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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024
or
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .
Commission File No. 001-38403
__________________________
CRONOS GROUP INC.
(Exact name of registrant as specified in its charter)
__________________________
British Columbia, Canada
N/A
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
4491 Concession Rd 12
Stayner, Ontario
L0M 1S0
(Address of principal executive offices)(Zip Code)
416-504-0004
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, no par valueCRONThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated fileroSmaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No x

As of August 5, 2024, there were 382,280,725 common shares of the registrant issued and outstanding.

1


Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to the “Company,” “Cronos Group,” “we,” “us” and “our” refer to Cronos Group Inc., its direct and indirect wholly owned subsidiaries and, if applicable, its joint ventures and investments accounted for by the equity method; the term “cannabis” means the plant of any species or subspecies of genus Cannabis and any part of that plant, including all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers; the term “U.S. hemp” has the meaning given to term “hemp” in the United States (“U.S.”). Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), including hemp-derived cannabidiol (“CBD”); and the term “U.S. Schedule I cannabis” means cannabis excluding U.S. hemp.
This Quarterly Report contains references to our trademarks and trade names and to trademarks and trade names belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us or our business by, any other companies. In addition, this Quarterly Report includes website addresses. These website addresses are intended to provide inactive, textual references only. The information on or referred to on these websites is not part of or incorporated into this Quarterly Report.
All currency amounts in this Quarterly Report are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars; all references to “C$” are to Canadian dollars; all references to “A$” are to Australian dollars; and all references to “ILS” are to New Israeli Shekels.
(Exchange rates are shown as C$ per $)As of
June 30, 2024June 30, 2023December 31, 2023
Spot rate1.36741.32421.3243
Year-to-date average rate1.35811.3474N/A
(Exchange rates are shown as ILS per $)As of
June 30, 2024June 30, 2023December 31, 2023
Spot rate3.77423.70513.6163
Year-to-date average rate3.69503.5892N/A
All summaries of agreements described herein are qualified by the full text of such agreements (certain of which have been filed as exhibits with the U.S. Securities and Exchange Commission).


2

PART I
FINANCIAL INFORMATION

3
Cronos Group Inc.
Condensed Consolidated Balance Sheets
(In thousands of U.S. dollars, except share amounts, unaudited)

As of June 30, 2024As of December 31, 2023
Assets
Current assets
Cash and cash equivalents$848,189 $669,291 
Short-term investments— 192,237 
Accounts receivable, net16,179 13,984 
Interest receivable5,183 10,012 
Other receivables7,227 6,341 
Current portion of loans receivable, net4,875 5,541 
Inventory, net29,182 30,495 
Prepaids and other current assets5,246 5,405 
Held-for-sale assets19,197 — 
Total current assets935,278 933,306 
Equity method investments, net21,226 19,488 
Other investments3,168 35,251 
Non-current portion of loans receivable, net73,165 69,036 
Property, plant and equipment, net36,964 59,468 
Right-of-use assets1,079 1,356 
Goodwill1,024 1,057 
Intangible assets, net19,103 21,078 
Other assets41 45 
Total assets$1,091,048 $1,140,085 
Liabilities
Current liabilities
Accounts payable$7,840 $12,130 
Income taxes payable61 64 
Accrued liabilities23,846 27,736 
Current portion of lease obligation931 994 
Derivative liabilities21 102 
Current portion due to non-controlling interests358 373 
Total current liabilities33,057 41,399 
Non-current portion due to non-controlling interests1,137 1,003 
Non-current portion of lease obligation1,062 1,559 
Total liabilities35,256 43,961 
Shareholders’ equity
Share capital (authorized for issue as of June 30, 2024 and December 31, 2023: unlimited; shares outstanding as of June 30, 2024 and December 31, 2023: 382,280,725 and 381,298,853, respectively)
616,379 613,725 
Additional paid-in capital49,298 48,449 
Retained earnings405,650 416,719 
Accumulated other comprehensive gain (loss)(12,013)20,678 
Total equity attributable to shareholders of Cronos Group1,059,314 1,099,571 
Non-controlling interests(3,522)(3,447)
Total shareholders’ equity1,055,792 1,096,124 
Total liabilities and shareholders’ equity$1,091,048 $1,140,085 
See notes to condensed consolidated interim financial statements.
4
Cronos Group Inc.
Condensed Consolidated Statements of Net Loss and Comprehensive Income (Loss)
(In thousands of U.S dollars, except share and per share amounts, unaudited)

