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Hexo Corp
Symbol HEXO
Shares Issued 257,004,004
Close 2019-11-15 C$ 2.35
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Hexo admits to unlicensed growing at Niagra facility

2019-11-15 17:15 ET - News Release

Ms. Jennifer Smith reports


Hexo Corp. has provided additional information about licensing at its facility in Niagara, Ont.

In November, 2018, prior to Hexo's acquisition of Newstrike Brands Ltd., the UP cannabis cultivation facility in Niagara was licensed by Health Canada and production from that facility began shortly after. Block B -- the space in question -- was included in the licence application. In October, 2018, Health Canada requested additional information for the application, pertaining specifically to the building where block B is housed. When the licence was received, the team was under the impression that block B was included in the licence. In February, 2019, Health Canada conducted an inspection of the facility, which included block B, and no observations were made about cultivation in this space. This further reinforced the assumption that it was indeed a licensed growing space.

On July 30, 2019, shortly after the Newstrike acquisition closed, Hexo discovered that cannabis was being grown in block B, which was not adequately licensed. Hexo management immediately ceased cultivation and production activities in the unlicensed space. The company notified Health Canada instantly and the regulator was satisfied with Hexo management's corrective actions. The company is confident that all product cultivated and produced in all its facilities is grown according to the highest quality standards and following all standard operating procedures. As an additional quality assurance measure, Hexo's chief operating officer personally inspected and certified any shipments for sale from that facility. All of the inventory on site at that time was held from shipping and scheduled for destruction.

"Hexo is keenly focused on producing high-quality products that Canadians can trust," said Hexo chief executive officer and co-founder Sebastien St-Louis. "Upon discovering that cannabis was being grown in an inadequately licensed area of the Niagara facility, we immediately ceased all activities and notified Health Canada. While we are disappointed with what we uncovered, we assume responsibility for any issues with UP products prior to the acquisition."

Today, the facility is no longer operational. On Oct. 24, 2019, Hexo announced it was right-sizing its operations and winding down operations in Niagara. UP cannabis is now grown at Hexo's Gatineau licensed cultivation facility in Gatineau, Que., as well as in Brantford in an indoor cultivation facility, and the company retains the ability to reinstate the Niagara facility should demand increase. On Oct. 28, 2019, the company announced it had received renewed licences, as well as new licences for its Belleville Centre of Excellence for research and for the sale of new cannabis categories.

Hexo is choosing to pro-actively address this occurrence now as it recently became aware that false information was being circulated to damage the reputation of the company. Hexo felt that it was diligent to ensure factually accurate information was available to its stakeholders.

About Hexo Corp.

Hexo is an award-winning consumer packaged goods cannabis company that creates and distributes innovative products to serve the global cannabis market. Through its hub-and-spoke business strategy, Hexo is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity.

We seek Safe Harbor.

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