CannTrust Archives - Green Market Report

Debra BorchardtDebra BorchardtNovember 25, 2019
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8min3850

The Facilities Are Fully Funded

On Oct. 9, 2019, The Green Organic Dutchman (OTC: TGOD) said in a press release that it was updating the market on credit financing. In the statement, it noted that “The Company may revise the construction schedule for its Ancaster and Valleyfield projects if it is unable to obtain sufficient financing on reasonable terms, within the required timeframe. There can be no assurance that this review will result in the completion of any financing transaction.” Basically, TGOD said it needed money to finish the projects as planned.

However, TGOD had previously issued an investor presentation in which it stated its Ontario projects were fully funded. This did not go unnoticed by shareholders who were surprised to learn that TGOD needed more money to complete its facilities. Then on October 18, just 10 days later,  the company said, “The Ancaster greenhouse is complete, and the Ancaster processing facility is approximately five weeks from material completion.”

On November 13, the company was able to secure financing and said, “A term sheet with an investment fund for a $40 million construction mortgage loan has also been signed, secured on the facilities at Ancaster and Valleyfield.” TGOD said that now it had this money secured, it could complete construction of the processing facility at Ancaster and complete construction of six zones in the Valleyfield hybrid greenhouse and enclose the balance of the facility with the ability to quickly expand production as the market develops.

Can’t Trust

CannTrust (NYSE: CTST) earned the social media moniker “can’t trust” after the company was caught growing plants in unlicensed rooms. This past summer in July, the company conceded that it had plants seized by regulators from five unlicensed rooms. The scandal resulted in a death spiral for the company as it lost its license, saw the CEO resign and at least a hundred workers have been laid off.

Backing up a bit, roughly around May 19 CEO Peter Aceto said the company was on track to meet its production goals. Within six weeks, the company announced that it received a report of non-compliance from Health Canada. Aceto said, “Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator. We have made many changes to make this right with Health Canada. We made errors in judgement, but the lessons we have learned here will serve us well moving forward.”

Last month, CannTrust said it planned to destroy about $12 million worth of plants and about $65 million worth of inventory. The company has seemed to clean house and may be able to move one from this “error in judgment,” but so far the market isn’t convinced and the stock is still near its year low of 77 cents.

It’s Worth More

It’s hard to convince investors to buy company stock when the company devalues the price of said stock. Zenabis Global Inc. (TSX:ZENA) (OTC: ZBISF) destroyed the value of its stock after announcing it was going to raise $20.8 million through a rights offering to holders of its common shares of record at the close of business on October 31, 2019. The stock was lately trading at 16 cents, down from its year high of $3.03. At one point in this debacle, the stock traded at one cent.

The company said that part of the strategy was to fend off a hostile takeover, but there didn’t seem to be anyone bidding on the company. Director of Corporate Communications Jonathan Anthony said that the decline in Zenabis stock is “outside our control,” yet the company absolutely trashed the value by pricing the rights at a 70% discount.
The Twitter universe though had another opinion regarding the stock. There are accusations of Zenabis insiders shorting the stock while covering themselves with the rights offering.

Stock jocks were specifically pointing to the Twitter account of @rubiconcapital for talking up Zenabis ahead of the offering that prices the rights at 15 cents. Then, the former CEO and current Chief Facilities Officer, Kevin Coft sold 2.6 million shares right before the rights offering. The company reported its earnings on November 14 but opted to not host a conference call to discuss the earnings with investors.

Our Bad. We Thought It Was Licensed

After acquiring Newstrike Brands, HEXO Corp. learned that there were plants growing in a room called Block B. The room passed inspection by Health Canada and Hexo said Health Canada said nothing in the report gave them cause for concern. However, within days of the closing of its acquisition the company said it became aware of the illegal plants and notified Health Canada. The mistake was blamed on a new software program run by the federal regulator. Still, the plants were destroyed as a result of the snafu.

While market watchers didn’t seem to criticize Hexo in the same manner that CannTrust was criticized, it certainly didn’t help the company. The facility is no longer being used for growing cannabis.