Three months ended June 30,Six months ended June 30,
2024202320242023
Net revenue, before excise taxes$38,678 $25,798 $74,045 $52,352 
Excise taxes(10,916)(6,777)(20,995)(13,836)
Net revenue27,762 19,021 53,050 38,516 
Cost of sales21,070 15,922 41,875 32,490 
Inventory write-down395 — 395 — 
Gross profit6,297 3,099 10,780 6,026 
Operating expenses
Sales and marketing4,330 5,297 9,662 11,038 
Research and development962 1,107 1,959 3,146 
General and administrative12,767 13,451 21,674 25,307 
Restructuring costs547 — 630 — 
Share-based compensation2,236 2,331 4,251 4,866 
Depreciation and amortization1,016 1,533 2,139 3,058 
Impairment loss on long-lived assets— — 1,974 — 
Total operating expenses21,858 23,719 42,289 47,415 
Operating loss(15,561)(20,620)(31,509)(41,389)
Other income
Interest income, net13,451 12,471 27,696 23,646 
Share of income (loss) from equity method investments917 270 2,365 (226)
Gain (loss) on revaluation of financial instruments(3,615)5,193 (6,257)(2,565)
Impairment loss on other investments(12,916)— (25,650)— 
Foreign currency transaction gain (loss)6,543 (3,174)19,802 (4,817)
Other, net248 17 (422)37 
Total other income4,628 14,777 17,534 16,075 
Loss before income taxes(10,933)(5,843)(13,975)(25,314)
Income tax benefit(2,174)(180)(2,732)(1,616)
Loss from continuing operations(8,759)(5,663)(11,243)(23,698)
Loss from discontinued operations— (2,834)— (4,056)
Net loss(8,759)(8,497)(11,243)(27,754)
Net loss attributable to non-controlling interest(2)(137)(245)(225)
Net loss attributable to Cronos Group
$(8,757)$(8,360)$(10,998)$(27,529)
Comprehensive income (loss)
Net loss$(8,759)$(8,497)$(11,243)$(27,754)
Other comprehensive income (loss)
Foreign exchange gain (loss) on translation(10,160)16,580 (32,521)18,994 
Comprehensive income (loss)(18,919)8,083 (43,764)(8,760)
Comprehensive income (loss) attributable to non-controlling interests58 (87)(75)(95)
Comprehensive income (loss) attributable to Cronos Group$(18,977)$8,170 $(43,689)$(8,665)
Net loss per share
Basic and diluted - continuing operations$(0.02)$(0.01)$(0.03)$(0.06)
Basic and diluted - discontinued operations— (0.01)— (0.01)
Basic and diluted - total
$(0.02)$(0.02)$(0.03)$(0.07)
See notes to condensed consolidated interim financial statements.
5
Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the six months ended June 30, 2024 and 2023
(In thousands of U.S. dollars, except share amounts, unaudited)
Number of sharesShare capitalAdditional paid-in capitalRetained earnings Accumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity
Balance as of January 1, 2024381,298,853 $613,725 $48,449 $416,719 $20,678 $(3,447)$1,096,124 
Activities relating to share-based compensation712,325 1,900 (401)— — — 1,499 
Net loss— — — (2,241)— (243)(2,484)
Foreign exchange gain (loss) on translation— — — — (22,471)110 (22,361)
Balance as of March 31, 2024382,011,178 $615,625 $48,048 $414,478 $(1,793)$(3,580)$1,072,778 
Activities relating to share-based compensation269,547 754 1,250 (71)— — 1,933 
Net loss— — — (8,757)— (2)(8,759)
Foreign exchange gain (loss) on translation— — — — (10,220)60 (10,160)
Balance as of June 30, 2024382,280,725 $616,379 $49,298 $405,650 $(12,013)$(3,522)$1,055,792 
Number of sharesShare capitalAdditional paid-in capitalRetained earnings Accumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity
Balance as of January 1, 2023380,575,403 $611,318 $42,682 $490,682 $(797)$(2,921)$1,140,964 
Activities relating to share-based compensation240,518 917 1,362 — — — 2,279 
Net loss— — — (19,169)— (88)(19,257)
Foreign exchange gain on translation— — — — 2,334 80 2,414 
Balance as of March 31, 2023380,815,921 $612,235 $44,044 $471,513 $1,537 $(2,929)$1,126,400 
Activities relating to share-based compensation273,436 917 1,273 — — — 2,190 
Net loss— — — (8,360)— (137)(8,497)
Foreign exchange gain on translation— — — — 16,530 50 16,580 
Balance as of June 30, 2023381,089,357 $613,152 $45,317 $463,153 $18,067 $(3,016)$1,136,673 

See notes to condensed consolidated interim financial statements.
6
Cronos Group Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands of U.S. dollars, except share amounts, unaudited)

