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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, 2023
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, 2023, there were 381,113,564 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, 2023September 30, 2022December 31, 2022
Spot rate1.35771.38291.3554
Year-to-date average rate1.34551.2829N/A
(Exchange rates are shown as ILS per $)As of
September 30, 2023September 30, 2022December 31, 2022
Spot rate3.81383.56603.5178
Year-to-date average rate3.63853.3107N/A
All summaries of agreements described herein are qualified by the full text of such agreements (certain of which have been filed as exhibits with the U.S. Securities and Exchange Commission).


2


PART I
FINANCIAL INFORMATION
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, 2023As of December 31, 2022
Assets
Current assets
Cash and cash equivalents$571,656 $764,644 
Short-term investments267,905 113,077 
Accounts receivable, net15,730 23,113 
Interest receivable11,723 2,469 
Other receivables4,707 3,298 
Current portion of loans receivable, net5,157 8,890 
Inventory, net35,847 37,559 
Prepaids and other current assets5,656 7,106 
Total current assets918,381 960,156 
Equity method investments, net18,258 18,755 
Other investments62,143 70,993 
Non-current portion of loans receivable, net68,301 72,345 
Property, plant and equipment, net55,604 60,557 
Right-of-use assets1,417 2,273 
Goodwill1,031 1,033 
Intangible assets, net24,236 26,704 
Deferred tax asset741 $193 
Total assets$1,150,112 $1,213,009 
Liabilities
Current liabilities
Accounts payable$4,749 $11,163 
Income taxes payable635 32,956 
Accrued liabilities23,868 22,268 
Current portion of lease obligation949 1,330 
Derivative liabilities29 15 
Current portion due to non-controlling interests354 384 
Total current liabilities30,584 68,116 
Non-current portion due to non-controlling interests1,009 1,383 
Non-current portion of lease obligation1,754 2,546 
Total liabilities33,347 72,045 
Shareholders’ equity
Share capital (authorized for issue as of September 30, 2023 and December 31, 2022: unlimited; shares outstanding as of September 30, 2023 and December 31, 2022: 381,113,564 and 380,575,403, respectively)
613,290 611,318 
Additional paid-in capital47,133 42,682 
Retained earnings461,509 490,682 
Accumulated other comprehensive loss
(2,110)(797)
Total equity attributable to shareholders of Cronos Group1,119,822 1,143,885 
Non-controlling interests(3,057)(2,921)
Total shareholders’ equity1,116,765 1,140,964 
Total liabilities and shareholders’ equity$1,150,112 $1,213,009 
See notes to condensed consolidated interim financial statements.
4

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

Three months ended September 30,Nine months ended September 30,
2023202220232022
Net revenue, before excise taxes$33,912 $26,070 $86,264 $80,243 
Excise taxes(9,102)(5,661)(22,938)(15,527)
Net revenue24,810 20,409 63,326 64,716 
Cost of sales20,124 17,265 52,614 50,540 
Inventory write-down716  716  
Gross profit3,970 3,144 9,996 14,176 
Operating expenses
Sales and marketing5,296 5,247 16,334 12,442 
Research and development1,246 2,541 4,392 10,656 
General and administrative14,366 16,354 39,673 53,771 
Restructuring costs1,423 387 1,423 3,396 
Share-based compensation1,957 4,247 6,823 10,446 
Depreciation and amortization1,457 1,702 4,515 4,368 
Impairment loss on long-lived assets   3,493 
Total operating expenses25,745 30,478 73,160 98,572 
Operating loss(21,775)(27,334)(63,164)(84,396)
Other income (expense)
Interest income, net13,375 7,208 37,021 13,028 
Gain (loss) on revaluation of derivative liabilities8 375 (14)14,204 
Share of income (loss) from equity method investments1,057 (1,119)831 4,078 
Gain (loss) on revaluation of financial instruments(5,291)17,049 (7,856)19,205 
Impairment loss on other investments (28,972) (40,210)
Foreign currency transaction gain (loss)8,816 2,387 3,999 (2,337)
Other, net966 (581)1,025 (397)
Total other income (expense)18,931 (3,653)35,006 7,571 
Loss before income taxes(2,844)(30,987)(28,158)(76,825)
Income tax expense (benefit)(1,254)2,118 (2,870)2,172 
Loss from continuing operations(1,590)(33,105)(25,288)(78,997)
Loss from discontinued operations(182)(3,781)(4,238)(10,880)
Net loss(1,772)(36,886)(29,526)(89,877)
Net income (loss) attributable to non-controlling interest(128)105 (353)(27)
Net loss attributable to Cronos Group$(1,644)$(36,991)$(29,173)$(89,850)
Comprehensive loss
Net loss$(1,772)$(36,886)$(29,526)$(89,877)
Other comprehensive income (loss)
Foreign exchange loss on translation(20,090)(60,572)(1,096)(68,756)
Comprehensive loss(21,862)(97,458)(30,622)(158,633)
Comprehensive income (loss) attributable to non-controlling interests(41)201 (136)62 
Comprehensive loss attributable to Cronos Group$(21,821)$(97,659)$(30,486)$(158,695)
Net loss per share
Basic and diluted - continuing operations$(0.00)$(0.09)$(0.07)$(0.21)
Basic and diluted - discontinued operations(0.00)(0.01)(0.01)(0.03)
Basic and diluted - total
$(0.00)$(0.10)$(0.08)$(0.24)
See notes to condensed consolidated interim financial statements.
5

