THC Global (ASX:THC) has been forced to justify its continued existence on the ASX after the troubled cannabis company delivered its half-year financial statements with an important proviso.

Independent auditor K.S. Black & Co. delivered what is known as a qualified opinion, saying it could not verify THC Global’s sales forecasts of its medical cannabis oils.

THC Global valued its property, plant and equipment at $18 million, based on a financial model that assumed $23 million in medicinal cannabis sales.

“Our qualification arises as a result of not being able to verify and obtain sufficient and appropriate audit evidence to verify those sales forecast assumptions in the financial model prepared by management in relation to the carrying amount in the financial statements of the CGU [cash generating unit] due to, in part, the early stage nature of the commercial dialogue and formal arrangements of those sales projections at scale,” independent auditor Scott Bennison wrote.

Previous sales forecasts have been delayed by longer lead times on customs clearance of key inventory inputs as a result of COVID-19, he added.

Two days after releasing the half-year reports on August 31, THC Global stood down its chief executive, effective immediately, and announced a strategic review into its business aimed at driving “sustainable revenue growth”.

The qualified opinion also attracted the notice of the ASX, which asked the company whether it intended to seek an unqualified opinion with regard to its future financial statements and whether it considered “its level of operations sufficient to warrant continued quotation of its securities on the ASX “.

In a letter to the ASX released on Wednesday, THC said it would continue to liaise with the independent auditor to enable the auditor to better understand the company’s financial model.

THC said its sales forecasts assumptions were extrapolated from actual figures achieved in July, “with reasonable growth assumptions and actual purchase orders that were in its sales pipeline”.

Chief operating officer Sonny Didugu said that THC was a “diversified global cannabis company with operations in both Australian and Canada seeking to establish its presence in multiple additional jurisdictions” and had more than 9,500 shareholders and a significant presence in the Australian medicinal cannabis industry.

The company is “concerned by the enquiry of the ASX into such a fundamental assumption of its listing on the ASX,” Didugu wrote on behalf of THC.

An ASX spokesman noted the independent auditor’s qualified opinion and said the exchange’s query consisted of “routine questions in these circumstances”.

The questions provide the company with an opportunity to address the qualified opinion, he said.

While THC lost $5.6 million in the first half, Didugu highlighted its 63 per cent revenue growth to $3.5 million and $9 million in cash and cash equivalents.

The strategic review underway may precipitate changes to the company’s operations and the board believes those changes “will positively dispose the Company to an increased level of business and corporate activity that are representative of an ASX Listed Company”.