Cannabis companies engaged in 'switching' to pass inspections
Here is some information I came across while looking into the Bonify problem. The Bonify recall was reported in Let’s Toke Business December 28, 2018 and had to do with an alleged purchase and sale of illegal cannabis by a Licensed Producer, in this case, Bonify located in Manitoba.
The process is known in the industry as “switching.” What happens is a licensed grower produces, we’ll say, 10 units of biomass that will not pass the Health Canada standard. So they purchase 10 units of clean biomass from a black market or craft grower and sell them the dirty 10 units back at a discount that the black market grower will convert into oil. The regulated grower must sell back an equal amount of product to balance the books for a Health Canada inspection. The regulated grower must test the biomass purchased, again for the record. The black market buyer doesn’t have to test the product as they are not regulated.
It seems the problem arose because some of the regulated growers told the black market suppliers that the transaction was legal because it was covered under the Access to Cannabis for Medical Purposes Regulations (ACMPR). The result is that some of the black market growers came out of the dark side and began to talk about what they were doing under the impression it was legal. Of course it was and is not legal. This played some role in the problem coming to light.
This is information that came to my attention while I casually looked into what was going on with Bonify. As yet I cannot tie “switching” directly to Bonify. As Bonify is a private company, unless Health Canada clarifies the situation, we are unlikely to find out. This general description might also describe what Ascent Industries (CSE: ASNT) was doing. As a public company possibly heading into a judicial appeal if they receive an adverse ruling from Health Canada, we stand a better chance for clarification.