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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 March 31, 2020
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)
__________________________
Ontario, Canada
N/A
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
720 King St. W., Suite 320
Toronto, Ontario
M5V 2T3
(Address of principal executive offices)(Zip Code)
416-504-0004
(Registrant’s telephone number, including area code)
____________________________
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 filerxAccelerated filero
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 May 7, 2020, there were 348,823,936 common shares of the registrant issued and outstanding.






1



Table of Contents
PART I
FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II
OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (the “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; and the term “U.S. hemp” has the meaning given to term “hemp” in the U.S. Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), including hemp-derived cannabidiol (“CBD”).
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 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.
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 Israeli New Shekels.

2


PART I
FINANCIAL INFORMATION
Item 1. Financial statements (Unaudited)
Table of Contents




3


Cronos Group Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2020 and December 31, 2019
(In thousands of U.S. dollars, except share amounts, unaudited)


As of
March 31, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$1,128,396  $1,199,693  
Short-term investments206,230  306,347  
Accounts receivable(1)
3,404  4,638  
Other receivables7,642  7,232  
Current portion of loans receivable3,911  4,664  
Prepaids and other assets11,079  9,395  
Inventory43,118  38,043  
Total current assets1,403,780  1,570,012  
Investments in equity accounted investees1,089  557  
Advances to joint ventures17,079  19,437  
Loan receivable, net54,147  44,967  
Property, plant and equipment154,164  161,809  
Right-of-use assets10,379  6,546  
Intangible assets72,599  72,320  
Goodwill214,689  214,794  
Total assets$1,927,926  $2,090,442  
Liabilities
Current liabilities
Accounts payable and other liabilities$34,290  $35,301  
Current portion of lease obligation1,057  427  
Derivative liabilities166,176  297,160  
Total current liabilities201,523  332,888  
Due to non-controlling interests1,681  1,844  
Lease obligation9,454  6,680  
Total liabilities$212,658  $341,412  
Commitments and contingencies (Notes 19 and 20)
Shareholders’ equity
Share capital(2)
$563,165  $561,165  
Additional paid-in capital25,483  23,234  
Retained earnings (accumulated deficit)1,213,686  1,137,646  
Accumulated other comprehensive income (loss)(85,877) 27,838  
Total equity attributable to shareholders of Cronos Group1,716,457  1,749,883  
Non-controlling interests(1,189) (853) 
Total shareholders’ equity1,715,268  1,749,030  
Total liabilities and shareholders’ equity$1,927,926  $2,090,442  
(1) Net of current expected credit loss (“CECL”) of $141 as of March 31, 2020 (December 31, 2019 – $136)
(2) Authorized for issuance as of March, 31 2020: unlimited (December 31, 2019 – unlimited). Shares issued as of March 31, 2020: 348,817,472 (as of December 31, 2019: 348,817,472)

See notes to condensed consolidated financial statements.
4


Cronos Group Inc.
Condensed Consolidated Statements of Net Income and Comprehensive Income (Loss)
For the three months ended March 31, 2020 and 2019
(In thousands of U.S dollars, except share and per share amounts)


Three months ended March 31,
20202019
Net revenue, before excise taxes$9,344  $3,391  
Excise taxes(912) (387) 
Net revenue8,432  3,004  
Cost of sales6,946  1,449  
Inventory write-down7,962    
Gross profit (loss)(6,476) 1,555  
Operating expenses
Sales and marketing7,112  1,128  
Research and development4,590  1,171  
General and administrative23,759  7,293  
Share-based payments2,436  1,771  
Depreciation and amortization687  318  
Total operating expenses38,584  11,681  
Operating loss(45,060) (10,126) 
Other income (expense)
Interest income7,751  2,087  
Share of loss from investments in equity accounted investees(1,172) (198) 
Gain on revaluation of derivative liabilities (Note 11)113,368  328,216  
Financing and transaction costs  (22,233) 
Other income794  16,243  
Total other income120,741  324,115  
Income before income taxes75,681  313,989  
Income tax recovery (expense)    
Net income$75,681  $313,989  
Net income (loss) attributable to:
Cronos Group$76,040  $314,092  
Non-controlling interests(359) (103) 
$75,681  $313,989  
Other comprehensive income (loss)
Foreign exchange gain (loss) on translation$(113,692) $3,898  
Total other comprehensive income (loss)(113,692) 3,898  
Comprehensive income (loss)$(38,011) $317,887  
Comprehensive income (loss) attributable to:
Cronos Group$(37,675) $317,987  
Non-controlling interests(336) (100) 
$(38,011) $317,887  
Net income per share
Basic$0.22  1.43  
Diluted0.20  0.33  
Weighted average number of outstanding shares
Basic348,817,472  218,949,590  
Diluted375,574,354  271,086,575  
See notes to unaudited interim consolidated financial statements.
5


Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity (Deficit)
For the three months ended March 31, 2020 and 2019
(In thousands of U.S. dollars, except share amounts, unaudited)


Number of sharesShare capitalAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity (deficit)
Balance as of January 1, 2020348,817,472  $561,165  $23,234  $1,137,646  $27,838  $(853) $1,749,030  
Vesting of options—  —  1,730  —  —  —  1,730  
Vesting of restricted share units—  —  706  —  —  —  706  
Vesting of common shares issued in connection with the use of certain publicity rights in brand development—  2,000  (187) —  —  —  1,813  
Net income (loss)—  —  —  76,040  —  (359) 75,681  
Other comprehensive income (loss)—  —  —  —  (113,715) 23  (113,692) 
Balance as of March 31, 2020348,817,472  $563,165  $25,483  $1,213,686  $(85,877) $(1,189) $1,715,268  

Number of sharesShare capitalAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity (deficit)
Balance as of January 1, 2019$178,720,022  $175,001  $11,263  $(27,945) $(9,870) $100  $148,549  
Shares issued149,831,154  248,302  —  —  —  —  248,302  
Share issuance costs—  (3,642) —  —  —  —  (3,642) 
Warrants exercised4,390,961  1,417  (529) —  —  —  888  
Vesting of options—  —  1,771  —  —  —  1,771  
Options exercised78,240  262  (261) (411) —  —  (410) 
Net income (loss)—  —  —  314,092  —  (103) 313,989  
Other comprehensive income—  —  —  —  3,895  3  3,898  
Balance as of March 31, 2019$333,020,377  $421,340  $12,244  $285,736  $(5,975) $  $713,345  
See notes to condensed consolidated financial statements.
6


Cronos Group Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2020 and 2019
(In thousands of U.S. dollars, except share amounts, unaudited)


Three months ended March 31,
20202019
Operating activities
Net income (loss)$75,681  $313,989  
Items not affecting cash:
Inventory write-down7,962    
Share-based payments2,436  1,771  
Depreciation and amortization1,162  494  
Share of net loss from investments in equity accounted investees1,172  198  
Gain on revaluation of derivative liabilities (Note 11)(113,368) (328,216) 
Gain on disposal of other investments(781) (15,498) 
Loss (gain) on unrealized foreign exchange(412) 51  
Provision for doubtful accounts2,068    
Non-cash sales and marketing1,821    
Other, net(1,157) (745) 
Net changes in non-cash working capital(15,482) 14,118  
Cash flows used in operating activities(38,898) (13,838) 
Investing activities
Purchase of short-term investments(126,514)   
Proceeds from disposal of short-term investments206,847    
Investments in equity accounted investees  (1,658) 
Proceeds from sale of other investments781  19,614  
Advances to joint ventures  (11,893) 
Purchase of property, plant and equipment(6,411) (10,119) 
Payment of accrued interest on construction loan payable  (89) 
Purchase of intangible assets(1,105) (38) 
Advances on loans receivable(14,512)   
Cash flows provided (used) in investing activities59,086  (4,183) 
Financing activities
Increase in bank indebtedness  316  
Advance from non-controlling interests  84  
Repayment of lease obligations(448) (23) 
Proceeds from Altria Investment  1,809,556  
Proceeds from exercise of warrants and options  889  
Withholding taxes paid on share appreciation rights  (411) 
Share issuance costs  (3,642) 
Repayment of construction loan payable  (15,971) 
Advance under Credit Facility  48,715  
Repayment of Credit Facility  (48,309) 
Cash flows provided (used) by financing activities(448) 1,791,204  
Effect of foreign currency translation on cash and cash equivalents(91,037) 14,421  
Increase (decrease) in cash and cash equivalents(71,297) 1,787,604  
Cash and cash equivalents, beginning of period1,199,693  23,927  
Cash and cash equivalents, end of period$1,128,396  $1,811,531  
Supplemental cash flow information
Interest paid7  507  
Interest received7,758    
See notes to condensed consolidated financial statements.
7