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2023 and 2022
(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, 2023380,575,403 $611,318 $42,682 $490,682 $(797)$(2,921)$1,140,964 
Activities relating to share-based compensation240,518 917 1,362 — — — 2,279 
Net loss— — — (19,169)— (88)(19,257)
Foreign exchange gain on translation— — — — 2,334 80 2,414 
Balance as of March 31, 2023380,815,921 $612,235 $44,044 $471,513 $1,537 $(2,929)$1,126,400 
Activities relating to share-based compensation273,436 917 1,273 — — — 2,190 
Net loss— — — (8,360)— (137)(8,497)
Foreign exchange gain on translation— — — — 16,530 50 16,580 
Balance as of June 30, 2023381,089,357 $613,152 $45,317 $463,153 $18,067 $(3,016)$1,136,673 
Activities relating to share-based compensation24,207 138 1,816 — — — 1,954 
Net loss— — — (1,644)— (128)(1,772)
Foreign exchange gain (loss) on translation— — — — (20,177)87 (20,090)
Balance as of September 30, 2023381,113,564 $613,290 $47,133 $461,509 $(2,110)$(3,057)$1,116,765 

6

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2023 and 2022
(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.
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,
20232022
Operating activities
Net loss$(29,526)$(89,877)
 Adjustments to reconcile net loss to cash used in operating activities:
Share-based compensation6,840 10,567 
Depreciation and amortization6,933 10,499 
Impairment loss on long-lived assets205 3,493 
Impairment loss on other investments 40,210 
Loss (gain) from investments7,103 (23,283)
Loss (gain) on revaluation of derivative liabilities14 (14,204)
Changes in expected credit losses on long-term financial assets(1,339)(577)
Foreign currency transaction (gain) loss
(3,999)2,337 
Other non-cash operating activities, net(1,918)3,680 
Changes in operating assets and liabilities:
Accounts receivable, net6,976 1,172 
Interest receivable(14,601)(5,332)
Other receivables25 3,601 
Prepaids and other current assets1,074 (904)
Inventory976 (4,241)
Accounts payable(7,595)(1,627)
Income taxes payable(32,728) 
Accrued liabilities1,910 (90)
Cash flows used in operating activities(59,650)(64,576)
Investing activities
Purchase of short-term investments(537,186)(275,370)
Proceeds from short-term investments380,765 116,925 
Dividends received from equity method investment1,301  
Dividend proceeds
346  
Proceeds from repayment on loan receivables14,151 2,339 
Purchase of property, plant and equipment(1,287)(3,087)
Purchase of intangible assets(344)(1,177)
Other investing activities862 70 
Cash flows used in investing activities(141,392)(160,300)
Financing activities
Withholding taxes paid on share-based awards(812)(2,208)
Other financing activities, net (69)
Cash flows used in financing activities(812)(2,277)
Effect of foreign currency translation on cash and cash equivalents8,866 (26,524)
Net change in cash and cash equivalents(192,988)(253,677)
Cash and cash equivalents, beginning of period764,644 886,973 
Cash and cash equivalents, end of period$571,656 $633,296 
Supplemental cash flow information
Interest paid$ $ 
Interest received$22,203 $7,734 
Income taxes paid$33,013 $158 