Six months ended June 30,
20242023
Operating activities
Net loss$(11,243)$(27,754)
 Adjustments to reconcile net loss to cash used in operating activities:
Share-based compensation4,251 4,887 
Depreciation and amortization3,244 4,785 
Impairment loss on long-lived assets1,974 205 
Impairment loss on other investments25,650 — 
Loss from investments
3,732 2,955 
Changes in expected credit losses on long-term financial assets1,021 (1,146)
Foreign currency transaction (gain) loss
(19,802)4,817 
Other non-cash operating activities, net829 (554)
Changes in operating assets and liabilities:
Accounts receivable, net(2,723)10,623 
Interest receivable1,174 (10,243)
Other receivables(1,009)(200)
Prepaids and other current assets(5)480 
Inventory292 (7,259)
Accounts payable(4,482)(2,478)
Income taxes payable(47)(32,801)
Accrued liabilities(3,316)(5,784)
Cash flows used in operating activities(460)(59,467)
Investing activities
Purchase of short-term investments— (479,763)
Proceeds from short-term investments187,447 169,418 
Dividends received from equity method investment— 1,299 
Advances on loans receivable
(8,836)— 
Proceeds from repayment on loans receivable5,298 11,388 
Purchase of property, plant and equipment(2,453)(1,298)
Purchase of intangible assets(457)(8)
Cash flows provided by (used in) investing activities180,999 (298,964)
Financing activities
Withholding taxes paid on share-based awards(905)(782)
Cash flows used in financing activities(905)(782)
Effect of foreign currency translation on cash and cash equivalents(736)3,997 
Net change in cash and cash equivalents178,898 (355,216)
Cash and cash equivalents, beginning of period669,291 764,644 
Cash and cash equivalents, end of period$848,189 $409,428 
Supplemental cash flow information
Interest paid$— $— 
Interest received$28,291 $13,385 
Income taxes paid$614 $32,995 

See notes to condensed consolidated interim financial statements.

