OSC asks tribunal to approve settlement with cannabis company Cronos, former CFO

TORONTO — The Ontario Securities Commission is asking the Capital Markets Tribunal to approve a settlement with an Ontario cannabis company and one of its former executives that the regulator alleges failed to file accurate financial statements.

In a filing made with the tribunal Thursday, the OSC says Toronto-based Cronos Group Inc. improperly recognized $7.6 million in revenue in its first, second and third quarter financial statements filed in 2019.

The regulator also accuses the company of overstating “virtually all” of its U.S. goodwill and a “significant” portion of its U.S. intangible assets by roughly US$234.9 million in its second quarter 2021 interim financial statements.

The OSC says some of the revenue errors were caused by dry flower transactions accounted for as revenue that “lacked commercial substance” and placed some of the blame on former chief financial officer William Hilson, who it alleged didn’t take appropriate steps to address these issues.

Cronos corrected the errors but reported related “material weaknesses in internal control over financial reporting.” The OSC says the errors constitute a breach of Ontario’s securities law and are contrary to public interest.

The OSC and Cronos declined to discuss the matter further and Hilson did not immediately respond to a request for comment.

This report by The Canadian Press was first published Oct. 21, 2022.

The Canadian Press