Cronos Group Files Announces That Its Previously Issued Unaudited Interim Financial Statements For First, Second and Third Quarters of 2019 Will Be Restated And Should No Longer Be Relied Upon
Kehoe Law Firm, P.C. is making investors aware that on March 17, 2020, Cronos Group Inc. (“Cronos” or the “Company”) (NasdaqGS: CRON) issued a press release announcing that Cronos Group
. . . determined, on the recommendation of the Audit Committee of the Company’s Board of Directors and after consultation with KPMG LLP, the Company’s independent registered public accounting firm, that Cronos Group’s previously issued unaudited interim financial statements for first, second and third quarters of 2019 prepared in accordance with International Financial Reporting Standards as filed on SEDAR, and with the U.S. Securities and Exchange Commission on Form 6-K, will be restated and reissued and should no longer be relied upon.
As previously announced, the Audit Committee of the Company’s Board of Directors has been conducting a review of certain bulk resin purchases and sales of products through the wholesale channel, and the restatement is being made to eliminate certain of these transactions through the wholesale channel. The Company will reduce revenue for the three months ended March 31, 2019 by C$2.5 million and the three months ended September 30, 2019 by C$5.1 million.
Cronos Group intends to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including its audited annual financial statements for the fiscal year ended December 31, 2019, no later than March 30, 2020. However, no assurance can be given that the anticipated timing of filing will be met due to the impact of COVID-19, as well as the need for the Company’s auditors to complete their audit work, among other things. In connection with the restatement, the Company anticipates that it will report one or more material weakness in internal control over financial reporting when it files its Form 10-K. [Emphasis added.]
Cronos Group Inc. Class Action Lawsuit Filed Seeking To Recover Damages On Behalf of CRON Investors
Kehoe Law Firm, P.C. previously advised investors that a class action lawsuit has been filed in United States District Court against Cronos Group Group Inc. and certain Cronos officers on behalf of Cronos shareholders who purchased, or otherwise acquired, Cronos securities between May 9, 2019 and March 2, 2020 (the “Class Period”).
The class action seeks to recover damages against the Cronos Defendants for alleged violations of the federal securities laws under the Securities Exchange Act of 1934.
The class action complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements and/or failed to disclose that: (1) Cronos had engaged in significant transactions for which its revenue recognition was inappropriate; (2) the foregoing would foreseeably necessitate reviews that would delay the Company’s ability to timely file its periodic reports; and (3) as a result, the public statements of Cronos were materially false and misleading at all relevant times.
According to the class action complaint:
On February 24, 2020, Cronos stated that it would delay its fourth quarter and fiscal year 2019 earnings release and conference call, previously scheduled for February 27, 2020.
On this news, Cronos’s share price fell $0.78 per share, or 10.91%, to close at $6.37 on February 24, 2020.
Then, on March 2, 2020, after the market closed, Cronos disclosed that it had requested a 15-day extension for filing a complete Annual Report on Form 10-K with the SEC for its fourth quarter and fiscal year 2019. Cronos attributed the delay to a ‘review by the Audit Committee of the Company’s Board of Directors, with the assistance of outside counsel and forensic accountants, of several bulk resin purchases and sales of products through the wholesale channel and the appropriateness of the recognition of revenue from those transactions.’
On this news, Cronos’s share price fell an additional $0.70 per share, or 11.63%, to close at $5.32 per share on March 3, 2020. [Emphasis added.]
Are You a Cronos Group Investor Who Purchased, Or Otherwise Acquired, CRON Securities During The Class Period And Suffered Losses?
Cronos investors who purchased, or otherwise acquired, the publicly-traded securities of Cronos during the Class Period between May 9, 2019 and March 2, 2020, both dates inclusive, and suffered losses are encouraged to contact either Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected], or John Kehoe, Esq, (215) 792-6676, Ext. 801, [email protected], to learn more about the Cronos class action lawsuit or potential legal claims.