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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 September 30, 2022
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.)
111 Peter St. Suite 300
Toronto, Ontario
M5V 2H1
(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 filerxAccelerated filer
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 November 3, 2022, there were 378,467,867 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 (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
September 30, 2022September 30, 2021December 31, 2021
Quarter-to-date average rate1.30531.2593N/A
Spot rate1.38291.26801.2746
Year-to-date average rate1.28291.25191.2541
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
Table of Contents
Item 1. Financial Statements
Table of Contents
6

3

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

As of September 30, 2022As of December 31, 2021
Assets(Unaudited)(Audited)
Current assets
Cash and cash equivalents$633,296 $886,973 
Short-term investments255,452 117,684 
Accounts receivable, net19,092 22,067 
Other receivables3,742 5,765 
Current portion of loans receivable, net8,739 5,460 
Inventory, net34,094 32,802 
Prepaids and other current assets8,896 8,967 
Total current assets963,311 1,079,718 
Equity method investments, net19,234 16,764 
Other investments94,557 118,392 
Non-current portion of loans receivable, net72,064 80,635 
Property, plant and equipment, net60,582 74,070 
Right-of-use assets5,103 8,882 
Goodwill1,012 1,098 
Intangible assets, net21,428 18,079 
Other168 100 
Total assets$1,237,459 $1,397,738 
Liabilities
Current liabilities
Accounts payable$9,989 $11,218 
Accrued liabilities25,629 26,069 
Current portion of lease obligation1,900 2,278 
Derivative liabilities73 14,375 
Current portion due to non-controlling interests379 433 
Total current liabilities37,970 54,373 
Non-current portion due to non-controlling interests1,346 1,913 
Non-current portion of lease obligation4,994 7,095 
Deferred income tax liability1,917 81 
Total liabilities46,227 63,462 
Shareholders’ equity
Share capital (authorized for issue as of September 30, 2022 and December 31, 2021: unlimited; shares outstanding as of September 30, 2022 and December 31, 2021: 378,346,260 and 374,952,693, respectively)
605,229 595,497 
Additional paid-in capital38,322 32,465 
Retained earnings569,566 659,416 
Accumulated other comprehensive income (loss)(18,980)49,865 
Total equity attributable to shareholders of Cronos Group1,194,137 1,337,243 
Non-controlling interests(2,905)(2,967)
Total shareholders’ equity1,191,232 1,334,276 
Total liabilities and shareholders’ equity$1,237,459 $1,397,738 
See notes to condensed consolidated interim financial statements.
4

Cronos Group Inc.
Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)
(In thousands of U.S dollars, except share and per share amounts, unaudited)

Three months ended September 30,Nine months ended September 30,
2022202120222021
Net revenue, before excise taxes$26,584 $24,590 $84,544 $58,092 
Excise taxes(5,661)(4,183)(15,527)(9,452)
Net revenue20,923 20,407 69,017 48,640 
Cost of sales19,766 21,137 56,814 56,156 
Inventory write-down   11,961 
Gross profit1,157 (730)12,203 (19,477)
Operating expenses
Sales and marketing5,923 10,821 16,517 34,284 
Research and development2,569 6,473 10,910 16,774 
General and administrative17,167 32,546 56,540 76,869 
Restructuring costs524  4,878  
Share-based compensation4,265 2,667 10,567 7,731 
Depreciation and amortization1,713 1,251 4,417 3,029 
Impairment loss on goodwill and indefinite-lived intangible assets 142  235,056 
Impairment loss on long-lived assets 1,784 3,493 4,739 
Total operating expenses32,161 55,684 107,322 378,482 
Operating loss(31,004)(56,414)(95,119)(397,959)
Other income (expense)
Interest income, net7,209 2,064 13,030 6,686 
Gain on revaluation of derivative liabilities375 132,916 14,204 131,290 
Share of income (loss) from equity method investments(1,119)(1,414)4,078 (4,172)
Gain on revaluation of financial instruments17,049 266 19,205 143 
Impairment loss on other investments(28,972) (40,210) 
Foreign currency transaction gain (loss)2,387  (2,337) 
Other, net(693)7 (556)1,041 
Total other income (expense)(3,764)133,839 7,414 134,988 
Income (loss) before income taxes(34,768)77,425 (87,705)(262,971)
Income tax expense (benefit)2,118 (159)2,172 (159)
Income (loss) from continuing operations(36,886)77,584 (89,877)(262,812)
Income (loss) from discontinued operations 82  (500)
Net income (loss)(36,886)77,666 (89,877)(263,312)
Net income (loss) attributable to non-controlling interest105 (250)(27)(842)
Net income (loss) attributable to Cronos Group$(36,991)$77,916 $(89,850)$(262,470)
Comprehensive income (loss)
Net income (loss)$(36,886)$77,666 $(89,877)$(263,312)
Other comprehensive income (loss)
Foreign exchange gain (loss) on translation(60,572)(22,818)(68,756)6,936 
Comprehensive income (loss)(97,458)54,848 (158,633)(256,376)
Comprehensive income (loss) attributable to non-controlling interests201 (265)62 167 
Comprehensive income (loss) attributable to Cronos Group$(97,659)$55,113 $(158,695)$(256,543)
Net income (loss) from continuing operations per share
Basic - continuing operations$(0.10)$0.21 $(0.24)$(0.71)
Diluted - continuing operations$(0.10)$0.21 $(0.24)$(0.71)
See notes to condensed consolidated interim financial statements.
5