7
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
1. Background, Basis of Presentation, and Summary of Significant Accounting Policies
(a)Background
Cronos Group Inc. (“Cronos” or the “Company”) is incorporated in the province of British Columbia under the Business Corporations Act (British Columbia) with principal executive offices at 4491 Concession Rd 12, Stayner, Ontario, L0M 1S0. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) and Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CRON.”
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® and Lord Jones®.
(b)Basis of presentation
These condensed consolidated interim financial statements of Cronos are unaudited. They have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) for interim financial information and with applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) relating to interim financial statements. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any other reporting period.
These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”).
Certain prior period amounts have been reclassified to conform to the current year presentation of our condensed consolidated interim financial statements. These reclassifications had no effect on the reported results of operations and ending shareholders’ equity.
(c)Discontinued Operations
In the second quarter of 2023, the Company exited its U.S. hemp-derived cannabinoid product operations. The exit of the U.S. operations represented a strategic shift that had a major effect on the Company’s operations and financial results, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive income (loss). Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations. For more information, see Note 2 “Discontinued Operations.”
(d)Segment information
Segment reporting is prepared on the same basis that the Company’s chief operating decision maker (the “CODM”) manages the business, makes operating decisions and assesses the Company’s performance. Prior to the second quarter of 2023, the Company reported results for two reportable segments, the U.S. and Rest of World. In the second quarter of 2023, as a result of the Company’s exit of its then-existing U.S. operations, the Company determined that it has one operating segment and therefore one reportable segment, which is comprised of operations in Canada and Israel and is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. All prior period segment disclosure information has been reclassified to conform to the current reporting structure in this Form 10-Q. These reclassifications had no effect on our consolidated financial statements in any period presented.
(e)Revenue recognition
The following tables present the Company’s revenue by major product category for continuing operations:
Three months ended June 30,
20242023
Cannabis flower$20,661 $14,014 
Cannabis extracts7,064 4,926 
Other37 81 
Net revenue$27,762 $19,021 
8
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
Six months ended June 30,
20242023
Cannabis flower$38,186 $27,142 
Cannabis extracts14,791 11,227 
Other73 147 
Net revenue$53,050 $38,516 
Net revenue attributed to a geographic region based on the location of the customer were as follows for continuing operations:
Three months ended June 30,
20242023
Canada$19,844 $13,595 
Israel6,889 5,426 
Other countries1,029 — 
Net revenue$27,762 $19,021 
Six months ended June 30,
20242023
Canada$38,715 $28,029 
Israel13,306 10,487 
Other countries1,029 — 
Net revenue$53,050 $38,516 
(f)Concentration of risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activities, primarily accounts receivable and other receivables, and its investing activities, including cash held with banks and financial institutions, short-term investments and loans receivable. The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $954,818 and $966,442 as of June 30, 2024 and December 31, 2023, respectively.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on the days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Accounts receivable are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan and a failure to make contractual payments for a period of greater than 120 days past due. As of June 30, 2024 and December 31, 2023, the Company had $20 and $3, respectively, in expected credit losses that have been recognized on receivables from contracts with customers.
As of June 30, 2024, the Company assessed that there is a concentration of credit risk, as 30% of the Company’s accounts receivable were due from one customer with an established credit history with the Company. As of December 31, 2023, 37% of the Company’s accounts receivable were due from one customer with an established credit history with the Company.
The Company sells products to a limited number of major customers. Major customers are defined as customers that each individually accounted for greater than 10% of the Company’s revenue. During the three months ended June 30, 2024, the Company earned a total net revenue before excise taxes of $19,941 from two major customers, together accounting for 52% of the Company’s total net revenues before excise taxes. During the three months ended June 30, 2023, the Company earned a total net revenue before excise taxes of $16,839 from three major customers, together accounting for 67% of the Company’s total net revenues before excise taxes. During the six months ended June 30, 2024, the Company earned a total net revenue before excise taxes of $45,482 from three customers, together accounting for 62% of the Company’s total net revenues before excise taxes. During the six months ended June 30, 2023, the Company earned a total net revenue before excise taxes of $34,732 from three major customers, together accounting for 67% of the Company’s total net revenue before excise taxes.
9
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
(g)New accounting pronouncements not yet adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances reportable segment disclosures by requiring disclosures such as significant segment expenses, information on the CODM and disclosures for entities with a single reportable segment. Additionally, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and we expect to adopt ASU 2023-07 retrospectively. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the existing income tax disclosures to provide additional information to better assess how an entity’s operations, related tax risks and tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. ASU 2023-09 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and we expect to adopt ASU 2023-09 prospectively. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.
(h)Adoption of new accounting pronouncements
On January 1, 2024, the Company adopted ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value. The amendments also require additional disclosures for equity securities subject to contractual sale restrictions. The adoption of ASU 2022-03 did not have a material impact on the Company’s condensed consolidated interim financial statements. With respect to the adoption of ASU 2022-03, see Note 4 “Investments” for discussion of the contractual restrictions related to the PharmaCann Option (as defined below).
2. Discontinued Operations
In the second quarter of 2023, the Company exited its then-existing U.S. hemp-derived cannabinoid product operations. Accordingly, the net loss of the U.S. operations for the three and six months ended June 30, 2023 are reported separately as loss from discontinued operations on the condensed consolidated statements of net loss and comprehensive income (loss). There was no activity in discontinued operations for the three and six months ended June 30, 2024.
10
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
The following table presents the major components comprising loss from discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2023:
Three months ended June 30,Six months ended June 30,
2023
Net revenue$380 $1,029 
Cost of sales848 2,044 
Inventory write-down839 839 
Gross profit(1,307)(1,854)
Operating expenses
Sales and marketing387 518 
Research and development
18 20 
General and administrative213 736 
Restructuring costs534 534 
Share-based compensation5 21 
Depreciation and amortization5 13 
Impairment loss on long-lived assets(i)
205 205 
Total operating expenses1,367 2,047 
Interest income3 8 
Other, net(ii)
(163)(163)
Total other income (loss)
(160)(155)
Loss before income taxes(2,834)(4,056)
Income tax expense (benefit)— — 
Net loss from discontinued operations$(2,834)$(4,056)
(i)During the three and six months ended June 30, 2023, as a result of the exit of the U.S. operations, the Company recognized an impairment charge of $205 related to the right-of-use lease assets associated with the Company’s former U.S. manufacturing facility in Los Angeles, California.
(ii)For the three and six months ended June 30, 2023, Other, net related to loss on disposal of assets that were part of the U.S. operations.

The following tables present the Company’s discontinued operations revenue by major product category:
Three months ended June 30,Six months ended June 30,
2023
Cannabis extracts380 1,029 
Net revenue$380 $1,029 

The following tables summarize the Company’s discontinued operations restructuring activity for the three and six months ended June 30, 2023:
Accrual as of April 1, 2023ExpensesPayments/Write-offsAccrual as of June 30, 2023
Employee Termination Benefits$— $442 $(223)$219 
Other Restructuring Costs— 92 — 92 
Total$— $534 $(223)$311 

Accrual as of January 1, 2023ExpensesPayments/Write-offsAccrual as of June 30, 2023
Employee Termination Benefits$— $442 $(223)$219 
Other Restructuring Costs— 92 — 92 
Total$— $534 $(223)$311 
11
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)

