cron-6k_20180930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

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

of the Securities Exchange Act of 1934

For the month of November 2018

Commission File No. 001-38403

 

CRONOS GROUP INC.

(Name of registrant)

 

720 King Street W., Suite 320

Toronto, Ontario

M5V 2T3

(Address of registrant’s principal executive office)

 

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

Form 20-F   Form 40-F  

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

    Yes      No  

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

    Yes      No  

 

 

 

 


 

EXHIBIT INDEX

 

 

 

Exhibit

 

Description

 

99.1

Unaudited Condensed Interim Consolidated Financial Statements dated November 12, 2018

99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations dated November 12, 2018

99.3

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Executive Officer dated November 13, 2018

99.4

Form 52-109F2 – Certification of Interim Filings Full Certificate – Chief Financial Officer dated November 13, 2018

 

 

 

1


 

SIGNATURES

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

 

 

 

CRONOS GROUP INC.

(Registrant)

 

 

By:

/s/ Michael Gorenstein  

 

Name:

Michael Gorenstein

Title:

President and Chief Executive Officer

Date:  November 13, 2018

 

 

 

2

cron-ex991_9.htm

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRONOS GROUP INC.

 

Unaudited Condensed Interim Consolidated Financial Statements

 

For the Three and Nine Months Ended September 30, 2018 and September 30, 2017

 

(in thousands of Canadian dollars)

 

 

 

 

 

 


 

 

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2018 and September 30, 2017

 

Table of Contents

 

Unaudited Condensed Interim Consolidated Statements of Financial Position

1

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

2

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

3

Unaudited Condensed Interim Consolidated Statements of Cash Flows

4

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

5

 

 

 

 


 

  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at September 30, 2018 and December 31, 2017

(in thousands of CDN $)

 

 

 

Notes

 

As at

September 30,

2018

 

 

As at

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

$

41,482

 

 

$

9,208

 

Accounts receivable

 

23(i)

 

 

3,278

 

 

 

1,140

 

Sales taxes receivable

 

 

 

 

9,953

 

 

 

3,114

 

Prepaids and other receivables

 

23(i)

 

 

10,246

 

 

 

790

 

Biological assets

 

6

 

 

5,632

 

 

 

3,722

 

Inventory

 

6

 

 

15,073

 

 

 

8,416

 

Loan receivable

 

7,23(i)

 

 

314

 

 

 

314

 

Total current assets

 

 

 

 

85,978

 

 

 

26,704

 

Advances to related corporations

 

8,23(i)

 

 

2,674

 

 

 

-

 

Investments in equity accounted investees

 

9

 

 

4,072

 

 

 

3,807

 

Other investments

 

10,23(iii)

 

 

994

 

 

 

1,347

 

Property, plant and equipment

 

11

 

 

127,595

 

 

 

56,172

 

Intangible assets

 

12

 

 

11,345

 

 

 

11,207

 

Goodwill

 

13

 

 

1,792

 

 

 

1,792

 

Total assets

 

 

 

$

234,450

 

 

$

101,029

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

23(ii)

 

$

3,066

 

 

$

7,878

 

Government remittances payable

 

 

 

 

739

 

 

 

-

 

Construction loan payable

 

15

 

 

5,724

 

 

 

-

 

Total current liabilities

 

 

 

 

9,529

 

 

 

7,878

 

Construction loan payable

 

15

 

 

-

 

 

 

5,367

 

Deferred income tax liability

 

22

 

 

2,656

 

 

 

1,416

 

Total liabilities

 

 

 

 

12,185

 

 

 

14,661

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

Share capital

 

16(a)

 

 

225,549

 

 

 

83,559

 

Shares to be issued

 

16(b)

 

 

17

 

 

 

-

 

Warrants

 

17(a)

 

 

1,548

 

 

 

3,364

 

Stock options

 

17(b)

 

 

4,982

 

 

 

2,289

 

Accumulated deficit

 

 

 

 

(11,261

)

 

 

(3,724

)

Accumulated other comprehensive income

 

 

 

 

1,119

 

 

 

880

 

Total equity attributable to shareholders of Cronos

 

 

 

 

221,954

 

 

 

86,368

 

Non-controlling interests

 

14

 

 

311

 

 

 

-

 

Total shareholders' equity

 

 

 

 

222,265

 

 

 

86,368

 

Total liabilities and shareholders' equity

 

 

 

$

234,450

 

 

$

101,029

 

Commitments and contingencies

 

21

 

 

 

 

 

 

 

 

Subsequent events

 

26

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Approved on behalf of the Board of Directors:

 

 

 

"Michael Gorenstein"

 

"James Rudyk"

 

Director

 

Director

 

 

   

 

1


 

  

Cronos Group Inc.

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

For the three and nine months ended September 30, 2018 and September 30, 2017

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

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

Notes

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

18

 

$

3,760

 

 

$

1,314

 

 

$

10,099

 

 

$

2,471

 

Cost of sales before fair value adjustments

5,6

 

 

1,688

 

 

 

464

 

 

 

4,509

 

 

 

877

 

Gross profit before fair value adjustments

 

 

 

2,072

 

 

 

850

 

 

 

5,590

 

 

 

1,594

 

Fair value adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

5,6

 

 

(1,533

)

 

 

(2,478

)

 

 

(11,108

)

 

 

(5,179

)

Realized fair value adjustments on inventory sold in the period

5,6

 

 

1,511

 

 

 

1,324

 

 

 

6,330

 

 

 

2,612

 

Total fair value adjustments

 

 

 

(22

)

 

 

(1,154

)

 

 

(4,778

)

 

 

(2,567

)

Gross profit

 

 

 

2,094

 

 

 

2,004

 

 

 

10,368

 

 

 

4,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

598

 

 

 

176

 

 

 

1,548

 

 

 

306

 

General and administrative

 

 

 

4,820

 

 

 

1,066

 

 

 

11,500

 

 

 

4,274

 

Share-based payments

17(b),20

 

 

1,223

 

 

 

539

 

 

 

2,947

 

 

 

1,170

 

Depreciation and amortization

11,12

 

 

330

 

 

 

255

 

 

 

938

 

 

 

684

 

Total operating expenses

 

 

 

6,971

 

 

 

2,036

 

 

 

16,933

 

 

 

6,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

 

(4,877

)

 

 

(32

)

 

 

(6,565

)

 

 

(2,273

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

(62

)

 

 

(22

)

 

 

(121

)

 

 

(159

)

Share of income (loss) from investment in associate

9

 

 

20

 

 

 

(53

)

 

 

64

 

 

 

363

 

Gain on other investments

10

 

 

-

 

 

 

1,128

 

 

 

221

 

 

 

2,399

 

Total other income (expense)

 

 

 

(42

)

 

 

1,053

 

 

 

164

 

 

 

2,603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

 

(4,919

)

 

 

1,021

 

 

 

(6,401

)

 

 

330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (recovery)

22

 

 

2,352

 

 

 

(76

)

 

 

1,197

 

 

 

(98

)

Net income (loss)

 

 

$

(7,271

)

 

$

1,097

 

 

$

(7,598

)

 

$

428

 

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cronos Group

 

 

 

(7,210

)

 

 

1,097

 

 

 

(7,537

)

 

 

428

 

Non-controlling interests

14

 

 

(61

)

 

 

-

 

 

 

(61

)

 

 

-

 

 

 

 

$

(7,271

)

 

$

1,097

 

 

$

(7,598

)

 

$

428

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

10,22

 

 

233

 

 

 

(2

)

 

 

237

 

 

 

692

 

Foreign exchange gain on translation of foreign operations

2(c)

 

 

3

 

 

 

-

 

 

 

3

 

 

 

-

 

Total other comprehensive income (loss)

 

 

 

236

 

 

 

(2

)

 

 

240

 

 

 

692

 

Comprehensive income (loss)

 

 

$

(7,035

)

 

$

1,095

 

 

$

(7,358

)

 

$

1,120

 

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cronos Group

 

 

 

(6,975

)

 

 

1,095

 

 

 

(7,298

)

 

 

1,120

 

Non-controlling interests

14

 

 

(60

)

 

 

-

 

 

 

(60

)

 

 

-

 

 

 

 

$

(7,035

)

 

$

1,095

 

 

$

(7,358

)

 

$

1,120

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

19

 

$

(0.04

)

 

$

0.01

 

 

$

(0.04

)

 

$

0.00

 

Weighted average number of outstanding shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

19

 

 

177,483,122

 

 

 

134,913,931

 

 

 

170,097,232

 

 

 

130,782,161

 

Diluted

19

 

 

177,483,122

 

 

 

143,592,860

 

 

 

170,097,232

 

 

 

139,461,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

2


 

  

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

For the three and nine months ended September 30, 2018 and September 30, 2017

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

 

 

Notes

 

Number of

shares

 

 

Share capital

 

 

Shares to be

issued

 

 

 

Share-based reserve

 

 

Accumulated

deficit

 

 

Accumulated other comprehensive income

 

 

Non-controlling interests

 

 

Total

 

 

 

 

 

 

 

Warrants

 

 

Stock options

 

 

 

 

 

 

 

 

 

Balance at January 1, 2017

 

 

 

121,725,748

 

 

$

33,590

 

 

$

-

 

 

$

3,983

 

 

$

735

 

 

$

(6,215

)

 

$

1,584

 

 

$

-

 

 

$

33,677

 

Shares issued

16(a)

 

 

14,376,112

 

 

 

32,346

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

32,346

 

Share issuance costs

 

 

 

-

 

 

 

(1,350

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,350

)

Vesting of options

17(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,170

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,170

 

Options exercised

17(b)

 

 

478,746

 

 

 

752

 

 

 

-

 

 

 

-

 

 

 

(267

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

485

 

Warrants exercised

17(a)

 

 

6,072,096

 

 

 

2,152

 

 

 

-

 

 

 

(619

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,533

 

Shares to be issued

16(c)

 

 

-

 

 

 

-

 

 

 

76

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

76

 

Unrealized gains reclassified to net income

10

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,537

)

 

 

-

 

 

 

(1,537

)

Net income

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

428

 

 

 

-

 

 

 

-

 

 

 

428

 

Other comprehensive income

10

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

692

 

 

 

-

 

 

 

692

 

Balance at September 30, 2017

 

 

 

142,652,702

 

 

$

67,490

 

 

$

76

 

 

$

3,364

 

 

$

1,638

 

 

$

(5,787

)

 

$

739

 

 

$

-

 

 

$

67,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

 

149,360,603

 

 

$

83,559

 

 

$

-

 

 

$

3,364

 

 

$

2,289

 

 

$

(3,724

)

 

$

880

 

 

$

-

 

 

$

86,368

 

Shares issued

16(a)

 

 

15,677,143

 

 

 

146,032

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

146,032

 

Share issuance costs

 

 

 

-

 

 

 

(9,479

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,479

)

Vesting of options

17(b)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,947

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,947

 

Options exercised

17(b)

 

 

366,638

 

 

 

721

 

 

 

-

 

 

 

-

 

 

 

(154

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

567

 

Warrants exercised

17(a)

 

 

13,114,336

 

 

 

4,616

 

 

 

-

 

 

 

(1,816

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,800

 

Shares to be issued

16(b)

 

 

-

 

 

 

-

 

 

 

17

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17

 

Share appreciation rights

17(b)

 

 

181,726

 

 

 

100

 

 

 

-

 

 

 

-

 

 

 

(100

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-controlling interests arising from Cronos Israel

14

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

371

 

 

 

371

 

Net loss

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,537

)

 

 

-

 

 

 

(61

)

 

 

(7,598

)

Other comprehensive income

10,22,2(c)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

239

 

 

 

1

 

 

 

240

 

Balance at September 30, 2018

 

 

 

178,700,446

 

 

$

225,549

 

 

$

17

 

 

$

1,548

 

 

$

4,982

 

 

$

(11,261

)

 

$

1,119

 

 

$

311

 

 

$

222,265

 

 

 

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

 

 

 

 

3


 

 

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the three and nine months ended September 30, 2018 and September 30, 2017

(in thousands of CDN $)

 

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

Notes

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

$

(6,392

)

 

$

1,097

 

 

$

(6,719

)

 

$

428

 

Items not affecting cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized change in fair value of biological assets

 

5,6

 

 

(1,533

)

 

 

(2,478

)

 

 

(11,108

)

 

 

(5,179

)

Realized fair value adjustments on inventory sold in the period

 

5,6

 

 

1,511

 

 

 

1,324

 

 

 

6,330

 

 

 

2,612

 

Share-based payments

 

17(b),20

 

 

1,223

 

 

 

539

 

 

 

2,947

 

 

 

1,170

 

Depreciation and amortization

 

11,12

 

 

645

 

 

 

255

 

 

 

1,760

 

 

 

684

 

Share of income (loss) from investment in associate

 

9

 

 

(20

)

 

 

53

 

 

 

(64

)

 

 

(363

)

Gain on other investments

 

10

 

 

-

 

 

 

(1,128

)

 

 

(221

)

 

 

(2,399

)

Deferred income tax expense (recovery)

 

22

 

 

1,473

 

 

 

(76

)

 

 

318

 

 

 

(98

)

Foreign exchange loss (gain)

 

 

 

 

2