Special Committee investigation has concluded,
Company continues to establish the foundation for a sustainable
future
VAUGHAN, ON, Oct. 24, 2019 /CNW/ - CannTrust Holdings Inc.
("CannTrust" or "the Company", TSX: TRST, NYSE: CTST) provided a
progress update regarding:
- The submission of CannTrust's detailed remediation plan to
Health Canada. The Company anticipates completing all of the
activities described within the plan by the end of the first
quarter of 2020.
- The conclusion of the Special Committee's independent
investigation, the findings of which have been accepted by the
Company's Board of Directors.
- A further temporary reduction in CannTrust's workforce in order
to align with reduced operations following Health Canada's partial
suspension of its licenses.
- Anticipated timing for the filing of CannTrust's financial
statements.
Submission of Remediation Plan to Health
Canada
CannTrust submitted its detailed remediation plan to
Health Canada on October 21, 2019.
The remediation plan specifies the actions the Company has both
taken and intends to take in order to address the measures
identified by Health Canada as necessary for the reinstatement of
the Company's licenses. It includes details about an expanded
comprehensive internal training program, a strengthened governance
and operations framework, infrastructure enhancements, and
prescribed accountabilities and timelines for a variety of
specified tasks. In addition, as outlined in the Company's news
release dated October 14, 2019, these
actions include the destruction of both biological assets and
inventory that were not authorized by the Company's license. The
Company will also take steps to recover all cannabis from
distributors and retailers that has not already been sold to end
consumers or returned to CannTrust.
The Company anticipates completing all of the activities
described within its remediation plan by the end of the first
quarter of 2020, although completion will be subject to Health
Canada's input and approval. To that end, the Company and Health
Canada have already engaged on various aspects of the remediation
plan.
"CannTrust is confident that its remediation plan addresses all
of the compliance issues identified by Health Canada," stated
Robert Marcovitch, CannTrust's
Chairman and interim Chief Executive Officer. "The Company has
already made significant progress in this regard, and is committed
to completing all of the remediation actions outlined in the plan,
with input from Health Canada as appropriate. We believe
that, taken together, these actions will establish a strong
compliance culture that will meet regulatory standards."
Conclusion of Special Committee's
Investigation
CannTrust's Special Committee was formed
following the Company's receipt of non-compliance reports from
Health Canada on July 8, 2019. The
Special Committee's mandate included completing an independent
investigation to identify the causes of the Company's regulatory
non-compliance, developing a plan for addressing those causes,
providing oversight for any operational actions necessary to bring
the Company into regulatory compliance, and evaluating the
Company's strategic alternatives.
The Special Committee's investigation into the Company's
regulatory non-compliance went beyond the observations in the
Health Canada compliance reports, and included a comprehensive
independent review of the Company's email and other documents, as
well as interviews with current and former employees, certain
members of senior management, and all members of the current Board
of the Directors.
The Special Committee has shared its findings with the Company's
Board of Directors and Health Canada, and this aspect of the
Special Committee's mandate is now complete.
"Over the past three months, the Special Committee has worked
tirelessly with its legal counsel and other professional advisors
to complete a thorough and independent investigation," stated
Mark Dawber, Chair of the Special
Committee. "Importantly, the Special Committee's investigation
found no evidence that any of the remaining members of the Board
were aware of or engaged in any non-compliance issues."
"I am very appreciative of the Special Committee's determined
efforts to complete the investigative phase of its mandate.
Leveraging the Special Committee's findings, CannTrust has taken
swift action to begin addressing the factors that led to its
non-compliance, including several involuntary departures from the
Company's leadership team," stated Mr. Marcovitch. "Our
focus is now firmly on the future, strengthening our executive
leadership through the addition of operational and regulatory
expertise. At the same time, we are acting to improve the Company's
governance practices and to attract new Directors as part of a
Board renewal process."
