Hexo Corp.'s auditor raised serious concerns about the company's future, as it reported a $67.9 million net loss in its latest quarter. PricewaterhouseCoopers LLP said its recent review of the Ottawa-based cannabis business showed that Hexo "did not maintain, in all material respects, effective internal control over financial reporting," and several factors "raise substantial doubt about its ability to continue as a going concern."
"The company has suffered recurring losses from operations, has had cash outflows from operating activities, and has financial liabilities that may require significant cash outflows over the next twelve months," the auditor wrote in a six-page report filed along with Hexo's fourth-quarter earnings.
It also noted that Hexo's existing funds and operational cash flow are "not sufficient" enough to fund debt repayments, capex budgets, and potential cash requirements under a senior convertible note. The auditor's report comes as Hexo is trying to quell the upheaval stemming from a recent strategic reorganization that involved the departure of co-founder and chief executive Sebastien St-Louis and chief operating officer Donald Courtney last week.
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