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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 June 30, 2021
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 August 5, 2021, there were 371,805,547 common shares of the registrant issued and outstanding.

1


Table of Contents
PART I
FINANCIAL INFORMATION
Item 1.3
Item 2.29
Item 3.43
Item 4.44
PART II
OTHER INFORMATION
Item 1.45
Item 2.45
Item 3.45
Item 4.45
Item 5.45
Item 6.46
Signatures.47

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 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
June 30, 2021June 30, 2020December 31, 2020
Average rate1.22931.38561.3036
Spot rate1.23951.35761.2751
Year-to-date average rate1.24811.36461.3411
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
Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020
6

3

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

As of June 30, 2021As of December 31, 2020
Assets(Unaudited)(Audited)
Current assets
Cash and cash equivalents$895,181 $1,078,023 
Short-term investments201,699 211,766 
Accounts receivable, net11,299 8,928 
Other receivables2,468 10,033 
Current portion of loans receivable, net5,028 7,083 
Prepaids and other current assets10,153 11,161 
Inventory, net35,605 44,002 
Held-for-sale assets645 1,176 
Total current assets1,162,078 1,372,172 
Advances to joint ventures499 467 
Investments in equity accounted investees, net20,970 19,235 
Other investments110,392  
Loan receivable, net94,113 87,191 
Property, plant and equipment, net193,920 187,599 
Right-of-use assets6,687 9,776 
Intangible assets, net70,409 69,720 
Goodwill179,543 179,522 
Total assets$1,838,611 $1,925,682 
Liabilities
Current liabilities
Accounts payable and other liabilities$29,829 $42,102 
Current portion of lease obligation1,206 1,322 
Derivative liabilities169,563 163,410 
Total current liabilities200,598 206,834 
Due to non-controlling interests1,768 2,188 
Lease obligation6,333 8,492 
Total liabilities208,699 217,514 
Commitments and contingencies (see Note 9)
Shareholders’ equity
Share capital (i, ii)
572,858 569,260 
Additional paid-in capital32,368 34,596 
Retained earnings955,721 1,064,509 
Accumulated other comprehensive income71,729 42,999 
Total equity attributable to shareholders of Cronos Group1,632,676 1,711,364 
Non-controlling interests(2,764)(3,196)
Total shareholders’ equity1,629,912 1,708,168 
Total liabilities and shareholders’ equity$1,838,611 $1,925,682 
(i)Authorized for issuance as of June 30, 2021: unlimited and December 31, 2020: unlimited.
(ii)Shares issued as of June 30, 2021: 371,805,547 and December 31, 2020: 360,253,332.

See notes to condensed consolidated 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 June 30,Six months ended June 30,
2021202020212020
Net revenue, before excise taxes$18,848 $11,432 $33,502 $20,776 
Excise taxes(3,226)(1,549)(5,269)(2,461)
Net revenue15,622 9,883 28,233 18,315 
Cost of sales19,445 9,743 35,019 16,689 
Inventory write-down11,961 3,062 11,961 11,024 
Gross loss(15,784)(2,922)(18,747)(9,398)
Operating expenses
Sales and marketing13,209 6,501 23,463 13,613 
Research and development (“R&D”)5,199 3,631 10,301 8,221 
General and administrative22,417 18,429 44,323 42,188 
Share-based payments2,565 2,546 5,064 4,982 
Depreciation and amortization1,043 679 1,778 1,366 
Total operating expenses44,433 31,786 84,929 70,370 
Operating loss(60,217)(34,708)(103,676)(79,768)
Other income (loss)
Interest income, net2,293 3,734 4,622 11,485 
Gain (loss) on revaluation of derivative liabilities115,248 (35,880)(1,626)77,488 
Impairment loss on long-lived assets (40,000)(1,741)(40,000)
Share of loss from equity accounted investments(1,115)(794)(2,758)(1,966)
Other, net1,127 (9)911 785 
Total other income (loss)117,553 (72,949)(592)47,792 
Income (loss) from continuing operations57,336 (107,657)(104,268)(31,976)
Loss from discontinued operations(561)(46)(582)(46)
Net income (loss)56,775 (107,703)(104,850)(32,022)
Net loss attributable to non-controlling interest(279)(726)(592)(1,085)
Net income (loss) attributable to Cronos Group$57,054 $(106,977)$(104,258)$(30,937)
Other comprehensive income (loss)
Net income (loss)$56,775 $(107,703)$(104,850)$(32,022)
Other comprehensive income (loss):
Foreign exchange gain (loss) on translation13,470 51,871 29,754 (61,821)
Total other comprehensive income (loss)13,470 51,871 29,754 (61,821)
Comprehensive income (loss)70,245 (55,832)(75,096)(93,843)
Less: comprehensive income (loss) attributable to non-controlling interests(394)(762)432 (1,098)
Comprehensive income (loss) attributable to Cronos Group$70,639 $(55,070)$(75,528)$(92,745)
Net income (loss) per share
Basic and diluted - continuing operations$0.15 $(0.31)$(0.28)$(0.09)
Weighted average number of outstanding shares
Basic371,721,382 349,075,408 367,391,118 348,946,439 
Diluted375,349,856 349,075,408 367,391,118 348,946,439 

