Mr. Avtar Dhillon reports

EMERALD HEALTH THERAPEUTICS REPORTS FOURTH QUARTER AND FISCAL 2018 FINANCIAL RESULTS; HIGHLIGHTS SALES GROWTH IN Q1 2019

Emerald Health Therapeutics Inc. has provided financial results for the fourth quarter and year ended Dec. 31, 2018.

Highlights

• Emerald's Q4 sales of $1.1-million was more than triple the prior quarter and year-over year; Q1 2019 sales were $2.6-million.
• Quebec-based Verdelite subsidiary expected to be in full production in 88,000-square-foot indoor facility by mid-2019.
• Supply agreements announced with seven provinces and territories representing over 90 per cent of the Canadian population; delivery fulfilment rates are close to 100 per cent.
• Fifty-one-per-cent-owned Emerald Health Naturals to sell non-cannabis natural health products for endocannabinoid system across Canada by mid-2019.

B.C.-based Pure Sunfarms joint venture:

• Q4 2018 sales of $4.9-million; Q1 2019 sales expected to exceed $14-million;
• Emerald records $1.4-million in Q4 2018 as share of income from Pure Sunfarms;
• Targeting and approaching all-in production costs below $1/gram;
• Fully planted in 1.1-million-square-foot greenhouse. On track to reach annualized production run rate in first greenhouse of 75,000 kilograms by midyear;
• Advancing plans to convert a second, nearly identical 1.1-million-square-foot greenhouse in the same complex. This greenhouse is targeted to complete its first harvest by 2020 and annualized full run rate production of 75,000 kilograms in Q4 2020.

"In the past year we have worked closely with our 50/50 venture partner to bring into full production one of the single largest cannabis growing assets in the world. Pure Sunfarms' 1.1-million-square-foot facility is now rapidly increasing production and sales. By leveraging our own technical expertise and infrastructure with strong partners in 2018, we solidified key building blocks with respect to production/supply, distribution, processing in the form of large-scale extraction, softgel encapsulation, and product innovation," said Avtar Dhillon, MD, president and executive chairman of Emerald.

"By further building upon our intellectual property and strategic partnerships, as well as our own internal expertise, we are working hard to increase market penetration through the development of new and differentiated ingestible and non-combustible products if, as expected, they become allowable before the end of 2019. This will coincide with the ongoing and substantial expansion of the adult-use retail system -- creating significant opportunity for the company in 2019 and what we anticipate to be a year of extraordinary sales growth for Emerald."

Financials results and capital resources

Selected quarterly financial information

The attached table summarizes selected financial information for the company for the last eight quarters, which was derived from annual financial statements prepared in accordance with IFRS (international financial reporting standards) or interim financial statements prepared in accordance with IFRS applicable to the preparation of interim financial statements, IAS 34, Interim Financial Reporting.

                                                                                             2018
                                            Dec. 31         Sept. 30         June 30     March 31

Revenue                                  $1,131,853         $321,070        $284,262     $373,218    
Share-based payments                      1,296,891        2,165,851       2,081,661    1,954,047   
Interest revenue                            438,974          222,740         274,436      250,064    
Share of income (loss) from JV            1,432,771        3,940,373         682,431     (301,793)   
Net (loss)                              (13,900,360)      (6,426,658)     (5,610,970)  (5,045,420)  
Net (loss) per share (basic and diluted)      (0.10)           (0.05)          (0.04)       (0.04)
                                                                                                    
                                                                                             2017
                                            Dec. 31         Sept. 30         June 30     March 31

Revenue                                    $279,362         $211,316        $245,708     $201,268    
Share-based payments                      1,979,553          271,968         369,788      201,186    
Interest revenue                             43,024           60,997          57,497            -       
Share of (loss) from JV                     (44,562)        (278,016)              -            -       
Net (loss)                               (4,027,569)      (1,939,371)     (1,669,026)  (1,205,858)  
Net (loss) per share (basic and diluted)      (0.04)           (0.02)          (0.02)       (0.02)    

The company's audited consolidated financial statements can be found on SEDAR. The company errantly filed an incomplete set of its consolidated financial statements on SEDAR at 10:33 p.m. ET on April 30, 2019. A new submission was made the following morning containing the complete audited financial statements for the years ended Dec. 31, 2018, and 2017.

