Cannabis CEO Blames Company’s Auditor for Half-Billion-Dollar Writedown

Article by Tim Kiladze, Globe and Mail

Cannabis CEO blames company’s auditor for half-billion-dollar writedown TIM KILADZE Cambridge, Mass.-based Tilt reported its 2018 earnings on May 1 and announced a US$496-million writedown. PABLO PORCIUNCULA BRUNE/AFP/GETTY IMAGES

The departing chief executive officer of Tilt Holdings Inc., a Canadian-listed cannabis company hoping to expand in the United States, is blaming his accounting firm for a writedown worth a half-billion U.S. dollars.
“The statement about Canada and the medicinal market that was in our [financial statements] was inaccurate,” Alex Coleman said in an interview on Friday, after Tilt announced he was stepping down as CEO but would stay on as chairman.
Cambridge, Mass.-based Tilt reported its 2018 earnings on May 1 and announced a US$496-million writedown. The non-cash charge relates to goodwill impairments tied to the company’s reverse takeover of Canada’s Sante Veritas Holdings Inc. in November.
As part of the reverse takeover, Tilt acquired three other U.S. businesses – Baker Technologies LLC, Briteside Holdings LLC and Sea Hunter Therapeutics LLC – and merged them to create a vertically-integrated company that offers cannabis production, retail software for dispensaries and consulting services. The combined company started trading as Tilt on the Canadian Securities Exchange (CSE) in December.
In its financial statements for the year ended Dec. 31, Tilt recorded impairment charges on three of these businesses: US$132-million for Sante Veritas Holdings Inc., US$158-million for Baker Technologies, and US$206-million for Briteside Holdings.
All three companies operate in Canada, and according to the statements, the combined writedown reflects the “outlook on the medical cannabis industry in Canada as a result of the legalized recreational market.” Tilt is hoping to obtain a licence from Health Canada to cultivate cannabis for the recreational market, but there is no assurance it will succeed. (For now it is constrained to the medicinal market.)
In the interview, Mr. Coleman took issue with this assessment, which he said came from Tilt’s auditor, MNP LLP. “I would say that MNP is underresourced and that kind of language was not attributed to our company,” he said. MNP did not respond to a request for comment.

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