b'CASES GOODWINresults and prospects. large return of its product by Zenabis. They further Lead plaintiff and counsel have been appointed inallege that this was due to the companys deficient the case. In February 2020, the parties filed a jointmanufacturing and quality control processes that led to scheduling motion, setting an April 3, 2020 deadline foradulterated cannabis products, adding that the facilities filing an amended complaint and any motion to dismisswere kept in dilapidated conditions which generated briefing to be completed by September 2, 2020. mold spores and caused crop infections. Sundial Growers, Inc.: In re Sundial Growers, Inc.In the New York Supreme Court action, the parties have completed briefing on defendants motion to Securities Litigation, Case No. 1:19-cv-08913- dismiss and the motion is set to be heard during 2020. ALC (S.D.N.Y. Sept. 25, 2019)In the federal matter pending in the Southern District Sundial Growers, Inc. (Sundial) is a Canadian basedof New York, the court has appointed lead plaintiff company that began producing cannabis in Decemberand lead counsel, and plaintiffs filed their amended 2018 and operates several facilities in Canada and thecomplaint on February 18, 2020. Both matters are United Kingdom. ongoing. On August 1, 2019, Sundial completed an IPO, sellingZynerba Pharmaceuticals, Inc.: Whiteley v. 11 million shares of common stock at $13 per share. InZynerba Pharmaceuticals, Inc. et al., Case No. its Registration Statement the company stated that it2:19-cv-04959-NIQA (E.D. Pa., Oct. 23, 2019)was a producer of high-quality and premium cannabis produced in its indoor grow rooms located in Alberta,Zynerba Pharmaceuticals, Inc. (Zynerba) is a clinical Canada.stage specialty pharmaceutical company that focuses On August 16, 2019, MarketWatch published anon developing pharmaceutically-produced transdermal article alleging the existence of severe quality controlCBD therapies for rare and near-rare neuropsychiatric deficiencies in Sundials products that would likelydisorders. impact 10% of the companys sales for the quarterZynerba began developing a transdermal CBD gel, ended June 30, 2019allegedly equivalent to 60%Zygel, for treating children and adolescent patients with more product than the company sold in its entire firstdevelopmental and epileptic encephalopathies (DEE). quarter of 2019. The article also claimed that priorIn April 2018, the company initiated phase two of one to the IPO one of the companys corporate buyers,of their clinical trials, which was a six-month open label Zenabis, returned a half ton of the companys productmulti-dose clinical trial designed to evaluate the efficacy on the purported basis that it contained visible mold,and safety of Zygel. In September 2019, Zynerba parts of rubber gloves and other non-cannabis material.announced the results of the clinic trial, concluding that Relatedly, in its disclosure of its financial results forit was well-tolerated although nearly all the patients the quarter ended June 30, 2019, Zenabis stated thatexperienced adverse events ranging from mild to certain third-party producers failed to supply saleableserious, and eight patients discontinued the study. That cannabis in line with contractual obligations and thatsame day, the companys stock price fell approximately they had to return a total of 554 kg of cannabis to the22% to close at $8.84 per share.supplier. Zenabis did not name any of the third-partyDays later, investors filed a putative class action alleging suppliers. violations of Sections 10(b) and 20(a), and Rule 10b-5, In September 2019, investors filed parallel state andagainst the company and its CEO and CFO, alleging federal actions against Sundial, alleging violations ofthat the company made materially false and misleading Sections 11, 12(a) and 15 of the Securities Act againststatements in their public filings and statements the company, certain directors and officers, andbecause they failed to disclose the adverse events that the companys underwriters. Plaintiffs allege thatwere allegedly occurring at the time. Instead, plaintiffs Registration Statement contained materially false andallege that the company continued to tout the benefits misleading statements because it failed to discloseof CBD for treating patients suffering from DEE and that some of its cannabis batches were of low-qualitycontained only generic, boilerplate representations and not fit for sale to its customers, which caused aabout the risks related to poor clinical results. 14'