CannTrust Nailed for Selling Unlicensed Product

CannTrust Nailed for Selling Unlicensed Product

In a new development, CannTrust Holdings has had a setback today as it emerged that an audit by Health Canada on its Pelham facility in Ontario found that the company was in violation of a set of regulations.

The company said Monday the rating was based on observations by the regulator regarding the growing of cannabis in five unlicensed rooms and inaccurate information provided to Health Canada. CannTrust said it had pending applications for production in the five rooms and that licences were eventually obtained in April. Additionally, CannTrust Holdings has already kept aside 7,500 kilos of cannabis harvested at its Vaughan facility and is prepared to wait before it passes the regulatory standards.

Canadian regulators slapped the firm with the warning after they found that growing of cannabis took place in five unlicensed rooms in the firm's Pelham, Ontario facility, dubbed the Niagara Perpetual Harvest Facility.

The company also said some of the product from these previously unlicensed rooms was distributed for sale.

"Ultimately this will tarnish the relationship between CannTrust and Health Canada. This is a high priority for us to correct these mistakes, particularly with Health Canada", Aceto said.

CannTrust said it has implemented some corrective actions, such as the retention of external advisers for an independent review of its compliance process and it has voluntarily advised Health Canada of "issues that may impact compliance at its Vaughan facility regarding product storage".

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When asked if the product placed on hold would become a material loss for the company, a CannTrust representative declined to confirm and said further updates would be shared at a later time.

The forward-looking information and statements in this news release include statements relating to the expected timeframe and resolution for the completion of Health Canada's quality product testing and the Company's response to Health Canada's compliance report. In the press release, it couldn't predict what the financial impact on the company would be.

CannTrust could in theory lose its license, Brochstein said, although he added that he does not think it's a likely outcome.

The shares were down $1.40 or almost 22 per cent at $5.06 in early afternoon trading on the Toronto Stock Exchange after falling as low at $5.03 just after the market opened.

"The fact the company never spotted this, or indeed still doesn't know how it happened, is a concern", he said.

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