A Michigan adult-use processor that already lost its medical cannabis license and has been fined at least $130,000 for past disciplinary actions faces new charges of track-and-trace and other violations.
The state’s Cannabis Regulatory Agency (CRA) accused Mt. Morris-based Sky Labs in a July 26 complaint of receiving THCA isolate from Colorado and using the license numbers of uninvolved Michigan processors to enter the product into the state’s Metrc track and trace system. Some of the THCA isolate was allegedly tested in California, where labs and their oversight have come under scrutiny.
According to the complaint filed by CRA attorneys, the latest investigation began March 20 when the Metrc system showed that Sky Labs received two shipments of THCA isolate earlier that month from a state-licensed medical marijuana processor. However, the medical processor denied transferring the product to Sky Labs and did not know why their license number was used.
A Sky Lab manager, identified in the complaint as R.H., admitted to investigators that the isolate “came from a business that is believed to be located in Colorado,” the complaint said. R.H. also allegedly admitted that the transfer was incorrectly entered as coming from the medical marijuana processor.
Sky Labs provided a certificate of analysis (COA) of the isolate. “This COA indicated that the product had been tested by a California laboratory in January 2024 and was 86.95% THC,” the complaint said.
R.H. also said the shipments actually arrived in January and “remained onsite for approximately two months without being tagged or tracked in Metrc. R.H. stated that Respondent initially did not enter the product in Metrc because Respondent did not know how to do so correctly.”
Later in March, Sky Labs Metrc data showed two additional shipments of THCA isolate from another licensed medical marijuana processor and seven shipments from a licensed adult-use processor. Both processors denied shipping the products to Sky Labs.
The complaint notes that Sky Labs doesn’t hold an industrial hemp processor license, but that some of the isolate was “incorrectly” entered as concentrate and hemp concentrate. Again, R.H. “indicated this was due to a lack of knowledge on how to properly track the THCA isolate in Metrc.”
Investigators conducted an unannounced inspection on April 22 and found THCA in the lobby. Another manager identified as Z.G. said the THCA had been delivered to her residence in Keego Harbor from the Colorado business and then was taken to the Sky Labs property.
“Z.G. stated that all of the THCA received by Respondent came from the Colorado business. Z.G. admitted that they incorrectly indicated in Metrc that the product was from Michigan licensees,” the complaint said.
Additionally, the complaint alleges that video surveillance showed another employee did not provide an entire batch of THCA product for safety testing, and the camera time stamp was off by one hour and seven minutes.
The complaint charges Sky Labs with eight violations of the Michigan Regulation and Taxation of Marihuana Act. Among them is that a licensed processor must purchase or transfer “marijuana or marijuana-infused products from only a licensed establishment.”
Regulators intend to impose fines and/or other sanctions, “which may include the suspension, revocation, restriction, and/or refusal to renew Respondent’s license.” Sky Labs has 21 days from the service of the complaint to request a hearing.
A CRA spokesperson declined to provide any further details about the case. “Disciplinary action is considered litigation because the licensee hasn’t had a hearing yet and no final decision has been made. We are unable to comment on pending litigation outside of the details put forth in the formal complaint,” said David Harns in an email.
Counsel or representatives for Sky Labs could not be reached.
Not the first violations for Sky Labs
Sky Labs has had other run-ins with the CRA. On June 14, 2023, it agreed to voluntarily surrender its medical processor license and was fined $100,000 after the 4-year-old child of an employee was hospitalized after eating mislabeled gummies.
In June 2022, Chewii Sour Cherry Edibles were distributed to employees because they were mislabled, according to a consent order. The labels said “200 MG CBD” and did not mention THC. An employee gave their child two gummies that actually contained 20 mg of THC. The child’s hospitalization led to an investigation by Child Protective Services.
Sky Labs also admitted to failing safety compliance testing for banned chemical residues, including Vitamin E acetate, in vape products; employee training violations; and Metrc tagging violations, according to a separate consent order signed the same day.
In addition to losing its medical license, stringent compliance requirements were placed on its adult-use license.
Other past violations include:
- In 2023, vape cartridges were recalled due to the possible presence of banned chemicals.
- In 2022, Sky Labs was fined $10,000 for filing late financial statements for fiscal year 2021.
- In 2021, Sky Labs was fined $20,000 for vape products containing Vitamin E acetate and Metrc labeling violations.