In addition to the bogus Block B plants, in June, Hexo had said it would do $400 million in revenue in 2020 and double net revenue in the fiscal fourth quarter. Just four months later the company instead reported that revenue was $15.4 million a drop from the third-quarter revenue of $15.9 million, so it wasn’t even an increase. The net revenue for 2019 was $59 million making it abundantly clear that $400 million in 2020 is never going to happen and so that number was retracted but not replaced with a new one.


William SumnerWilliam SumnerSeptember 18, 2019
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4min3480

It’s time for your Daily Hit of cannabis financial news for September 18, 2019.

On the Site

Overcoming Canada’s Cannabis Shortage

Shortages of Canadian marijuana appeared immediately after recreational sales of cannabis starting from October 2018.  Hence, there is a typical Canadian refrain almost lately.  Because of little inventory remaining, many stores are closed three days a week, and provincial distributors are blaming federal regulations and producers. Some of the giant retailer’s licenses have also frozen and some are limited to 25 stores on the state level.

Supreme Cannabis

The Supreme Cannabis Company, Inc. (FIRE.TO) (SPRWF) reported net revenue of $19 million for the fourth quarter ending June 30, 2019, a 90% increase sequentially. The net loss for the quarter was $421,000. Supreme Cannabis’ core recreational flower brand, 7ACRES, accounted for the company’s marked increase in revenue, growing 443% year-over-year from $3.5 million in Q4 2018 to $19 million in Q4 2019.

In Other News

CannTrust

In a blow to the beleaguered company, CannTrust Holdings Inc. (TSX: TRST) (NYSE: CTST) announced that is has received a Notice of Licence Suspension under section 64(1) of the Cannabis Act, citing noncompliance. The notice is a partial suspension for the company’s license for cultivation and a full suspension of its license for standard processing, medical sales, cannabis drugs and research. CannTrust will still be able to cultivate and harvest existing lots or batches previously propagated, as well as the ancillary such as drying, trimming, and milling. Health Canada will reinstate CannTrust’s license if the reasons for the suspension no longer exist or if CannTrust demonstrates that the suspension was unfounded.

Flower One

Flower One Holdings Inc. (CSE: FONE) (OTCQX: FLOOF) has entered a sale-leaseback agreement with Treehouse Real Estate Investment Trust, Inc. for the company’s 25,000 square-foot indoor cultivation and production facility in North Las Vegas, including the adjacent vacant lot. The company is planning to build a commercial kitchen and manufacturing space on the property. Construction is expected to begin by the second quarter of 2020. Treehouse will purchase the property for $20 million. “Flower One is thrilled to form a long-term partnership with Treehouse, enabling us to access significant capital to continue our expansion in Nevada and potentially beyond,” said Kellen O’Keefe, Chief Strategy Officer at Flower One. “Flower One is actively pursuing multi-state opportunities and plans to utilize its partnership with Treehouse in order to do so.”


Debra BorchardtDebra BorchardtAugust 16, 2019
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4min4780

The Ontario Securities Commission approved a request by CannTrust Holdings Inc. (NYSE: CTST) for a management cease trade order (“MCTO”) under National Policy 12-203 – Management Cease Trade Orders. Such a request means that the Chief Executive Officer, Chief Financial Officer and members of the board of directors or other persons who had or may have access to material information that has not been publicly disclosed can not trade shares of the company. CannTrust said that it does not affect the ability of investors who are not insiders to trade.

In addition to that, CannTrust said it will probably miss its filing deadline of August 14, 2019, to file an interim financial report for the three and six month periods ending June 30, 2019. CannTrust is now in a holding pattern waiting on decisions from Health Canada as a result of the company’s facilities not complying with the regulations as stated by law. “Health Canada has advised the Company that it is unable to provide any guidance about the timing or content of its decisions concerning the Company.”

Health Canada could order total destruction of the seized inventory, but so far hasn’t indicated if it will do so. CannTrust also said that has not had any discussions with Health Canada with regards fixing the situation it finds itself in.

