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Tantalus Labs sells remaining cannabis in ‘fire sale’

Published on July 27, 2023 by David Wylie

Photo: Contributed

Tantalus Labs has received court approval to sell more than 1.5 million grams of bulk cannabis, including dried flower, milled weed, and shake.

The financially destitute Maple Ridge, B.C., cannabis producer won a BC Supreme Court decision against the Canada Revenue Agency (CRA) earlier this month to sell its remaining cannabis under what’s described as a “fire sale basis.”

Tantalus brought the court action in response to the CRA’s plan to attend the facility on July 11 to ensure the destruction of its remaining cannabis excise stamps and product after the federal agency refused to renew the company’s excise licence.

The company estimated it could have generated about $2 million in revenue from its inventory over the month of July if the sale had been conducted in an orderly fashion; whereas a rushed sale would earn less than $300,000.

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Justice Shelley Fitzpatrick says in her reasons for judgment that the CRA refused to renew the excise licence as a result of its unhappiness with amounts owed.

“I am satisfied that, despite the very abbreviated sales process that has been undertaken, the process has been conducted in a reasonable manner and the proposed sale itself is reasonable,” she says.

“It is, as Tantalus and the proposal trustee have described, on a ‘fire sale basis,’ but unfortunately those are the circumstances that are before us. That circumstances arise somewhat inexplicably from the position of CRA, and CRA’s threat to enter Tantalus’ premises and destroy the inventory and/or its value.”

Selling for as little as 25 cents a gram

In an affidavit, Sutton argues the sale is in the best interest of Tantalus and its creditors, including the CRA.

“Based on my 11 years of experience working the cannabis industry, I believe, given a reasonable disposition time, the fair market value of the bulk cannabis inventory is $0.25 – $0.75 per gram (approximately $300,000-$900,000),” he says in the court document.

Tantalus is selling:

• 611,046 grams of bulk whole flower cannabis;
• 405,415 grams of bulk milled cannabis; and
• 360,940 grams of bulk cannabis shake.

According to court documents posted online by Ernst and Young, Atlantic Cultivation had the winning bid—the dollar amount was not disclosed. Cultivars include LA Kush Cake, Coastal Sage, and Banjo.

Tantalus struggled to pay taxes since early 2021

Tantalus’ CFO says in a court document that the company started struggling to pay the excise tax in February 2021, blaming COVID-19. The company managed to pay an outstanding amount of $120,000 through a payment plan. Then in 2022, Tantalus reported to the CRA it had been struggling due to logistical issues caused by major flooding in BC.

As of May, Tantalus owed the CRA more than $4.3 million.

At that point, the CRA was threatening to garnish bank accounts and income, as well as seize assets.

In July, the CRA sent Tantalus a letter saying the company didn’t meet the requirement to have its licence renewed: “You have not demonstrated that your business has sufficient financial resources to conduct business in a responsible manner.”

Tantalus has 75,000 square feet of licensed space in its greenhouse facility.