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2022 and 2021
(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, 2022374,952,693 $595,497 $32,465 $659,416 $49,865 $(2,967)$1,334,276 
Activities relating to share-based compensation347,287 871 2,900 — — — 3,771 
Net loss— — — (32,638)— (15)(32,653)
Foreign exchange gain (loss) on translation— — — — 16,223 (246)15,977 
Balance as of March 31, 2022375,299,980 $596,368 $35,365 $626,778 $66,088 $(3,228)$1,321,371 
Activities relating to share-based compensation395,156 2,251 (167)— — — 2,084 
Share issuance pursuant to research and development milestones2,201,235 6,007 — — — — 6,007 
Net loss— — — (20,221)— (117)(20,338)
Foreign exchange gain (loss) on translation— — — — (24,400)239 (24,161)
Balance as of June 30, 2022377,896,371 $604,626 $35,198 $606,557 $41,688 $(3,106)$1,284,963 
Activities relating to share-based compensation449,889 603 3,124 — — — 3,727 
Net income (loss)— — — (36,991)— 105 (36,886)
Foreign exchange gain (loss) on translation— — — — (60,668)96 (60,572)
Balance as of September 30, 2022378,346,260 $605,229 $38,322 $569,566 $(18,980)$(2,905)$1,191,232 
See notes to condensed consolidated interim financial statements.
6

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2022 and 2021
(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, 2021360,253,332 $569,260 $34,596 $1,064,509 $42,999 $(3,196)$1,708,168 
Activities relating to share-based compensation11,403,258 15,652 (2,506)(7,694)— — 5,452 
Net loss— — — (161,312)— (313)(161,625)
Foreign exchange gain on translation— — — — 15,145 1,139 16,284 
Balance as of March 31, 2021371,656,590 $584,912 $32,090 $895,503 $58,144 $(2,370)$1,568,279 
Activities relating to share-based compensation148,957 2,451 278 (63)— — 2,666 
Top-up rights out-of-period adjustment— (14,505)— 3,227 — — (11,278)
Net loss— — — (179,074)— (279)(179,353)
Foreign exchange gain (loss) on translation— — — — 13,585 (115)13,470 
Balance as of June 30, 2021371,805,547 $572,858 $32,368 $719,593 $71,729 $(2,764)$1,393,784 
Activities relating to share-based compensation1,497,314 14,020 (1,995)(4,232)— — 7,793 
Net income (loss)— — — 77,916 — (250)77,666 
Foreign exchange loss on translation— — — — (22,803)(15)(22,818)
Balance as of September 30, 2021373,302,861 $586,878 $30,373 $793,277 $48,926 $(3,029)$1,456,425 

See notes to condensed consolidated interim financial statements.
7

Cronos Group Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands of U.S. dollars, except share amounts, unaudited)