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 Summary of Significant Accounting Policies
(a)Background
Cronos Group Inc. (“Cronos” or the “Company”) is incorporated in the province of British Columbia under the Business Corporations Act (British Columbia) with principal executive offices at 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 is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio. Cronos’ diverse international brand portfolio includes Spinach®, PEACE NATURALS® and Lord Jones®.
The Company continues to monitor the conflict in Israel and potential impacts the conflict could have on the Company’s personnel and business in Israel and the recorded amounts of assets and liabilities related to the Company’s operations in Israel. The extent to which the conflict may impact the Company’s personnel, business and activities will depend on future developments which remain highly uncertain and cannot be predicted. It is possible that the recorded amounts of assets and liabilities related to the Company’s operations in Israel could change materially in the near term.
(b)Basis of presentation
These 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 adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 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, 2022 (the “Annual Report”).
Certain prior period amounts have been reclassified to conform to the current year presentation of our condensed consolidated interim financial statements. These reclassifications had no effect on the reported results of operations and ending shareholders’ equity.
(c)Discontinued Operations
In the second quarter of 2023, the Company exited its U.S. hemp-derived cannabinoid product operations. The exit of the U.S. operations represented a strategic shift that has a major effect on the Company’s operations and financial results, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive loss. Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations. For more information, see Note 2 “Discontinued Operations”.
(d)Segment information
Segment reporting is prepared on the same basis that the Company’s chief operating decision maker (the “CODM”) manages the business, makes operating decisions and assesses the Company’s performance. Historically, the Company has reported results for two reportable segments, the U.S. and Rest of World. In the second quarter of 2023, as a result of the Company’s exit of its then-existing U.S. operations, the Company determined that it has one operating segment and therefore one reportable segment, which is comprised of operations in Canada and Israel and is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. All prior period segment disclosure information has been reclassified to conform to the current reporting structure in this Form 10-Q. These reclassifications had no effect on our consolidated financial statements in any period presented.
(e)Revenue recognition
The following tables present the Company's revenue by major product category for continuing operations:
9

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
Three months ended September 30,
20232022
Cannabis flower$17,414 $13,674 
Cannabis extracts7,268 6,627 
Other128 108 
Net revenue$24,810 $20,409 
Nine months ended September 30,
20232022
Cannabis flower$44,556 $48,038 
Cannabis extracts18,495 16,197 
Other275 481 
Net revenue$63,326 $64,716 
Net revenue attributed to a geographic region based on the location of the customer were as follows for continuing operations:
Three months ended September 30,
20232022
Canada$18,738 $13,370 
Israel5,673 7,039 
Other countries399  
Net revenue$24,810 $20,409 
Nine months ended September 30,
20232022
Canada$46,767 $41,335 
Israel16,160 23,381 
Other countries399  
Net revenue$63,326 $64,716 
(f)Concentration of risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activities, primarily accounts receivable and other receivables, and its investing activities, including cash held with banks and financial institutions, short-term investments and loans receivable. The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $945,179 and $987,836 as of September 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the Company had $45 and $2, respectively, in expected credit losses that have been recognized on receivables from contracts with customers.
As of September 30, 2023, the Company assessed that there is a concentration of credit risk, as 43% of the Company’s accounts receivable were due from two customers with an established credit history with the Company. As of December 31, 2022, 56% of the Company’s accounts receivable were due from three customers with an established credit history with the Company.
10

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
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, 2023, the Company earned a total net revenue before excise taxes of $22,618 from three major customers, together accounting for 67% of the Company’s total net revenues before excise taxes. 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, together accounting for 60% of the Company’s total net revenues before excise taxes. During the nine months ended September 30, 2023, the Company earned a total net revenue before excise taxes of $57,398 from three major customers, together accounting for 67% 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, together accounting for 58% of the Company’s total net revenues before excise taxes.
(g)Adoption of new accounting pronouncements
On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 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 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The adoption of ASU 2022-02 did not have a material impact on the Company’s condensed consolidated interim financial statements.
(h)New accounting pronouncements not yet adopted
In June 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value. The amendments also require additional disclosures for equity securities subject to contractual sale restrictions. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, and we expect to adopt ASU 2022-03 prospectively. The Company does not expect the adoption of ASU 2022-03 to have a material impact on its condensed consolidated interim financial statements.
2. Discontinued Operations
In the second quarter of 2023, the Company exited its then-existing U.S. hemp-derived cannabinoid product operations. Accordingly, the net loss of the U.S. operations for the three and nine months ended September 30, 2023 and 2022 are reported separately as loss from discontinued operations on the condensed consolidated statements of net loss and comprehensive loss.
11