The Company had no assets or liabilities presented in the condensed consolidated balance sheets related to its discontinued operations as of both June 30, 2024 and December 31, 2023.
For the six months ended June 30, 2024, there were no purchases of property plant and equipment related to discontinued operations. For the six months ended June 30, 2023, purchases of property plant and equipment related to discontinued operations were $67.
3. Inventory, net
Inventory, net is comprised of the following items:
As of June 30, 2024As of December 31, 2023
Raw materials$5,351 $4,795 
Work-in-progress9,116 10,593 
Finished goods14,367 14,819 
Supplies and consumables348 288 
Total$29,182 $30,495 
4. Investments
(a)Equity method investments, net
A reconciliation of the carrying amount of the investments in equity method investees, net is as follows:
Ownership interestAs of June 30, 2024As of December 31, 2023
Cronos Growing Company Inc. (“Cronos GrowCo”)
50%$21,226 $19,488 
$21,226 $19,488 
The following is a summary of the Company’s share of net income (losses) from equity investments accounted for under the equity method of accounting:
For the three months ended June 30,For the six months ended June 30,
2024202320242023
Cronos GrowCo$917 $270 $2,365 $(226)
$917 $270 $2,365 $(226)
Beginning in the third quarter of 2024, the results of Cronos GrowCo will be consolidated into the results of the Company, and the Company’s investment in Cronos GrowCo will be reclassified as an intercompany transaction and eliminated upon consolidation. For more information, see Note 12 “Subsequent Events.”
(b)Other investments
Other investments consist of investments in common shares and options of two companies in the cannabis industry.
PharmaCann Option
On June 14, 2021, the Company purchased an option (the “PharmaCann Option”) to acquire 473,787 shares of Class A Common Stock of PharmaCann, Inc. (“PharmaCann”), a vertically integrated cannabis company in the United States, at an exercise price of $0.0001 per share, representing approximately 10.5% of PharmaCann’s issued and outstanding capital stock on a fully diluted basis as of the date of the PharmaCann Option, for an aggregate purchase price of approximately $110,392. The PharmaCann Option is classified as an investment in an equity security without a readily determinable fair value. The Company measures the PharmaCann Option at cost less accumulated impairment charges, if any, and subsequently adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As of June 30, 2024 and December 31, 2023, based on updated information provided by PharmaCann in the second quarter, the Company’s ownership percentage in PharmaCann on a fully diluted basis was approximately 6.2% and 6.6%, respectively. The decrease in the Company’s ownership percentage since acquisition does not materially affect the Company’s rights under the PharmaCann Option. The PharmaCann Option is measured at fair value on a non-recurring basis and is a level 3 asset. See Note 10 “Fair Value Measurements” for more information on the fair value hierarchy. The PharmaCann Option is reported as Other investments on the consolidated balance sheet as of June 30, 2024 and December 31, 2023.
12
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
During the first and second quarters of 2024, the Company identified adverse forecast changes in the financial performance of PharmaCann as indicators of impairment related to the PharmaCann Option and conducted analyses comparing the PharmaCann Option’s carrying amount to its estimated fair value. The fair value was estimated using the market approach. Under the market approach, the key assumptions are the selected multiples and the discount for lack of marketability. As a result of these analyses, the Company recorded non-cash impairment charges of $12,734 and $12,916 in the first and second quarters of 2024, respectively, as the difference between the carrying amount of the PharmaCann Option and its estimated fair value, in the condensed consolidated statements of net loss and comprehensive loss for the six months ended June 30, 2024.
The Company may sell, transfer or dispose of the PharmaCann Option without PharmaCann’s prior written consent, subject to the following conditions: (i) any transferee of any part of the PharmaCann Option must comply with and commit to comply with all regulations issued by a governmental entity applicable to such transferee in all material respects; (ii) any transferee of any part of the PharmaCann Option must agree to be bound by the terms of the Option Purchase Agreement, dated as of June 14, 2021 (the “Option Purchase Agreement”), as a “Purchaser” thereunder; (iii) the Company may not split and/or transfer the PharmaCann Option, in the aggregate, to more than four persons (with certain exceptions); (iv) no transferee may be a Prohibited Assignee (as defined in the Option Purchase Agreement); and (v) subject to certain exceptions, in the event that the Company (or a Permitted Transferee of the whole PharmaCann Option) transfers less than all of the PharmaCann Option to any third party that is not a Permitted Transferee, certain governance and information rights terminate immediately, unless waived by the PharmaCann board of directors in its sole and absolute discretion.
Additionally, in the event of an initial underwritten public offering of PharmaCann’s common stock pursuant to an effective registration statement, to the extent that holders of PharmaCann common stock are subject to any lock-up period imposed by the underwriter in connection therewith, the Company will, if applicable, execute a customary lock-up agreement on the same material terms and conditions as the other holders of common stock are subject to or as otherwise agreed between PharmaCann and the Company, subject to certain conditions with respect to the duration of the lock-up period.
Vitura Health Limited (formerly known as Cronos Australia)
The Company owns approximately 10% of the outstanding common shares of Vitura Health Limited (“Vitura”). The investment is considered an equity security with a readily determinable fair value. Changes in the fair value of the investment are recorded as gain (loss) on revaluation of financial instruments on the condensed consolidated statements of net loss and comprehensive loss.
The following table summarizes the Company’s other investments activity:
As of April 1, 2024Unrealized lossImpairment chargesForeign exchange effectAs of June 30, 2024
PharmaCann$12,916 $— $(12,916)$— $— 
Vitura6,842 (3,755)— 81 3,168 
$19,758 $(3,755)$(12,916)$81 $3,168 
As of January 1, 2024Unrealized lossImpairment chargesForeign exchange effectAs of June 30, 2024
PharmaCann$25,650 $— $(25,650)$— $— 
Vitura9,601 (6,097)— (336)3,168 
$35,251 $(6,097)$(25,650)$(336)$3,168 
As of April 1, 2023Unrealized gainImpairment chargesForeign exchange effectAs of June 30, 2023
PharmaCann$49,000 $— $— $— $49,000 
Vitura13,833 5,194 — (102)18,925 
$62,833 $5,194 $— $(102)$67,925 
As of January 1, 2023Unrealized lossImpairment chargesForeign exchange effectAs of June 30, 2023
PharmaCann$49,000 $— $— $— $49,000 
Vitura21,993 (2,729)— (339)18,925 
$70,993 $(2,729)$— $(339)$67,925 

