What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-05 · 419 added, 938 removed, 347 unchanged (80% of the section changed)

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019

Condensed Consolidated Statements of Changes in Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

Notes to Condensed Consolidated Financial Statements

Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three months ended M arch 3 1 , 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the three months ended March 3 1 , 202 1 and 20 20 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

Cronos Group Inc.

Condensed Consolidated Balance Sheets

As of September 30, 2020 and December 31, 2019

(In thousands of U.S.

dollars, except share amounts, unaudited)

September 30, 2020 December 31, 2019

dollars, except share amounts) Table of Contents

As of March 31, 2021 As of December 31, 2020

Assets (Unaudited) (Audited)

Current assets

1 unchanged sentence

Short-term investments 214,925 211,766

Accounts receivable (i)

Accounts receivable, net (i)

Other receivables 3,796 10,033

Current portion of loans receivable 7,781 4,664

Prepaids and other assets 10,532 9,395

Current portion of loans receivable, net (ii)

Prepaids and other current assets 15,053 11,161

Inventory, net 46,437 44,002

1 unchanged sentence

Total current assets 1,320,344 1,372,172

Investments in equity accounted investees 19,059 557

Advances to joint ventures 487 467

Loan receivable, net 76,148 44,967

Property, plant and equipment 171,404 159,948

Investments in equity accounted investees, net 19,221 19,235

Loan receivable, net (ii)

90,953 87,191

Property, plant and equipment, net 192,123 187,599

Right-of-use assets 8,538 9,776

Intangible assets 68,604 71,235

Intangible assets, net 70,085 69,720

Goodwill 179,531 179,522

8 unchanged sentences

Total liabilities 313,003 217,514

Commitments and contingencies (ii)

Commitments and contingencies (iii)

Shareholders’ equity

Share capital (iii,iv)

Share capital (iv, v)

584,912 569,260

1 unchanged sentence

Retained earnings 895,503 1,064,509

Accumulated other comprehensive income (loss) ( 7,820 ) 27,838

Accumulated other comprehensive income 58,144 42,999

Total equity attributable to shareholders of Cronos Group 1,570,649 1,711,364

2 unchanged sentences

Total liabilities and shareholders’ equity $ 1,881,282 $ 1,925,682

(i) Net of current expected credit loss allowance of $ 64 as of September 30, 2020 (December 31, 2019 – $ 136 )

(ii) Refer to Note 19 and Note 20 in the notes to condensed consolidated financial statements.

(iii) Authorized for issuance as of September 30, 2020:

unlimited (December 31, 2019 – unlimited).

(iv) Shares issued as of September 30, 2020:

355,733,914 (as of December 31, 2019:

(i) Net of current expected credit loss allowance on accounts receivable of $ 66 and $ 74 as of March 31, 2021 and December 31, 2020, respectively.

(ii) Net of current expected credit loss allowance on loans receivable of $ 3,020 and $ 2,439 as of March 31, 2021 and December 31, 2020, respectively.

(iii) Refer to Note 9.

Commitments and Contingencies in the notes to condensed consolidated financial statements.

(iv) Authorized for issuance as of March 31, 2021:

unlimited and December 31, 2020:

(v) Shares issued as of March 31, 2021:

371,656,590 and December 31, 2020:

360,253,332 .

2 unchanged sentences

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)

For the three and nine months ended September 30, 2020 and 2019

(In thousands of U.S dollars, except share and per share amounts, unaudited)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Three months ended March 31,

Net revenue, before excise taxes $ 14,654 $ 9,344

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Operating loss ( 43,459 ) ( 45,060 )

Other income (expense)

Interest income, net 3,781 8,939 15,266 20,455

Share of loss from investments in equity accounted investees ( 1,327 ) ( 565 ) ( 3,293 ) ( 1,504 )

Gain on revaluation of derivative liabilities 105,307 632,482 182,795 1,158,008

Financing and transaction costs ( 40 ) ( 6,083 ) ( 40 ) ( 31,684 )

Impairment loss on goodwill and intangible assets — — ( 40,000 ) —

Gain on disposal of other investments 3,974 — 4,743 16,242

Loss on reclassification of held-for-sale assets ( 919 ) — ( 919 ) —

Other income (loss)