See notes to condensed consolidated financial statements.
5

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the three months ended June 30, 2021 and 2020
(In thousands of U.S. dollars, except share amounts, unaudited)

Number of sharesShare capitalAdditional paid-in capitalRetained earnings Accumulated other comprehensive incomeNon-controlling interestsTotal shareholders’ equity
Balance at April 1, 2021371,656,590 $584,912 $32,090 $895,503 $58,144 $(2,370)$1,568,279 
Warrants exercised10,000 4 (2)— — — 2 
Vesting of options— — 1,864 — — — 1,864 
Options exercised80,603 102 (102)— — —  
Restricted share units settled58,354 345 (345)— — —  
Withholding taxes paid on share-based awards— — (183)(63)— — (246)
Vesting of restricted share units— — 701 — — — 701 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development— 2,000 (1,655)— — — 345 
Top-up rights out-of-period adjustment— (14,505)— 3,227 — — (11,278)
Net income (loss)— — — 57,054 — (279)56,775 
Foreign exchange gain (loss) on translation— — — — 13,585 (115)13,470 
Balance at June 30, 2021371,805,547 $572,858 $32,368 $955,721 $71,729 $(2,764)$1,629,912 
Number of sharesShare capitalAdditional paid-in capitalRetained earnings Accumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity
Balance at April 1, 2020348,817,472 $563,165 $25,483 $1,213,686 $(85,877)$(1,189)$1,715,268 
Vesting of options— — 1,770 — — — 1,770 
Options exercised1,068,930 1,329 (1,328)— — — 1 
Vesting of restricted share units— — 776 — — — 776 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development— — 345 — — — 345 
Top-up rights exercised— 717 — — — — 717 
Net loss— — — (106,977)— (726)(107,703)
Foreign exchange gain (loss) on translation— — — — 51,907 (36)51,871 
Balance at June 30, 2020349,886,402 $565,211 $27,046 $1,106,709 $(33,970)$(1,951)$1,663,045 

See notes to condensed consolidated financial statements.
6

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the six months ended June 30, 2021 and 2020
(In thousands of U.S. dollars, except share amounts, unaudited)


Number of sharesShare capitalAdditional paid-in capitalRetained earningsAccumulated other comprehensive incomeNon-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 
Warrants exercised7,842,859 1,165 (1,163)— — — 2 
Vesting of options— — 3,928 — — — 3,928 
Options exercised3,651,002 3,315 (3,305)— — — 10 
Restricted share units settled58,354 345 (345)— — —  
Withholding taxes paid on share-based awards— — (1,162)(7,757)— — (8,919)
Vesting of restricted share units— — 1,136 — — — 1,136 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development— 2,000 (1,317)— — — 683 
Top-up rights out-of-period adjustment— (3,227)— 3,227 — —  
Net loss— — — (104,258)— (592)(104,850)
Foreign exchange gain on translation— — — — 28,730 1,024 29,754 
Balance at June 30, 2021371,805,547 $572,858 $32,368 $955,721 $71,729 $(2,764)$1,629,912 
Number of sharesShare capitalAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Non-controlling interestsTotal shareholders’ equity
Balance as of January 1, 2020348,817,472 $561,165 $23,234 $1,137,646 $27,838 $(853)$1,749,030 
Vesting of options— — 3,500 — — — 3,500 
Options exercised1,068,930 1,329 (1,328)— — — 1 
Vesting of restricted share units— — 1,482 — — — 1,482 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development— 2,000 158 — — — 2,158 
Top-up rights exercised— 717 — — — — 717 
Net loss— — — (30,937)— (1,085)(32,022)
Foreign exchange loss on translation— — — (61,808)(13)(61,821)
Balance at June 30, 2020349,886,402 $565,211 $27,046 $1,106,709 $(33,970)$(1,951)$1,663,045 