Nine months ended September 30,
20222021
Operating activities
Net loss$(89,877)$(263,312)
 Adjustments to reconcile net loss to cash used in operating activities:
Share-based compensation10,567 7,731 
Depreciation and amortization10,499 8,911 
Impairment loss on goodwill and indefinite-lived intangible assets 235,056 
Impairment loss on long-lived assets3,493 4,739 
Impairment loss on other investments40,210  
(Income) loss from investments(23,283)4,172 
Gain on revaluation of derivative liabilities(14,204)(131,290)
Changes in expected credit losses on long-term financial assets(577)13,162 
Foreign currency transaction loss2,337  
Other non-cash operating activities, net233 (2,831)
Changes in operating assets and liabilities:
Accounts receivable, net1,172 (5,747)
Other receivables1,716 7,431 
Prepaids and other current assets(904)1,054 
Inventory(4,241)14,335 
Accounts payable and accrued liabilities(1,717)(11,089)
Cash flows used in operating activities(64,576)(117,678)
Investing activities
Purchase of short-term investments(275,370)(119,820)
Proceeds from short-term investments116,925 135,801 
Purchase of other investments (110,392)
(Advances) repayments on loan receivables2,339 (6,905)
Purchase of property, plant and equipment(3,087)(10,651)
Purchase of intangible assets(1,177)(1,044)
Other investing activities70 2,775 
Cash flows used in investing activities(160,300)(110,236)
Financing activities
Withholding taxes paid on share-based awards(2,208)(13,182)
Other financing activities, net(69)18 
Cash flows used in financing activities(2,277)(13,164)
Effect of foreign currency translation on cash and cash equivalents(26,524)5,622 
Net change in cash and cash equivalents(253,677)(235,456)
Cash and cash equivalents, beginning of period886,973 1,078,023 
Cash and cash equivalents, end of period$633,296 $842,567 
Supplemental cash flow information
Interest paid$ $ 
Interest received7,734 4,025 
Income taxes paid158 873 

See notes to condensed consolidated interim financial statements.

8

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 Accounting Policies
(a)Background
Cronos Group Inc. (“Cronos Group” or the “Company”) is incorporated in the province of British Columbia and under the Business Corporations Act (British Columbia) with principal executive offices at 111 Peter St., Suite 300, Toronto, Ontario, M5V 2H1. 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 committed to building disruptive intellectual property by advancing cannabis research, technology and product development and is seeking to build an iconic brand portfolio. Cronos Group’s diverse international brand portfolio includes Spinach®, PEACE NATURALS®, Lord Jones®, Happy Dance® and PEACE+®.
(b)Basis of presentation
The condensed consolidated interim financial statements of Cronos Group 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 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 accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 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, 2021 (the “Annual Report”).
Certain prior year 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)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. The Company determined that it has the following two reportable segments: U.S. (the “U.S. segment”) and ROW (the “ROW segment”). The U.S. operating segment consists of the manufacture and distribution of U.S. hemp-derived cannabinoid infused products. The ROW operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. These two segments represent the geographic regions in which the Company operates and the different product offerings within each geographic region. The results of each segment are regularly reviewed by the CODM to assess the performance of the segment and make decisions regarding the allocation of resources using Adjusted EBITDA (as defined below) as the measure of segment profit or loss. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, non-cash items and items that do not reflect management’s assessment of ongoing business performance.
(d)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, loans receivable, and advances to joint ventures. The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $992,385 and $1,118,684 as of September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021, the Company had $2 and $8, respectively, in expected credit losses that have been recognized on receivables from contracts with customers in the ROW segment. As of September 30, 2022 and December 31, 2021, the Company had $457 and $104, respectively, in expected credit losses that have been recognized on receivables from contracts with customers in the U.S. segment.
9

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
As of September 30, 2022, the Company assessed that there is a concentration of credit risk, as 68% of the Company’s accounts receivable were due from three customers with an established credit history with the Company. As of December 31, 2021, 88% of the Company’s accounts receivable were due from four customers 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 September 30, 2022, the Company earned a total net revenue before excise taxes of $12,094 from three major customers in the ROW segment, together accounting for 56% of the Company’s total net revenues before excise taxes. During the three months ended September 30, 2021, the ROW segment earned a total net revenue before excise taxes of $12,256 from three major customers, together accounting for 60% of the Company’s total net revenues before excise taxes. During the nine months ended September 30, 2022, the Company earned a total net revenue before excise taxes of $36,564 from three major customers in the ROW segment, together accounting for 54% of the Company’s total net revenue before excise taxes. During the nine months ended September 30, 2021, the ROW segment earned a total net revenue before excise taxes of $25,667 from three major customers, together accounting for 53% of the Company’s total net revenues before excise taxes. During the three and nine months ended September 30, 2022 and 2021, the U.S. segment had no major customers.
(e)Adoption of new accounting pronouncements
On January 1, 2022, the Company adopted ASU No. 2020-06, Debt –Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815–40) (“ASU No. 2020-06”). ASU No. 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU No. 2020-06 is part of the Financial Accounting Standards Board’s (“FASB”) simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The adoption of ASU No. 2020-06 did not have an impact on the Company’s condensed consolidated interim financial statements.
(f)New accounting pronouncements not yet adopted
In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU No. 2022-02”). ASU No. 2022-02 eliminates the existing troubled debt restructuring recognition and measurement guidance, and instead aligns the accounting treatment to that of other loan modifications. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. ASU No. 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. ASU No. 2022-02 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, and is to be adopted prospectively. The Company does not expect the adoption of ASU No. 2022-02 to have a material impact on its condensed consolidated interim financial statements.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU No. 2022-03”). ASU No. 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. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, and is to be adopted prospectively. The Company does not expect the adoption of ASU No. 2022-03 to have a material impact on its condensed consolidated interim financial statements.
2. Inventory, net
Inventory, net is comprised of the following items:
As of September 30, 2022As of December 31, 2021
Raw materials$7,863 $9,211 
Work-in-progress11,021 12,405 
Finished goods14,205 10,778 
Supplies and consumables1,005 408 
Total$34,094 $32,802 
10

