CannTrust Trying to Clear Mess Created Due to Unlicensed Cultivation

CannTrust Trying to Clear Mess Created Due to Unlicensed Cultivation

CannTrust Holdings (TSX: TRST) (NYSE: CTST) said that its application for a management cease trade order has been approved by the Ontario Securities Commission.

The management cease trade order prohibits the company’s directors and executive officers from trading in securities until two full business days after all filings CannTrust is required to make under Ontario securities laws are made, including filing of the Q2 financials.

The order does not affect the ability of investors who are not insiders to trade in the securities of the company. CannTrust had already voluntarily imposed a blackout period on its directors and executive officers trading in the company’s securities.

CannTrust has been trying to clear the mess created due to its unlicensed cultivation.

The company estimates the value of the inventory and biological assets impacted by the pending Health Canada decisions is roughly $51 million as of June 30. The impacted inventory represents about 53% of the company’s total inventory while the impacted biological assets represent about 30% of the company’s total biological assets as of June 30.

CannTrust had terminated CEO Peter Aceto and made senior management changes following the ongoing investigation by a special committee of its board of the company’s non-compliance with Health Canada regulations.

Under the supervision of the special committee, the company is preparing a remediation plan for submission to and consideration by Health Canada.

So far, the company has not had any substantive discussions with Health Canada concerning remediation matters. Health Canada has yet to provide any guidance about the timing or content of its decisions.

Health Canada has placed a hold on inventory which includes approximately 5,200kg of dried cannabis that was harvested in the unlicensed rooms in Pelham. CannTrust has put a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the unlicensed rooms.

In the event that Health Canada orders the destruction of all or a portion of the product grown in the unlicensed rooms, the company’s results for the second quarter of 2019 would be materially adversely impacted, according to a CannTrust statement.