Financings

During 2018 the company completed equity financings that resulted in total proceeds from unit issuances and warrant exercises of $82.0-million (net of $500,000 transaction costs). The company has intended or intends to use the proceeds of the financings to finance the completion of capital projects and potential future expansion and acquisitions, including partnership transactions, for research and development, to expand the company's existing extraction capabilities, and for working capital and general corporate purposes.

Emerald's financial statements, management discussion and analysis, and additional information on Emerald are available on SEDAR or on the company's website.

Corporate update

Production and sourcing

Pure Sunfarms

Pure Sunfarms (PSF), Emerald's 50-per-cent-owned joint venture, completed conversion of its 1.1-million-square-foot Delta 3 greenhouse operation in Delta, B.C., and secured the full cultivation licence for the 1.03-million-square-foot growing area of this facility. It has completed planting of this growing area and is on track to reach its annualized full production run rate of 75,000 kilograms by mid-2019.

Subsequent to year-end, PSF exercised its option to acquire the nearly identical 1.1-million-square-foot Delta 2 sister facility. It is now moving forward on its plan to convert this facility with the goal of at least doubling annual cannabis production and support its goal to be a high-quality, low-cost producer in Canada. PSF aims to complete its first harvest at the Delta 2 facility mid-2020 and achieve full run-rate production in the fourth quarter of 2020, subject to the receipt of Health Canada licences.

Emerald entered into supply agreements with Pure Sunfarms to purchase 40 per cent of production in 2018 and 2019 as well as 25 per cent of total production in 2020 through 2022.

PSF also entered into a supply agreement with the Ontario Cannabis Retail Corp. to supply Pure Sunfarms-branded products to the Ontario adult-use market.

PSF entered into a credit agreement with Bank of Montreal and Farm Credit Canada in respect of a $20-million (Canadian) secured non-revolving term loan with the intent to use the proceeds to finance the final cost of converting its 1.1-million-square-foot greenhouse as well as for general corporate purposes.

Verdelite

On May 2, 2018, the company acquired 100 per cent of the issued and outstanding shares of Agro-Biotech Sciences Inc. and its affiliate Agro-Biotech Property Holdings Inc. Emerald subsequently changed Agro-Biotech's name to Verdelite.

Verdelite is an 88,000-square-foot indoor grow facility in Quebec with a capacity of 5,000 kg. It is licensed to cultivate and sell cannabis flower as well as extract, manufacture, synthesize, test and sell next-generation cannabis products. The licence also allows Verdelite to build and operate a laboratory for research and development of cannabis-based products. Verdelite aims to be at full production capacity mid-2019.

Hemp

On Sept. 26, 2018, the company entered into a long-term supply agreement to obtain harvested hemp flower and leaf. The supply agreement was signed with Emerald Health Hemp Inc. to purchase cannabidiol-containing hemp biomass for extraction into CBD oil. The initial supply agreement will continue to Dec. 31, 2022, with an option to extend for an additional two years. Five hundred acres of hemp were harvested in October, 2018, from farms located in Manitoba and Prince Edward Island and 1,000 acres are expected to be harvested in each subsequent year of the agreement.

Cannabis sales agreements -- adult-use markets

The company completed its first shipments of adult-use cannabis during the fourth quarter of 2018, fulfilling its initial supply scheduling, product and volume commitments in British Columbia as well as Newfoundland and Labrador following the legalization of adult-use cannabis, and in 2019 has delivered its first shipments to Ontario, Prince Edward Island, Alberta and Yukon. Emerald has achieved fulfilment rates close to 100 per cent. The company has also announced supply agreements with Saskatchewan and Quebec and expects recreational sales Canada-wide in 2019. The company completed its first shipment of CBD oils for the recreational market in April, 2019, and expects cannabis oils to be a significant source of revenue in 2019.