NYSE

CannTrust is currently listed on the New York Stock Exchange and said it has kept the exchange up to date on its interactions with Health Canada. The company said in its statement that “The NYSE advised the Company that as a consequence of the Company’s announcements concerning its audited financial statements for the year ended December 31, 2018 and its unaudited financial statements for the quarter ended March 31, 2019, the Company is viewed as no longer having a complete annual report on Form 40-F on file for the year ended December 31, 2018.”

For now, CannTrust shares will continue to trade on both the Toronto Securities Exchange and the NYSE. “However, the NYSE advised the Company that (a) it will closely monitor the status of the Company’s late filing and any related public disclosures for up to six months from its due date, and (b) if the Company fails to file its annual report and any subsequent reports within six months of their filing due dates, the NYSE will determine, in its sole discretion, whether to halt trading in the Company’s securities or whether to allow the Company’s securities to trade for up to an additional six months, depending upon the circumstances.” The NYSE also noted that it could begin delisting the company shares at any time if the circumstances warranted it.

Financial Impact

At the beginning of the scandal, CannTrust repeatedly stated that it expected to take some sort of financial hit, but couldn’t determine what that would be. At this time, CannTrust says the estimated value of the inventory affected by the Health Canada decisions is roughly $51 million. This accounts for 53% of the total company inventory and about 30% of the total biological assets. CannTrust still has approximately $250 million in cash and cash equivalents.

 


Debra BorchardtDebra BorchardtAugust 12, 2019
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8min5570

It’s time for your Daily Hit of cannabis financial news for August 12, 2019.

On The Site

CannTrust

After the market closed on Friday, CannTrust Holdings Inc. (NYSE: CTST)said it received a report from Health Canada telling the company that “Its manufacturing facility in Vaughan, Ontario has been rated non-compliant with certain regulations.”CannTrust stock is dropping over 25% to lately trade at roughly $2.26 in pre-market trading as shareholders learn about the continuing problems with the facilities causing more uncertainty.

The news that the company’s facility has failed a recent inspection is troubling because it was supposed to have addressed problems from previous inspections in which the company was found to be growing cannabis in rooms that hadn’t received licenses.  Health Canada has said that it is currently unable to provide any guidance about the timing or content of its decisions regarding CannTrust.

Saving Money

On August 6th we published an article that illustrated the savings for consumers and additional profits for cultivators that could be produced through the use of a properly organized Cannabis Cooperative Association (“CCA”). This article describes the savings for consumers and the additional profits for cultivators in the movement of cannabis in the form of extracted oil.

As we have said on multiple occasions, a CCA is the most financially efficient structure for engaging in business in California’s cannabis industry. The utilization of a CCA for the movement of cannabis as extracted oil produces even greater price reductions for consumers and increased profits for cultivators than with flower. This occurs because more costs are incurred between the cultivator and the consumer in the movement of extracted oil than in the movement of flower.

Novel?

It was announced on January 2019 that the European Food Safety Association, EFSA is about to make a decision in order to classify CBD oil and other CBD products as a novel food. This decision was announced at the Novel Food Commission meeting which was held in Brussels in 2016. This led to a final imminent decision very soon and EFSA considered CBD products as Novel Food.

In recent times, there has been tremendous growth in food products available in the market which eventually included Cannabidiol. And, according to reports, it is clear that the European CBD Market is going to encounter a boom in the near future. Eventually, the regulators started taking a closer look at the CBD products and oil available in the European market.

