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Report on Business Cannabis Professional Monday, July 8: CannTrust non-compliance, Neptune CEO change, Alberta pot taxes, Niagara cannabis hotel

Cannabis Professional’s daily recap of industry news. View archive here.

Slow start to this summer Monday in the marijuana world, with the notable exceptions of Toronto-based CannTrust getting in trouble with Health Canada for growing in yet-to-be-licensed rooms and Quebec-based cannabis processor Neptune Wellness getting a new occupant in its corner office as of today. In Ontario, the Niagara region could soon be getting its own cannabis-friendly hotel and further west, the Alberta government has disclosed quite a windfall from weed taxes.

– Jameson Berkow

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CannTrust broke rules, grew in unlicensed rooms

Shares of Vaughan, Ontario-based cannabis producer CannTrust are falling in Monday pre-market trading after the company disclosed a non-compliance order it received from Health Canada for its Pelham cultivation facility, forcing the company to delay releasing thousands of kilograms worth of inventory.

Read our developing story here: CannTrust plunges as company faces shortages after Health Canada says pot producer broke rules

The company violated federal regulations by allowing production to occur in five grow rooms in its 12-room facility between October 2018 and March 2019, CannTrust said in a statement, adding that licenses have been subsequently issued for those rooms. As a result, Health Canada has placed a hold on 5,200kg of dried cannabis produced from those five rooms until the regulator is satisfied the products are compliant with federal regulations.

CannTrust’s Nasdaq-listed stock fell 19 per cent in pre-market trading following the disclosure.

Health Canada is conducting quality checks on those products, the company said, with results expected within the next two weeks. In the meantime, CannTrust is warning some “customers and patients will experience temporary product shortages.”

In addition to growing in unlicensed rooms, Health Canada also issued its non-compliance rating based on “inaccurate information” provided to the regulator by CannTrust employees, though the company did not disclose the nature of the inaccurate information.

CannTrust hired Andrea Kirk as vice president of quality and compliance in March of 2019 and she has since trained 17 employees on proper quality and compliance procedures, the company said.

Neptune Wellness appoints Michael Cammarata CEO

After nearly five years running the former natural health product maker, Jim Hamilton is stepping down as chief executive officer of Neptune Wellness in favour of new leadership as the Laval, Quebec-based company accelerates its transformation into one of Canada’s largest cannabis processors.

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Mr. Hamilton will remain an advisor to the board as Michael Cammarata steps into his former roles as both CEO and a member of the company’s board effective immediately. Mr. Cammarata co-founded Schmidt’s Naturals, which was eventually sold to Unilever in 2017, and also continues to run his own venture capital and private equity firm, Random Occurrence.

Neptune won its cannabis processing license from Health Canada back in January, but had already scored an extraction agreement with Canopy Growth last year. Since becoming licensed, the company has established similar agreements with other major producers such as Tilray and the Green Organic Dutchman last month. The company was originally founded in the late 1990s as a producer of natural health products such as krill oil, but since moving into cannabis in late 2017, Neptune’s TSX-listed stock has nearly tripled.

In May, the company agreed to pay founding CEO Henri Harland $5.4-million in shares to settle a constructive dismissal lawsuit filed by its former leader after Mr. Harland left the company in 2014. He had been seeking more than $8-million in total compensation.

Niagara man building pot-friendly hotel

The Pink Elephant Inn is coming to St. Catharines.

According to a report over the weekend from the St. Catharines Standard, the facility on Lundy’s Lane is already under construction and is due to open before the end of 2019 with 37 rooms, a four-season pool and (naturally) an on-site pizzeria. Cannabis will be given to guests as part of the room rental fee, the report says.

Conrad Floyd, the property’s owner, already operates two cannabis-friendly AirBnB units in Hamilton located above the grey-market dispensary he ran previously. Those units are described on the home-sharing website as a “safe and luxurious environment for the cannabis enthusiast ... smoking cannabis is permitted and encouraged.”

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Unlike those units, which allow cannabis consumption but do not provide it directly, Mr. Floyd faces potential legal problems if he intends to provide future Pink Elephant gets with complimentary cannabis. While the federal Cannabis Act does allow adults to share up to 30 grams of dried cannabis with other adults without any license or authorization - and Mr. Floyd intends to have a 19+ policy at his hotel - any act that could be interpreted as cannabis sales would require a license. Multiple cannabis-focused lawyers have pointed this out on social media.

Cannabis hospitality continues to be a growing field in Canada, with the website HotelsCannabis.com recently listing Haliburton, Ontario’s Sir Sam’s Inn and Spa as an accommodation where cannabis consumption is allowed.

Alberta made $30-million in cannabis taxes since legalization

According to year-end financial statements from the government of Alberta, roughly $30-million in cannabis-related taxes were collected by the province during the first six months of legalization.

The figure was $4-million above what the provincial government had previously forecast. Alberta is unique among Canadian provinces in actually making more money from legalization than it had expected while several other provinces have fallen below their targets. Nova Scotia, for example, sold slightly over $17-million worth of legal cannabis in roughly four months after legalization, or about $5-million below its target as online sales proved disappointing versus expectations.

Early data appears to show increasing the number of accessible brick-and-mortar cannabis retail options has a direct impact on sales. After the first handful of physical cannabis stores opened in Ontario in April, following nearly six months of online-only legal transactions in the province, total sales nearly tripled on a month-over-month basis.

Alberta currently has more licensed cannabis retail stores operating within its borders than in the rest of the country combined. As of Monday morning, the Alberta Gaming, Liquor and Cannabis (AGLC) listed 156 licensed cannabis retailers authorized for sales in the province.

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