Value-added processing

Factors R&D Technology Inc.

On Aug. 27, 2018, the company signed a term sheet to form a strategic alliance with FTI, a division of Factors Group of Nutritional Companies Inc., in which FTI will provide pharmaceutical-grade, large-scale manufacturing capacity as well as expertise in good-manufacturing-practice-level extraction, softgel production and packaging. FTI will provide the company with access to a facility capable of processing up to one million kg of biomass annually and softgel production capacity of up to 600 million capsules per year.

Phase 1 of the Health Canada review of the application process has been successfully completed and the licensing process is expected to be completed later in 2019.

Medipharm

Emerald entered into a cannabis concentrate program agreement with Medipharm Labs Corp. on Oct. 5, 2018, for an initial term of three years. Medipharm currently operates one of the largest cannabis concentrate manufacturing facilities in Canada and is built to cGMP (current good manufacturing practices) and ISO standards. Emerald ships dried cannabis to Medipharm which Medipharm uses to produce purified cannabis oil for the recreational market.

Product innovation

Emerald is pursuing research and product development focused on improving the bioavailability of cannabinoids, developing new dosage formats and targeting core disease states including sleep, anxiety, pain and mood. This product development is also focused on delivering new products with the anticipated expansion of allowable products to include edibles in the recreational market.

In the next months, Emerald is planning the launch through its joint venture, Emerald Health Naturals, the Endo natural health product line with its non-cannabinoid Phytocann ingredients that support the endocannabinoid system.

Emerald is conducting animal studies in preparation for planned clinical trials that may be initiated by year-end. These studies are intended to target specific disease indications using Emerald products and will be carried out to support the use of Emerald products for medical use.

On Oct. 16, 2018, the company filed 12 provisional U.S. patent applications covering Emerald's unique defined dose cannabis dosage forms and formulations, bringing the total number of provisional U.S. patents filed by the company to 17. The products aim to provide more precise and consistent delivery, dosage and formulations.

Indena

On Feb. 5, 2019, Emerald entered into a licence with Indena SpA of Milan, Italy, bearing certain exclusivity rights in Canada to use Indena's cannabidiol (CBD) extraction technology and contract manufacturing services for CBD extraction. In addition, Emerald obtained exclusive use of Indena's proprietary Phytosome technology for the purpose of developing novel cannabinoid-based products with superior utility.

Other strategic transactions

On Aug. 15, 2018, the company increased its ownership in Northern Vine to 100 per cent. Renamed Avalite, this subsidiary possesses a dealer licence and is able to undertake analytical testing and certain importing/exporting not permitted under a producer licence.

On Nov. 19, 2018, the company announced it received conditional approval from the TSX Venture Exchange regarding its 51:49 joint venture, Emerald Health Naturals (EHN), with Emerald Health Bioceuticals Inc., subject to the finalization of definitive documentation.

EHB's product line consists of nutritional supplements which use non-cannabis, non-psychoactive plant-based ingredients to provide potentially beneficial support to the body's endocannabinoid system. The company agreed to invest $5.0-million for 51-per-cent ownership of EHN and EHB granted EHN the exclusive Canadian distribution rights to EHB's product line for 49-per-cent ownership of EHN.

Conference call

Emerald Health Therapeutics will host its fiscal fourth quarter and 2018 year-end financial results conference call on Wednesday, May 1, 2019, at 8:30 a.m. ET. To access the audio broadcast, please dial 866-652-5200, or via the Internet at the Choruscall website. An archived version of the presentation will be available for 90 days on the investors section of Emerald's website.

About Emerald Health Therapeutics Inc.

Emerald Health Therapeutics is a Canadian licensed producer of cannabis. Its 50-per-cent-owned Pure Sunfarms joint venture in B.C. is licensed and in full production in 1.03 million square feet of the first of its two 1.1-million-square-foot greenhouses. The capacity of each greenhouse is estimated to exceed 75,000 kg of cannabis annually. Emerald's Verdelite operation in Quebec is completing the buildout of its 88,000-square-foot indoor cultivation facility and is scaling up production.

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