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CannTrust Fires Off Response to Compliance Controversy

By Eric Volkman - Jul 22, 2019 at 6:44PM

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The company says it provides answers to regulator Health Canada's noncompliance report.

Early on Monday, CannTrust Holdings ( CNTTQ 0.00% ) said it filed a response to regulator Health Canada's report of noncompliance by the company.

In a press release, CannTrust said it submitted the response on July 17, several days after admitting that Health Canada had served the notice of noncompliance. CannTrust's report was drafted by a special committee convened by the company's board of directors. CannTrust said that all four members of the committee are independent of company management.

Marijuana plant in growing facility

Image source: Getty Images.

CannTrust provided no detail on the contents of the response and said the special committee's investigation into the alleged noncompliance was "ongoing." The investigation is one of the committee's mandates. CannTrust added that the committee has met with the company's legal counsel and other advisors on the matter.

"The Special Committee takes these issues very seriously and is committed to working with Health Canada to bring the Company into compliance," CannTrust quoted one of the committee members, Robert Macovitch, as saying.

"Although we want to move as quickly as possible, we are mindful of the critical need to be thorough," he added.

Health Canada confirmed in a statement to Canadian business newspaper Financial Post that it had received CannTrust's response. It said it would review it and other available information when determining the enforcement measures it might impose. The regulator has not provided a time frame on when it might hand down a ruling.

CannTrust announced last Monday that it received its notice of noncompliance over five grow rooms in its Pelham, Ontario, greenhouse. The quintet had received their licenses in April; however, it seems product had been grown there since October 2018. Roughly 5,200 kilos of cannabis was being cultivated in those spaces. Health Canada has placed a hold on the offending cannabis.

All told, Pelham houses 12 grow rooms. In the wake of the noncompliance report, the company voluntarily placed a hold on about 7,500 kilos grown in Pelham.

At the time, CannTrust said Health Canada's assessment was "based on observations by the regulator regarding the growing of cannabis in five unlicensed rooms and inaccurate information provided to the regulator by CannTrust employees."

Unlicensed cannabis cultivation is illegal in Canada, even though possession and consumption is entirely legal.

The company's stock hasn't recovered from the beating it took after news of the noncompliance report was released. After peaking at over $11 per share earlier this year, it's now at $2.73.

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