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It was only upon the acquisition that Hexo made the discovery that Block B was in fact not licensed.

This is the second major licensed producer to have been found to be growing in unlicensed spaces since legalization. Last summer, CannTrust was stripped of its license and had to destroy $77 million worth of cannabis as a result.

Hexo has been struggling with declining sales, and shut a number of its facilities last month to reduce costs. Niagara was one of them, and the company laid off 200 employees in the process.

“Hexo is keenly focused on producing high-quality products that Canadians can trust,” said Hexo CEO and co-founder Sebastien St-Louis. “Upon discovering that cannabis was being grown in an inadequately licensed area of the Niagara facility we immediately ceased all activities and notified Health Canada. While we are disappointed with what we uncovered, we assume responsibility for any issues with UP products prior to the acquisition.”

Hexo could not immediately be reached for comment.