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Exclusive: Pot Company Cronos Receives Sec Inquiry

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The Securities and Exchange Commission has sent an inquiry to Cronos Group Inc., one of the largest cannabis producers in Canada, requesting the company retain records related to how it recognizes certain revenue, according to internal Cronos communications reviewed by MarketWatch.

In an email sent to employees from a company lawyer on March 10, Cronos CRON, +2.24% CRON, +4.45% instructed staff to retain certain records pertaining to a “confidential and non-public inquiry by the Securities and Exchange Commission.” The SEC Division of Enforcement has requested that the company retain and preserve all records about revenue recognition related to bulk-resin purchases and wholesale sales of biomass or other products, according to the email and an attached document. Bulk resin is a type of cannabis concentrate, and biomass is marijuana from which companies typically extract oil for vape products or edibles.

Cronos and the SEC declined to comment.

Cronos — a Canadian licensed pot producer backed by a $1.8 billion investment from tobacco company Altria Group Inc. MO, +6.77% — said in an SEC filing on March 2 that it was conducting an internal review into its accounting practices surrounding purchases of marijuana extracts and wholesale revenue. Cronos disclosed Tuesday that as a result of its review it would have to reissue three quarters of financial statements for 2019, and will report C$2.5 million in reduced revenue for the first quarter and C$5.1 million for the third quarter. The company also disclosed that it would likely report “one or more” material weaknesses in its internal controls related to financial reporting.

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Source: https://www.marketwatch.com/story/exclusive-pot-company-cronos-receives-sec-inquiry-2020-03-19?mod=cannabis-watch

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