Cannabis plants at Canopy Growth's Tweed facility in Smiths Falls, Ont., on Sept 18, 2018.Fred Lum/the Globe and Mail
Canopy Growth Corp. WEED-T has parted ways with its long-time accounting firm as the once-enormous cannabis company faces a financial crisis amid falling revenue and a rush to sell assets in hopes of paying down its mounting debt.
KPMG LLP, which has been the company’s independent accounting firm and official auditor since 2019 – when Canopy boasted a market value of more than $18-billion – has resigned from its role as of June 22, Canopy said in a public filing.
Thursday morning, Canopy, based in Smiths Falls, Ont., released a statement naming PKF O’Connor Davies LLP as KPMG’s replacement. The statement said the change has been “under way for some time” and “did not result from any disagreements between the company and KPMG.”
However, according to the June 22 Form 10-K that Canopy filed with the U.S. Securities and Exchange Commission, KPMG “issued an adverse opinion on the effectiveness of our internal control over financial reporting.”
Last week, Canopy acknowledged “material misstatements” related to its BioSteel sports drink division that required the company to remove tens of millions of dollars in sales from previously reported quarterly results.
How Canopy Growth, the star of Canada’s cannabis dreams, fell from grace
In a separate filing also dated June 22, Canopy said KPMG found “a lack of the required number of trained operational and IT personnel with the appropriate skills and knowledge and with appropriate assigned authorities, responsibilities and accountability related to the design, implementation and operating effectiveness of internal control over financial reporting.”
The review, according to the separate filing known as Form 8-K, also identified a “lack of segregation of duties in the review of customer orders, inadequate controls over the review and approval of sales returns, and inadequate controls relating to revenue recognition policies and procedures.”
“This also contributed to the failure to impair goodwill related to the BioSteel reporting unit on a timely basis,” the Form 8-K filing said.
Canopy is four months into a major strategic shift to what it calls an “asset-light” model in Canada. That plan involved cutting roughly 800 jobs, closing its flagship production facility, which was housed alongside its headquarters in a former Hershey chocolate factory in Smiths Falls and selling off all of its remaining cannabis cultivation and processing facilities.
The company has sold five production facilities since April 1, Canopy said Thursday, most recently completing the sale of its operations in Modesto, Calif. Those five assets have generated $81-million, getting Canopy more than halfway toward its goal of selling $150-million worth of property by Sept. 30.
Jameson Berkow