See notes to condensed consolidated financial statements.
7

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

Six months ended June 30,
20212020
Operating activities
Net loss$(104,850)$(32,022)
 Adjustments to reconcile net loss to cash provided by operating activities:
Share-based payments5,064 4,982 
Depreciation and amortization5,083 2,879 
Share of loss from investments in equity accounted investees2,758 1,966 
Gain (loss) on revaluation of derivative liabilities1,626 (77,488)
Impairment loss on long-lived assets1,741 40,000 
Expected credit losses on long-term financial assets 1,357 
Other non-cash operating activities, net(1,192)599 
Changes in operating assets and liabilities:
Accounts receivable, net(2,194)2,895 
Other receivables6,960 (3,047)
Prepaids and other current assets1,268 1,187 
Inventory, net(1,010)(24,292)
Inventory write-down11,961 11,024 
Accounts payable and other liabilities(13,412)(8,417)
Cash flows used in operating activities(86,197)(78,377)
Investing activities
Purchase of short-term investments(120,180)(200,173)
Proceeds from short-term investments136,204 279,275 
Purchase of other investments(110,392) 
Purchase of property, plant and equipment(8,347)(13,344)
Purchase of intangible assets(843)(2,754)
Proceeds from sale of held-for-sale assets2,059  
Advances on loans receivable(5,064)(23,974)
Proceeds from sale of other investments 769 
Cash flows provided by (used in) investing activities(106,563)39,799 
Financing activities
Withholding taxes paid on share-based awards(8,919) 
Proceeds from exercise of warrants and options12 1 
Cash flows provided by (used in) financing activities(8,907)1 
Effect of foreign currency translation on cash and cash equivalents18,825 (51,416)
Net change in cash and cash equivalents(182,842)(89,993)
Cash and cash equivalents, beginning of period1,078,023 1,199,693 
Cash and cash equivalents, end of period$895,181 $1,109,700 
Supplemental cash flow information
Interest paid$ $90 
Interest received2,961 11,575 
Income taxes paid858  
See notes to condensed consolidated financial statements.



8

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, 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 Street, 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, with international production and distribution across five continents. The Company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development and is seeking to build an iconic brand portfolio. Cronos Group’s brand portfolio includes PEACE NATURALS, a global wellness platform; two adult-use brands, COVE and Spinach; and three U.S. hemp-derived consumer products brands, Lord Jones, Happy Danceand PEACE+.
Cronos Group has established strategic joint ventures in Canada, Israel, and Colombia. “Cronos Israel” consists of a cultivation company (Cronos Israel G.S. Cultivation Ltd.), a manufacturing company (Cronos Israel G.S. Manufacturing Ltd.), a distribution company (Cronos Israel G.S. Store Ltd.) and a pharmacy company (Cronos Israel G.S. Pharmacy Ltd.) and is consolidated for financial reporting purposes. The Company also holds approximately 31% of the issued capital of Cronos Australia Limited (“Cronos Australia”) and accounts for its investment in Cronos Australia under the equity method of accounting. For additional discussion regarding the joint ventures and strategic investment, see Note 3. Investments.
(b)Out-of-period adjustments
During the three months ended March 31, 2021, the Company identified an error in the accounting related to the withholding taxes on the net exercise of stock options, which resulted in an understatement of accounts payable and other liabilities of $966 and overstatements of other receivables, retained earnings and share capital of $3,202, $3,838 and $330, respectively, as of December 31, 2020. The error was deemed immaterial, and thus the Company has recorded an out-of-period adjustment to the condensed consolidated balance sheet and the condensed consolidated statement of changes in equity during the first quarter of 2021 to correct the error. This error had no impact to the condensed consolidated statement of net income (loss) and comprehensive income (loss). The impact of the out-of-period adjustments are included within the changes in operating assets and liabilities and withholding taxes paid on share-based awards lines in the Company’s condensed consolidated statements of cash flows.
During the three months ended June 30, 2021, the Company identified an error in the accounting related to the exercise of Top-up Rights (as defined herein), which resulted in an overstatement of share capital and an understatement of gain on revaluation of derivative liabilities of $3,227 as of December 31, 2020, and overstatements of share capital and loss on revaluation of derivative liabilities and an understatement of retained earnings of $14,505, $11,278 and $3,227, respectively, as of March 31, 2021. The error was deemed immaterial, and thus the Company has recorded an out-of-period adjustment to the condensed consolidated balance sheet, the condensed consolidated statement of net income (loss) and comprehensive income (loss) and the condensed consolidated statement of changes in equity during the second quarter of 2021 to correct the error. The impact of the out-of-period adjustments are included within the adjustments to net loss in the Company’s condensed consolidated statements of cash flows.
(c)Basis of presentation
The interim condensed consolidated 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 six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other reporting period.
These condensed consolidated 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, 2020 (the “Annual Financial Statements”).
Certain prior year amounts have been reclassified to conform to the current year presentation of our condensed consolidated financial statements. These reclassifications had no effect on the reported results of operations and ending shareholders’ equity.
9

