How much will the Organigram (OGI.V) product recall cost the company?
The numbers are still accruing, but as of today’s Q1 2017 financials, at least $499k of product has been lost, a situation that isn’t helping the company’s $750k loss on the quarter.
On sales of $2.23 million (yes, that seems low to me too), the company shipped 260k grams of dried bud and 77k ml of cannabis oil in registering its loss.
Organigram claims: “After adjusting for the change in fair value of inventory and biological assets, gross margin for the quarter was more than 65% and the Company generated adjusted EBITDA of $272,839 and cash flow of $510,015.”
But the recall loss could be much larger going forward. Or not much larger. We don’t know.
As a result of the recall, the unrealized fair value adjustment of inventory includes a loss of $499,857 for the three-month period ended November 30, 2016 and there may be further adjustments to the unrealized fair value of biological assets and inventory.
CEO Denis Arsenault, predictably, spun it as positively as he could, reasoning that the whole shamozzle is a positive.
“Organigram, like many of the first movers in this emerging industry, has experienced incredible growth in our business, operating infrastructure, and within our team. We have also faced challenges and setbacks as the regulations that govern our industry and the market in which we operate continues to evolve. Thanks to the prompt action of our team, the understanding and loyalty of our patients and investors, the support of our licensed testing counterparties, and the collaboration and oversight of our industry’s regulators, the Company has been able to address these challenges and setbacks immediately and definitively.”
Definitively may be stretching it, considering there are still losses to be calculated, and the origin of the non-approved, non-organic pesticide found in the product, at levels higher than those approved in food use, and of a nature that emits hydrogen cyanide when burned, have still yet to be determined.
Organigram is working closely with Health Canada to determine the origin of the non-permitted ingredients.
That shouldn’t be too difficult, since the non-permitted ingredients have been apparently used since February 2016. Toss me your log books, Denis, and I’ll have a squizz.
— Chris Parry
For the sake of full disclosure, do you receive payment from companies to write articles about them? And are you currently in a financial dispute with Organigram with regards to a disputed bill?
We’re very clear on the site that we do marketing programs with some companies we write about, also that we’re not averse to writing negative things about clients when deserved.
We’ve also clarified previously that, indeed, Organigram has an unpaid bill from some 18 months ago, so we are conflicted, but we’ve also written positive things about the company in the time since. This story, frankly, isn’t ‘opinion’, it’s straight news. The company has failed its customers and investors, it’s cost the money, and it’s affected other companies doing business with them.
If Organigram paid you to write a positive article I am sure the story would be different. Also, you state, “… that we’re not averse to writing negative things about clients when deserved.” What other companies have you written continuously negative articles about – there is a hidden agenda here Chris. Have you written equally the same amount of articles about Mettrum and their recall or some of the other scam companies in the marijuana space?
A few things:
1) How would the story be any different if Organigram paid for a story? You think there’s a way to spin selling consumers medicine that turns into hydrogen cyanide? “On the upside, it’s a quick death.”
2) We write negatively about client companies, or companies we’re invested in, any time they deserve it. A few months back, when I was holding a significant amount of Aphria stock and they had just invested in two client companies, and they were then busted scamming veterans, I said it was a shitty thing to do and railed against them for weeks. Lifestyle Delivery Systems was a client company and did the wrong thing, and we pounded them out. Laguna Blends was a client company and missed on their promises and we told people not to buy until they fixed their deal, much to the then-CEO’s annoyance.
3) Yes, I Wrote about Mettrum when it was found out how bad their recall was, though less than I did about Organigram because the Globe broke the story well and wide, and they weren’t pulling the same bullshit OGI pulled this month.
You can say there’s a hidden agenda all you like, but we put right at the top of our site who we’re either doing business with or invested in, and again at the bottom of the site, and we put disclosures on stories where required, and we tell everyone that we’ll cut a motherfucker if they deceive investors, client or not, investment or not. It’s our big differentiator, and it’s why we do such good business – because a company that’s worried we’ll turn on them is a company we don’t want on board. The company’s that don’t believe they have anything to fear? Those are the guys running their ship the right way.
I appreciate your comments and you do bring to attention some points that need to be addressed, but I think you are attempting to make more of a story about the recall then what the recall actually means.
You stated, “You think there’s a way to spin selling consumers medicine that turns into hydrogen cyanide? ‘On the upside, it’s a quick death'”. Based on your statement I am positive you do not understand the recall, so I will post, for the sake of discussion, what a type two recall entails directly quoted from Health Canada’s website. “A Type II recall refers to a situation in which the use of, or exposure to a product may cause temporary adverse health consequences, or where the probability of serious adverse health consequences is remote. A Type III recall refers to a situation in which the use of, or exposure to a product is not likely to cause any adverse health consequences.”‘ Please note the part that concludes that long term health consequences are not an issue and from what I have heard there is no reported serious health consequences. In argument to your first point, no one will end up dying, but some feelings might get hurt.
I agree that OGI should have been testing for these chemicals and we can both agree that the industry (Health Canada) will clamp down to ensure this does not happen again.
As a whole I agree that OGI went about the recall the wrong way, from an investors stand point, with their news release 5 minutes prior to market close on that specific day.
I appreciate your articles and your commentary; although, we might not always share the same opinion or view. Thank you for taking the time to write back.
Cheers