Cronos Group Inc. Announces Final Settlement Agreements

Rhea-AI Summary

Cronos Group has reached final settlement agreements with the SEC and the OSC regarding investigations into its previously disclosed financial statement restatements. The SEC's settlement, issued on October 24, 2022, imposes a cease-and-desist order but does not involve any civil penalties. Concurrently, the OSC requires Cronos to pay C$1.34 million and acknowledges non-compliance with Ontario's Securities Act. Additionally, Cronos will have restrictions on private offering exemptions for five years and will retain an independent consultant to improve its internal controls.

Positive

• No civil penalties or financial fines from the SEC, indicating a favorable resolution.
• Commitment to improving internal controls, which may enhance investor confidence.

Negative

• Payment of C$1.34 million to the OSC, impacting short-term liquidity.
• Loss of private offering exemptions for five years may restrict access to capital.
• Loss of seasoned issuer status for three years could limit market opportunities.

TORONTO, Oct. 24, 2022 (GLOBE NEWSWIRE) -- Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos” or the “Company”) today announced that it has reached final settlement agreements with each of the U.S. Securities and Exchange Commission (the “SEC”) and the Staff of the Ontario Securities Commission (the “OSC”) that resolve those regulators’ investigations regarding the previously disclosed restatements by the Company of its financial statements for the first three quarters of 2019 and the second quarter of 2021.

“We are pleased to have resolved these matters,” said Mike Gorenstein, Chairman, President and Chief Executive Officer of Cronos. “Important steps have been taken to strengthen our internal controls, and we are committed to continuing this work.”

SEC Settlement
On October 24, 2022, the SEC issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8(a) of the U.S. Securities Act of 1933 (the “Securities Act”) and Section 21(c) of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”), Making Findings, and Imposing a Cease-and-Desist Order (the “SEC Settlement Order”) resolving the SEC’s investigation of the restatements by the Company described above.

The Company has agreed to settle with the SEC, without admitting or denying the allegations described in the SEC Settlement Order. The SEC Settlement Order fully and finally disposes of the investigation of the Company by the SEC into the restatements without the payment of any civil penalty or other amount.

The SEC Settlement Order requires the Company to cease and desist from committing or causing any violations and any future violations of certain provisions of the U.S. federal securities laws. Additionally, the Company agreed to certain undertakings which include, among other things, retaining a qualified independent consultant (the “Consultant”) to engage in a review of, and make recommendations with respect to, certain of the Company’s internal accounting controls and internal control over financing reporting.

OSC Settlement
On October 24, 2022, the Ontario Capital Markets Tribunal approved a settlement agreement (the “OSC Settlement Agreement”) between the Company and the staff of the OSC, resolving the OSC’s investigation of the restatements by the Company described above.

Pursuant to the terms of the OSC Settlement Agreement, which fully and finally disposes of the investigation of the Company by the OSC, Cronos agreed to pay a total of C$1.34 million to fully settle the matter and acknowledged that it had not complied with certain requirements under the Securities Act (Ontario) in connection with the filing of interim financial reports in the manner set out therein. Additionally, the Company agreed to retain the Consultant on substantially the same terms as were required by the SEC pursuant to the SEC Settlement Order.

Additional Information
As a result of the SEC Settlement, the Company will be unable to rely on the private offering exemptions provided by Regulations A and D under the Securities Act for a period of five years; lose its status as a well-known seasoned issuer for a period of three years; and be unable to rely on the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 for a period of three years.

For more information regarding the SEC Settlement Order and the OSC Settlement Agreement, please see the Company’s Form 8-K filed on EDGAR at www.sec.gov/edgar and on the Company’s SEDAR profile at www.sedar.com.

About Cronos
Cronos is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio. Cronos’ diverse international brand portfolio includes Spinach^®, PEACE NATURALS^®, Lord Jones^®, Happy Dance^® and PEACE+^®. For more information about Cronos and its brands, please visit: thecronosgroup.com.

Cronos Contact
Shayne Laidlaw
Tel: (416) 504-0004
investor.relations@thecronosgroup.com

FAQ

What settlements did Cronos Group reach on October 24, 2022?

Cronos Group settled with the SEC and OSC regarding past financial statement restatements.

Did Cronos Group incur any penalties from the SEC?

No, Cronos Group settled without admitting any allegations and faced no civil penalties.

How much did Cronos pay to the Ontario Securities Commission?

Cronos agreed to pay C$1.34 million to settle the OSC investigation.

What restrictions will Cronos face following the SEC settlement?

Cronos will lose private offering exemptions for five years and seasoned issuer status for three years.

Who will be reviewing Cronos's internal controls?

An independent consultant will be retained to review and recommend improvements to internal accounting controls.