Interest income, net 2,329 7,751

Gain (loss) on revaluation of derivative liabilities ( 116,874 ) 113,368

Impairment loss on property, plant and equipment and right-of-use assets ( 1,741 ) —

Other loss ( 1,859 ) ( 378 )

Total other income (loss) ( 118,145 ) 120,741

Income (loss) before income taxes 69,925 604,222 37,949 1,104,125

Income tax expense 988 58 988 58

Income from continuing operations $ 68,937 $ 604,164 $ 36,961 $ 1,104,067

Income (loss) from discontinued operations ( 473 ) ( 36 ) ( 519 ) ( 63 )

Income (loss) from continuing operations ( 161,604 ) 75,681

Loss from discontinued operations ( 21 ) —

Net income (loss) $ ( 161,625 ) $ 75,681

6 unchanged sentences

Total other comprehensive income (loss) 16,284 ( 113,692 )

Comprehensive income (loss) $ 94,631 $ 591,706 $ 788 $ 1,113,428

Comprehensive loss $ ( 145,341 ) $ ( 38,011 )

Comprehensive income (loss) attributable to:

2 unchanged sentences

$ ( 145,341 ) $ ( 38,011 )

Net income (loss) per share

Net income (loss) per share (i)

Basic - continuing operations $ ( 0.44 ) $ 0.22

Basic - discontinued operations 0.00 0.00 0.00 0.00

Diluted - continuing operations (i)

0.19 1.62 0.10 0.92

Diluted - discontinued operations (i)

Diluted - continuing operations (ii)

( 0.44 ) 0.20

2 unchanged sentences

363,012,740 374,330,168

(i) In computing diluted earnings per share, incremental common shares are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive.

See notes to condensed consolidated financial statements.

Cronos Group Inc.

Condensed Consolidated Statements of Changes in Equity (Deficit)

For the three months ended September 30, 2020 and 2019

(In thousands of U.S.

dollars, except share amounts, unaudited)

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders' equity (deficit)

Balance at July 1, 2020 349,886,402 $ 565,221 $ 27,046 $ 1,106,709 $ ( 33,970 ) $ ( 1,951 ) $ 1,663,055

Warrants exercised 5,407,890 619 ( 619 ) — — — —

Vesting of options — — 1,551 — — — 1,551

Options exercised 25,534 57 ( 53 ) — — — 4

Vesting of restricted share units, net of withholding taxes 414,088 — 4,217 — — — 4,217

Vesting of common shares issued in connection with the use of certain publicity rights in brand development — — 349 — — — 349

Top-up Rights exercised — 680 — — — — 680

Net income (loss) — — — 69,033 — ( 569 ) 68,464

Other comprehensive income — — — — 26,150 17 26,167

Balance at September 30, 2020 355,733,914 $ 566,577 $ 32,491 $ 1,175,742 $ ( 7,820 ) $ ( 2,503 ) $ 1,764,487

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders' equity (deficit)

Balance at July 1, 2019 336,144,543 $ 423,108 $ 14,779 $ 471,310 $ 11,973 $ ( 112 ) $ 921,058

Shares issued 5,086,586 56,109 — — — — 56,109

Share issuance costs — ( 4 ) — — — — ( 4 )

Vesting of options — — 2,891 — — — 2,891

Options exercised 18,619 38 ( 33 ) ( 25 ) — — ( 20 )

Vesting of restricted share units — — 186 — — — 186

Top-up Rights exercised 2,514,459 45,338 — — — — 45,338

Net income (loss) — — — 604,410 — ( 282 ) 604,128

Other comprehensive loss — — — — ( 12,414 ) ( 8 ) ( 12,422 )

Balance at September 30, 2019 343,764,207 $ 524,589 $ 17,823 $ 1,075,695 $ ( 441 ) $ ( 402 ) $ 1,617,264

(i) For the three months ended March 31, 2021 and 2020, the Company reported a basic and diluted loss from discontinued operations of $ 0.00 per share and $ 0.00 per share and $ 0.00 per share and $ 0.00 per share, respectively.

