cron-6k_20190509.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 May 2019

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 May 8, 2019

99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations dated May 8, 2019

99.3

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Executive Officer dated May 9, 2019

99.4

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Financial Officer dated May 9, 2019

 

 

 

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:  May 9, 2019

 

 

 

2

cron-ex991_9.htm

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRONOS GROUP INC.

 

Unaudited Condensed Interim Consolidated Financial Statements

 

For the Three Months Ended March 31, 2019 and March 31, 2018

 

(in thousands of Canadian dollars)

 

 

 

 

 

 


 

 

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2019 and March 31, 2018

 

Table of Contents

 

Unaudited Condensed Interim Consolidated Statements of Financial Position

1

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

2

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

3

Unaudited Condensed Interim Consolidated Statements of Cash Flows

4

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

5

 

 

 

 


  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at March 31, 2019 and December 31, 2018

(in thousands of CDN $)

 

 

 

Notes

 

As at

March 31,

2019

 

 

As at

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

22(a)

 

$

2,418,277

 

 

$

32,634

 

Interest receivable

 

22(a)

 

 

3,130

 

 

 

-

 

Accounts receivable

 

22(a)

 

 

5,559

 

 

 

4,163

 

Sales taxes receivable

 

 

 

 

5,594

 

 

 

3,419

 

Prepaid expenses and other assets

 

 

 

 

5,092

 

 

 

4,190

 

Biological assets

 

5

 

 

11,506

 

 

 

9,074

 

Inventory

 

5

 

 

25,150

 

 

 

11,584

 

Total current assets

 

 

 

 

2,474,308

 

 

 

65,064

 

Advances to joint ventures

 

6(a)

 

 

21,920

 

 

 

6,395

 

Net investments in equity accounted investees

 

6(b)

 

 

2,185

 

 

 

4,038

 

Other investments

 

7,22(c)

 

 

300

 

 

 

705

 

Property, plant and equipment

 

8

 

 

184,570

 

 

 

171,720

 

Right-of-use assets

 

3(a),11(a)

 

 

1,875

 

 

 

171

 

Intangible assets

 

9(a)

 

 

11,087

 

 

 

11,234

 

Goodwill

 

9(b)

 

 

1,792

 

 

 

1,792

 

Total assets

 

 

 

$

2,698,037

 

 

$

261,119

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Bank indebtedness

 

22(b)

 

$

422

 

 

$

-

 

Accounts payable and other liabilities

 

22(b)

 

 

45,016

 

 

 

15,372

 

Holdbacks payable

 

22(b)

 

 

8,482

 

 

 

7,887

 

Government remittances payable

 

22(b)

 

 

1,313

 

 

 

1,123

 

Current portion of lease obligations

 

11,22(b)

 

 

134

 

 

 

41

 

Derivative liabilities

 

13,22(b)

 

 

1,664,275

 

 

 

-

 

Construction loan payable

 

12,22(b)

 

 

-

 

 

 

20,951

 

Total current liabilities

 

 

 

 

1,719,642

 

 

 

45,374

 

Lease obligations

 

11,22(b)

 

 

1,827

 

 

 

119

 

Due to non-controlling interests

 

10,22(b)

 

 

2,247

 

 

 

2,136

 

Deferred income tax liability

 

20

 

 

4,371

 

 

 

1,850

 

Total liabilities

 

 

 

 

1,728,087

 

 

 

49,479

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

Share capital

 

14(a)

 

 

556,930

 

 

 

225,500

 

Warrants

 

15(a)

 

 

845

 

 

 

1,548

 

Stock options

 

15(b)

 

 

6,631

 

 

 

6,241

 

Retained earnings (accumulated deficit)

 

 

 

 

404,499

 

 

 

(22,715

)

Accumulated other comprehensive income

 

 

 

 

1,049

 

 

 

930

 

Total equity attributable to shareholders of Cronos Group

 

 

 

 

969,954

 

 

 

211,504

 

Non-controlling interests

 

10

 

 

(4

)

 

 

136

 

Total shareholders' equity

 

 

 

 

969,950

 

 

 

211,640

 

Total liabilities and shareholders' equity

 

 

 

$

2,698,037

 

 

$

261,119

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

19

 

 

 

 

 

 

 

 

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 months ended March 31, 2019 and March 31, 2018

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

 

 

 

 

 

Three Months Ended March 31,

 

 

 

Notes

 

2019

 

 

2018

 

Gross revenue

 

16

 

$

6,985

 

 

$

2,945

 

Excise taxes

 

 

 

 

(515

)

 

 

-

 

Net revenue

 

 

 

 

6,470

 

 

 

2,945

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

Cost of sales before fair value adjustments

 

4(b)

 

 

2,984

 

 

 

1,567

 

Gross profit before fair value adjustments

 

 

 

 

3,486

 

 

 

1,378

 

Fair value adjustments

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

 

4(b)

 

 

(13,553

)

 

 

(2,744

)

Realized fair value adjustments on inventory sold in the period

 

4(b)

 

 

3,722

 

 

 

