Canadian cannabis producer CannTrust Holdings plans to destroy $77 million Canadian dollars ($58 million USD) in an effort to comply with federal regulators.
CannTrust announced in September that Health Canada suspended the company’s licenses to produce and sell cannabis after regulators discovered the company was growing cannabis at unlicensed facilities. In July, a whistleblower alerted Health Canada to unlicensed cultivation in Pelham, Ontario. In August, they found five rooms that had been converted to product storage without approval.
Since then, CannTrust has fired its former CEO Peter Aceto and forced the resignation of founder and chairman Eric Paul. CannTrust will destroy C$12 million in cannabis plants and C$65 million in inventory and the process will allow the company to get back into accordance with its license. Some of the product being destroyed was returned by patients, distributors and retailers.
“CannTrust is confident that its detailed remediation plan will not only address all of the compliance issues identified by Health Canada, but it will also build a best-in-class compliance environment for the future,” said interim CEO Robert Marcovitch.
CannTrust said it would provide a detailed report to Health Canada that attempts to fulfill all requirements to reinstate the licenses. Investors are optimistic that the company can convince Health Canada to reinstate the licenses as shares in the company went up 30 percent after the announcement.
CannTrust also laid off 180 people in order to restrict its workforce. The layoffs will result in annual cash savings of $9 million and a $2 million reduction in future severance costs. The majority of the layoffs affected employees in cultivation and customer service roles.
“I didn’t think this was going to happen because it was business as usual at the company, despite all the news reports about the unlicensed growing. We were told to keep cultivating, and just keep doing our jobs,” said an employee who was terminated.