Earnings (Loss) per Share.

(ii) In computing diluted earnings per share, incremental common shares are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive.

Earnings (Loss) per Share.

See notes to condensed consolidated financial statements.

Cronos Group Inc.

Condensed Consolidated Statements of Changes in Equity (Deficit)

For the nine months ended September 30, 2020 and 2019

Condensed Consolidated Statements of Changes in Equity

(In thousands of U.S.

dollars, except share amounts, unaudited)

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity (deficit)

dollars, except share amounts, unaudited) Table of Contents

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity

Balance as of January 1, 2021 360,253,332 $ 569,260 $ 34,596 $ 1,064,509 $ 42,999 $ ( 3,196 ) $ 1,708,168

2 unchanged sentences

Options exercised 3,570,399 3,213 ( 3,203 ) — — — 10

Vesting of restricted share units, net of withholding taxes 414,088 — 5,699 — — — 5,699

Vesting of restricted share units — — 435 — — — 435

Withholding taxes paid on share-based awards — — ( 979 ) ( 7,694 ) — — ( 8,673 )

Vesting of common shares issued in connection with the use of certain publicity rights in brand development — — 338 — — — 338

1 unchanged sentence

Net income (loss) — — — ( 161,312 ) — ( 313 ) ( 161,625 )

Other comprehensive income (loss) — — — — ( 35,658 ) 4 ( 35,654 )

Balance at September 30, 2020 355,733,914 $ 566,577 $ 32,491 $ 1,175,742 $ ( 7,820 ) $ ( 2,503 ) $ 1,764,487

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity (deficit)

Foreign exchange gain (loss) on translation — — — — 15,145 1,139 16,284

Balance as of March 31, 2021 371,656,590 $ 584,912 $ 32,090 $ 895,503 $ 58,144 $ ( 2,370 ) $ 1,568,279

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity

Balance as of January 1, 2020 348,817,472 $ 561,165 $ 23,234 $ 1,137,646 $ 27,838 $ ( 853 ) $ 1,749,030

Shares issued 154,917,740 304,411 — — — — 304,411

Share issuance costs — ( 3,722 ) — — — — ( 3,722 )

Warrants exercised 7,390,961 2,034 ( 596 ) — — — 1,438

Vesting of options — — 1,730 — — — 1,730

Options exercised 170,087 356 ( 339 ) ( 861 ) — — ( 844 )

Vesting of restricted share units — — 706 — — — 706

Top-up Rights exercised 2,565,397 46,509 — — — — 46,509

Vesting of common shares issued in connection with the use of certain publicity rights in brand development — 2,000 ( 187 ) — — — 1,813

Net income (loss) — — — 76,040 — ( 359 ) 75,681

Other comprehensive income (loss) — — — — 9,429 ( 5 ) 9,424

Balance at September 30, 2019 343,764,207 $ 524,589 $ 17,823 $ 1,075,695 $ ( 441 ) $ ( 402 ) $ 1,617,264

Foreign exchange gain (loss) on translation — — — — ( 113,715 ) 23 ( 113,692 )

Balance as of March 31, 2020 348,817,472 $ 563,165 $ 25,483 $ 1,213,686 $ ( 85,877 ) $ ( 1,189 ) $ 1,715,268

See notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(In thousands of U.S.

dollars, except share amounts, unaudited)

Nine months ended September 30,

dollars, except share amounts, unaudited) Table of Contents

Three months ended March 31,

Operating activities

4 unchanged sentences

Depreciation and amortization 1,880 1,162

Share of loss from investments in equity accounted investees 3,293 1,504

Gain on revaluation of derivative liabilities ( 182,795 ) ( 1,158,008 )

Gain on disposal of other investments ( 4,743 ) ( 16,242 )

Impairment loss on goodwill and intangible assets 40,000 —

Loss (gain) on unrealized foreign exchange ( 3,020 ) 807

Provision for inventory and doubtful accounts 3,119 —

Non-cash sales and marketing 2,505 —

Loss on reclassification of held-for-sale assets 919 —

Other, net ( 298 ) ( 89 )

