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CannTrust Board Takes Next Steps To Gain Regulatory Approval

Wayne Duggan

CannTrust Holdings Inc (NYSE: CTST) shares rocketed higher by 16% on Monday after the company reported its next step in bringing its cannabis production business back into compliance following a September license suspension.

CannTrust said it has determined the company will need to destroy $12 million in biological assets and $65 million in inventory as a result of previous production that violated the terms of the company’s license. CannTrust had its license suspended by Health Canada on Sept. 17 after the company was found to be growing cannabis in unlicensed rooms.

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Why It’s Important

CannTrust is in a race to get its production back up and running after Health Canada shut down its entire operation in September. Since the license suspension went into effect CannTrust has only been allowed to cultivate and harvest existing crops and dry and trim marijuana from those crops. It has been unable to grow new batches of cannabis or sell its current inventory.

In addition to destroying assets in violation with its license, CannTrust said Monday it's taking other measures to ensure future compliance, including improving personnel awareness and upgrading the company’s record-keeping and inventory tracking.

“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," interim CEO Robert Marcovitch said in a statement.

Benzinga’s Take

No matter how many measures CannTrust has put in place to remedy the situation and ensure future compliance, the final green light for CannTrust must come from Canadian regulators. In the near term, at least, Monday’s rally gets CannTrust stock back above the $1 minimum listing requirement for the NYSE, potentially delaying the need for a reverse split.

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