cron-6k_20180630.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Section 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August 2018

Commission File No. 001-38403

 

CRONOS GROUP INC.

(Name of registrant)

 

720 King Street W., Suite 320

Toronto, Ontario

M5V 2T3

(Address of registrant’s principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F   Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1):

    Yes      No  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7):

    Yes      No  

 

 

 

 


 

EXHIBIT INDEX

 

 

 

Exhibit

 

Description

 

99.1

Unaudited Condensed Interim Consolidated Financial Statements dated August 13, 2018

99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations dated August 13, 2018

99.3

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Executive Officer dated August 14, 2018

99.4

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Financial Officer dated August 14, 2018

 

 

 

1


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

 

 

CRONOS GROUP INC.

(Registrant)

 

 

By:

/s/ Michael Gorenstein  

 

Name:

Michael Gorenstein

Title:

President and Chief Executive Officer

Date:  August 14, 2018

 

 

 

2

cron-ex991_8.htm

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRONOS GROUP INC.

 

Unaudited Condensed Interim Consolidated Financial Statements

 

For the Three and Six Months Ended June 30, 2018 and June 30, 2017

 

(in thousands of Canadian dollars)

 

 

 

 

 

 


 

 

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2018 and June 30, 2017

 

Table of Contents

 

Unaudited Condensed Interim Consolidated Statements of Financial Position

1

Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss

2

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

3

Unaudited Condensed Interim Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Interim Consolidated Financial Statements

5

 

 

 

 


  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at June 30, 2018 and December 31, 2017

(in thousands of CDN $)

 

 

 

Notes

 

As at

June 30,

2018

 

 

As at

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

$

89,609

 

 

$

9,208

 

Accounts receivable

 

22(i)

 

 

2,844

 

 

 

1,140

 

Sales taxes receivable

 

 

 

 

6,952

 

 

 

3,114

 

Prepaids and other receivables

 

 

 

 

4,112

 

 

 

790

 

Biological assets

 

6

 

 

6,899

 

 

 

3,722

 

Inventory

 

6

 

 

12,334

 

 

 

8,416

 

Loan receivable

 

7,22(i)

 

 

314

 

 

 

314

 

Total current assets

 

 

 

 

123,064

 

 

 

26,704

 

Promissory note receivable

 

8,22(i)

 

 

1,304

 

 

 

-

 

Investment in Whistler

 

9

 

 

3,851

 

 

 

3,807

 

Other investments

 

10

 

 

725

 

 

 

1,347

 

Property, plant and equipment

 

11

 

 

93,657

 

 

 

56,172

 

Intangible assets

 

12

 

 

11,043

 

 

 

11,207

 

Goodwill

 

13

 

 

1,792

 

 

 

1,792

 

Total assets

 

 

 

$

235,436

 

 

$

101,029

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

22(ii)

 

$

2,333

 

 

$

7,878

 

Total current liabilities

 

 

 

 

2,333

 

 

 

7,878

 

Construction loan payable

 

14

 

 

5,565

 

 

 

5,367

 

Deferred income tax liability

 

21

 

 

268

 

 

 

1,416

 

Total liabilities

 

 

 

 

8,166

 

 

 

14,661

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

Share capital

 

15(a)

 

 

224,742

 

 

 

83,559

 

Shares to be issued

 

15(c)

 

 

17

 

 

 

-

 

Warrants

 

16(a)

 

 

1,868

 

 

 

3,364

 

Stock options

 

16(b)

 

 

3,810

 

 

 

2,289

 

Accumulated deficit

 

 

 

 

(4,051

)

 

 

(3,724

)

Accumulated other comprehensive income

 

 

 

 

884

 

 

 

880

 

Total shareholders' equity

 

 

 

 

227,270

 

 

 

86,368

 

Total liabilities and shareholders' equity

 

 

 

$

235,436

 

 

$

101,029

 

Commitments and contingencies

 

20

 

 

 

 

 

 

 

 

Subsequent events

 

25

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

 

 

 

Approved on behalf of the Board of Directors:

 

 

 

"Michael Gorenstein"

 

"James Rudyk"

 

Director

 

Director

 

 

   

 

1


 

  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss)

For the three and six months ended June 30, 2018 and June 30, 2017

(in thousands of CDN $, except share and per share amounts)

 

 

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

Notes

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

 

17

 

$

3,394

 

 

$

643

 

 

$

6,339

 

 

$

1,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory expensed to cost of sales, before fair value adjustments

 

5,6

 

 

