Weeding Thru EconomicWeeding Thru EconomicDamages Doesn’tHave to be a BuzzkillHave to be a Buzzkill

March 7, 2019

Presented by:Sheri GallantCPA CMA CFFCPA, CMA, CFF

Weeding Through Economic Damage

Personal Injury / Wrongful Death / Accident Benefits• Will there be an

increase in motorincrease in motor vehicle accidents?

• Children or unsuspecting adultsunsuspecting adults ingesting edibles

• Long-time user may i t i l timpact survival rates, ability to maintain employment, income l llevels

Weeding Through Economic Damage

Medical

Liability – Medical vs. Recreational

Producer Courier to Customer Customer

Medical

Customer

RecreationalTransit

to Retail Outlet

Retail Outlet

Producer Transit to Province Warehouse Customer

Courier to Customer

Weeding Through Economic Damage

Business Interruption/Property Damage• Cultivators vs Processers• Cultivators vs. Processers

Licensed – Standard or Micro (Craft) Doesn’t mean they sell what they grow Significant, rigorous testing/quality requirements

Same requirements as for medical This can result in entire crop being destroyed

• What does that mean for BI? Losses are only recoverable if

impact on salesimpact on sales Need to only consider what

would have been sold versus what was producedwhat was produced

Weeding Through Economic Damage

N b f Pl

Consider this example:

Number of PlantsSeed/Clip/ Veg State Cultivating Harvesting

% Harvested

Grams per Plant

Strain 1 1,100 1,000 900 82% 24Strain 2 1,100 800 500 45% 35Strain 3 1,100 1,150 1,000 91% 28Strain 4 1,100 900 700 64% 40

Throughout each stage, plants are discarded Between harvesting and packaging, tests may result in entire

b i d t dcrop being destroyed Note – Grams per Plant vary by strain

Weeding Through Economic Damage

Should Cannabis be treated as a commodity?• Prior to legalization, companies were able to

produce more than they could sell Customers who had medical prescription p p

would go elsewhere, permanent loss of this customer

Long tail impact!

• After legalization, significant shortage in product to sell If lose a medical customer, presumably will be

able to sell any cannabis produced once operations resumed to other customers

Short tail impact!

• As more producers enter into the arena, may revert back to long tail impact

Weeding Through Economic Damage

Stock Loss – dependent on li di hpolicy wording, we have seen

• Replacement Cost • Actual Cash ValueActual Cash Value• Up to $ per gram based on what

state plant is in at DOLD i d C bi Dried Cannabis

Plants in flowering Plants in Vegetative State Clones Mother plant

Weeding Through Economic Damage

Retail Operations –Provincial vs. Private• Theft

Li bili• Liability• Shortages of Product

What Next ??• What Next ??

ThankThank You!You!

MDD F i A t tMDD ForensicAccountants148 Fullarton Street, Suite 1704

London, Ontario N6A 5P3

T 519 432 1123 F 519 432 1503

Sheri Gallantsgallant@mdd.com

T 519.432.1123 F 519.432.1503

> mdd.com

MDD ForensicAccountants @mdd1933 MDD Forensic Accountants

Presented By

Sheri GallantCPA, CMA, CFFJoined MDD: 1990

Overview of ExpertiseBusiness Interruption, Personal Injury &Business Interruption, Personal Injury & Wrongful Death, Products Liability & Recall, Physical Damages, Stock & Contents, Accident Benefits and Fidelity Claims.Claims.

IndustriesAgriculture, Retail & Wholesale, Manufacturing and Processing, PowerManufacturing and Processing, Power Generation, Transportation and Consulting Sectors.

Firm O iOverview & Areas of& Areas of Expertise

Who We Are

> Originally founded in 1933.

> 11 Offices in Canada.

> MDD’s forensic accountants specialize in a wideMDD s forensic accountants specialize in a wide range of insurance and litigation matters.

> We are routinely retained for evaluations that require our extensive knowledge of accounting, business, operational and manufacturing processes across many industries.

> MDD’s exceptional dedication, singularly qualified experts and demonstrated results in this highly

i li d f ti h l b thspecialized area of accounting have long been the hallmark of our firm.

Our Core Practice Areas

Builders Risk & Soft Costs Fraud & Investigations

Business & Shareholder

Franchise LitigationAccident Benefits

Business & Shareholder Disputes Intellectual Property

Business Interruption Liability Losses

Business Valuation Litigation Support Property Damage

BI, loss of income

Catastrophe Services Lost Profits

Contingency & Entertainment Claims

Personal Injury & Product Recall

Physical Damages

Damage

LiabilityProduct Recall

/ profit

Class Actions

Entertainment Claims

Cyber Risks

Disability InsuranceClaims

Physical Damages

Product Liability & Product Recall

Reports Insurance Values

Stock & Content Losses

FidelityLitigation

Divorce & MaritalDisputes

Environmental Damages

Stock & Content Losses

Expropriation

Subrogation

Surety Bonds & Funds Control Services

Extra Expenses Toxic Tort

Fidelity Claims Valuable Papers

Proprietary & Confidential

Proprietary and Confidential – This presentation contains information that is confidential andproprietary to MDD Forensic Accountants and may contain trade secrets It is intended to be strictlyproprietary to MDD Forensic Accountants and may contain trade secrets. It is intended to be strictlyconfidential and is to be used solely for discussion purposes. No part of this presentation may bedisclosed to any third party or reproduced by any means without the prior written consent of MDDForensic Accountants. This presentation does not constitute work product, opinion or a deliverable.

Thi t ti t i i f ti i f d i th f i t d d f l idThis presentation contains information in summary form and is therefore intended for general guidanceonly. It is not intended to be a substitute for detailed research or the exerciseof professional judgment. MDD Forensic Accountants does not accept any responsibility for lossoccasioned to any person acting or refraining from action as a result of any material in this presentation.On any specific matter, reference should be made to the appropriate advisor.y p , pp p

MDD Forensic Accountants refers to one or more of MDD International Limited, a UK private companylimited by guarantee (“MDD-International”), its network of member firms, and their related entities. MDDInternational and each of its member firms are legally separate and independent entities. MDDInternational does not itself engage in the provision of services to clientsInternational does not itself engage in the provision of services to clients.

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