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Concerns raised over medical marijuana firm’s press releases

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Concerns raised over medical marijuana firm’s press releases

The Globe and Mail
Published Wednesday, Dec. 31 2014, 6:50 PM EST
Last updated Wednesday, Dec. 31 2014, 7:30 PM EST
Comments closed

Creative Edge Nutrition, the company seeking to become Canada’s largest producer of medical marijuana, has been dropped by its investor relations firm due to concerns over improper press releases issued to the markets.

The news release service Marketwired quietly reissued two press releases by Creative Edge Nutrition on Wednesday, removing the phone number for New York communications firm 5WPR as the investor relations contact, and removing the name of William Swalm as the spokesman for the company. In a separate move, 5WPR also removed Creative Edge from a list of clients on its website.

A source close to the matter told The Globe and Mail the move came at the insistence of 5WPR, after the firm learned Creative Edge had issued press releases under its name, but without its knowledge or approval. Marketwired said it was contacted by Creative Edge to remove the references to the New York firm, but gave no further information.

Creative Edge is a Michigan-based company that is seeking to become Canada’s largest grower of medical marijuana through its Ontario subsidiary CEN Biotech. Its application to open “the world’s largest” marijuana production facility in Lakeshore, Ont. is currently being evaluated by Health Canada.

However, there are mounting concerns over the company’s conduct, including numerous misrepresentations made by Creative Edge and CEN Biotech, as well as a large number of insider stock sales by chief executive officer Bill Chaaban over the past year.

The Globe and Mail published an article on Dec. 20, detailing several cases where Creative Edge appeared to make false or misleading claims to investors, through public statements and press releases, which caused the stock price to rise. But while Mr. Chaaban was touting the company to investors and wooing Health Canada, he was also selling off his own shares by the millions. Mr. Chaaban sold more than 71 million shares in 2014, for more than $4.6-million (U.S). Most of that was profit, since, as an insider, his shares were obtained at a fraction of a penny.

In response to The Globe and Mail’s article, the company issued a press release on Dec. 21 that purported to be an interview between a shareholder and Creative Edge’s “internal public relations spokesperson,” Isak Weber. In that press release, Mr. Weber claimed The Globe and Mail’s figures were “grossly misstated,” that the newspaper had “created their own story,” and said the company could not respond to numerous requests for an interview because it was under an SEC-mandated “quiet period.”

However, several elements of the press release are problematic. The assertion that Creative Edge is under a quiet period mandated by the U.S. Securities and Exchange Commission is misleading. As a non-SEC reporting company trading on the U.S. over-the-counter (OTC) market, SEC quiet period rules do not apply to the company, according to the regulator’s rules. The Globe and Mail has tried to reach Mr. Weber but could not find any contact information or evidence of his employment at the company or as a public relations professional. The company has provided no evidence that the figures detailing Mr. Chaaban’s share sales are misstated.

5WPR asked for its name to be removed from that press release. The company asserts that it was not aware of the press release, nor did it approve its content, despite being listed as the contact for further questions.

The second of the two problematic press releases was issued Wednesday morning, when Creative Edge announced James Robinson had taken the reins as CEO of Creative Edge, so that Mr. Chaaban could focus on operating the Canadian medical marijuana subsidiary CEN Biotech, which is to be spun-out into a separate operation. 5WPR’s name was also later expunged from that announcement when a revised version was released.

An attempt by The Globe and Mail to reach Mr. Chaaban or Creative Edge Nutrition through the e-mail address provided on the updated press releases failed when the e-mail bounced back. A spokesman for Health Canada could not be reached for comment.

Based in Manhattan, 5WPR’s client list includes McDonald’s, M&M’s, and the Jackie Robinson Foundation.

Creative Edge Nutrition, a penny stock that soared to a market capitalization of more than $350-million when the company erroneously claimed to have been given an operating licence by Health Canada, has lost considerable value in recent months. The shares have fallen 34 per cent since the Dec. 20 Globe and Mail article, and closed at 1.32 cents on Wednesday. The company’s market capitalization has fallen by $24-million since the article was published.

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