August 1, 2019 / 9:53 PM / 3 months ago

CannTrust discloses Ontario Securities probe, delays second-quarter results

(Reuters) - The Ontario Securities Commission has opened an investigation into CannTrust Holdings Inc (TRST.TO), the cannabis producer said on Thursday, less than a month after the health regulator found unlicensed pot cultivation by the company.

FILE PHOTO: Marijuana plants are displayed for sale at Canna Pi medical marijuana dispensary in Seattle, Washington, November 27, 2012. REUTERS/Anthony Bolante/File Photo

CannTrust said the inventory and biological assets affected by Health Canada’s action to be about C$51 million as at June 30. This is the first time that the company has provided an estimate.

The company said it would miss the deadline to file its interim results for the three and six months ended June 30 due to the “significant uncertainty” on the valuation of its inventory, assets and revenue recognition related to Health Canada’s pending decisions.

Health Canada had placed a hold on about 5,200 kg of dried cannabis harvested in the five unlicensed rooms, while CannTrust put a voluntary hold on 7,500 kg of inventory produced in the rooms.

The company, which is exploring a possible sale, said while the potential impact of the violations were still unknown, it may force restatement of some of its historical financial statements and management’s discussion and analysis for the periods ended Dec. 31, 2018 and March 31, 2019.

The company suspended the sale and shipment of all its cannabis products on July 11.

The Joint Serious Offences Team (JSOT), a partnership of the OSC and police formed to target fraud, market manipulation and other such offenses, will handle the investigation.

The company, which fired its chief executive officer and chairman, also said it had applied for a management cease trade order until it files the financial statements.

An order will prevent trading in the company’s securities by the CEO, CFO, directors or other persons who had or may have access to material information not publicly disclosed.

The OSC confirmed it had an active JSOT investigation without providing further details.

Reporting by Shanti S Nair in Bengaluru; Editing by Sriraj Kalluvila

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