CannTrust Holdings (NYSE:CTST) is down 15% premarket on modest volume in response to a recent audit of its Pelham, Ontario greenhouse facility by Health Canada showing non-compliance with certain regulations.
Specifically, the company was growing cannabis in five unlicensed rooms during the period from October 2018 to March 2019 while its applications were under review (licenses were issued in April 2019). Company employees also provided inaccurate information to the regulator.
Health Canada has placed a hold on ~5,200 kg of dried cannabis that was harvested from the (then) unlicensed rooms until it confirms that the weed is compliant with regulations.
CannTrust has also voluntarily held ~7,500 kg of pot harvested at its Vaughan facility that was produced in previously unlicensed rooms until it can be verified as compliant.
Operations at both sites remain fully licensed at this point.
The company says that the holds may result in temporary product shortages for some customers, adding that it does not know, at this point, if the situation will affect financial results.
CEO Peter Aceto says, "Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator. We have made many changes to make this right with Health Canada. We made errors in judgement, but the lessons we have learned here will serve us well moving forward."