In Other News

MediPharm Labs

MediPharm Labs (MEDIF) reported that its second-quarter revenue was $31.5 million, a 43% increase over Q1 2019, reflecting Canadian cannabis extraction-only industry and the ramp-up of new committed contracts. Gross Profit was $11.3 million, a 65% increase over Q1 2019, while Gross Margin was 36% compared to 31% in Q1 2019, reflecting increased production and production efficiency that continues to improve as the Company realizes economies of scale. Adjusted EBITDA was $7.7 million, 79% higher than Q1 2019, while Adjusted EBITDA margin was 24% compared to 20% in Q1 2019. Net income before tax was $4.1 million compared to a net loss of $0.3 million in Q1 2019

MariMed

MariMed (MRMD) report that its revenues for the second quarter of 2019 were $25.7 million, up 774% compared to $2.9 million in the same year-ago quarter. The increase in revenue was primarily the result of hemp seeds sales totaling $25.2 million dollars, of which $22.0 million was recognized in the quarter. The remaining revenue is expected to be recognized in the third and fourth quarters of 2019 upon payment from the buyer. Revenues excluding the hemp seed sales increased 24% to $3.7 million versus the year-ago quarter.

Gross profit for the second quarter of 2019 was $8.9 million or 34.8% of revenues, up 341.1% from $2.0 million or 68.9% of revenues in the same quarter from a year ago. Gross profit in MariMed’s core businesses as a percentage of revenues increased to 72.4% in the second quarter of 2019 from 68.9% in the year-ago quarter. Net income for the second quarter of 2019 was $4.7 million or $0.02 per fully diluted share, improving from a net loss of $393,000 or $(0.00) per basic share in the year-ago quarter.

Medicine Man Tech

Medicine Man Technologies, Inc. (OTCQX: MDCL) announced that it has entered into a binding term sheet to acquire Colorado-based Dabble Extracts, an award-winning cannabis concentrate company that specializes in processing medical and recreational marijuana into premium-grade extracts.

Under the terms of the term sheet, the company will pay $3,750,000 for Dabble Extracts. The purchase price will consist of $750,000 in cash and 996,678 shares of common stock priced at $3.01/share, which is the average closing price of the Company’s stock for the five trading days prior to August 6, 2019. The terms can also be referenced in the 8-K, which outlines the closing conditions. The obligations of the Company and Dabble Extracts under the term sheet are conditioned upon the satisfaction of mutual waiver of certain conditions, including regulatory approval.

Nabis

Nabis Holdings Inc. (CSE: NAB) (OTC: NABIF has entered into a Definitive Agreement for the acquisition of 100% of the membership units of a licensed medical marijuana business in the state of Arizona.

The Asset, licensed under the provisions of the Arizona Medical Marijuana Act, operates a dispensary in Phoenix, Arizona. The dispensary in Phoenix has been operating since 2015 with proprietary branded products and wholesale operations, including an established distribution network serving more than 50% of the dispensaries in Arizona.

The audited sales for 2017 and 2018 were USD $7.4 million and $8.7 million respectively.  2019 unaudited revenue is on pace for sales of USD $9 million. The dispensary specializes in top-tier flower, vape pens, concentrates, edibles, tinctures, and CBD products.

 


Debra BorchardtDebra BorchardtAugust 12, 2019
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4min4730

After the market closed on Friday, CannTrust Holdings Inc. (NYSE: CTST)said it received a report from Health Canada telling the company that “Its manufacturing facility in Vaughan, Ontario has been rated non-compliant with certain regulations.” CannTrust stock is dropping over 25% to lately trade at roughly $2.26 in pre-market trading as shareholders learn about the continuing problems with the facilities causing more uncertainty.

The news that the company’s facility has failed a recent inspection is troubling because it was supposed to have addressed problems from previous inspections in which the company was found to be growing cannabis in rooms that hadn’t received licenses.  Health Canada has said that it is currently unable to provide any guidance about the timing or content of its decisions regarding CannTrust.

According to a company statement, Heath Canada’s rating was based on observations made during an inspection completed during the period July 10-16, 2019, which noted:

  • The conversion of five rooms from operational areas to storage areas, which were used for storage since June 2018 without prior approval of Health Canada;

  • The construction of two new areas without prior approval of Health Canada, one of which was used to store cannabis since November 2018;

  • Insufficient security controls at the manufacturing facility;

  • Inadequate quality assurance investigations and controls;

  • Standard operating procedures that did not to meet the requirements under regulations; and

  • Documents or information that was not retained in a manner to enable Health Canada to complete its audit in a timely manner.

