Fake Quote Scandal: Medical Marijuana Firm CEN Biotech Receives Major Setback

Published: Feb 20, 2015

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February 19, 2015
By Renee Morad , BioSpace.com Breaking News Staff

All eyes have been on CEN Biotech, a subsidiary of Creative Edge Nutrition, Inc. , which trades in the OTC markets, to soon become Health Canada’s largest producer of medical marijuana. But the company recently received news of a major setback, when they were notified late Friday that the federal government refused its application for a license.

“Based on a thorough assessment in line with the extensive requirements built into the Medical Marijuana Program, Health Canada has advised CEN Biotech of its intent to reject its application,” Health Canada spokesperson Stephane Shank said in a statement to The Globe and Mail.

On Thursday, Feb. 19, almost a week after the news about CEN Biotech’s rejected application, Creative Edge Nutrition published a shareholder update that said the company was pleased to announce that it had been asked to provide additional information to Health Canada in support of its application.

In April of last year, a change in Canada’s production and distribution laws made it legal for any licensed company to grow and ship medical marijuana to patients, spurring an industry that experts say could be worth as much as $1.2 billion within the next decade. Tweed Inc. , which listed its shares on the Toronto Stock Exchange’s Venture Exchange and raised $30 million through an RTO last March, was one of the first marijuana companies to become licensed in Canada. Other firms like privately-owned Tilray and Aphria (TSX Venture: APH) are also licensed under Health Canada’s Marijuana for Medical Purposes Regulations (MMPR).

But for CEN Biotech, the journey has come with some major hiccups. Before the news of its application rejection, the firm made headlines several weeks ago for its embarrassing PR gaffe, in which they published quotes from a fictitious employee in a company press release intended to dispute claims and address shareholder questions. CEN Biotech allegedly claimed to investors that the company had been licensed, or was on the verge of being licensed, by Health Canada. Rumors surfaced that this false misrepresentation caused a significant rise in the stock price of Creative Edge Nutrition, Inc.

CEN Biotech issued a press release on Dec. 21 quoting a man named Isak Weber, the supposed "head of the company’s internal public relations." Investigations conducted by The Globe and Mail revealed that Isak Weber was an employee that the firm invented.

Bill Chaaban, chief executive officer of CEN Biotech, argued that the quotes came from a real employee, Roger Glasel, who is registered with Health Canada and empowered to speak for the company.

“The information in the document was valuable and accurate, but he mistakenly used a nom de plume,” Chaaban said in an emailed statement to BioSpace. “Roger has reasons to be concerned about privacy and opted for the non de plume.”

Chaaban added that the story, which was “a painful lesson in PR—a subject we’re not experts in,” is now behind them and “the subject of a good laugh at our expense on Canadian TV.”

According to Chaaban, the Canadian situation is “different than anything being experienced in the U.S.”

“We are a startup, working towards approvals at the local and federal level after a Supreme Court ruling mandating the medical product for those in need,” Chaaban said.

Chaaban added that the company is working towards servicing the land, water and sewer, as well as various compliance issues before getting the full go-ahead. Once that is set in place, the process of recruiting, retaining and directing workers and engaging in quality control will follow.

But all of that rests on receiving a license. Until then, CEN Biotech’s progress will remain at a standstill.

Back in November, Creative Edge Nutrition, Inc. announced its plan to spin off CEN Biotech, which will be a new publicly-traded company.

"This is a unique opportunity to combine the legacy, scale and scope of a well-established business while capturing the entrepreneurial energy of a new company to better serve the needs of each," stated CEO Bill Chaaban in a company press release. "By eliminating the potential conflicts that currently exist between the dynamics created by both sectors, each business will now be positioned for significant vertically integrated growth."

Meanwhile, Creative Edge Nutrition, Inc. , which trades in the OTC markets and of which CEN Biotech is currently a subsidiary, hit a recent 52-week low of $0.0073. On Friday, Feb. 13, the stock closed at $0.0208; as of mid-day on Feb. 18, the stock was trading around $0.01 and hovered in that range the following day, Feb. 19, after the company announced that they’ve been asked for additional information from Health Canada regarding their license application.

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