1,254

 

 

 

215

 

 

 

2,821

 

 

 

413

 

Gross profit before fair value adjustments

 

 

 

 

2,140

 

 

 

428

 

 

 

3,518

 

 

 

744

 

Fair value adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

 

5,6

 

 

(6,831

)

 

 

(1,122

)

 

 

(9,575

)

 

 

(2,701

)

Realized fair value adjustments on inventory sold in the period

 

5,6

 

 

2,625

 

 

 

429

 

 

 

4,819

 

 

 

1,288

 

Total fair value adjustments

 

 

 

 

(4,206

)

 

 

(693

)

 

 

(4,756

)

 

 

(1,413

)

Gross profit

 

 

 

 

6,346

 

 

 

1,121

 

 

 

8,274

 

 

 

2,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

364

 

 

 

87

 

 

 

950

 

 

 

131

 

General and administrative

 

 

 

 

4,219

 

 

 

1,872

 

 

 

6,680

 

 

 

3,208

 

Share-based payments

 

16(b),19

 

 

950

 

 

 

439

 

 

 

1,724

 

 

 

631

 

Depreciation and amortization

 

11,12

 

 

323

 

 

 

228

 

 

 

608

 

 

 

429

 

Total operating expenses

 

 

 

 

5,856

 

 

 

2,626

 

 

 

9,962

 

 

 

4,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

490

 

 

 

(1,505

)

 

 

(1,688

)

 

 

(2,242

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

 

 

(37

)

 

 

13

 

 

 

(59

)

 

 

(137

)

Share of income from Whistler investment

 

9

 

 

3

 

 

 

313

 

 

 

44

 

 

 

416

 

Gain on other investments

 

10

 

 

-

 

 

 

1,330

 

 

 

221

 

 

 

1,271

 

Total other income (expense)

 

 

 

 

(34

)

 

 

1,656

 

 

 

206

 

 

 

1,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

 

 

456

 

 

 

151

 

 

 

(1,482

)

 

 

(692

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax recovery

 

21

 

 

(267

)

 

 

(23

)

 

 

(1,155

)

 

 

(22

)

Net income (loss)

 

 

 

$

723

 

 

$

174

 

 

$

(327

)

 

$

(670

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on revaluation and disposal of other investments, net of tax

 

10,21

 

 

39

 

 

 

11

 

 

 

4

 

 

 

694

 

Comprehensive income (loss)

 

 

 

$

762

 

 

$

185

 

 

$

(323

)

 

$

24

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

18

 

$

0.00

 

 

$

0.00

 

 

$

(0.00

)

 

$

(0.01

)

Weighted average number of outstanding shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

18

 

 

175,529,196

 

 

 

132,647,546

 

 

 

166,343,078

 

 

 

128,824,503

 

Diluted

 

18

 

 

211,524,230

 

 

 

167,787,028

 

 

 

166,343,078

 

 

 

128,824,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

 

 

 

 

2


 

  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

For the three and six months ended June 30, 2018 and June 30, 2017

(in thousands of CDN $, except number of share amounts)

 

 

Notes

 

Number of

shares

 

 

Share capital

 

 

Shares to be

issued

 

 

Share-based reserve

 

 

Accumulated

deficit

 

 

Accumulated other comprehensive income

 

 

Total

 

 

 

 

 

 

 

 

 

Warrants

 

 

Stock options

 

 

 

 

 

 

 

Balance at January 1, 2017

 

 

 

 

121,725,748

 

 

$

33,590

 

 

$

-

 

 

$

3,983

 

 

$

735

 

 

$

(6,215

)

 

$

1,584

 

 

$

33,677

 

Shares issued

 

15(a)

 

 

7,705,000

 

 

 

17,336

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,336

 

Share issuance costs

 

 

 

 

-

 

 

 

(1,322

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,322

)

Vesting of options

 

16(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

631

 

 

 

-

 

 

 

-

 

 

 

631

 

Options exercised

 

16(b)

 

 

394,163

 

 

 

689

 

 

 

-

 

 

 

-

 

 

 

(247

)

 

 

-

 

 

 

-

 

 

 

442

 

Warrants exercised

 

16(a)

 

 

3,317,416

 

 

 

1,272

 

 

 

-

 

 

 

(383

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

889

 

Unrealized gains reclassified to net income

 

10

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(691

)

 

 

(691

)

Net loss

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(670

)

 

 

-

 

 

 

(670

)

Other comprehensive income

 

10

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

694

 

 

 

694

 