The company has held back cannabis inventory as a result of the non-compliance issues. The company has said that it is trying to remediate the problems with Health Canada which has resulted in changes in the company’s executive suite.

The company’s interim CEO Robert Marcovitch said, “We are continuing to work hard to regain the trust of Health Canada, our patients, shareholders, and partners. We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada’s report. We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the Company into full regulatory compliance as quickly as possible.”

Separately, CannTrust said that it pre-paid the outstanding mortgage of approximately $13.3 million to Meridian Credit Union which was secured by its greenhouse in Pelham, Ontario, as well as associated interest and administrative costs.


Debra BorchardtDebra BorchardtAugust 9, 2019
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4min4690

CannTrust Holdings Inc. (TSX: TRST)( NYSE: CTST) said that its independent auditor, KPMG LLP, Chartered Professional Accountants told the company that as of August 8, 2019, it is withdrawing its report dated March 27, 2019 on the company’s consolidated financial statements as at and for the year ended December 31, 2018 and its interim report to the Audit Committee dated May 13, 2019 on the unaudited condensed interim consolidated financial statements as at and for the three month period ended March 31, 2019.

In addition to that, KPMG said the reports should no longer be relied upon. CannTrust confirmed that KPMG remains CannTrust’s independent auditor.  The stock is falling another 5% on Friday morning to lately trade at $2.12.

“We will continue cooperating with our auditor and regulators, and take whatever steps are necessary to restore full trust in the Company’s regulatory compliance. Our medical patients, customers, shareholders, and employees deserve nothing less”, said Robert Marcovitch, the Company’s Chief Executive Officer.

This stems from the recent trouble surrounding the company’s illegal growing of cannabis in unlicensed rooms. That resulted in a Health Canada review as to whether CannTrust can release inventory that is being held and whether the company can retain its licenses. Health Canada has apparently placed a hold on inventory which includes approximately 5,200kg of dried cannabis that was harvested in the previously unlicensed rooms in Pelham until it deems that the company is compliant with regulations. In addition, CannTrust said it has instituted a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the previously unlicensed rooms.

KPMG’s decision was prompted by CannTrust’s caution against reliance on its financial statements for the year ending December 31, 2018 and for the three months ended March 31, 2019, as well as the recent sharing with KPMG of newly uncovered information from the Special Committee’s investigation, including information that led to senior leadership changes announced on July 25, 2019.

Internal emails showed that former CEO Peter Aceto was aware of the illegal growing and was terminated “with cause.” It also seems that another former CEO and board chair Eric Paul sold stock in the company in November 2018 and had been aware of the illegal growing as well. Mark Litman another director of the company also sold shares during November. Thus, insider trading accusations are flying around as well.

Also back in November, the company’s former CFO noted that there were “deficiencies” in the company’s disclosure record in a letter to the Ontario Securities Commission. He said the company had agreed to take “remedial steps” to address them.


William SumnerWilliam SumnerJuly 31, 2019
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4min3680

It’s time for your Daily Hit of cannabis financial news for July 31, 2019.

On the Site

Brightfield Group Names Top 5 CBD Companies

The CBD industry is becoming much more saturated than it was before the passing of the U.S. Farm Bill late last year, with new products entering the market, threatening to take a slice of the CBD pie that the early producers of CBD have enjoyed until this time…Brightfield Group listed the Top 5 CBD Companies that the research group says “continue to make a name for themselves” within the growing CBD market. Here’s what we know about these various companies…

TILT Holdings

Following the market close and at the end of the evening on Tuesday, TILT Holdings Inc.  (CSE: TILT) (OTCQB: SVVTF) said that it refiled amended and restated management’s discussion and analysis for the quarters and year ended December 31, 2018, and for the three month period ended March 31, 2019, and 2018  (the YE 2018 MD&A and the Q1 2019 MD&A together.  The documents were prepared following a continuous disclosure review by the British Columbia Securities Commission of the company’s disclosure records.