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements
For the three months ended March 31, 2020
(In thousands of U.S. dollars, except for gram and share amounts, unaudited)
1. Background
Cronos Group Inc. (the “Cronos Group” or the “Company”) is a corporation incorporated on August 21, 2012 under the Business Corporations Act (Ontario) with principal executive offices at 720 King Street West, Suite 320, Toronto, Ontario, M5V 2T3. The Company’s common shares are currently listed on the Toronto Stock Exchange (“TSX”) and Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CRON.”
Cronos Group is an innovative global cannabinoid company, with international production and distribution across five continents. The Company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development and is building an iconic brand portfolio. Cronos Group’s brand portfolio includes PEACE NATURALS™, a global wellness platform; two adult-use brands, COVE™ and Spinach™; and two U.S hemp-derived consumer products brands, Lord Jones™ and PEACE+™.
Cronos Group has established four strategic joint ventures in Canada, Israel, and Colombia. One of these strategic joint ventures, Cronos Israel (as defined herein) is consolidated for financial reporting purposes. The Company also holds approximately 31% of the issued capital of Cronos Australia Limited (“Cronos Australia”) and accounts for its investment in Cronos Australia under the equity method of accounting. For additional discussion regarding the joint ventures and strategic investment, see Note 6.
2. Summary of Significant Accounting Policies
(a)Basis of Presentation
The interim condensed consolidated financial statements of Cronos Group are unaudited. They have been prepared in accordance with U.S generally accepted accounting principles for interim financial information and with applicable rules and regulations of the Securities and Exchange Commission relating to interim financial statements. Accordingly, they do not include all of the information and footnotes required by U.S generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for any other quarterly period.
These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes included in its Annual Report on Form 10-K/A for the year ended December 31, 2019 (the “Annual Financial Statements”).
(b)Basis of Consolidation
The accompanying financial statements include the accounts of the Company, and all entities in which the Company has a controlling voting interest and/or is the primary beneficiary of a variable interest as of and for the period presented. The Company consolidates the financial results of the following entities, which the Company controls:
SubsidiariesJurisdiction of IncorporationIncorporation Date
Ownership Interest (ii)
Cronos Israel G.S. Cultivations Ltd. (i)
IsraelFebruary 4, 201870%
Cronos Israel G.S. Manufacturing Ltd. (i)
IsraelSeptember 4, 201890%
Cronos Israel G.S. Store Ltd. (i)
IsraelJune 28, 201890%
Cronos Israel G.S. Pharmacies Ltd. (i)
IsraelFebruary 15, 201890%
(i) These Israeli entities are collectively referred to as “Cronos Israel.”
(ii) “Ownership interest” is defined as the proportionate share of net income to which the Company is entitled; equity interest may differ from ownership interest as described herein.
In the condensed consolidated statements of net income (loss) and comprehensive income (loss), the net income (loss) and comprehensive income (loss) are attributed to the equity holders of the Company and to the non-controlling interests. Non-controlling interests in the equity of Cronos Israel are presented separately in the shareholders’ equity (deficit) section of the condensed consolidated balance sheets and condensed consolidated statements of changes in equity (deficit). All intercompany transactions and balances are eliminated upon consolidation.