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
The following table presents the major components comprising loss from discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30,Nine months ended September 30,
2023202220232022
Net revenue$ $514 $1,029 $4,301 
Cost of sales 2,501 2,044 6,274 
Inventory write-down(i)
  839  
Gross profit (1,987)(1,854)(1,973)
Operating expenses
Sales and marketing 676 518 4,075 
Research and development
 28 20 254 
General and administrative190 813 926 2,769 
Restructuring costs28 137 562 1,482 
Share-based compensation(4)18 17 121 
Depreciation and amortization 11 13 49 
Impairment loss on long-lived assets(ii)
  205  
Total operating expenses214 1,683 2,261 8,750 
Interest income1 1 9 2 
Other, net(iii)
31 (112)(132)(159)
Total other income (loss)
32 (111)(123)(157)
Loss before income taxes(182)(3,781)(4,238)(10,880)
Income tax expense (benefit)    
Net loss from discontinued operations$(182)$(3,781)$(4,238)$(10,880)
(i)For the nine months ended September 30, 2023, Inventory write-down relates to the disposal of obsolete inventory as a result of the exit of the U.S. operations.
(ii)During the nine months ended September 30, 2023, as a result of the exit of the U.S. operations, the Company recognized an impairment charge of $205 related to the right-of-use lease assets associated with the Company’s former U.S. manufacturing facility in Los Angeles, California.
(iii)For the three and nine months ended September 30, 2023 and September 30, 2022, Other, net related to gain and loss on disposal of assets that were part of the U.S. operations.

The following tables present the Company's discontinued operations revenue by major product category:
Three months ended September 30,
20232022
Cannabis extracts 514 
Net revenue$ $514 
Nine months ended September 30,
20232022
Cannabis extracts1,029 4,301 
Net revenue$1,029 $4,301 
12

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
The following tables summarize the Company’s discontinued operations restructuring activity for the three and nine months ended September 30, 2023 and 2022:
Accrual as of June 30, 2023ExpensesPayments/Write-offsAccrual as of September 30, 2023
Employee Termination Benefits$219 $28 $(169)$78 
Other Restructuring Costs92  (92) 
Total$311 $28 $(261)$78 
Accrual as of January 1, 2023ExpensesPayments/Write-offsAccrual as of September 30, 2023
Employee Termination Benefits$ $470 $(392)$78 
Other Restructuring Costs 92 (92) 
Total$ $562 $(484)$78 
Accrual as of June 30, 2022ExpensesPayments/Write-offsAccrual as of September 30, 2022
Employee Termination Benefits$66 $137 $(93)$110 
Total$66 $137 $(93)$110 
Accrual as of January 1, 2022ExpensesPayments/Write-offsAccrual as of September 30, 2022
Employee Termination Benefits$ $1,482 $(1,372)$110 
Total$ $1,482 $(1,372)$110 
The following table presents a reconciliation of assets and liabilities of the discontinued operations presented in the condensed consolidated balance sheets:
As of September 30, 2023As of December 31, 2022
Assets
Current assets
Cash and cash equivalents$900 $2,300 
Accounts receivable, net 253 
Other receivables 775 
Prepaids and other current assets5 464 
Inventory, net 934 
Current assets of discontinued operations905 4,726 
Non-current assets
Property, plant and equipment, net 254 
Right-of-use assets 430 
Intangible assets, net 1,594 
Non-current assets of discontinued operations 2,278 
Liabilities
Current liabilities
Accounts payable 166 
Accrued liabilities210 807 
Current portion of lease obligation 415 
Current liabilities of discontinued operations$210 $1,388 
13