CannTrust

Following the disastrous revelation that the company began growing cannabis plants in grow rooms without licenses, CannTrust Holdings Inc. (TSX: TRST)(NYSE: CTST) said that its special committee has retained Greenhill & Co. Canada Ltd. as the Special Committee’s financial advisor, to assist in a review of strategic alternatives. Those options include a sale of the company, a merger or changes to the company’s strategy. The interim CEO has said the talks are happening at only a conversation level at this time.

In Other News

Harvest Health & Recreation

Harvest Health & Recreation, Inc. (CSE: HARV,) (OTCQX: HRVSF) announced that it has entered a term sheet for a secure term loan of up to $225 million. The loan comes from an investment fund managed by Torian Capital Partners, and will be made available to Harvest in three tranches of $75 million. Harvest will use the proceeds from the loan to fund expansion initiatives. “Harvest is in a strong financial position in the cannabis industry and this growth capital, which we believe is provided at an attractive financing cost will enable us to deliver on our commitment to enhance shareholder value,” said Steve White, CEO of Harvest. “With greater financial flexibility, we are better equipped to execute our strategy to aggressively expand our retail and wholesale footprint across the U.S. into key markets, while seeking to build and acquire brands for broad distribution,” White concluded.


Debra BorchardtDebra BorchardtJuly 31, 2019
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4min20360

Following the disastrous revelation that the company began growing cannabis plants in grow rooms without licenses, CannTrust Holdings Inc. (TSX: TRST)(NYSE: CTST) said that its special committee has retained Greenhill & Co. Canada Ltd. as the Special Committee’s financial advisor, to assist in a review of strategic alternatives. Those options include a sale of the company, a merger or changes to the company’s strategy. The interim CEO has said the talks are happening at only a conversation level at this time.

Unlicensed Grow Rooms

Just a few weeks ago, a Health Canada audit found that the company was growing cannabis in five unlicensed rooms and that inaccurate information was given to the regulator by CannTrust employees. CannTrust said that it accepted Health Canada’s non-compliance finding and took actions to ensure current and future compliance.

The growing in the five unlicensed rooms took place from October 2018 to March 2019 during which time CannTrust had pending applications for these rooms. The company received the licenses for each of the five rooms in April 2019.  There are 12 rooms in total at the facility.

Health Canada placed a hold on inventory which includes approximately 5,200kg of dried cannabis that was harvested in the previously unlicensed rooms in Pelham until it deems that the company is compliant with regulations. In addition, CannTrust said it instituted a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the previously unlicensed rooms.

At this time, the company said it has suspended all sales and shipments. A former employee Nick Lalonde told Bloomberg News that he was “instructed to put up fake walls to obscure unlicensed plants in photos submitted to Health Canada.”

Top Executives Bad Behavior

Internal emails showed that CEO Peter Aceto was aware of the illegal growing and has since resigned. It also looks like he lost approximately C$8.2 million in stock options due to his termination with cause. It also seems that another former CEO and board chair Eric Paul sold stock in the company in November 2018 and had been aware of the illegal growing as well. Mark Litman another director of the company also sold shares during November. Thus, insider trading accusations are flying around as well.

Also back in November, the company’s former CFO noted that there were “deficiencies” in the company’s disclosure record in a letter to the Ontario Securities Commission. He said the company had agreed to take “remedial steps” to address them. Board member and interim CEO Robert Marcovitch said those issues had been addressed but didn’t say what they were. He has also said that the company will “clean house.”

The numerous class-action lawsuits are lining up as securities lawyers see this as chum in the water.


Debra BorchardtDebra BorchardtJuly 12, 2019
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4min12150

Beleaguered cannabis company CannTrust Holdings Inc. (NYSE: CTST) shares were falling 10% in early trading after the company announced it placed a hold on product sales. After the market closed on Thursday, the company said it would voluntarily “hold on sale and shipment of all cannabis products as a precaution while Health Canada visits and reviews its Vaughan, Ontario manufacturing facility.”