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
(d)Adoption of new accounting pronouncements
On January 1, 2021, the Company adopted ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU No. 2020-01”). ASU No. 2020-01 clarifies the interaction of accounting for the transition into and out of the equity method as well as measuring certain purchased options and forward contracts to acquire investments. The adoption of ASU No. 2020-01 did not have an impact on the Company’s interim condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU No. 2019-12 eliminates certain exceptions and simplifies the application of U.S. GAAP-related changes in enacted tax laws or rates and employee stock option plans. The adoption of ASU No. 2019-12 did not have an impact on the Company’s interim condensed consolidated financial statements.
(e)New accounting pronouncements not yet adopted
In August 2020, the FASB issued ASU 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 FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU No. 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU No. 2020-06 will have on its condensed consolidated financial statements.

2. Inventory, net
Inventory, net is comprised of the following items:
As of June 30, 2021As of December 31, 2020
Raw materials$7,471 $11,489 
Work-in-progress17,291 26,278 
Finished goods10,247 5,905 
Supplies and consumables596 330 
Total$35,605 $44,002 
Inventory is written down for any obsolescence such as slow-moving or non-marketable products, or when the net realizable value of inventory is less than the carrying value. During the three months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $11,961 and $3,062, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $11,961 and $11,024, respectively.

3. Investments
(a)Variable interest entities and investments in equity accounted investees, net
The Company holds variable interests in Cronos Growing Company Inc. (“Cronos GrowCo”), Natuera S.à.r.l (“Natuera”), MedMen Canada Inc. (“MedMen Canada”) and Cannasoul Lab Services Ltd. (“CLS”). The Company’s investments in Cronos GrowCo, Natuera and MedMen Canada are exposed to economic variability from each entity’s performance; however, the Company does not consolidate the entities as it does not have the power to direct the activities that most significantly impact each entity’s economic performance. Thus, Cronos Group is not considered the primary beneficiary of each entity. These investments are accounted for as equity method investments classified as “Investments in equity accounted investees, net” in the consolidated balance sheets.
Cronos GrowCo is a joint venture incorporated under the Canada Business Corporations Act (“CBCA”) on June 14, 2018 with the objective of cultivating and commercializing cannabis and cannabis products. Cronos Group holds variable interests in Cronos GrowCo through its ownership of 50% of Cronos GrowCo’s common shares and senior secured debt. Cronos GrowCo’s economic performance is driven by the quantity and strains of cannabis grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.
10

