)
NET LOSS AND COMPREHENSIVE LOSS		(9,144)		(11,658)		(26,000)		(35,480)
Net loss and comprehensive loss attributable to:		(9,144)				(26,000)
Emerald Health Therapeutics, Inc.			(11,491)			(35,087)
Non‐controlling interest		‐		(167)		‐		(393)
		(9,144)		(11,658)		(26,000)		(35,480)
Net loss per common share
Basic and diluted		0.04		0.06		0.12		0.19
Weighted average number of common
shares outstanding
Basic and diluted		213,416,660		200,336,735		212,258,873		188,925,204

The accompanying notes form an integral part of these condensed interim consolidated financial statements

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