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(a) Evaluation of Disclosure Controls and Procedures.
−Removed: The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of September 30, 2021.
−Removed: Based on that evaluation, management has concluded that, as of September 30, 2021, due to the existence of material weaknesses in the Company’s internal control over financial reporting described below, the disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in reports we file or submit under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act, is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
+Added: The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of March 31, 2022.
+Added: Based on that evaluation, management has concluded that, as of March 31, 2022, due to the existence of material weaknesses in the Company’s internal control over financial reporting described below, the disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in reports we file or submit under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act, is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Material Weakness in Internal Controls Over Financial Reporting
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As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”), we have identified the following material weakness:
−Removed: • Inventory Verification:
−Removed: The Company failed to properly design and execute sufficient procedures to verify inventory quantities.
−Removed: Specifically, while inventory counts were performed in the fourth quarter, (i) the aggregate value of items excluded from the count exceeded the Company’s materiality threshold, and (ii) human error in count execution, data transposition and reconciliation analysis resulted in inaccurate adjustments.
−Removed: This deficiency did not result in errors that were quantitatively material.
−Removed: Nevertheless, the deficiency creates a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.
−Removed: Remediation Plan and Status
−Removed: The Company’s management, with oversight from the Audit Committee of the Board of Directors, has initiated a plan to remediate the material weakness, previously disclosed in the Annual Report.
−Removed: During the nine months ended September 30, 2021, the Company started the implementation process on all remediation controls identified in its remediation plan as disclosed in the table below.
−Removed: The Company does not expect full remediation until year end 2021.
−Removed: The plan and progress as of the filing date is described below:
−Removed: Material Weakness Control, Control Enhancement or Mitigant Implementation Status Management Testing Status Remediation Status
−Removed: Inventory Verification • Enhance count procedures to ensure appropriate consideration and coverage of their total inventory balance
−Removed: Completed Tested Not Remediated
−Removed: • Implement cycle counts as a redundant control to supplement the annual physical count
−Removed: Completed Tested Not Remediated
−Removed: • Provide training to inventory teams on count procedures and inventory management control expectations
−Removed: Completed Tested Not Remediated
−Removed: As previously disclosed in the Company’s Quarterly Report on Form 10-Q/A for the second quarter ended June 30, 2021, we have identified the following material weaknesses:
• Control Environment:
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reporting unit and certain macroeconomic, industry and market conditions when evaluating goodwill associated with our U.S.
−Removed: reporting unit and Lord Jones ® brand indefinite-lived intangible asset for potential impairment.
−Removed: The material weakness in the control environment and contributed to material misstatements related to the impairment of goodwill and indefinite-lived intangible assets that led to the restatement of the Company’s interim condensed consolidated financial statements for the three and six months ended June 30, 2021.
−Removed: The material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.
+Added: reporting unit and our Lord Jones ® brand indefinite-lived intangible asset for potential impairment.
+Added: The material weakness in the control environment contributed to material misstatements related to the impairment of goodwill and indefinite-lived intangible assets that led to the restatement of the Company’s interim condensed consolidated financial statements for the three and six months ended June 30, 2021.
+Added: The material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.
The lack of personnel in our accounting function with appropriate level of knowledge and experience in U.S.
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In Progress Not Tested Not Remediated
−Removed: Cronos Group will continue to review, optimize, and enhance its financial reporting controls and procedures.
+Added: The Company will continue to review, optimize, and enhance its financial reporting controls and procedures.
As the Company continues to evaluate and work to improve its internal control over financial reporting, the Company may implement additional measures to address the material weaknesses or certain of the remediation measures described above may be enhanced or modified.
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(b) Changes in Internal Control over Financial Reporting
−Removed: Other than the identification of the new material weaknesses and those measures described above to remediate the material weaknesses, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
+Added: Other than those material weaknesses identified and measures described above to remediate the material weaknesses identified in the prior year, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), that occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
OTHER INFORMATION
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.