Earlier this week CannTrust admitted that a Health Canada audit found that the company was growing cannabis in five unlicensed rooms in its Pelham facility and inaccurate information was provided to the regulator by CannTrust employees. As a part of that announcement the company said it volunteered that there may be storage problems at the Vaughan facility. It seems this decision to stop sales is related to Health Canada heading over to that facility to review its compliance with the rules.

The stock closed at $4.94 on Friday, July 5. It was lately trading at $2.76 on news that all sales have been halted.

The company said that all medical sales made through customer service or through the e-commerce site were stopped as of midnight July 10. The company said it is working with regulators as they review the company’s grow facility. CannTrust also stated that the impact on its future financial results is undetermined. In addition, the said in a statement that a Special Committee of the Board of Directors had been established. “The Special Committee is comprised of independent members of the Board of Directors. The purpose of the Special Committee is to investigate this matter in its entirety,” read the statement.

Unlicensed Grow Rooms

CannTrust said it had accepted Health Canada’s non-compliance finding and had taken actions to ensure current and future compliance. The company stated that the growing in the unlicensed rooms took place from October 2018 to March 2019 during which time CannTrust had pending applications for these rooms with Health Canada. These rooms were constructed in accordance with regulations and Good Production Practices, and licenses were issued for each of the five rooms in April 2019.  There are 12 rooms in total at the facility.

Health Canada has apparently placed a hold on inventory which includes approximately 5,200kg of dried cannabis that was harvested in the previously unlicensed rooms in Pelham until it deems that the company is compliant with regulations. In addition, CannTrust said it has instituted a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the previously unlicensed rooms.

Patients and consumers who have questions about CannTrust products can contact the Company’s customer care team at customercare@canntrust.ca and 1-855-RX4-CANN.

 

 

 


Debra BorchardtDebra BorchardtJuly 8, 2019
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4min16530

CannTrust Holdings Inc. (TSX: TRST)(NYSE: CTST) stock has fallen almost 20% after the company announced that a Health Canada audit found that the company was growing cannabis in five unlicensed rooms and inaccurate information was provided to the regulator by CannTrust employees. While the company’s name says trust, it seems Health Canada couldn’t trust the company to wait until the grow rooms were licensed before beginning work.

CannTrust said it has accepted Health Canada’s non-compliance finding and has taken actions to ensure current and future compliance. The company stated that the growing in the unlicensed rooms took place from October 2018 to March 2019 during which time CannTrust had pending applications for these rooms with Health Canada. These rooms were constructed in accordance with regulations and Good Production Practices, and licenses were issued for each of the five rooms in April 2019.  There are 12 rooms in total at the facility.

Health Canada has apparently placed a hold on inventory which includes approximately 5,200kg of dried cannabis that was harvested in the previously unlicensed rooms in Pelham until it deems that the company is compliant with regulations. In addition, CannTrust said it has instituted a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the previously unlicensed rooms.

“Our team has focused on building a culture of transparency, trust, and excellence in every aspect of our business, including our interactions with the regulator. We have made many changes to make this right with Health Canada. We made errors in judgment, but the lessons we have learned here will serve us well moving forward,” said Peter Aceto, Chief Executive Officer. The company couldn’t acknowledge how these actions would affect its financial statements.

Health Canada is conducting quality checks of product samples on hold at Pelham, with results expected in 10 to 12 business days. Due to the product on hold, some CannTrust said its customers and patients will experience temporary product shortages. The company said it is exploring options to mitigate these shortages.

CannTrust Reacts

CannTrust said it has implemented a number of corrective actions including:

  • Further comprehensive employee training
  • Retained external advisors for an independent review of compliance processes
  • Comprehensive review and update of processes and procedures
  • Voluntarily advised Health Canada of issues that may impact compliance at its Vaughan facility regarding product storage

The company has also hired Andrea Kirk, for the newly created role of Vice President, Quality. Since joining the company in March 2019, she has hired and trained 17 quality and compliance professionals.

The stock has had a 52-week high of $11.97 and was lately trading at $3.95.



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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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