New allegations levied against a Michigan marijuana operator underscore the industrywide challenges of verifying product composites, ensuring accurate lab test results and the murky business of converting raw cannabis into finished goods.
Michigan regulators on Wednesday filed a complaint against a marijuana processing company they allege purchased vast quantities of unregulated THCA concentrate from outside the state, misidentifying the product in state-mandated tracking records and numerous other charges.
The complaint from the Cannabis Regulatory Agency (CRA) lists eight counts against Sky Labs, a vertically integrated operator based in Mount Morris, Michigan, that was ordered to surrender its medical marijuana processor license a year ago and pay a $100,000 fine related to safety violations at its facility and the presence of banned chemicals in its vape products, including vitamin E acetate.
The thickening agent vitamin E acetate is banned for inhalation by the U.S. Food and Drug Administration, which concluded the substance was the likely culprit that caused 2,800 hospitalizations and 68 deaths during the 2019-20 vape crisis, according to the Centers for Disease Control and Prevention.
An open secret
The latest CRA allegations highlight a well-known but seldom substantiated business practice in the U.S. cannabis industry in which operators purchase hemp-derived concentrates from other states and mix them into marijuana products sold in the regulated market – all while evading track-and-trace requirements and protocols.
In this latest incident involving Sky Labs, a general manager for the company told CRA investigators the company purchased 130,300 grams of THCA isolate from a Colorado business, which mailed that product to a manager’s home in Keego Harbor, Michigan, about 50 miles south of Mount Morris.
A certificate of analysis (COA) – a summary of testing results on various product components, including THC potency, heavy metals and certain pesticides – indicated the product was tested by a California laboratory in January 2024.
COAs have come under intense scrutiny in the past few months, as a pesticide scandal has eroded confidence in California’s regulated marijuana market.
Eight counts
The CRA’s charges against Sky Labs include:
- Purchasing or transferring marijuana products from an unlicensed operator.
- Obtaining cannabinoids from an unlicensed supplier.
- Failing to provide recorded images with accurate time and date stamps.
- Violating a requirement to include product batch numbers, ID tags or labels.
- Interfering with or preventing a laboratory from collecting product samples to comply with testing requirements.
Three of the counts were related to compliance breaches under the statewide inventory monitoring system, Metrc, including:
- Accurately entering transactions, inventory and other information.
- Developing products that were unidentified or recorded.
- Identifying and consistently tracking products in the system.
Under state rules, the CRA can suspend, revoke, restrict or refuse to renew a license – or impose a fine related to these counts.
MJBizDaily was unsuccessful in trying to contact Sky Labs for comment.
Denise Policella, an attorney for the company, did not immediately respond to an MJBizDaily inquiry.
The alleged violations were first reported by Crain’s Detroit Business.
A million-dollar brand
Sky Labs manufactures and sells a variety of marijuana products including edibles, vape cartridges and multiple flower strains.
Its Bossy vape brand is popular in Michigan, where it generated more than $100,000 in retail sales in June, according to Seattle-based cannabis analytics provider Headset.
According to its profile page on Headset’s website, Bossy “occupies a unique space in the market with its vertically integrated approach.
“Furthermore, it is part of Michigan’s inaugural wave of recreationally licensed brands, reflecting its commitment to quality and compliance.”
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Previous incidents
The 2023 penalties regulators issued against Sky Labs included full on-site audits and a mandate to provide the CRA all logs for 12 months.
The orders were issued after the company admitted to various safety compliance breaches, including skirting security requirements, storing illicit products and distributing them to workers.
In April 2022, the CRA blocked the sale of more than $5 million worth of Sky Labs products after the agency put them on hold.
But the agency stopped short of issuing a formal recall.
The CRA claimed the company in June 2022 distributed packages of 200-milligram CBD gummies to 10 employees, one of whom gave two 20-milligram pieces to her 4-year-old child, resulting in a hospitalization.
A police report was filed related to the incident, and Michigan’s Children’s Protective Services launched an investigation.
Sky Labs in 2021 was fined $20,000 for underreporting vape cartridges, which were sold to consumers without full testing clearances, MLive reported.
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.
