Business
Marijuana financial restatements show industry still maturing, insiders say
The marijuana industry has an accounting problem, with a number of companies correcting errors in financial statements in recent years through restatements.
Restating financial results is a rare occurrence for most public companies: 2020 had the lowest number of financial restatements by public companies in the past 20 years with only 364, according to a report by Massachusetts-based Audit Analytics.
But a disproportionate number of them have come from the cannabis industry over the past few years, making it harder for investors to gauge the financial health of a company.
Restatements also can lead to potentially costly class action lawsuits.
In the case of the marijuana industry, the restatements have included high-profile companies:
Florida-based multistate operator Jushi Holdings in September said it filed restated financial results for this year’s first quarter.
Chicago-headquartered MSO Verano Holdings announced in July it would restate five quarters of financial results.
KushCo Holdings, a California-based packaging company now known as Greenlane Holdings, announced in 2019 it was restating results from fiscal 2018 and 2017 to reflect accounting errors stemming from previous acquisitions.
Canadian cultivator and processor Cronos Group, headquartered in Toronto, said in November 2021 it would restate financials for the three- and six-month periods ending June 30 of that year.
Matt Karnes, founder of New York-based cannabis financial consultancy GreenWave Advisors, attributes the problem largely to the U.S. government’s marijuana prohibition.
That has prevented major accounting firms such as the Big Four – Deloitte, EY (formerly Ernst & Young), KPMG and PricewaterhouseCoopers – from servicing the marijuana industry.
He also chalks it up to inexperienced and/or understaffed in-house accounting departments at public cannabis companies.
“Financial reporting is definitely an area that many people overlook,” he said.
Accounting for errors
Jushi announced on Sept. 9 it filed restated first-quarter 2022 results.
The company identified two errors:
Right-of-use assets associated with finance leases, accrued expenses and other liabilities.
Operating, investing and financing activity cash flow.
“These errors did not impact the cash balance as of March 31, 2022, and there was no net change in cash flows during the three months then ended,” according to a Jushi news release.
Verano said in July that it would be restating five quarterly financial statements dating to March 31, 2021, and that all of its disclosures and investor presentations since then “should therefore no longer be relied upon.”
Stock-based compensation had been understated, according to a news release, affecting the stated tax expenses.
“In this particular case, it seems like it was an error that was overlooked,” Karnes said, “and it seems like a very simple matter that should have been identified.
“And so it really brings home the point that I’ve been expressing for a long time now, that many cannabis companies lack the in-house accounting expertise that other industries have.”
Common pitfalls
John Pelliterri, a partner at New York-headquartered Grassi Advisors and Accountants, said the issues Verano and Jushi have grappled with are common in the marijuana industry, where accounting for the cash-based sector is particularly challenging and equity-based compensation is common.
In addition, he said common pitfalls include:
Inventory, which moves quickly in cannabis.
State taxes combined with issues related to Section 280E of the federal tax code, which prohibits marijuana businesses from taking traditional business deductions.
Convoluted ownership structures.
Some management teams might choose to invest more in the company’s brand rather than key areas such as accounting.
But, Pelliterri said, with time and, perhaps, by learning the hard way, restatements will become less common.
“We’re getting there,” he said. “Once you get in a year, two years, you start to understand the nuances and then you get a handle on a lot of the issues.
“But there’s not that many people that have been doing it that long.”
Legal risks
Toronto-based Cronos Group announced in November 2021 it would restate financials for the three and six months ending June 30, 2021, after failing to report more than $220 million in impairment charges.
“As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy,” President and CEO Kurt Schmidt said in a statement this past February.
In the meantime, a number of law firms launched investigations to determine whether there were grounds for – and shareholder interest in – filing a class action lawsuit.
“Cronos stock was down more than 15% during intraday trading on Nov. 9, 2021, thereby injuring investors,” according to a November 2021 news release, issued by Philadelphia-based Kehoe Law, soliciting investors who lost more than $25,000 to contact the firm.
“The restating of a public company’s financial statements is like ringing the alarm bell for class action lawyers,” Robert Cohen, a litigation partner at the Cassels law firm in Toronto, told MJBizDaily via email.
“It doesn’t necessarily mean that a class action will ensue or be successful, but it typically means that there is smoke to be investigated, and often when there is smoke, there is fire.”