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
For the nine months ended September 30, 2023, purchases of property plant and equipment related to discontinued operations were $67. For the nine months ended September 30, 2022, purchases of property plant and equipment related to discontinued operations were $133.
3. Inventory, net
Inventory, net is comprised of the following items:
As of September 30, 2023As of December 31, 2022
Raw materials$6,739 $7,421 
Work-in-progress11,665 15,646 
Finished goods16,536 13,503 
Supplies and consumables907 989 
Total$35,847 $37,559 
4. Investments
(a)Equity method investments, net
A reconciliation of the carrying amount of the investments in equity method investees, net is as follows:
Ownership interestAs of September 30, 2023As of December 31, 2022
Cronos Growing Company Inc. (“Cronos GrowCo”)
50%$18,258 $18,755 
$18,258 $18,755 
The following is a summary of the Company’s share of net gain (loss) from equity method investments:
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Cronos GrowCo$1,057 $(1,119)$831 $4,078 
$1,057 $(1,119)$831 $4,078 
(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 the purchase date of the PharmaCann Option, for an aggregate purchase price of approximately $110,392. 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. As of September 30, 2023, the Company’s proforma 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. The PharmaCann Option is measured at fair value on a non-recurring basis and is a level 3 asset. See Note 11 “Fair Value Measurements” for more information on the fair value hierarchy.
Vitura Health Limited (formerly known as Cronos Australia)
The Company owns approximately 10% of the outstanding common shares of Vitura Health Limited (“Vitura”). The investment is considered an equity security with a readily determinable fair value. Changes in the fair value of the investment are recorded as gain (loss) on revaluation of financial instruments on the condensed consolidated statements of net loss and comprehensive loss. During the three months ended September 30, 2023, Vitura declared a dividend of A$0.01 per ordinary share. Based on the Company’s holding of 55,176,065 ordinary shares in the capital of Vitura, the Company recorded dividend income of $346 within other, net on the condensed consolidated statements of net loss and comprehensive loss.
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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, 2023Unrealized lossImpairment chargesForeign exchange effectAs of September 30, 2023
PharmaCann$49,000 $ $ $ $49,000 
Vitura18,925 (5,204) (578)13,143 
$67,925 $(5,204)$ $(578)$62,143 
As of January 1, 2023Unrealized lossImpairment chargesForeign exchange effectAs of September 30, 2023
PharmaCann$49,000 $ $ $ $49,000 
Vitura21,993 (7,933) (917)13,143 
$70,993 $(7,933)$ $(917)$62,143 
As of July 1, 2022Unrealized gainImpairment chargesForeign exchange effectAs of September 30, 2022
PharmaCann$99,154 $ $(28,972)$ $70,182 
Vitura9,515 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 
Vitura8,000 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 was estimated using a combination of the market and income approaches. Under the income approach, significant inputs used in the discounted cash flow method were the discount rate, growth rates, cash flow projections, and the timing of federal legalization of cannabis in the U.S. Under the market valuation approach, the key assumptions that require judgment under the Guideline Public Companies method are cash flow projections, selected multiples and the discount for lack of marketability. As a result of this analysis, 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 loss and comprehensive loss.
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Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of U.S. dollars, except share amounts)
5. Loans Receivable, net
Loans receivable, net consists of the following:
As of September 30, 2023As of December 31, 2022
GrowCo Credit Facility
$4,911 $4,427 
Add: Current portion of accrued interest246 4,463 
Total current portion of loans receivable5,157 8,890 
GrowCo Credit Facility
53,350 56,898 
Mucci Promissory Note
13,051 13,438 
Cannasoul Collaboration Loan1,683 1,837 
Add: Long-term portion of accrued interest217 172 
Total long-term portion of loans receivable68,301 72,345 
Total loans receivable, net$73,458 $81,235 
Cronos GrowCo Credit Facility
On August 23, 2019, the Company, as lender, and Cronos GrowCo, as borrower, entered into a senior secured credit agreement for an aggregate principal amount of C$100,000 (the “GrowCo Credit Facility”). The GrowCo Credit Facility is secured by substantially all present and after-acquired personal and real property of Cronos GrowCo. In August 2021, the GrowCo Credit Facility was amended to increase the aggregate principal amount available to C$105,000. As of both September 30, 2023, and December 31, 2022, Cronos GrowCo had drawn C$104,000 ($76,600 and $76,730, respectively) from the GrowCo Credit Facility. The interest rate on the outstanding borrowings is the Canadian Prime Rate plus 1.25%, with interest payments due on December 2021, December 2022, and quarterly thereafter. Principal payments of C$1,000 commenced in March 2022 and are due quarterly thereafter. For the three months ended September 30, 2023, Cronos GrowCo repaid C$1,666 ($1,076) in principal and C$2,032 ($1,189) in interest related to the GrowCo Credit Facility. For the nine months ended September 30, 2023, Cronos GrowCo repaid C$5,833 ($4,170) in principal and C$11,458 ($8,430) in interest related to the GrowCo Credit Facility. As of September 30, 2023, Cronos GrowCo had repaid C$9,833 ($7,243) and C$18,518 ($13,639) in principal and interest, respectively, under the terms of the GrowCo Credit Facility.
Mucci Promissory Note
On June 28, 2019, the Company entered into a promissory note receivable agreement (the “Mucci Promissory Note”) for C$16,350 (approximately $12,042) with the Cronos GrowCo joint venture partner (“Mucci”). The Mucci Promissory Note is secured by a general security agreement covering all the assets of Mucci. On September 30, 2022, the Mucci Promissory Note was amended and restated to increase the interest rate from 3.95% to the Canadian Prime Rate plus 1.25%, change the interest payments from quarterly to annual, and defer Mucci’s initial cash interest payment from September 30, 2022 to July 1, 2023.
Prior to July 1, 2022, interest accrued on the Mucci Promissory Note was capitalized as part of the principal balance. As of July 1, 2022, interest was accrued and to be paid in cash beginning on July 1, 2023. Prior to 2023, there were no repayments of principal or interest on the Mucci Promissory Note. For the nine months ended September 30, 2023, Mucci repaid C$