Cronos' Shares Plummet On Q3 Financial Report Delay Due To Pending Impairment Charge For U.S. CBD Activities

Cannabis company Cronos Group Inc. CRON CRON had to delay filing third-quarter earnings due to pending impairment charge for its U.S. CBD activities. The Toronto-based company revealed Tuesday it has filed a Form 12b-25 with the U.S. Securities and Exchange Commission (SEC) in relation to its quarterly financial report for the period ended September 30, 2021.

Cronos was unable to complete its financial statements for the third quarter because the audit committee of the company’s board of directors requires additional time to evaluate goodwill and indefinite-lived intangible assets in the company’s U.S. reporting unit for impairment.

The company expects that it will record an impairment charge of not less than $220 million on goodwill and indefinite-lived intangible assets in its U.S. reporting unit for the three and six months ended June 30, 2021, and may incur an additional impairment in the three months ended September 30, 2021. The impairment charge is not expected to impact cash and cash equivalents or revenues.

Cronos added it plans to file a complete version of the Form 10-Q with the SEC, together with its corresponding quarterly filings in Canada, as soon as practicable, but does not expect to do so within the five-day extension period afforded by Rule 12b-25 under the Securities Exchange Act of 1934, as amended. The company is working diligently to complete these filings and anticipates, but cannot assure, that it will be finalized and filed within 60 days.

Canadian Securities Disclosures

Cronos has applied for a management cease trade order (MCTO) with the applicable securities regulatory authorities in Canada until such time that the filings referred to above are made. An MCTO generally restricts all trading in securities of the Company, whether direct or indirect, by the Company’s CEO  and CFO. However, the MCTO may be extended to include the directors of the Company, among others. The issuance of an MCTO does not generally affect the ability of persons who are not the company's CEO or CFO to trade in securities of the Company. There is no guarantee that an MCTO will be granted.

Price Action

Cronos’ shares were trading 13.34% lower at $5.82 per share at the time of writing Tuesday morning.

Photo: Courtesy of Joel Muniz on Unsplash