b'KushCo Holdings, Inc.:inference that defendants made an honest mistake in May v. KushCo Holdings, Inc. et al.,their accounting. Lastly, the court found that KushCos decision to dismiss its independent public accounting Case No. 8:19-cv-00798-JLS-KESfirm and the resignation of KushCos CFO in the (C.D. Cal. Apr. 30, 2019)aftermath of the restatement were not necessarily an indication that either party knew or should have known KushCo Holdings, Inc. (KushCo) is a company thatof accounting improprieties . and material weaknesses provides packaging, containers, and other ancillaryin internal controls over financial reporting that led to products for the cannabis industry. In April 2019, KushCoKushCos restatement, but was rather the natural result publicly disclosed to investors that the financial statementsof the restatement itself.included in their SEC filings for the 2018 fiscal yearPlaintiffs subsequently appealed the dismissal to understated the companys net loss by approximatelythe U.S. Court of Appeals for the Ninth Circuit $14.1 million due to errors in the accounting methodologyon December 15, 2020, and, following mediation used for certain contingent payments related toarrangements, moved to dismiss the case voluntarily. transactions. The companys stock price fell by 7.76%The Ninth Circuit dismissed the appeal on to $5.35 per share. February 18, 2021.An investor filed a putative class action against the company, certain of its current and former officers, and its auditor alleging violations of Sections 10(b) and 20(a)Curaleaf Holdings, Inc.: of the Exchange Act and Rule 10b-5 promulgatedIn re Curaleaf Securities Litigation, Case No. thereunder. Plaintiffs alleged that defendants made false1:19-cv-04486-BMC (E.D.N.Y. Aug. 5, 2019)and materially misleading statements concerning the companys financial position. Specifically, plaintiff allegesCuraleaf Holdings, Inc. (Curaleaf) is a that the companys incorrect financial statementsMassachusetts-based leading cannabis company with stemmed from their acquisition of three companies,operations in 23 states. which increased the companys assets fivefold. As part of the acquisitions, KushCo was to pay the sellers inIn November 2018, Curaleaf made a number of contingent stock in amounts related to each acquiredannouncements related to the launch of its hemp-derived companys future performance. Although the companyCBD products. The products, which included gel claimed to have properly applied Generally Acceptedcapsules, oil droplets and vape pens, were marketed as Accounting Principles (GAAP), plaintiff alleges thatpotential solutions to chronic pain, anxiety, depression, defendants did not and instead they classified thePTSD, the treatment of Parkinsons and Alzheimers contingent payments as equity instead of liabilities.disease, in addition to the growth and spread of cancer. Plaintiff alleges that by doing so, the company avoidedIn July 2019, the FDA publicly issued a warning letter to having to remeasure periodically the fair value of the stockCuraleaf claiming the company was selling unapproved earnouts. As a result, plaintiff alleges that the companysand misbranded drugs and improperly marketing its financial reporting was false and misleading and inflatedCBD products as dietary supplements in violation of the the companys stock price, allowing the company to payFederal Food, Drug and Cosmetic Act. The letter required for the acquisitions. Curaleaf to provide the FDA with information that they Defendants moved to dismiss the case on Februaryhad taken steps to address the violations. Following the 18, 2020. A hearing on Defendants Joint Motion toissuance of the letter, the companys stock price fell 8%. Dismiss occurred on September 18, 2020, and onIn July 2019, Curaleaf issued a press release reporting November 2, 2020, the judge dismissed the case withthat it provided a response to the FDA, removed the prejudice. The court found that plaintiffs had failed tostatements on its website referenced in the agencys letter allege a strong inference of scienter, finding that failure toregarding the products health benefits, and discontinued follow GAAP, without more, does not establish scienter.many of those products. However, the company denied The court was not persuaded by plaintiffs allegationsthat its conduct was in violation of the federal Food, that the GAAP violations supported an inference ofDrug and Cosmetic Act. On an August 2, 2019 earnings scienter because they had a significant impact oncall, the companys CFO at the time defended the KushCos financial results, noting that, at the time thecompany, emphasizing that successful companies take accounting decision was made, defendants could notrisks and characterized its regulatory issues as a situation have known whether it would positively or negativelywith a tremendous amount of ambiguity.affect their revenue for the period. This inability toInvestors brought a putative class action against the predict the effect of the GAAP violation also undercutcompany and its CEO, COO and CFO, alleging violations plaintiffs argument of motive. The court also held thatof Sections 10(b) and 20(a) of the Exchange Act, and Rule plaintiffs were unable to adequately rebut the plausible10b-5 promulgated thereunder. Plaintiffs allege that 11'