“I’ve got news and it isn’t good,” said the Ascent Industries (ASNT.C) rep on the phone just now. “But we believe it will be a short process getting back on track, and welcome any Health Canada directives that helps us attain the highest levels of compliance and quality for our customers.”
That’s a paragraph no cannabis company wants to put out into the world, especially after their news earlier this week that they’d developed water soluble CBD tech which could light up the canna-beverage business, but credit to Ascent Industries for ensuring the first anyone heard about their record-keeping compliance issue was from their own people, and not the rumour mill.
To be clear: They called me to ensure I’d seen the news.
Health Canada informed Ascent Industries Corp.’s wholly owned subsidiary, Agrima Botanicals Corp., on Sept. 26, that it did not meet all of its record keeping and other compliance requirements during a Health Canada inspection conducted between Aug. 28 and Aug. 30. As a result, Agrima’s licences have been partially suspended by Health Canada. Agrima has commenced the process of addressing the identified issues and has initiated discussions with Health Canada for the reinstatement of the licences.
I’ve got to say, I’m pretty surprised by this. I’ve been through the Agrima facility a couple of times over the last few years, with the last visit being about six weeks ago, and compare to other facilities I’ve visited, theirs had the highest levels of ‘annoying adherence to the rules’ of any.
People entering rooms one at a time, having to use swipe cards on the way in and out, signing into the building, having escorts everywhere, the whole industry has to go way over the top on this stuff (IMO), but certainly Ascent went the extra mile.
That said, you only need one slip up at the wrong time.
There wasn’t a whole lot of info I could get out of Ascent about this situation today, for several reasons, not the least of which was a large portion of their executive team is traveling at the moment, but also because the information they have regarding the situation is not yet complete.
I asked if they’d be able to work to keep their plants alive during this time, and was told they believed so, but that sales and processing would need to halt while they were addressing the issues, which seems fair and not overly arduous.
I asked if they expected this to be an expensive problem to fix and was told no, that the issues appeared to be procedural. We’re not talking rat holes in the grow room or the need to move a warehouse six feet to the right, rather that their tracking system had issues they need to upgrade.
When asked if they’d heard of others getting the same sweep through by inspectors, perhaps as a pre-October law change show of strength by regulators, I was told they were asking the same question of companies and consultants they’re in contact with, but that it didn’t really matter either way because, “If we missed anything, we want to fix that thing, and this will only make us better at what we do. We have no complaints about being held to a high standard, and hope that’s always the way going forward.”
On whether this will lead to a stock sell-off tomorrow, I was told, “We understand if that’s the reaction, and obviously we can’t tell what Health Canada’s schedule will be to sign off on the fixes, but we don’t anticipate this being an issue that’s going to impact our bottom line in a big way. We’re just going to be open about it, professional about it, and ensure we’re seen as being reliable industry participants.”
Fair enough. Ascent owns Agrima Botanicals, a (usually) licensed grow facility in the BC Fraser Valley, and is also moving forward with the licensing of a large scale greenhouse, currently growing vegetables for the supermarket world, which they hope to convert to cannabis production, and the construction of a commercial kitchen/extraction operation, a stone’s throw from their main facility.
The company, which has a $194 million market cap, holds licenses in Oregon and Nevada, and is a licensed dealer with Health Canada.
I hold stock in the company and plan to acquire more on dips.
UPDATE: As expected, ASNT stock opened sharply lower on the news above Friday morning, marching down all the way to $0.55 from the previous $0.77 close, but throughout the day it climbed back consistently, ending at a solid comeback of $0.72.
Part of the reason behind that comeback has been how the company has handled the situation. A news release today broke out how they’re dealing with the situation, towit:
- Enhanced its quality assurance and regulatory compliance team with the addition of three experienced staff, headed by an individual with extensive quality assurance and quality control experience in pharmaceutical and other highly regulated industries;
- In addition, the company has conducted an audit of its record-keeping controls and procedures, identifying areas for enhancement, and commenced implementation of operational improvements;
- Further, the company has or will be relieving certain managerial staff of their positions with the company.
Again, I like how this outfit puts transparency at the forefront. We’re still low on details, but at least they’re being upfront.
— Chris Parry
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