In another instance, Cronos Group restated its first-, second- and third-quarter financial statements in 2019 after reviewing sales of bulk resin and wholesale products.
That spurred one shareholder to attempt to file a class action lawsuit on behalf of other individuals, arguing that the company had “orchestrated a scheme to inflate its reported revenue figures” and that the errors had ultimately negatively affected the share price.
According to the Ontario Court Appeal’s Sept. 26 decision to allow the class action regarding the 2019 restatements to move ahead, the defendants dispute that the share price drop is attributed to the restatements but, rather, to the COVID-19 pandemic and delayed distribution of a new product in the United States.
Cronos Group did not respond to a request for comment from MJBizDaily.
The Court of Appeal’s decision shows that class actions are the most common way to take action against public companies for alleged misrepresentations that come to light from the restatement of financial statements, Cohen said.
“Starting a class action, obtaining leave of the court to proceed and getting it across the finish lines of both a trial and an appeal is rare in Canada, as many class actions settle along the way,” Cohen said.
“Having said that, just the commencement of a class action which has various badges of merit can prove to be very damaging to a public company, including to its ability to raise funds at critical times.”
Considering the risks and costs associated with restatements of financial statements, both Karnes and Pelliterri advise marijuana companies to invest in accounting and make an effort to stay on top of the latest developments. The industry is still new.
“A lot of the rules are still being written,” Pelliterri said.
“As more people get into the industry and it becomes more mainstream, a larger group will gravitate (toward cannabis) from a financial perspective.”
Kate Robertson can be reached at kate.robertson@mjbizdaily.com.
Source: https://mjbizdaily.com/marijuana-financial-restatements-show-industry-still-maturing-insiders-say/
Business
Jio’s 1,600-Satellite LEO Constellation Gets Technical Green Light
Reliance Jio has crossed a significant milestone in its space connectivity ambitions after its proposal to deploy a Low Earth Orbit (LEO) satellite constellation of around 1,600 satellites received a positive technical assessment from the Indian National Space Promotion and Authorisation Centre (IN-SPACe).
The evaluation, conducted jointly by IN-SPACe, the Indian Space Research Organisation (ISRO), and the Wireless Planning and Coordination (WPC) wing of the Department of Telecommunications, reportedly concluded that Jio’s proposed system meets the required technical standards and is comparable to leading global satellite broadband networks.
India’s Indigenous LEO Satellite Vision
Under the proposal, Reliance Jio plans to deploy between 1,600 and 1,650 satellites in Low Earth Orbit at an altitude of around 650 kilometres.
The planned constellation is expected to provide high-speed satellite connectivity across India, with approximately 32 satellites visible from any location at a given time. The company aims to roll out the network within the next two to three years, subject to regulatory approvals.
According to industry estimates, the satellite system could deliver 4.5 to 5 terabits per second (Tbps) of total data capacity, making it one of the largest satellite broadband projects proposed in India.
The project is expected to require an investment of $10–15 billion (approximately ₹95,000 crore to ₹1.42 lakh crore), reflecting the scale of infrastructure needed for satellite manufacturing, launches, ground stations, and user terminals.
Regulatory Process Moves Forward
Following the successful technical review, the proposal is expected to move into the next phase of regulatory approvals.
The government may now assist Jio in securing orbital slots, coordinating spectrum usage, and filing applications with the International Telecommunication Union (ITU), the global body responsible for managing satellite orbit and frequency allocations.
Obtaining orbital rights remains a critical step, as Low Earth Orbit has become increasingly competitive due to the growing number of satellite broadband projects being planned worldwide.
Officials also indicated that the proposed satellite architecture has been designed to coexist with future Indian LEO constellations, allowing multiple domestic operators to share orbital resources efficiently.
Broadband, Mobile Connectivity, and Strategic Applications
Jio plans to use the satellite network to provide a range of communication services, including satellite broadband, mobile backhaul, enterprise connectivity, and direct-to-device (D2D) satellite communication, particularly in remote and underserved regions where conventional telecom infrastructure is limited.
The company also intends to establish 20 to 22 ground stations across India to support network operations.
Apart from commercial telecommunications, officials have highlighted the project’s potential strategic importance. A domestically developed satellite constellation could strengthen India’s communication infrastructure, reduce dependence on foreign satellite operators, and support national security requirements.