Balance at June 30, 2017

 

 

 

 

133,142,327

 

 

$

51,565

 

 

$

-

 

 

$

3,600

 

 

$

1,119

 

 

$

(6,885

)

 

$

1,587

 

 

$

50,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

 

 

149,360,603

 

 

$

83,559

 

 

$

-

 

 

$

3,364

 

 

$

2,289

 

 

$

(3,724

)

 

$

880

 

 

$

86,368

 

Shares issued

 

15(a)

 

 

15,677,143

 

 

 

146,032

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

146,032

 

Share issuance costs

 

 

 

 

-

 

 

 

(9,444

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,444

)

Vesting of options

 

16(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,724

 

 

 

-

 

 

 

-

 

 

 

1,724

 

Options exercised

 

16(b)

 

 

353,339

 

 

 

682

 

 

 

-

 

 

 

-

 

 

 

(142

)

 

 

-

 

 

 

-

 

 

 

540

 

Warrants exercised

 

16(a)

 

 

11,364,335

 

 

 

3,852

 

 

 

-

 

 

 

(1,496

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,356

 

Shares to be issued

 

15(c)

 

 

-

 

 

 

-

 

 

 

17

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17

 

Share appreciation rights

 

16(b)

 

 

150,215

 

 

 

61

 

 

 

 

 

 

 

 

 

 

 

(61

)

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(327

)

 

 

-

 

 

 

(327

)

Other comprehensive loss

 

10,21

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

4

 

Balance at June 30, 2018

 

 

 

 

176,905,635

 

 

$

224,742

 

 

$

17

 

 

$

1,868

 

 

$

3,810

 

 

$

(4,051

)

 

$

884

 

 

$

227,270

 

 

 

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

 

 

 

 

3


 

 

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the three and six months ended June 30, 2018 and June 30, 2017

(in thousands of CDN $)

 

 

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

Notes

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

$

723

 

 

$

174

 

 

$

(327

)

 

$

(670

)

Items not affecting cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

 

5,6

 

 

(6,831

)

 

 

(1,122

)

 

 

(9,575

)

 

 

(2,701

)

Realized fair value adjustments on inventory sold in the period

 

5,6

 

 

2,625

 

 

 

429

 

 

 

4,819

 

 

 

1,288

 

Share-based payments

 

16(b),19

 

 

950

 

 

 

439

 

 

 

1,724

 

 

 

631

 

Depreciation and amortization

 

11,12

 

 

575

 

 

 

228

 

 

 

1,115

 

 

 

429

 

Share of income from Whistler investment

 

9

 

 

(3

)

 

 

(313

)

 

 

(44

)

 

 

(416

)

Gain on other investments

 

10

 

 

-

 

 

 

(1,330

)

 

 

(221

)

 

 

(1,271

)

Deferred income tax recovery

 

21

 

 

(267

)

 

 

(23

)

 

 

(1,155

)

 

 

(22

)

Foreign exchange loss (gain)

 

 

 

 

4

 

 

 

-

 

 

 

(12

)

 

 

-

 

 

 

 

 

 

(2,224

)

 

 

(1,518

)

 

 

(3,676

)

 

 

(2,732

)

Net changes in non-cash working capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

(318

)

 

 

(55

)

 

 

(1,704

)

 

 

(191

)

Sales taxes receivable

 

 

 

 

(2,686

)

 

 

-

 

 

 

(3,838

)

 

 

-

 

Prepaids and other receivables

 

 

 

 

544

 

 

 

(2,087

)

 

 

(3,322

)

 

 

(2,152

)

Biological assets

 

 

 

 

4,422

 

 

 

1,079

 

 

 

6,398

 

 

 

1,711

 

Inventory

 

 

 

 

(5,945

)

 

 

(883

)

 

 

(8,737

)

 

 

(2,093

)

Accrued interest on loan receivable

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5

)

Accounts payable and other liabilities

 

 

 

 

(659

)

 

 

136

 

 

 

(5,750

)

 

 

208

 

Cash flows used in operating activities

 

 

 

 

(6,866

)

 

 

(3,328

)

 

 

(20,629

)

 

 

(5,254

)

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of purchase price liability

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,299

)

Investment in Whistler

 

9

 

 

-

 

 

 

(1,076

)

 

 

-

 

 

 

(1,076

)

Investment in ABcann Global Corporation

 

10

 

 

-

 

 

 

(1,016

)

 

 

-

 

 

 

(1,016

)

Proceeds from sale of other investments

 

10

 

 

280