Due Diligence / Audit
From an investor’s perspective, a “plan” is one that has a reasonable chance of being achieved.
A common request from our firm is to qualify the readiness of an applicant to become a licensed producer. For example, a capital venture firm will recruit us to audit the programs and build-out readiness of a late-stage applicant which they wish to purchase or invest in.
A cultivation licence application can navigate through the review process with Health Canada, but this does not imply their programs or designs are acceptable. Health Canada reviews maybe 5% of the documentation provided in the application, and which 5% they choose to inspect is not always predictable. This means that a sanitation program may meet requirements, but the recall program could be deficient. Also, much of the actual review of the programs comes at the pre-licence inspection (PLI) stage when the inspector audits on site.
CCI has been hired by venture capital, investment groups, law firms and other producers, to conduct due diligence investigation of both written materials and build-out readiness. Our reports provide these types of clients with insight into whether or not the applicant is ready for the PLI, how much additional work may be required, and also if it will be a good investment.
The most common areas of deficiency are with regards to the quality programs and the business plan. Quality programs must borrow heavily from pharmaceutical standards, in which our firm is experienced; they are used to mitigate risk and provide an investigational route should a quality issue is observed. With business plans, often the data points are outdated, the revenue forecast is unreasonable, or certain assumptions have no basis. From an investor perspective, a “plan” is one that has a reasonable chance of being achieved.