2,194

 

Total fair value adjustments

 

 

 

 

(9,831

)

 

 

(550

)

Gross profit

 

 

 

 

13,317

 

 

 

1,928

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

1,500

 

 

 

586

 

Research and development

 

 

 

 

1,557

 

 

 

-

 

General and administrative

 

 

 

 

9,611

 

 

 

2,461

 

Share-based payments

 

15(b),18

 

 

737

 

 

 

774

 

Depreciation and amortization

 

8,9(a),11(a)

 

 

470

 

 

 

285

 

Total operating expenses

 

 

 

 

13,875

 

 

 

4,106

 

Operating loss

 

 

 

 

(558

)

 

 

(2,178

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

 

 

2,720

 

 

 

(22

)

Financing costs

 

12,13

 

 

(29,561

)

 

 

-

 

Gain on revaluation of derivative liabilities

 

13

 

 

436,383

 

 

 

-

 

Share of income (loss) from investments in equity accounted investees

 

6

 

 

(264

)

 

 

41

 

Gain on disposal of Whistler

 

6

 

 

20,606

 

 

 

-

 

Gain on other investments

 

7

 

 

924

 

 

 

221

 

Total other income

 

 

 

 

430,808

 

 

 

240

 

Income (loss) before income taxes

 

 

 

 

430,250

 

 

 

(1,938

)

Deferred income tax expense (recovery)

 

20

 

 

2,557

 

 

 

(888

)

Net income (loss)

 

 

 

$

427,693

 

 

$

(1,050

)

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

Cronos Group

 

 

 

$

427,829

 

 

$

(1,050

)

Non-controlling interests

 

10

 

 

(136

)

 

 

-

 

 

 

 

 

$

427,693

 

 

$

(1,050

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

Gain (loss) on revaluation and disposal of other investments, net of tax

 

7,20

 

$

103

 

 

$

(35

)

Foreign exchange gain on translation of foreign operations

 

2(d),10

 

 

16

 

 

 

-

 

Total other comprehensive income (loss)

 

 

 

 

119

 

 

 

(35

)

Comprehensive income (loss)

 

 

 

$

427,812

 

 

$

(1,085

)

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

Cronos Group

 

 

 

$

427,948

 

 

$

(1,085

)

Non-controlling interests

 

10

 

 

(136

)

 

 

-

 

 

 

 

 

$

427,812

 

 

$

(1,085

)

Earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

Basic

 

17

 

$

1.95

 

 

$

(0.01

)

Diluted

 

17

 

$

0.48

 

 

$

(0.01

)

Weighted average number of outstanding shares

 

 

 

 

 

 

 

 

 

 

Basic

 

17

 

 

218,949,590

 

 

 

157,054,891

 

Diluted

 

17

 

 

271,086,575

 

 

 

157,054,891

 

 

 

 

 

 

 

 

 

 

 

 

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 months ended March 31, 2019 and March 31, 2018

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based reserve

 

 

Retained earnings

 

 

Accumulated other

 

 

Non-

 

 

 

 

 

 

 

Notes

 

Number of shares

 

 

Share capital

 

 

Shares to be issued

 

 

Warrants

 

 

Stock options

 

 

(accumulated deficit)

 

 

comprehensive income

 

 

controlling interests

 

 

Total

 

Balance at January 1, 2019 as previously reported

 

 

 

 

178,720,022

 

 

$

225,500

 

 

$

-

 

 

$

1,548

 

 

$

6,241

 

 

$

(22,715

)

 

$

930

 

 

$

136

 

 

$

211,640

 

Adoption of IFRS 16

 

3(a)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(68

)

 

 

-

 

 

 

(4

)

 

 

(72

)

Balance at January 1, 2019 as restated

 

 

 

 

178,720,022

 

 

 

225,500

 

 

 

-

 

 

 

1,548

 

 

 

6,241

 

 

 

(22,783

)

 

 

930

 

 

 

132

 

 

 

211,568

 

Shares issued

 

14(a)

 

 

149,831,154

 

 

 

334,099

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

334,099

 

Share issuance costs

 

 

 

 

-

 

 

 

(4,901

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,901

)

Warrants exercised

 

15(a)

 

 

4,390,961

 

 

 

1,884

 

 

 

-

 

 

 

(703

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,181

 

Vesting of options

 

15(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

737

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

737

 

Options exercised

 

15(b)

 

 

375

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Share appreciation rights exercised

 

15(b)

 

 

77,865

 

 

 

346

 

 

 

-

 

 

 

-

 

 

 

(346

)

 

 

(547

)

 

 

-

 

 

 

-

 

 

 

(547

)

Net income (loss)

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

427,829

 

 

 

-

 

 

 

(136

)

 

 

427,693

 

Other comprehensive income

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

119

 

 

 

-

 

 

 

119

 

Balance at March 31, 2019

 

 

 

 

333,020,377

 

 

$

556,930

 

 

$

-

 

 

$

845

 

 

$

6,631

 

 

$

404,499

 

 

$

1,049

 

 

$

(4

)