13
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
5. Loans Receivable, net
Loans receivable, net consists of the following:
As of June 30, 2024As of December 31, 2023
GrowCo Credit Facility
$4,875 $5,034 
Add: Current portion of accrued interest— 507 
Total current portion of loans receivable, net
4,875 5,541 
GrowCo Credit Facility
57,271 53,638 
Mucci Promissory Note
13,929 13,379 
Cannasoul Collaboration Loan1,692 1,771 
Add: Long-term portion of accrued interest273 248 
Total long-term portion of loans receivable, net
73,165 69,036 
Total loans receivable, net$78,040 $74,577 
Cronos GrowCo Credit Facility
On August 23, 2019, the Company, as lender, and Cronos GrowCo, as borrower, entered into a senior secured credit agreement for an aggregate principal amount of C$100,000 (the “GrowCo Credit Facility”). The GrowCo Credit Facility is secured by substantially all present and after-acquired personal and real property of Cronos GrowCo. In August 2021, the GrowCo Credit Facility was amended to increase the aggregate principal amount available to C$105,000.
In June 2024, the GrowCo Credit Facility was amended to increase the aggregate principal amount available by C$70,000 by providing a second secured non-revolving credit facility (“Term Loan B”). The funds from Term Loan B will be used to expand Cronos GrowCo’s purpose-built cannabis facility and will mature 10 years after the commencement of sales from the expansion area, following which, principal will be repaid on a quarterly basis. Interest on Term Loan B is payable on a quarterly basis until maturity beginning after the first borrowing under Term Loan B. Prior to July 1, 2024, only C$12,000 of the C$70,000 increased principal availability could be drawn, which Cronos GrowCo drew in full on June 20, 2024.
As of June 30, 2024 and December 31, 2023, Cronos GrowCo had drawn C$116,000 and C$104,000 ($84,833 and $78,532, respectively), respectively from the GrowCo Credit Facility. The interest rate on the outstanding borrowings is the Canadian Prime Rate plus 1.25%, with interest payments due quarterly. Principal payments of C$1,000 commenced in March 2022 and are currently C$1,667, due quarterly. For the three months ended June 30, 2024, Cronos GrowCo repaid C$1,667 ($1,216) in principal and C$1,920 ($1,401) in interest related to the GrowCo Credit Facility. For the six months ended June 30, 2024, Cronos GrowCo repaid C$3,333 ($2,447) in principal and C$3,862 ($2,835) in interest related to the GrowCo Credit Facility. As of June 30, 2024, Cronos GrowCo had repaid an aggregate C$14,833 ($10,848) and C$24,384 ($17,832) in principal and interest, respectively, under the terms of the GrowCo Credit Facility.
Beginning in the third quarter of 2024, the results of Cronos GrowCo will be consolidated into the results of the Company, and the Cronos GrowCo Credit Facility will be reclassified as an intercompany transaction and eliminated upon consolidation. For more information, see Note 12 “Subsequent Events.”
Mucci Promissory Note
On June 28, 2019, the Company entered into a promissory note receivable agreement (the “Mucci Promissory Note”) for C$16,350 (approximately $11,957) with the Cronos GrowCo joint venture partner (“Mucci”). The Mucci Promissory Note is secured by a general security agreement covering all the assets of Mucci. On September 30, 2022, the Mucci Promissory Note was amended and restated to increase the interest rate from 3.95% to the Canadian Prime Rate plus 1.25%, change the interest payments from quarterly to annual, and defer Mucci’s initial cash interest payment from September 30, 2022 to July 1, 2023. On June 20, 2024, the Mucci Promissory Note was amended and restated. As a result, interest accrued on the Mucci Promissory Note between July 1, 2023 and July 1, 2024 was capitalized as part of the principal balance, which increased the loans receivable and decreased interest receivable by $974 on the condensed consolidated balance sheets as of June 30, 2024. As of July 1, 2024, interest is accrued and to be paid in cash beginning on July 1, 2025.
Prior to July 1, 2022, interest accrued on the Mucci Promissory Note was capitalized as part of the principal balance. As of July 1, 2022, interest was accrued and to be paid in cash beginning on July 1, 2023. Prior to 2023, there were no repayments of principal or interest on the Mucci Promissory Note. For the three and six months ended June 30, 2023, Mucci made a payment of C$1,750 (approximately $1,322) under the Mucci Promissory Note, with C$1,187 ($897) related to accrued interest and C$563 ($425) related to outstanding principal. For the three and six months ended June 30, 2024, there were no repayments of principal or interest on the Mucci Promissory Note.
14
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
Cannasoul Collaboration Loan
As of both June 30, 2024 and December 31, 2023, Cannasoul Lab Services Ltd. has received ILS 8,297 (approximately $2,198 and $2,294, respectively), from the Cannasoul Collaboration Loan.
Expected credit loss allowances on the Company’s long-term financial assets for the six months ended June 30, 2024 and 2023 were comprised of the following items:
As of April 1, 2024
Increase(i)
Foreign exchange effectAs of June 30, 2024
GrowCo Credit Facility$10,740 $1,207 $(109)$11,838 
Mucci Promissory Note89 1 — 90 