8

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements
For the three months ended March 31, 2020
(In thousands of U.S. dollars, except for gram and share amounts, unaudited)
3. New Accounting Pronouncements
(a)Adoption of new accounting pronouncements
On January 1, 2020, the Company adopted ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820) (“ASU No. 2018-13”). ASU No. 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements. The adoption of this standard was applied prospectively and did not have a material impact on the Company’s condensed consolidated financial statements.
On January 1, 2020, the Company adopted ASU No. 2018-15, Intangibles – Goodwill and Other Internal-use-software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU No. 2018-15”). ASU No. 2018-15 amends current guidance to align the accounting for costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs associated with developing or obtaining internal-use software. The guidance in ASU No. 2018-15 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The adoption of this standard was applied prospectively and did not have a material impact on the Company’s condensed consolidated financial statements.
On January 1, 2020, the Company adopted ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU No. 2017-04”). ASU No. 2017-04 eliminates step 2 from the goodwill impairment test and instead requires an entity to measure the impairment of goodwill assigned to a reporting unit if the carrying value of assets and liabilities assigned to the reporting unit, including goodwill, exceeds the reporting unit’s fair value. The guidance in ASU No. 2017-04 is effective for annual and interim goodwill tests completed by the Company beginning on January 1, 2020. The adoption of this standard was applied prospectively and the Company will follow a one-step model for goodwill impairment.
(b)New accounting pronouncements not yet adopted
In January 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). ASU No. 2020-01 clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The guidance in ASU No. 2020-01 is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have a material impact on its condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU No. 2019-12 eliminates certain exceptions and simplifies the application of U.S. GAAP-related to changes in enacted tax laws or rates and employee stock option plans. ASU No. 2019-12 is effective for annual and interim periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have a material impact on its condensed consolidated financial statements.
4. Revenues from Contracts with Customers
Cronos Group disaggregates net revenues based on product type. For further discussion, see Note 18. Receivables were $3,404 as of March 31, 2020 (December 31, 2019 – $4,638). The Company recorded a current expected credit loss allowance of $141 as of March 31, 2020 (December 31, 2019 – $136).
Cronos Group offers discounts to customers for prompt payment and calculates cash discounts as a percentage of the list price based on historical experience and agreed-upon payment terms. Cronos Group records an allowance for cash discounts, which is included as a contra-asset against receivables on the Company’s condensed consolidated balance sheets.
Revenue is measured net of returns. As a result, the Company is required to estimate the amount of returns based on the historical data by customer and product type, adjusted for forward-looking information. This is recorded as a provision against accounts receivable on the Company’s consolidated balance sheets. The Company estimates sales returns based principally on historical volume and return rates, as a reduction to revenues. The difference between actual sales and estimated sales returns is recorded in the period in which the actual amounts become known. These differences, if any, have not had a material impact on the Company’s condensed consolidated financial statements.
Upon return, products can be extracted from dried cannabis, resold, or destroyed depending on the nature of the product. The Company has assessed that the amount recoverable for the three months ended March 31, 2020 is immaterial.
9

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements
For the three months ended March 31, 2020
(In thousands of U.S. dollars, except for gram and share amounts, unaudited)
5. Inventory
Inventory is comprised of the following items:
As of
March 31, 2020December 31, 2019
Raw materials$4,198  $2,469  
Work-in-progress – dry cannabis14,799  11,538  
Work-in-progress – cannabis extracts17,517  17,975  
Finished goods – dry cannabis3,312  1,798  
Finished goods – cannabis extracts2,564  2,624  
Supplies and consumables728  1,639  
Total$43,118  $38,043  
Inventory is written down for any obsolescence or when the net realizable value of inventory is less than the carrying value. For the three months ended March 31, 2020, the Company recorded write-downs related to inventory of $7,962.
There were no inventory write-downs for the three months ended March 31, 2019.
6. Investments and Advances to Joint Ventures
Variable Interest Entities
The Company holds variable interests in Cronos Growing Company Inc. (“Cronos GrowCo”), Natuera S.à.r.l (“Natuera”) and MedMen Canada Inc. (“MedMen Canada”).
Cronos GrowCo is a joint venture incorporated under the Canada Business Corporations Act (“CBCA”) on June 14, 2018 with the objective of building a cannabis production greenhouse, applying for cannabis licenses under the Cannabis Act (Canada), and growing, cultivating, extracting, producing and selling cannabis in accordance with such licenses. Cronos Group holds variable interests in Cronos GrowCo through its ownership of 50% of Cronos GrowCo’s common shares and senior secured debt in Cronos GrowCo. The Company has also agreed to purchase a minimum amount of Cronos GrowCo’s cannabis product annually, subject to Cronos GrowCo’s receipt of all applicable licenses and permits. Cronos GrowCo’s economic performance is driven by the quantity and strains of cannabis grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.
MedMen Canada is a joint venture incorporated under the CBCA on March 13, 2018, with the objective of the retail sale and marketing of cannabis products in Canada. MedMen Canada holds the exclusive license to the MedMen brand in Canada for a minimum term of 20 years. Cronos holds variable interests in MedMen Canada through its ownership of 50% of MedMen Canada’s common shares and other subordinated debt in the entity. MedMen Canada’s economic performance is driven by the quantity and strains of cannabis sold. Subject to applicable law, the joint venture partners mutually determine the quantity and strains of cannabis to be sold in MedMen Canada’s retail stores, if and when stores are opened.
Natuera is a joint venture registered in Luxembourg with the objective of cultivating and commercializing medical cannabis to serve the export market. Cronos holds variable interests in Natuera through its ownership of 50% of Natuera’s common shares and other debt in the entity. Natuera’s economic performance is driven by the quantity and strains of cannabis to be grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.
The Company’s investments in Cronos GrowCo, Natuera and MedMen Canada are exposed to economic variability from each entity’s performance, however the Company does not consolidate the entities as it does not have the power to direct the activities that most significantly impact the joint ventures’ economic performance; thus, Cronos Group is not considered the primary beneficiary of the entity. These investments are accounted for as equity method investments classified as Investments in Equity Accounted Investees in the consolidated balance sheets.
10

