Cronos Group (CRON 1.12%) management announced on Tuesday that they will be restating items from the first three quarters of the cannabis company's fiscal 2019. In a press release, they stated that those quarterly reports "should no longer be relied upon."
The recommendation to restate the financials comes from the company's Audit Committee and its accounting firm, KPMG. The Audit Committee has been reviewing sales and purchases that took place during the quarters, and it will eliminate some transactions related to bulk resin purchases as well as certain wholesale product sales.
One consequence of the restatement is that it will reduce Cronos's revenue figures. For the period ending March 31, 2019, the company says 2.5 million Canadian dollars will come off its top line, which had totaled C$6.5 million. And for the period ending Sept. 30, 2019, Cronos will remove CA$5.1 million in revenue. During that period, the company had recorded sales of CA$12.7 million after excise taxes.
Cronos shares are down close to 75% in one year
Cronos has struggled over the past year, and its underwhelming financial results have been reflected in its stock price. It has also faced headwinds as a result of its exposure to the vaping niche. The Centers for Disease Control and Prevention (CDC) says that more than 2,800 people have suffered lung injuries caused by vaping. Vape sales were supposed to be key to the Cronos's long-term growth, but given the health-related concerns, as well as the fact that the company's key investor, Altria Group (MO 0.10%) has already made multiple writedowns of its investment in vape company Juul, the value of that market segment for Cronos remains a big question mark.
However, the pot stock's decline over the past year still isn't quite as bad as the decline of the Horizons Marijuana Life Sciences ETF (HMLSF -0.74%), which tracks the broader cannabis industry. That ETF is down 79%.