 

$

969,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

 

 

149,360,603

 

 

$

83,559

 

 

$

-

 

 

$

3,364

 

 

$

2,289

 

 

$

(3,724

)

 

$

880

 

 

$

-

 

 

$

86,368

 

Shares issued

 

14(a)

 

 

5,257,143

 

 

 

46,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

46,000

 

Share issuance costs

 

 

 

 

-

 

 

 

(3,081

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,081

)

Shares to be issued

 

14(b)

 

 

 

 

 

 

-

 

 

 

961

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

961

 

Warrants exercised

 

15(a)

 

 

6,972,479

 

 

 

1,966

 

 

 

-

 

 

 

(686

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,280

 

Vesting of options

 

15(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

774

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

774

 

Options exercised

 

15(b)

 

 

42,256

 

 

 

106

 

 

 

-

 

 

 

-

 

 

 

(33

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

73

 

Net loss

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,050

)

 

 

-

 

 

 

-

 

 

 

(1,050

)

Other comprehensive loss

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(35

)

 

 

-

 

 

 

(35

)

Balance at March 31, 2018

 

 

 

 

161,632,481

 

 

$

128,550

 

 

$

961

 

 

$

2,678

 

 

$

3,030

 

 

$

(4,774

)

 

$

845

 

 

$

-

 

 

$

131,290

 

 

 

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 months ended March 31, 2019 and March 31, 2018

(in thousands of CDN $)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

Notes

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

$

427,693

 

 

$

(1,050

)

Items not affecting cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

 

4(b)

 

 

(13,553

)

 

 

(2,744

)

Realized fair value adjustments on inventory sold in the period

 

4(b)

 

 

3,722

 

 

 

2,194

 

Share-based payments

 

15(b),18

 

 

737

 

 

 

774

 

Depreciation and amortization

 

8,9(a),11(a)

 

 

470

 

 

 

285

 

Depreciation relieved on inventory sold

 

 

 

 

235

 

 

 

169

 

Share of loss (income) from investments in equity accounted investees

 

6

 

 

264

 

 

 

(41

)

Gain on disposal of Whistler

 

6

 

 

(20,606

)

 

 

-

 

Gain on other investments

 

7

 

 

(924

)

 

 

(221

)

Gain on revaluation of derivative liabilities

 

13

 

 

(436,383

)

 

 

-

 

Deferred income tax expense (recovery)

 

20

 

 

2,557

 

 

 

(888

)

Foreign exchange loss (gain)

 

 

 

 

67

 

 

 

(16

)

Net changes in non-cash working capital

 

21

 

 

17,320

 

 

 

(12,212

)

Cash and cash equivalents used in operating activities

 

 

 

 

(18,401

)

 

 

(13,750

)

Investing activities

 

 

 

 

 

 

 

 

 

 

Investments in equity accounted investees

 

6

 

 

(2,200

)

 

 

-

 

Advances to joint ventures

 

6

 

 

(15,812

)

 

 

-

 

Proceeds from sale of other investments

 

7

 

 

26,078

 

 

 

687

 

Payment to exercise ABcann warrants

 

7

 

 

-

 

 

 

(113

)

Purchase of property, plant and equipment

 

8

 

 

(13,454

)

 

 

(7,642

)

Purchase of intangible assets

 

9(a)

 

 

(51

)

 

 

(131

)

Advance to Cronos Israel

 

2(a),10

 

 

-

 

 

 

(926

)

Cash and cash equivalents used in investing activities

 

 

 

 

(5,439

)

 

 

(8,125

)

Financing activities

 

 

 

 

 

 

 

 

 

 

Increase in bank indebtedness

 

 

 

 

422

 

 

 

-

 

Advance from non-controlling interests

 

10

 

 

111

 

 

 

-

 

Repayment of lease obligations

 

11

 

 

(32

)

 

 

(13

)

Repayment of construction loan payable

 

12

 

 

(21,311

)

 

 

-

 

Payment of accrued interest on construction loan payable

 

12

 

 

(121

)

 

 

(185

)

Advance under Credit Facility

 

12

 

 

65,000

 

 

 

-

 

Repayment of Credit Facility

 

12

 

 

(65,000

)

 

 

-

 

Proceeds from Altria Investment

 

13,14(a)

 

 

2,434,757

 

 

 

-

 

Proceeds from share issuance

 

14(a)

 

 

-

 

 

 

46,000

 

Share issuance costs

 

 

 

 

(4,901

)

 

 

(3,081

)

Proceeds from shares to be issued

 

14(b)

 

 

-

 

 

 

961

 

Proceeds from exercise of warrants and options

 

15(a),(b)

 

 

1,182

 

 

 

1,353

 

Withholding taxes paid on share appreciation rights

 

15(b)

 

 

(547

)

 

 

-

 

Cash and cash equivalents provided by financing activities

 

 

 

 

2,409,560

 

 

 

45,035

 

Net change in cash and cash equivalents

 

 

 

 

2,385,720

 

 

 

23,160

 

Cash and cash equivalents - beginning of period