Net changes in non-cash working capital ( 29,123 ) ( 25,098 )

Gain (loss) on revaluation of derivative liabilities 116,874 ( 113,368 )

Impairment loss on property, plant and equipment and right-of-use assets 1,741 —

Expected credit losses on financial assets and non-cash charges to inventory 681 2,068

Other non-cash operating activities, net 1,749 643

Changes in non-cash working capital:

Accounts receivable, net 1,931 472

Other receivables 5,687 ( 1,235 )

Prepaids and other current assets ( 3,737 ) ( 2,439 )

Inventory, net ( 1,007 ) ( 14,319 )

Accounts payable and other liabilities ( 12,675 ) 2,039

Cash flows used in operating activities ( 46,002 ) ( 38,898 )

Investing activities

Purchase of short-term investments ( 125,562 ) ( 384,288 )

Proceeds from disposal of short-term investments 220,058 —

Investments in equity accounted investees — ( 1,658 )

Proceeds from sale of other investments 4,743 19,614

Advances to joint ventures — ( 15,951 )

Proceeds from (purchase of) short-term investments, net — 80,333

Purchase of property, plant and equipment ( 6,680 ) ( 6,411 )

Payment of accrued interest on construction loan payable — ( 89 )

Purchase of intangible assets ( 392 ) ( 1,105 )

Acquisition of Redwood — ( 227,224 )

Advances on loans receivable ( 2,645 ) ( 14,512 )

Proceeds from repayment of loans receivable — 238

Cash assumed on acquisition — 2,957

Other non-cash investing activities, net — 781

Cash flows provided by (used in) investing activities ( 9,717 ) 59,086

Financing activities

Advance from non-controlling interests ( 187 ) 183

Repayment of lease obligations ( 613 ) ( 448 )

Proceeds from Altria Investment — 1,809,556

Proceeds from exercise of Top-up Rights — 31,566

Proceeds from exercise of warrants and options 5 1,455

Withholding taxes paid on equity awards ( 2,148 ) ( 861 )

Share issuance costs — ( 3,722 )

Advance of loans payable — 48,715

Repayment of loans payable — ( 48,309 )

Transaction costs paid on construction loan payable — ( 15,971 )

Withholding taxes paid on share-based awards ( 8,673 ) —

Other non-cash investing activities, net 10 —

Cash flows provided by (used in) financing activities ( 9,276 ) ( 448 )

6 unchanged sentences

Interest received 1,157 7,758

Income taxes paid 624 —

See notes to condensed consolidated financial statements.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Background, Basis of Presentation and Accounting Policies

(a) Background

Cronos Group Inc.

(“Cronos Group” or the “Company”) was incorporated on August 21, 2012 under the Business Corporations Act (Ontario).

Effective July 9, 2020, the Company’s legal existence was continued to the Province of British Columbia and under the British Columbia Business Corporations Act.

(“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 building an iconic brand portfolio.

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;

2 unchanged sentences

hemp-derived consumer products brands, Lord Jones ™ , Happy Dance ™ and PEACE+ ™ .

Cronos Group has established four strategic joint ventures in Canada, Israel, and Colombia.

One of these strategic joint ventures, Cronos Israel (as defined herein) is consolidated for financial reporting purposes.

Cronos Group has established strategic joint ventures in Canada, Israel, and Colombia.

Cronos Israel (as defined herein) 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.

Summary of Significant Accounting Policies and Changes in Accounting Policy

(a) Basis of presentation

Investments in Equity Accounted Investees, net .

(b) Out-of-period adjustments

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 common stock 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 as of March 31, 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 non-cash working capital and withholding taxes paid on share-based awards lines in the Company’s condensed consolidated statements of cash flows.

The interim condensed consolidated financial statements of Cronos Group are unaudited.

5 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended September 30, 2020 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 consolidated financial statements and related notes included in its Annual Report on Form 10-K/A for the year ended December 31, 2019 (the “Annual Financial Statements”).

(b) Basis of consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company, and all entities in which the Company has a controlling voting interest and/or is the primary beneficiary of a variable interest as of and for the period presented.