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements
For the three months ended March 31, 2020
(In thousands of U.S. dollars, except for gram and share amounts, unaudited)
(a)Net investment in equity accounted investees
A reconciliation of the carrying amount of the investments in associates and joint ventures is as follows:
Carrying Amount
Ownership %March 31, 2020December 31, 2019
Whistler Medicinal Marijuana Company (“Whistler”)(i)
N/A$  $  
Cronos Australia(ii)
31%  (346) 
Cronos GrowCo50%1,089  1,501  
MedMen Canada50%    
Natuera50%  (598) 
$1,089  $557  
(i) Whistler was incorporated in British Columbia, Canada and is a license holder under the Cannabis Act (Canada) with production facilities in British Columbia, Canada. Although the Company held less than 20% of the ownership interest and voting control of Whistler, the Company had the ability to exercise significant influence through its power to elect board members. The Company fully divested its investment in Whistler during the three months ended March 31, 2019.
(ii) On October 25, 2019, Cronos Australia issued 40 million new shares in an initial public offering at an offering price of A$0.50 per share. Cronos’ ownership in Cronos Australia decreased from 50% to 31% on November 7, 2019 when Cronos Australia began trading on the Australian Securities Exchange. This resulted in a reconsideration event, which required the reassessment of the Company’s VIE conclusion. Upon reconsideration, the Company determined that the entity was no longer a VIE as of December 31, 2019 and is now reported under the equity method.
The Company’s share of net earnings (losses) from equity investments accounted for under the equity method of accounting:
For the three months ended March 31,
20202019
Whistler$  $29  
Cronos Australia(i)
  (244) 
Cronos GrowCo(311) 11  
MedMen Canada  6  
Natuera(ii)
(861)   
$(1,172) $(198) 
(i) The Company’s share of accumulated net losses in excess of its equity investment and advances in Cronos Australia were $515 for the three months ended March 31, 2020 (March 31, 2019 – $nil).
(ii) The Company’s share of accumulated net losses in excess of its equity investment in Natuera has been applied as a loss allowance on the loan receivable. See Note 6(b) and Note 10.

11

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements
For the three months ended March 31, 2020
(In thousands of U.S. dollars, except for gram and share amounts, unaudited)
(b)Advances to Joint Venture
MedMen Canada(i)
Cronos GrowCo
Cronos Australia (ii)
NatueraTotal
As of January 1, 2020$471  $18,966  $  $  $19,437  
Credit loss allowance  (917)     (917) 
Effect from foreign exchange(36) (1,405)     (1,441) 
As of March 31, 2020$435  $16,644  $  $  $17,079  
As of January 1, 20191,244  2,970  475