Cannasoul Collaboration Loan518 4 (16)506 
$11,347 $1,212 $(125)$12,434 
As of January 1, 2024
Increase(i)
Foreign exchange effectAs of June 30, 2024
GrowCo Credit Facility$11,176 $1,010 $(348)$11,838 
Mucci Promissory Note89 3 (2)90 
Cannasoul Collaboration Loan524 8 (26)506 
$11,789 $1,021 $(376)$12,434 
As of April 1, 2023Increase (decrease)Foreign exchange effectAs of June 30, 2023
GrowCo Credit Facility$11,719 $(379)$239 $11,579 
Mucci Promissory Note91 (7)2 86 
Cannasoul Collaboration Loan514 4 (15)503 
$12,324 $(382)$226 $12,168 
As of January 1, 2023Increase (decrease)Foreign exchange effectAs of June 30, 2023
GrowCo Credit Facility$12,455 $(1,149)$273 $11,579 
Mucci Promissory Note89 (5)2 86 
Cannasoul Collaboration Loan522 8 (27)503 
$13,066 $(1,146)$248 $12,168 
(i)During the three and six months ended June 30, 2024, $1,212 and $1,021, respectively, were recorded as increases to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive income (loss) primarily as a result of the increased loans under the GrowCo Credit Facility. During the three and six months ended June 30, 2023, $382 and $1,146, respectively, were recorded as decreases to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive income (loss) as a result of adjustments to our expected credit losses.
15
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
6. Restructuring
In the first quarter of 2022, the Company initiated a strategic plan to realign the business around its brands, centralize functions and evaluate the Company’s supply chain (the “Realignment”). As part of the Realignment, on February 28, 2022, the Board approved plans to leverage the Company’s strategic partnerships to improve supply chain efficiencies and reduce manufacturing overhead by exiting its production facility in Stayner, Ontario, Canada (the “Peace Naturals Campus”). On February 27, 2023, the Board approved revisions to the Realignment, which were expected to result in the Company maintaining select components of its operations at the Peace Naturals Campus, namely distribution warehousing, certain research and development activities and manufacturing of certain of the Company’s products, while seeking to sell and lease back all or some of the Peace Naturals Campus or to lease certain portions of the Peace Naturals Campus to third parties. In the third quarter of 2023, the Board approved revisions to the Realignment to wind-down operations at its Winnipeg, Manitoba facility (“Cronos Fermentation”), list the Cronos Fermentation facility for sale, and implement additional organization-wide cost reductions as the Company continues its Realignment initiatives. The Realignment initiatives were intended to position the Company to drive profitable and sustainable growth over time.
On November 26, 2023, the Company entered into an agreement with Future Farmco Canada Inc. for the sale and leaseback of the Peace Naturals Campus. This agreement was subsequently terminated pursuant to its terms during the second quarter of 2024. The Company is continuing to evaluate its strategic options for the Peace Naturals Campus, which may include continuing and expanding operations at the facility.
During the first quarter of 2024, the Company ceased operations at Cronos Fermentation and performed an assessment under ASC 360 of the recoverability of the carrying value of the Cronos Fermentation assets, and determined the carrying value of the assets was not fully recoverable. The fair value was estimated using a combination of the market and income approaches. As a result of this analysis, an impairment loss on long-lived assets of $1,631 was recorded to the condensed consolidated statements of net loss and comprehensive loss in the six months ended June 30, 2024. As of June 30, 2024, the assets of Cronos Fermentation met the held-for-sale criteria and were classified to assets held for sale on the condensed consolidated balance sheet and the assets are valued at their fair value less costs to sell. A $445 loss for estimated costs to sell was recorded in the six months ended June 30, 2024 as a result of the classification of the Cronos Fermentation assets as held for sale.
During the three and six months ended June 30, 2024, the Company incurred $547 and $630 of restructuring costs in its continuing operations in connection with the Realignment. Charges related thereto include shutdown costs at the Cronos Fermentation facility, as well as employee-related costs such as severance and other termination benefits. During the three and six months ended June 30, 2023, the Company recognized no restructuring costs in continuing operations in connection with the Realignment. Restructuring costs incurred in the Company’s discontinued operations during the three and six months ended June 30, 2023 is presented in Note 2 “Discontinued Operations.”
The following table summarizes the Company’s restructuring activity for the three and six months ended June 30, 2024:
Accrual as of April 1, 2024ExpensesPayments/Write-offsAccrual as of June 30, 2024
Employee Termination Benefits$38 $— $(14)$24 
Other Restructuring Costs— 547 — 547 
Total$38 $547 $(14)$571 
Accrual as of January 1, 2024ExpensesPayments/Write-offsAccrual as of June 30, 2024
Employee Termination Benefits$150 $62 $(188)$24 
Other Restructuring Costs— 568 (21)547 
Total$150 $630 $(209)$571 