Rightsizing Cost Structure Pending License
Reinstatement
To maximize efficiencies and maintain a
strong balance sheet, the Company will temporarily streamline its
workforce by as many as 140 people, or approximately one quarter,
through a series of phased layoffs between late October and the
conclusion of 2019. This action is prudent because of the Company's
significantly reduced operations following Health Canada's partial
suspension of its licenses. The headcount reductions are expected
to result in monthly cash savings of approximately $0.4
million, and the Company will incur severance of up to $0.8
million in the event that employees are not recalled within 35
weeks. The realized cash savings as a result of this layoff will be
dependent on the timing of employee recalls pending reinstatement
of the Company's licenses by Health Canada.
"This was a difficult decision, but it is imperative that our
workforce reflects the current requirements of our business," said
Mr. Marcovitch. "Reducing the Company's current operating expenses
supports our financial sustainability, and places us in the best
position to fully resume production upon the reinstatement of our
licenses. We look forward to rehiring at that time, and once again
delivering high-quality, innovative products to both our customers
and patients."
Timing of Financial Statements
CannTrust continues to
work closely with its professional advisors, with a view towards
refiling its restated audited financial statements for the year
ended December 31, 2018, its restated
interim financial statements for the first quarter of 2019, and its
interim financial statements for the second and third quarters of
2019, together with the related management's discussion and
analysis for the corresponding periods, within the next 60 days.
The actual timing for filing these statements may be affected by
intervening events.
Default Status Report
In accordance with its
obligations under the alternative information guidelines set out in
National Policy 12-203 – Management Cease Trade Orders ("NP
12-203"), which require the Company to provide biweekly updates
until such time as the Company is current with its filing
obligations under Canadian securities laws, this new release is
intended to supplement the information contained in the Company's
news releases dated August 16,
August 29, September 12, September
26 and October 10, 2019. The
Company intends to continue to comply with the alternative
information guidelines of NP 12-203 and confirms that, except as
previously disclosed, there are no subsequent specified defaults
(actual or anticipated) within the meaning of NP 12-203.
Forward-Looking Statements
This press release contains
"forward-looking information" within the meaning of Canadian
Securities laws and "forward-looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of
1995 and other applicable United
States safe harbor laws, and such statements are based upon
CannTrust's current internal expectations, estimates, projections,
assumptions and beliefs and views of future events. Forward-looking
information and forward-looking statements can be identified by the
use of forward-looking terminology such as "believes", "expect",
"likely", "may", "will", "should", "intend", "anticipate",
"potential", "proposed", "estimate" and other similar words,
including negative and grammatical variations thereof, or
statements that certain events or conditions "may", "would" or
"will" happen, or by discussions of strategy.
The forward-looking information and statements in this news
release include statements relating to corrective actions being
taken by the Company, and Health Canada's pending determinations.
Forward-looking information and statements necessarily involve
known and unknown risks, including, without limitation: actions
taken in respect of the Company's products by its customers and
regulators; results of Health Canada's investigation, including
orders and compliance measures required by Health Canada and their
impact on the operations, inventory, assets and financial condition
of the Company; the Company's implementation of remediation plans
and related actions; regulatory approval; risks associated with
general economic conditions; adverse industry events; loss of
markets; future legislative and regulatory developments in
Canada, the United States and elsewhere; the cannabis
industry in Canada generally; and,
the ability of CannTrust to implement its business strategies.
Any forward-looking information and statements speak only as of
the date on which they are made, and, except as required by law,
CannTrust does not undertake any obligation to update or revise any
forward-looking information or statements, whether as a result of
new information, future events or otherwise. New factors emerge
from time to time, and it is not possible for CannTrust to predict
all such factors. When considering these forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in CannTrust's Annual
Information Form dated March 28, 2019
(the "AIF") and filed with the applicable Canadian securities
regulatory authorities on SEDAR at www.sedar.com and filed as an
exhibit CannTrust's Form 40-F annual report under the United States
Securities Exchange Act of 1934, as amended, with the United States
Securities and Exchange Commission on EDGAR at www.sec.gov. The
risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.
The TSX and NYSE do not accept responsibility for the adequacy
or accuracy of this release.
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SOURCE CannTrust Holdings Inc.