Sat | Jul 4, 2020

Canadian partner exits Epican investment

Published:Friday | May 29, 2020 | 12:16 AM
File
Epican CEO Karibe McKenzie inspects a marijuana plant, code-named Girl Scout Cookie, at the company’s farm at Mavis Bank, 
St Andrew, in December 2018.
File Epican CEO Karibe McKenzie inspects a marijuana plant, code-named Girl Scout Cookie, at the company’s farm at Mavis Bank, St Andrew, in December 2018.

CANADIAN COMPANY The Green Dutchman, TGOD, announced this week that it sold all of its 49 per cent stake in Epican Medicinal Limited, which operates local cannabis herb houses and a farm in Jamaica.

TGOD held an investor call on Thursday but did not disclose the sale price.

“On May 25, the company sold its interest in Epican to ­another shareholder of Epican for a ­nominal amount,” TGOD said in a release prior to the investor call.

As reasons for exiting the ­investment, the Canadian investor cited a history of operating losses, recent economic developments in Jamaica due to the pandemic, and TGOD’s decision to no longer pursue opportunities to export cannabis from Jamaica. Epican, which has been reported as being controlled by Karibe and Dwayne McKenzie, has not ­responded to requests for comment.

The disposal comes nearly two years after TGOD initially bought into the Jamaican company in a cash deal worth CDN$8.3 million. At the time, Epican was fairly ­valued at CDN$1.5 million.

Epican operates two stores at Marketplace in Kingston and Jimmy Cliff Boulevard in Montego Bay. During a cursory check on walk-in traffic at one of those stores, the herb house seemed well patronised, with a stream of 20 persons passing through in one hour. However, the amounts spent were not ascertained.

TGOD booked CDN$3 million ($318 million) of impairments on the share of Jamaica assets held in Epican, which assumed a ­carrying value of CDN$2.7 ­million for the assets at December 2019. The ­reason the ­impairment was greater than the carrying value was due to TGOD’s ­accounting for its share of losses at CDN$150,000 as well as foreign exchange movements.

The transaction to dispose of the 49 per cent equity stake in Epican also came with a partial repayment of debt.

“Upon completion of the disposition, Epican repaid CDN$250,000 of a CDN$700,000 loan owing by Epican to the ­company and issued the ­company a promissory note to repay the balance,” the Canadian company said in its statement to shareholders.

The sale occurred after the close of the quarter and so information on the price of the transaction was not immediately disclosed.

Overall, TGOD reported a CDN$73-million net loss for its March quarter on revenues of just CDN$3.0 million due to a CDN$53-million global impairment.

In the 2019 financial year, Epican generated CDN$2.4 million ($240 million) in ­revenue for TGOD, but recorded a net loss of CDN$2.2 million, ­according to TGOD’s ­disclosure. The Jamaican company’s total assets were once estimated at CDN$20.3 million in past ­financials released by TGOD.

steven.jackson@gleanerjm.com