Reports suggest preliminary discussions are underway regarding the possibility of integrating defence-related payloads into some satellites, enabling both civilian and strategic use.
Major Step for India’s Space and Telecom Sectors
Industry analysts view the technical clearance as an important milestone in India’s expanding private space ecosystem. If Jio secures the remaining regulatory approvals and international orbital clearances, the project could become the country’s first large-scale indigenous LEO satellite broadband network.
The initiative also aligns with India’s broader efforts to expand digital connectivity while strengthening its presence in the global satellite communications market.
Business
Alleged Crores Pharma Scam Mastermind Arrested from Surat
After evading law enforcement for nearly 13 years, an accused linked to a large-scale pharmaceutical fraud case has been arrested by Delhi Police from Surat, Gujarat. The suspect is alleged to have orchestrated a series of financial scams involving fake identities, forged documents, and dishonoured cheques used to procure high-value pharmaceutical raw materials.
Authorities say the accused, identified as Himmat Singh Lodha, is believed to have defrauded multiple pharmaceutical companies in Delhi of goods worth approximately ₹98 lakh before disappearing and remaining underground for years.
Fake Business Deals and Dishonoured Cheques Used in Fraud
Investigators claim the accused posed as a legitimate pharmaceutical trader and placed bulk orders for expensive drug ingredients, offering post-dated cheques as payment security.
In one documented case from 2013, he allegedly obtained around 550 kilograms of Gliclazide, a diabetes-related pharmaceutical ingredient, valued at over ₹26 lakh. When suppliers attempted to encash the cheques, they were reportedly returned with the remark “account closed.”
Following the transaction, the accused allegedly vacated his office and rented residence and disappeared without settling payments. He was later declared a proclaimed offender in 2016 after repeatedly failing to appear before court proceedings. Authorities had also issued a reward for information leading to his arrest.
Multiple Identities and Repeated Fraud Pattern
Police investigations further link the accused to another cheating case dating back to 2012, where he allegedly used a fake identity, “Kailash Jain,” to obtain a large consignment of Ambroxol HCL, a pharmaceutical compound used in cough medications. The value of that consignment was estimated at around ₹72 lakh.
Officials believe the accused followed a consistent modus operandi—posing as a credible businessman, securing high-value goods on deferred payment terms, and then disappearing after delivery while shutting down business operations.
Investigators suspect that forged business records, fake company credentials, and fabricated financial histories were used to build trust with suppliers and gain access to expensive raw materials.
Multi-State Surveillance Leads to Arrest in Surat
A special Crime Branch team tracked the accused through coordinated surveillance efforts across multiple cities, including Mumbai, Ahmedabad, and Surat. After nearly a month of technical monitoring and intelligence gathering, officials located and arrested him from a residential area in Surat.
Authorities also revealed that the accused had been involved in property-related activities while staying under the radar to avoid detection.
Growing Threat of Corporate Identity Fraud
The case highlights a rising trend of organised financial fraud targeting industries that rely heavily on trust-based transactions and deferred payments. Experts note that criminals increasingly exploit gaps in corporate verification systems by using fake GST registrations, temporary offices, and forged documentation to appear legitimate.
Cybercrime and financial fraud specialists warn that such schemes are becoming more complex with the widespread availability of digital business tools, making it easier to create convincing but fraudulent corporate identities.
Experts Urge Stronger Due Diligence in High-Value Transactions
Experts, including former IPS officer and cybercrime specialist Prof. Triveni Singh, emphasize the need for stricter verification procedures in commercial dealings. He noted that relying solely on paperwork or digital business profiles can expose companies to significant financial risk.
Authorities and industry experts recommend physical verification of business operations, bank account validation, and detailed background checks before engaging in high-value or deferred-payment transactions—particularly in sectors like pharmaceuticals, where single consignments can involve transactions worth crores.
Business
EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices
A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.
Investigation Under Digital Markets Act Gains Momentum
The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.
Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.
Industry Groups Demand Swift Action
Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.
Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.
In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.
Google Denies Allegations
Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.
However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.
Potential Billion-Euro Penalties
If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.
Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.
Wider Implications for Big Tech
The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.
A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.
As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.
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