By Kristine Owram
(Bloomberg) -- CannTrust Holdings Inc. plunged 26% in pre-
market trading Monday after the troubled Canadian pot company
said a second facility breached regulations.
Health Canada, the government agency that oversees the
cannabis industry, has informed CannTrust that its manufacturing
facility in Vaughan, Ontario broke several rules, the company
said in a statement. CannTrust has already been struggling with
the fallout from breaches at its greenhouse in Pelham, Ontario,
where it grew cannabis in unlicensed rooms.
The Pelham breaches led to the firing of Chief Executive
Officer Peter Aceto, a halt on all sales and shipments of
CannTrust products, and a joint investigation by securities
regulators and police. Its auditor KPMG LLP withdrew its reports
on the Canadian cannabis company’s year-end and first-quarter
results.
Health Canada found the following problems at the Vaughan
facility:
* Five rooms converted from operational areas to storage without
prior approval; these were used for storage since June 2018
* Two new areas were constructed without Health Canada approval,
one of which was used to store pot since November
* Insufficient security controls
* Inadequate quality assurance investigations and controls
* Standard operating procedures that didn’t meet regulatory
requirements
* Documents or information were not retained in a way that would
enable Health Canada to complete its audit in a timely matter
“We have retained independent consultants who have already
started addressing some of the deficiencies noted in Health
Canada’s report,” interim CEO Robert Marcovitch said in the
statement. “We are looking at the root causes of these issues
and will take whatever remedial steps are necessary to bring the
company into full regulatory compliance as quickly as possible.”
Health Canada has told CannTrust that it’s unable to
provide any guidance about the timing or content of its
decisions regarding the company. Penalties for breaching
cannabis regulations can include the suspension or cancellation
of a company’s license.
CannTrust also said Monday it has pre-paid the outstanding
mortgage of C$13.3 million ($10 million) on its Pelham
greenhouse to Meridian Credit Union. That was the company’s only
secured indebtedness.
The company has hired Greenhill & Co. to explore potential
alternatives, including a sale.
