Epsilon Healthcare has confirmed that its Crystal Mountain manufacturing facility is likely to close as the company continues to overhaul its Canadian operations.

In a quarterly update to the ASX, the firm said the hydroponics wholesaling business, which is based in Langley, British Columbia, “is not likely to continue to operate” following an operational review in North America.

Insolvency management proceedings, which are similar to an administration process in Australia, have already begun for two other wholly owned Canadian subsidiaries, Canndeo Canada and 0970203 B.C. Ltd.

Closed: the message which greets visitors to Epsilon’s Crystal Mountain manufacturing website

Two other dormant entities in Canada, which Epsilon said have no assets, liabilities or operations, will also be deregistered.

The ongoing restructure follows Epsilon’s grim assessment of the Canadian market, where it said business conditions have seen a “protracted deterioration” for 12 months.

The impact of Covid on supply chains, negative trading conditions and an “overall decline in Canadian cannabis markets generally” all hit the company, it said back in March.

Epsilon stressed that its Canadian restructure is not expected to impact operations in Australia.

The update came as Epsilon secured another A$2.1m through a capital raise, with $600,000 to be settled this week and a further $1.5m subject to certain conditions.

The strategic placement, that will see 17.5m share issued to an unnamed investor at $0.034 per share, will provide working capital at its Southport facility.

Meanwhile, Epsilon said it remains confident that a commercial partnership between THC Pharma and The Valens Company will be extended beyond a three-month trial at the end of May.

Under the agreement, Valens has access to Epsilon’s GMP manufacturing facility in return for Valens funding all “mutually budgeted operational and capital expenditure”.

The two companies have set a sales target for medicinal cannabis products of $2 million during the trial period.

Epsilon said production at its Southport facility ramped up during the quarter for both Valens and non-Valens customers.

“In Q1 2022 the company produced over 20,000 units of tinctures and 5,000 units of dried flower bottles both for Valens and non-Valens customers, a production level reflective of only one month of the Valens partnership,” the firm said.

“As an indicator of the continued ramp up, in April alone, a further 6,500 fried flower bottles were packed for release at the Southport facility.”  

It added that its cash receipts in the first quarter of $555,000 was “not reflective of the true post-Valens run rate”, with THC Pharma’s total receipts currently exceeding $1m.

Turning to its clinic business, Tetra Health, Epsilon said it saw “modest growth” in consultations of approximately 10% on the previous quarter with an unaudited revenue increase of 25%.

Steve has reported for a number of consumer and B2B titles over a journalism career spanning more than three decades. He is a regulator contributor to health journal, The Medical Republic, writing on...