Related Party Matters
|6 Months Ended|
Jun. 30, 2021
|Related Party Transactions [Abstract]|
|Related Party Matters||Related Party Matters
Emerald Health Sciences
In January 2018, the Company entered into a securities purchase agreement with Emerald Health Sciences, pursuant to which Emerald Health Sciences purchased a majority of the equity interest in the Company, resulting in a change in control transaction. While Emerald Health Sciences no longer maintains a controlling interest in the Company, it holds a significant equity interest and have provided the Company with financing under the Amended Credit Agreement, as disclosed in Note 4.
On December 19, 2019, the Company entered into an Independent Contractor Services Agreement with Dr. Avtar Dhillon, a member of Emerald Health Sciences Board of Directors and its CEO, pursuant to which Dr. Dhillon will provide ongoing corporate finance and strategic business advisory services to the Company. In exchange for his services, Dr. Dhillon initially received a monthly fee of $10,000, with (i) $5,000 paid each month and (ii) $5,000 accruing from the effective date of the agreement and payable upon the Company’s completion of a material financing. On March 30, 2020, the Company and Dr. Dhillon amended the Independent Contractor Services Agreement by agreeing to defer payment of 100% of Dr. Dhillon’s consulting fees until the Board of Directors determines that the Company has been sufficiently financed to make such payments at which point the Company agreed to pay Dr. Dhillon his accrued consulting fees, and 10% of his accrued consulting fees, less applicable tax and other withholdings. The deferral was paid concurrent with the August 2020 Financing. After the August 2020 Financing, Dr. Dhillon continues to receive a monthly cash fee of $10,000 per month for his services. The Board of Directors reviews the monthly rate paid to Dr. Dhillon within 90 days of the end of each fiscal year. The Independent Contractor Services Agreement has an initial term of one year and automatically renews thereafter unless terminated earlier by either party. The Independent Contractor Services Agreement may be terminated by either party for cause upon written notice to the other party if the other party defaults in the performance of the agreement in any material respect or materially breaches the terms of the agreement, or without cause upon 30 days’ prior written notice to the other party. Under this agreement, for the three and six months ended June 30, 2021, the Company incurred fees of $30,000 and $60,000, respectively. For the the three and six months ended June 30, 2020, the Company incurred fees of $36,387 and $66,387, respectively. As of June 30, 2021 and December 31, 2020, the Company has accrued $10,000 of consulting fees and $7,032 in expense related to the Independent Contractor Services Agreement, respectively.
In addition, there is a Board Observer Agreement in place with Emerald Health Sciences to allow Dr. Dhillon to act as a representative of Emerald Health Sciences as a non-voting observer in meetings of the Board.
Emerald Health Pharmaceuticals, Inc.
As of June 30, 2021, Jim Heppell and Punit Dhillon are board members of the Company and Emerald Health Pharmaceuticals, a subsidiary of Emerald Health Sciences. As of June 30, 2021, Jim Heppell is also a board member of Emerald Health Sciences. The Company’s CEO, Punit Dhillon also served as a board member of Emerald Health Sciences until he tendered his resignation from such board on August 10, 2020.
The Company shares the same office location as Emerald Health Pharmaceuticals in San Diego, CA. The Company entered into a month-to-month lease agreement, effective April 30, 2021, with Emerald Health Pharmaceuticals as the sublessor and the Company as the sublessee. Under the sublease agreement the Company pays monthly base rent of $4,000 in addition to its share of common area expenses and utilities. For the three and six months ended June 30, 2021, the Company recognized $6,000 in expense under the sublease. As of June 30, 2021, the Company has paid Emerald Health Pharmaceuticals $4,000 for a security deposit which is included in other assets in the Company's Condensed Consolidated Balance Sheets.
Emerald Health Biotechnology España, S.L.U.
In January 2021 and April 2021, the Company entered into two separate Collaborative Research Agreements pursuant to a Master Services Agreement with Emerald Health Biotechnology España, S.L.U, a research and development entity with substantial expertise in cannabinoid science and a subsidiary of Emerald Health Research, Inc. which is 100% owned by Emerald Health Sciences. Under the agreements, Emerald Health Biotechnology España, S.L.U. will provide research and development services pursuant to an agreed upon project plans for the research and development of CBDVHS and preclinical development services for novel analogues. The term of each agreement is initially for a one-year period. The agreements will terminate upon delivery and acceptance of the final deliverables under the project plans or if either party is in breach of the terms of the contract and such breach remains uncured for 45 days. Payment for services are based on the negotiated amounts for the completion of agreed upon objectives as provided in the Collaborative Research Agreements. For the three and six months ended June 30, 2021, the Company incurred $73,678 and $143,278, respectively, in expenses under the CollaborativeResearch Agreements. As of June 30, 2021, the Company has recognized prepaid asset in the amount of $10,390 to be offset against future research and development costs under the Collaborative Research Agreements.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef