Exhibit

Description

99.1

Unaudited Condensed Interim Consolidated Financial Statements dated May 8, 2019

99.2

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

99.3

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

99.4

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

CRONOS GROUP INC.

(Registrant)

By:

/s/ Michael Gorenstein  

Name:

Michael Gorenstein

Title:

President and Chief Executive Officer

CRONOS GROUP INC.

Unaudited Condensed Interim Consolidated Financial Statements

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

(in thousands of Canadian dollars)

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Financial Statements

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

Unaudited Condensed Interim Consolidated Statements of Financial Position

1

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

2

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

3

Unaudited Condensed Interim Consolidated Statements of Cash Flows

4

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

5

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at March 31, 2019 and December 31, 2018

(in thousands of CDN $)

Notes

As at

March 31,

2019

As at

December 31,

2018

Assets

Current assets

Cash and cash equivalents

22(a)

$

2,418,277

$

32,634

Interest receivable

22(a)

3,130

-

Accounts receivable

22(a)

5,559

4,163

Sales taxes receivable

5,594

3,419

Prepaid expenses and other assets

5,092

4,190

Biological assets

5

11,506

9,074

Inventory

5

25,150

11,584

Total current assets

2,474,308

65,064

Advances to joint ventures

6(a)

21,920

6,395

Net investments in equity accounted investees

6(b)

2,185

4,038

Other investments

7,22(c)

300

705

Property, plant and equipment

8

184,570

171,720

Right-of-use assets

3(a),11(a)

1,875

171

Intangible assets

9(a)

11,087

11,234

Goodwill

9(b)

1,792

1,792

Total assets

$

2,698,037

$

261,119

Liabilities

Current liabilities

Bank indebtedness

22(b)

$

422

$

-

Accounts payable and other liabilities

22(b)

45,016

15,372

Holdbacks payable

22(b)

8,482

7,887

Government remittances payable

22(b)

1,313

1,123

Current portion of lease obligations

11,22(b)

134

41

Derivative liabilities

13,22(b)

1,664,275

-

Construction loan payable

12,22(b)

-

20,951

Total current liabilities

1,719,642

45,374

Lease obligations

11,22(b)

1,827

119

Due to non-controlling interests

10,22(b)

2,247

2,136

Deferred income tax liability

20

4,371

1,850

Total liabilities

1,728,087

49,479

Shareholders' equity

Share capital

14(a)

556,930

225,500

Warrants

15(a)

845

1,548

Stock options

15(b)

6,631

6,241

Retained earnings (accumulated deficit)

404,499

(22,715

)

Accumulated other comprehensive income

1,049

930

Total equity attributable to shareholders of Cronos Group

969,954

211,504

Non-controlling interests

10

(4

)

136

Total shareholders' equity

969,950

211,640

Total liabilities and shareholders' equity

$

2,698,037

$

261,119

Commitments and contingencies

19

Subsequent events

25

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

Approved on behalf of the Board of Directors:

"Michael Gorenstein"

"James Rudyk"

Director

Director

Cronos Group Inc.

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

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

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

Three Months Ended March 31,

Notes

2019

2018

Gross revenue

16

$

6,985

$

2,945

Excise taxes

(515

)

-

Net revenue

6,470

2,945

Cost of sales

Cost of sales before fair value adjustments

4(b)

2,984

1,567

Gross profit before fair value adjustments

3,486

1,378

Fair value adjustments

Unrealized change in fair value of biological assets

4(b)

(13,553

)

(2,744

)

Realized fair value adjustments on inventory sold in the period

4(b)

3,722

2,194

Total fair value adjustments

(9,831

)

(550

)

Gross profit

13,317

1,928

Operating expenses

Sales and marketing

1,500

586

Research and development

1,557

-

General and administrative

9,611

2,461

Share-based payments

15(b),18

737

774

Depreciation and amortization

8,9(a),11(a)

470

285

Total operating expenses

13,875

4,106

Operating loss

(558

)

(2,178

)

Other income (expense)

Interest income (expense)

2,720

(22

)

Financing costs

12,13

(29,561

)

-

Gain on revaluation of derivative liabilities

13

436,383

-

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

6

(264

)

41

Gain on disposal of Whistler

6

20,606

-

Gain on other investments

7

924

221

Total other income

430,808

240

Income (loss) before income taxes

430,250

(1,938

)

Deferred income tax expense (recovery)

20

2,557

(888

)

Net income (loss)

$

427,693

$

(1,050

)

Net income (loss) attributable to:

Cronos Group

$

427,829

$

(1,050

)

Non-controlling interests

10

(136

)

-

$

427,693

$

(1,050

)

Other comprehensive income (loss)

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

7,20

$

103

$

(35

)

Foreign exchange gain on translation of foreign operations

2(d),10

16

-

Total other comprehensive income (loss)

119

(35

)

Comprehensive income (loss)

$

427,812

$

(1,085

)

Comprehensive income (loss) attributable to:

Cronos Group

$

427,948

$

(1,085

)

Non-controlling interests

10

(136

)

-

$

427,812

$

(1,085

)

Earnings (loss) per share

Basic

17

$

1.95

$

(0.01

)

Diluted

17

$

0.48

$

(0.01

)

Weighted average number of outstanding shares

Basic

17

218,949,590

157,054,891

Diluted

17

271,086,575

157,054,891

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

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

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

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

Share-based reserve

Retained earnings

Accumulated other

Non-

Notes

Number of shares

Share capital

Shares to be issued

Warrants

Stock options

(accumulated deficit)

comprehensive income

controlling interests

Total

Balance at January 1, 2019 as previously reported

178,720,022

$

225,500

$

-

$

1,548

$

6,241

$

(22,715

)

$

930

$

136

$

211,640

Adoption of IFRS 16

3(a)

-

-

-

-

-

(68

)

-

(4

)

(72

)

Balance at January 1, 2019 as restated

178,720,022

225,500

-

1,548

6,241

(22,783

)

930

132

211,568

Shares issued

14(a)

149,831,154

334,099

-

-

-

-

-

-

334,099

Share issuance costs

-

(4,901

)

-

-

-

-

-

-

(4,901

)

Warrants exercised

15(a)

4,390,961

1,884

-

(703

)

-

-

-

-

1,181

Vesting of options

15(b)

-

-

-

-

737

-

-

-

737

Options exercised

15(b)

375

2

-

-

(1

)

-

-

-

1

Share appreciation rights exercised

15(b)

77,865

346

-

-

(346

)

(547

)

-

-

(547

)

Net income (loss)

-

-

-

-

-

427,829

-

(136

)

427,693

Other comprehensive income

-

-

-

-

-

-

119

-

119

Balance at March 31, 2019

333,020,377

$

556,930

$

-

$

845

$

6,631

$

404,499

$

1,049

$

(4

)

$

969,950

Balance at January 1, 2018

149,360,603

$

83,559

$

-

$

3,364

$

2,289

$

(3,724

)

$

880

$

-

$

86,368

Shares issued

14(a)

5,257,143

46,000

-

-

-

-

-

-

46,000

Share issuance costs

-

(3,081

)

-

-

-

-

-

-

(3,081

)

Shares to be issued

14(b)

-

961

-

-

-

-

-

961

Warrants exercised

15(a)

6,972,479

1,966

-

(686

)

-

-

-

-

1,280

Vesting of options

15(b)

-

-

-

-

774

-

-

-

774

Options exercised

15(b)

42,256

106

-

-

(33

)

-

-

-

73

Net loss

-

-

-

-

-

(1,050

)

-

-

(1,050

)

Other comprehensive loss

-

-

-

-

-

-

(35

)

-

(35

)

Balance at March 31, 2018

161,632,481

$

128,550

$

961

$

2,678

$

3,030

$

(4,774

)

$

845

$

-

$

131,290

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

Cronos Group Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

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

(in thousands of CDN $)

Three Months Ended March 31,

Notes

2019

2018

Operating activities

Net income (loss)

$

427,693

$

(1,050

)

Items not affecting cash and cash equivalents:

Unrealized change in fair value of biological assets

4(b)

(13,553

)

(2,744

)

Realized fair value adjustments on inventory sold in the period

4(b)

3,722

2,194

Share-based payments

15(b),18

737

774

Depreciation and amortization

8,9(a),11(a)

470

285

Depreciation relieved on inventory sold

235

169

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

6

264

(41

)

Gain on disposal of Whistler

6

(20,606

)

-

Gain on other investments

7

(924

)

(221

)

Gain on revaluation of derivative liabilities

13

(436,383

)

-

Deferred income tax expense (recovery)

20

2,557

(888

)

Foreign exchange loss (gain)

67

(16

)

Net changes in non-cash working capital

21

17,320

(12,212

)

Cash and cash equivalents used in operating activities

(18,401

)

(13,750

)

Investing activities

Investments in equity accounted investees

6

(2,200

)

-

Advances to joint ventures

6

(15,812

)

-

Proceeds from sale of other investments

7

26,078

687

Payment to exercise ABcann warrants

7

-

(113

)

Purchase of property, plant and equipment

8

(13,454

)

(7,642

)

Purchase of intangible assets

9(a)

(51

)

(131

)

Advance to Cronos Israel

2(a),10

-

(926

)

Cash and cash equivalents used in investing activities

(5,439

)

(8,125

)

Financing activities

Increase in bank indebtedness

422

-

Advance from non-controlling interests

10

111

-

Repayment of lease obligations

11

(32

)

(13

)

Repayment of construction loan payable

12

(21,311

)

-

Payment of accrued interest on construction loan payable

12

(121

)

(185

)

Advance under Credit Facility

12

65,000

-

Repayment of Credit Facility

12

(65,000

)

-

Proceeds from Altria Investment

13,14(a)

2,434,757

-

Proceeds from share issuance

14(a)

-

46,000

Share issuance costs

(4,901

)

(3,081

)

Proceeds from shares to be issued

14(b)

-

961

Proceeds from exercise of warrants and options

15(a),(b)

1,182

1,353

Withholding taxes paid on share appreciation rights

15(b)

(547

)

-

Cash and cash equivalents provided by financing activities

2,409,560

45,035

Net change in cash and cash equivalents

2,385,720

23,160

Cash and cash equivalents - beginning of period

32,634

9,208

Effects of foreign exchange on cash

(77

)

-

Cash and cash equivalents - end of period

$

2,418,277

$

32,368

Supplemental cash flow information

Interest paid

$

675

$

307

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

1.

Nature of business

Cronos Group Inc. ("Cronos Group" or the "Company") was incorporated under the Business Corporations Act (Ontario). Cronos Group is a public corporation, with its head office located at 720 King Street West, Suite 320, Toronto, Ontario, M5V 2T3. The Company's common shares are listed on the Nasdaq Global Market and on the Toronto Stock Exchange ("TSX") under the ticker symbol ("CRON").

Cronos Group is an innovative global cannabinoid company, with international production and distribution across five continents. The Company is engaged in the cultivation, manufacturing, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. Cronos Group is committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos Group is building an iconic brand portfolio. Cronos Group’s brand portfolio includes PEACE NATURALS™, a global health and wellness brand, and two adult-use brands, COVE™ and Spinach™. The Company operates two wholly-owned license holders ("License Holders") under the Cannabis Act (Canada) and its relevant regulations (the "Cannabis Act"). The Company's License Holders are Peace Naturals Project Inc. ("Peace Naturals"), which has production facilities near Stayner, Ontario, and Original BC Ltd. ("OGBC"), which has a production facility in Armstrong, British Columbia.

Cronos Group has also established five strategic joint ventures in Canada, Israel, Australia, and Colombia, and holds minority interests in cannabis-related companies and License Holders. One of these strategic joint ventures is considered a subsidiary for financial reporting purposes, refer to Note 2(a).

2.

Basis of presentation

These unaudited condensed interim consolidated financial statements for the three months ended March 31, 2019 and March 31, 2018 have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting. The accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company's audited annual consolidated financial statements for the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The Company applied, as of January 1, 2019, International Financial Reporting Standard ("IFRS") 16, Leases and Interpretation of the IFRS Interpretations Committee ("IFRIC") 23, Uncertainty over income tax treatments. As required by IAS 34, the nature and effect of these changes are disclosed in Note 3.

These unaudited condensed interim consolidated financial statements do not conform in all respects to the requirements of IFRS as issued by the International Accounting Standards Board for annual financial statements. Accordingly, these unaudited condensed interim consolidated financial statements should be read in conjunction with the Company's December 31, 2018 audited annual consolidated financial statements and notes.

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the "Board") on May 8, 2019.

2.

Basis of presentation (continued)

(a)

Basis of consolidation

These unaudited condensed interim consolidated financial statements include the accounts of Cronos Group Inc. and its subsidiaries, summarized in the following chart:

Subsidiaries

Jurisdiction of incorporation

Incorporation date

Ownership interest

Hortican Inc. ("Hortican")

Canada

January 17, 2013

100%

Peace Naturals

Canada

November 21, 2012

100%

OGBC

Canada

March 15, 2013

100%

Cronos Canada Holdings Inc.

Canada

March 13, 2018

100%

Cronos Global Holdings Inc.

Canada

April 25, 2017

100%

Cronos Israel G.S. Cultivations Ltd. ⁽ⁱ⁾

Israel

February 4, 2018

70%

Cronos Israel G.S. Manufacturing Ltd. ⁽ⁱ⁾

Israel

September 4, 2018

90%

Cronos Israel G.S. Store Ltd. ⁽ⁱ⁾

Israel

June 28, 2018

90%

Cronos Israel G.S. Pharmacies Ltd. ⁽ⁱ⁾

Israel

February 15, 2018

90%

Cronos Labs Ltd. ("Cronos Device Labs")

Israel

March 14, 2019

100%

Cronos Group Celtic Holdings Ltd.

Ireland

February 6, 2018

100%

Cronos Malta Holdings Ltd.

Malta

October 25, 2018

100%

⁽ⁱ⁾

These Israeli entities are collectively referred to as "Cronos Israel".

In the unaudited condensed interim consolidated statements of operations and comprehensive income (loss), net income (loss) and other 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 section of the unaudited condensed interim consolidated statements of financial position and the unaudited condensed interim consolidated statements of changes in equity.

(b)

Investments in equity accounted investees

Investees in which the Company has significant influence or joint control are accounted for using the equity method. The Company's interests in equity accounted investees as at March 31, 2019 are summarized in the following chart.

Equity accounted investees

Jurisdiction of incorporation

Ownership interest

Cronos Australia Limited ("Cronos Australia")

Australia

50%

MedMen Canada Inc. ("MedMen Canada")

Canada

50%

Cronos Growing Company Inc. ("Cronos GrowCo")

Canada

50%

NatuEra S.à r.l

Luxembourg

50%

As at December 31, 2018, the Company held a 19% ownership interest in Whistler Medical Marijuana Company ("Whistler"). During the three months ended March 31, 2019, the Company divested of its investment in Whistler.

(c)

Basis of measurement

Apart from biological assets, other investments, and derivative liabilities, which are measured at fair value, the unaudited condensed interim consolidated financial statements have been presented and prepared on the basis of historical cost.

2.

Basis of presentation (continued)

(d)

Functional and presentation currency

These unaudited condensed interim consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company. The functional currency of all subsidiaries is the national currency of the respective jurisdiction of incorporation. Refer to Note 2(a).

3.

Adoption of new accounting pronouncements

(a)

IFRS 16, Leases

IFRS 16 was issued in January 2016 and replaces the previous guidance on leases, predominantly IAS 17, Leases. The Company has applied IFRS 16 with an initial application date of January 1, 2019, in accordance with the transitional provisions specified in IFRS 16. As a result, the Company has changed its accounting policy for lease contracts as detailed below. The Company has applied the following practical expedients:

(i)

The Company applied the simplified transition approach and did not restate comparative information. As a result, the Company recognized the cumulative effect of initially applying IFRS 16 as an adjustment to the accumulated deficit as at January 1, 2019.

(ii)

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17, and IFRIC 4, Determining whether an arrangement contains a lease, were not reassessed for whether there is a lease. The Company applied the definition of a lease under IFRS 16 to contracts entered into or changed on or after January 1, 2019.

In accordance with the practical expedients applied, the Company has recognized lease liabilities and right-of-use assets at the date of initial application for leases previously classified as operating leases in accordance with IAS 17. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. The Company has elected to measure the right-of-use assets at the carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the Company's incremental borrowing rate at the date of initial application. For the lease previously classified as a finance lease under IAS 17, the carrying amount of the right-of-use asset and the lease liability at the date of initial application is equal to the carrying amount of the leased asset and lease liability immediately before the date of initial application.

The following table summarizes the impacts of adopting IFRS 16 on the Company's unaudited condensed interim consolidated financial statements as at the date of initial application:

As at January 1, 2019

As previously reported

under IAS 17

Adjustments ⁽ⁱ⁾

As restated

under IFRS 16

Right-of-use assets

$

217

$

1,890

$

2,107

Accumulated depreciation

46

144

190

Current lease liabilities

41

303

344

Non-current lease liabilities

119

1,515

1,634

Accumulated deficit

(22,715

)

(68

)

(22,783

)

Non-controlling interests

136

(4

)

132

⁽ⁱ⁾

The adjustments are due to the recognition of right-of-use assets and lease obligations for lease contracts previously classified as operating leases under IAS 17 prior to the date of initial application. The weighted average incremental borrowing rate applied to the lease liabilities recognized at the date of initial application is 12%. There would be no difference between the discounted value of the operating lease commitments disclosed at December 31, 2018 and the adjustments above. Furthermore, there were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

3.

Adoption of new accounting pronouncements (continued)

(a)

IFRS 16, Leases (continued)

The following is the Company's policy for accounting for lease contracts in accordance with IFRS 16:

At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property and equipment. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(b)

IFRIC 23, Uncertainty over income tax treatments

IFRIC 23 clarifies the application of recognition and measurement requirements in IAS 12, Income taxes, when there is uncertainty over income tax treatments. It specifically addresses whether an entity considers each tax treatment independently or collectively, the assumptions an entity makes about the examination of tax treatments by taxation authorities, how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, and how an entity considers changes in facts and circumstances. IFRIC 23 became effective for fiscal years beginning on or after January 1, 2019, with earlier application permitted. The Company has adopted this interpretation as of its effective date and has assessed no significant impact as a result of the adoption of this interpretation.

4.

Accounting changes

(a)

Change in estimate

During the three months ended March 31, 2018, the Company revised its estimate of the useful life of the Health Canada licenses, and assessed that the licenses have an estimated useful life equal to the remaining useful life of the corresponding facilities described in Note 9(a). Previously, the Company estimated that the Health Canada Licenses had an indefinite life. The change in estimate was accounted for prospectively.

(b)

Change in accounting policy

During the three months ended June 30, 2018, the Company made a voluntary change in accounting policy to capitalize the direct and indirect costs attributable to the biological asset transformation. The previous accounting policy was to expense these costs as period costs.

4.

Accounting changes (continued)

(b)

Change in accounting policy (continued)

Three Months Ended

March 31, 2019

Three Months Ended

March 31, 2018

Original

accounting

policy

New

accounting

policy

Original

accounting

policy

New

accounting

policy

Unaudited condensed interim consolidated statement of operations and comprehensive income (loss)

Cost of sales

Cost of sales before fair value adjustments

$

1,684

$

2,984

$

521

$

1,567

Production costs

3,338

-

1,714

-

Total cost of sales

5,022

2,984

2,235

1,567

Gross profit before fair value adjustments

1,448

3,486

710

1,378

Fair value adjustments:

Unrealized change in fair value of biological assets

(16,891

)

(13,553

)

(4,458

)

(2,744

)

Realized fair value adjustments on inventory sold in the period

5,022

3,722

3,240

2,194

Total fair value adjustments

(11,869

)

(9,831

)

(1,218

)

(550

)

Gross profit

$

13,317

$

13,317

$

1,928

$

1,928

Three Months Ended

March 31, 2019

Three Months Ended

March 31, 2018

Original

accounting

policy

New

accounting

policy

Original

accounting

policy

New

accounting

policy

Unaudited condensed interim consolidated statement of cash flows

Operating activities

Items not affecting cash:

Unrealized change in fair value of biological assets

$

(16,891

)

$

(13,553

)

$

(4,458

)

$

(2,744

)

Realized fair value adjustments on inventory sold in the period

5,022

3,722

3,240

2,194

Net changes in non-cash working capital:

Biological assets

15,033

11,695

3,740

2,026

Inventory

(18,501

)

(17,201

)

(3,802

)

(2,756

)

Net effect on cash flows used in operating activities

$

(15,337

)

$

(15,337

)

$

(1,280

)

$

(1,280

)

5.

Biological assets and inventory

(a)

Biological assets

The Company's biological assets consist of cannabis plants. The changes in the carrying amounts of the biological assets are as follows:

Three Months Ended March 31,

2019

(Note 4)

2018

(Note 4)

Biological assets - beginning of period

$

9,074

$

3,722

Capitalization of production costs

3,338

1,714

Unrealized change in fair value of biological assets

13,553

2,744

Transferred to inventory upon harvest

(14,459

)

(3,690

)

Biological assets - end of period

$

11,506

$

4,490

As at March 31, 2019, the Company has 67,635 plants classified as biological assets which are expected to ultimately yield 6,155 kg of dry cannabis (December 31, 2018 - 46,004 plants which were expected to ultimately yield 6,303 kg of dry cannabis).

The Company measures its biological assets at fair value less costs to sell. This valuation is based on the expected harvest yield (on a grams per plant basis) for plants currently being cultivated, adjusted for the expected net selling price less post-harvest costs attributable to bringing a harvested gram of cannabis to a saleable condition and ultimate sale (on a per gram basis). The Company accretes the fair value of each cannabis plant on a straight-line basis over the expected growing cycle. As at March 31, 2019, the plants were on average 5 weeks into the growing cycle, 38% complete, and were ascribed approximately 38% (December 31, 2018 - 6 weeks, 37%, and 37%, respectively) of their expected fair value at harvest date.

(b)

Inventory

Inventory consisted of the following:

As at March 31, 2019

As at December 31, 2018

Dry cannabis

Finished goods

181 kg

$

1,014

187 kg

$

972

Work-in-process

3,261 kg

16,222

1,789 kg

7,733

17,236

8,705

Cannabis oils ⁽ⁱ⁾

Finished goods

200 kg

1,054

115 kg