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
MedMen Canada is a joint venture incorporated under the CBCA on March 13, 2018, with the objective of the retail sale and marketing of cannabis products in Canada. MedMen Canada holds the exclusive license to the MedMen brand in Canada for a minimum term of 20 years. The Company holds variable interests in MedMen Canada through its ownership of 50% of MedMen Canada’s common shares and other subordinated debt. MedMen Canada’s economic performance is driven by the quantity and strains of cannabis sold. Subject to applicable law, the joint venture partners mutually determine the quantity and strains of cannabis to be sold in MedMen Canada’s retail stores, if and when stores are opened.
Natuera is a joint venture registered in Luxembourg with the objective of cultivating and commercializing hemp and cannabis products. The Company holds variable interests in Natuera through its ownership of 50% of Natuera’s common shares. Natuera’s economic performance is driven by the quantity and strains of cannabis grown, which is mutually determined by the joint venture partners.
CLS is a wholly owned subsidiary of Cannasoul Analytics Ltd., incorporated with the purpose of establishing a commercial cannabis analytical testing laboratory located on the premises of Cronos Israel (the “Cannasoul Collaboration”). Cronos Israel agreed to advance up to ILS 8,297 ($2,511) by a non-recourse loan (the “Cannasoul Collaboration Loan”) to CLS over a period of two years from April 1, 2020 for the capital and operating expenditures of the laboratory. The loan bears interest at 3.5% annually. Cronos Israel will receive 70% of the profits of the laboratory until such time as it has recovered 150% of the amounts advanced to CLS, after which time it will receive 50% of the laboratory profits. As a result, the Company is exposed to economic variability from CLS’s performance. The Company does not consolidate CLS as it does not have the power to direct the activities that most significantly impact the entity’s economic performance; thus, the Company is not considered the primary beneficiary of the entity. The carrying amount of the non-recourse loan is recorded under loans receivable and the full loan amount, ILS 8,297, represents the Company’s maximum potential exposure to losses through the Cannasoul Collaboration. See Note 4. Loans Receivable, net for further information regarding loans receivable.
A reconciliation of the carrying amount of the investments in associates and joint ventures is as follows:
Ownership interestAs of June 30, 2021As of December 31, 2020
Cronos Australia31%$ $ 
Cronos GrowCo50%19,022 19,235 
Natuera(i)
50%1,948  
$20,970 $19,235 
(i)On April 1, 2021, the Company and an affiliate of Agroidea (“AGI”), the other joint venture partner of Natuera, converted all advances made to Natuera under the master loan agreement entered into with Natuera on September 27, 2019 (the “Natuera Series A Loan”), plus accrued interest, into equity of Natuera. Total aggregate gross advances to Natuera under the Natuera Series A Loan were $15,500, of which the Company advanced 50% and AGI advanced the remaining 50%, or $7,750 each. As a result, the Company transferred the carrying value of the Natuera Series A Loan of approximately $2,013 plus accrued interest of $540, for a total investment value of $2,553, which approximates fair value, to investments in equity accounted investees in respect of Natuera. See Note 4. Loans Receivable, net.
The Company’s share of net losses from equity investments accounted for under the equity method of accounting:
For the three months ended June 30,For the six months ended June 30,
2021202020212020
Cronos Australia$ $(235)$ $(235)
Cronos GrowCo(459)(190)(758)(501)
Natuera(656)(369)(2,000)(1,230)
$(1,115)$(794)$(2,758)$(1,966)
11

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
The Company determined that the maximum exposure of loss on investments in non-consolidated investments is limited to the Company’s initial investment, advances and/or loans for each variable interest entity. The following is a summary of the maximum exposure to loss as of June 30, 2021 and December 31, 2020:
Ownership interestAs of June 30, 2021As of December 31, 2020
Cronos Australia31%$1,573 $1,530 
Cronos GrowCo50%21,723 21,125 
MedMen Canada50%494 467 
Natuera50%8,047 8,154 
Total$31,837 $31,276 
(b)Other investments
Other investments consist of investments in options of companies in the cannabis industry.
On June 14, 2021, the Company purchased an option to acquire 473,787 shares of Class A Common Stock of PharmaCann, Inc. (“PharmaCann”), a vertically integrated cannabis company in the United States, at an exercise price of $0.0001 per share, representing approximately 10.5% of PharmaCann’s issued and outstanding capital stock on a fully diluted basis, for an aggregate purchase price of approximately $110,392. The option exercise will be based upon various factors, including the status of U.S. federal cannabis legalization, as well as regulatory approvals, including in the states where PharmaCann operates that may be required upon exercise. This option is classified as an equity security without a readily determinable fair value. The Company has elected to measure the fair value of the 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. The option is reported as other investments on the condensed consolidated balance sheet for the period ended June 30, 2021. As of June 30, 2021 and December 31, 2020, the Company did not hold any additional other investments.

4. Loans Receivable, net
As of June 30, 2021As of December 31, 2020
Natuera Series A Loan(i)
$ $3,518 
GrowCo Facility(ii)
1,614 3,137 
Add: Accrued interest3,414 428 
Total current portion of loans receivable5,028 7,083 
GrowCo Facility(ii)
77,474 69,939 
Mucci Promissory Note(iii)
13,969 13,324 
Cannasoul Collaboration Loan(iv)