16
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
7. Share-based Compensation
(a)Share-based award plans
The Company has granted stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees and non-employee directors under the 2018 Stock Option Plan dated June 28, 2018 (the “2018 Stock Option Plan”), the Employment Inducement Award Plan #1 (the “Employment Inducement Award Plan”), the 2020 Omnibus Equity Incentive Plan dated March 29, 2020 (the “2020 Omnibus Plan”) and the DSU Plan dated August 10, 2019 (the “DSU Plan”). The Company can no longer make grants under the 2018 Stock Option Plan or the Employment Inducement Award Plan.
The following table summarizes the total share-based compensation expense associated with the Company’s stock options and RSUs for the three and six months ended June 30, 2024 and 2023:
For the three months ended June 30,For the six months ended June 30,
2024202320242023
Stock options$33 $372 $67 $1,106 
RSUs2,203 1,959 4,184 3,760 
Total share-based compensation$2,236 $2,331 $4,251 $4,866 
(b)Stock options
Vesting conditions for grants of options are determined by the Compensation Committee of the Company’s Board of Directors. The typical vesting for stock option grants made under the 2020 Omnibus Plan is annual vesting over three to five years with a maximum term of ten years. The typical vesting for stock option grants made under the 2018 Stock Option Plan is quarterly vesting over three to five years with a maximum term of seven years. The 2018 Stock Option Plan did not, and the 2020 Omnibus Plan does not, authorize grants of options with an exercise price below fair market value.
The following is a summary of the changes in stock options for the six months ended June 30, 2024 and 2023:
Weighted-average exercise price (C$) (i)
Number of optionsWeighted-average remaining contractual term (years)
Balance as of January 1, 2024$14.50 2,103,201 1.84
Cancellation, forfeiture and expiry of options
19.05 (1,381,696)
Balance as of June 30, 2024$5.78 721,505 4.13
Exercisable as of June 30, 2024$6.59 520,820 3.58
Weighted-average exercise price (C$) (i)
Number of optionsWeighted-average remaining contractual term (years)
Balance as of January 1, 2023$10.57 5,350,600 0.73
Issuance of options2.96 188,317 
Cancellation, forfeiture and expiry of options
7.75 (3,435,716)
Balance as of June 30, 2023$14.50 2,103,201 2.34
Exercisable as of June 30, 2023$18.72 1,426,612 1.00
(i)The weighted-average exercise price reflects the conversion of foreign currency-denominated stock options translated into C$ using the average foreign exchange rate as of the date of issuance.
The following table summarizes stock options outstanding:
As of June 30, 2024As of December 31, 2023
2020 Omnibus Plan702,264 702,264 
2018 Stock Option Plan 19,241 1,400,937 
Total stock options outstanding721,505 2,103,201 
17
Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
(c)Restricted share units
The following is a summary of the changes in RSUs for the six months ended June 30, 2024 and 2023:
Weighted-average grant date fair value (C$)(ii)
Number of RSUs
Balance as of January 1, 2024$3.77 7,381,541 
Granted(i)
2.95 2,503,835 
Vested and issued3.53 (1,343,425)
Cancellation and forfeitures2.98 (