After trading hours on Friday, August 9, 2019, CannTrust received a report from Health Canada notifying the Company that its manufacturing facility in Vaughan, Ontario has been rated non-compliant with certain regulations. CannTrust has accepted Health Canada’s findings and remedial actions are underway.
Heath Canada’s rating was based on observations made during an inspection completed during the period July 10-16, 2019, which noted:
- The conversion of five rooms from operational areas to storage areas, which were used for storage since June 2018without prior approval of Health Canada;
- The construction of two new areas without prior approval of Health Canada, one of which was used to store cannabis since November 2018;
- Insufficient security controls at the manufacturing facility;
- Inadequate quality assurance investigations and controls;
- Standard operating procedures that did not to meet the requirements under regulations; and
- Documents or information that were not retained in a manner to enable Health Canada to complete its audit in a timely manner.
As previously announced, the Company implemented a voluntary hold on the sale and shipment of all cannabis products while Health Canada reviewed its Vaughan, Ontario manufacturing facility. CannTrust continues to work closely with Health Canada and will provide further details of the hold and other developments as they become available.
Under the direction of the recently constituted independent Special Committee of the board of directors of the Company and newly-appointed interim CEO, Robert Marcovitch, the Company has already begun the process of investigating and remediating the root causes of any non-compliance and expects to propose a robust remediation plan to Health Canada.
The Company’s CEO Robert Marcovitch stated: “We are continuing to work hard to regain the trust of Health Canada, our patients, shareholders and partners. We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada’s report. 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.”
Although the Company, under the supervision of the Special Committee, is preparing a remediation plan for submission to and consideration by Health Canada, Health Canada has advised the Company that it is currently unable to provide any guidance about the timing or content of its decisions concerning the Company.
Prepayment of Meridian Loan
The Company has also recently pre-paid the outstanding mortgage of approximately $13.3 million to Meridian Credit Union which was secured by its greenhouse in Pelham, Ontario, as well as associated interest and administrative costs. Meridian is arm’s-length to the Company and this loan represented the Company’s only secured indebtedness.
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