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
3. Investments
(a)Variable interest entities and equity method investments, net
A reconciliation of the carrying amount of the investments in equity method investees, net is as follows:
Ownership interestAs of September 30, 2022As of December 31, 2021
Cronos Growing Company Inc. (“Cronos GrowCo”)
50%$19,234 $16,764 
NatuEra S.à.r.l. (“Natuera”)50%  
$19,234 $16,764 
The following is a summary of the Company’s share of net income (loss) from equity method investments:
For the three months ended September 30,For the nine months ended September 30,
2022202120222021
Cronos GrowCo$(1,119)$(1,214)$4,078 $(1,972)
Natuera (200) (2,200)
$(1,119)$(1,414)$4,078 $(4,172)
(b)Other investments
Other investments consist of investments in common shares and options of two companies in the cannabis industry.
PharmaCann, Inc.
In 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, which represented an ownership interest of approximately 10.5% as of December 31, 2021. The PharmaCann Option is classified as an equity security without a readily determinable fair value. The Company has elected to measure the fair value of the PharmaCann Option at cost less impairment, if any, and subsequently adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. On February 28, 2022, PharmaCann closed the previously announced transaction with LivWell Holdings, Inc. (“LivWell”) pursuant to which PharmaCann acquired LivWell (the “LivWell Transaction”). LivWell is a multi-state cannabis cultivation and retail leader based in Colorado. As a result of the LivWell Transaction, the Company’s ownership percentage in PharmaCann on a fully-diluted basis decreased to approximately 6.4%. As of September 30, 2022, the Company’s ownership percentage in PharmaCann on a fully-diluted basis was approximately 6.3%. The decrease in the Company’s ownership percentage since acquisition does not materially affect the Company’s rights under the PharmaCann Option.
Cronos Australia Limited
The Company owns approximately 10% of the outstanding common shares of Cronos Australia Limited (“Cronos Australia”). 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 income (loss) and comprehensive income (loss). During the three months ended September 30, 2022, Cronos Australia declared a dividend of AUD $0.01 per ordinary share. Based on the Company’s holding of 55,176,065 ordinary shares in the capital of Cronos Australia, the Company recorded dividend income of $390 within other, net on the condensed consolidated statements of net income (loss) and comprehensive income (loss).
11

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
The following table summarizes the Company’s other investments activity:
As of July 1, 2022Unrealized gainImpairment chargesForeign exchange effectAs of September 30, 2022
PharmaCann$99,154 $ $(28,972)$ $70,182 
Cronos Australia9,515 17,118  (2,258)24,375 
$108,669 $17,118 $(28,972)$(2,258)$94,557 
As of January 1, 2022Unrealized gainImpairment chargesForeign exchange effectAs of September 30, 2022
PharmaCann$110,392 $ $(40,210)$ $70,182 
Cronos Australia8,000 19,114  (2,739)24,375 
$118,392 $19,114 $(40,210)$(2,739)$94,557 
During both the three months ended March 31, 2022 and the three months ended September 30, 2022, 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 for the three months ended March 31, 2022 was estimated using a combination of the market and income approaches, and the fair value for the three months ended September 30, 2022 was estimated using the income approach. Under the income approach, significant inputs used in the discounted cash flow method include discount rate, growth rates, and cash flow projections. As a result of these analyses, the Company recorded non-cash impairment charges of $11,238 and $28,972 during the three months ended March 31, 2022 and September 30, 2022, respectively, as the difference between the carrying amount of the PharmaCann Option and its estimated fair value in the condensed consolidated statements of net income (loss) and comprehensive income (loss).
During the three and nine months ended September 30, 2021, the Company had no gain or loss on revaluation of other investments. As of September 30, 2022 and December 31, 2021, the Company did not hold any additional other investments.
4. Loans Receivable, net
Loans receivable, net consists of the following:
As of September 30, 2022As of December 31, 2021
GrowCo Facility(i)
$