The Company consolidates the financial results of the following entities, which the Company controls:

Subsidiaries Jurisdiction of incorporation Incorporation date Ownership interest (ii)

Cronos Israel G.S.

Cultivation Ltd.

Israel February 4, 2018 70 %

Cronos Israel G.S.

Manufacturing Ltd.

Israel September 4, 2018 90 %

Cronos Israel G.S.

Israel June 28, 2018 90 %

Cronos Israel G.S.

Pharmacy Ltd.

Israel February 15, 2018 90 %

(i) These Israeli entities are collectively referred to as “Cronos Israel.”

(ii) “Ownership interest” is defined as the proportionate share of net income to which the Company is entitled;

equity interest may differ from ownership interest.

In the condensed consolidated statements of net income (loss) and comprehensive income (loss), the net income (loss) and 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 (deficit) section of the condensed consolidated balance sheets and condensed consolidated statements of changes in equity (deficit).

All intercompany transactions and balances are eliminated upon consolidation.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Goodwill and indefinite life intangible assets are reviewed for impairment annually or more frequently when events or changes in circumstances indicate that fair value of the reporting unit has been reduced to less than its carrying value.

The Company performs an impairment test annually in the fourth quarter by comparing the fair value of the reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired.

An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The Company determined that it has two reporting units:

reporting unit and the Rest of World reporting unit.

During the second quarter of 2020, the Company concluded that the projected impact of the COVID-19 pandemic on its sales and revenues in the near term, together with the volatility in the market conditions during the period represented potential indicators of impairment for the U.S.

reporting unit.

Accordingly, the Company performed an interim impairment analysis during the second quarter of 2020.

No triggering events were identified during the three months ended September 30, 2020.

See Note 13 for more information regarding intangibles assets and goodwill.

(d) Definite life intangible assets

On July 1, 2020, the Company changed its method of amortization for the computer software asset class from an accelerated 50 % double declining method to the straight-line method of five years .

The Company determined that the change in estimate to the straight-line method is more appropriate based on the usage of the assets in the asset class.

The change in estimate is applied prospectively as of July 1, 2020.

Intangible assets with finite useful lives are recorded at cost less any accumulated amortization and accumulated impairment losses.

Intangible assets acquired through a business combination are measured at fair value at the acquisition date.

The Company capitalizes certain costs incurred in connection with its enterprise resource planning software, which include external direct costs of materials and services consumed in developing or obtaining internal-use software, payroll and payroll-related costs for employees who are directly associated with and who devote time to the development of the software for the function intended.

All other costs are expensed as incurred.

Intangible assets with finite useful lives are amortized over their estimated useful lives using the following methods and rates:

Software Straight-line 5 years

Enterprise resource planning (“ERP”) system Straight-line 5 years

Health Canada licenses Straight-line Useful life of corresponding facilities

Israeli codes (i)

Straight-line Useful life of corresponding facilities

(i) The preliminary licenses granted to Kibbutz Gan Shmuel (the Cronos Israel joint venture partner) by the Medical Cannabis Unit of the Israeli Ministry of Health in early 2017 (the “Israeli codes”) were transferred by non-controlling interests to Cronos Israel in exchange for equity interests in the Cronos Israel entities specified above.

Amortization begins when assets become available for use.

The estimated useful life, amortization method, and rate are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

(e) Assets held for sale and discontinued operations

In accordance with Accounting Standards Codification (“ASC”) 205-20 Presentation of Financial Statements:

Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meet the criteria in paragraph 205-20-45-10.

In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations.

At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.

During the three months ended September 30, 2020, Original B.C.

(“OGBC”) met the criteria for “held-for-sale”.

As a result, the Company has reflected amounts relating to OGBC as a disposal group classified as held-for-sale on the consolidated balance sheet and included as part of discontinued operations on the consolidated statement of net income (loss) and comprehensive income (loss) for all

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

periods presented in this Quarterly Report.

OGBC is no longer included in the segment reporting following the reclassification to discontinued operations.

The discontinued operations of OGBC are described further in Note 24.

The following table presents a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to total assets and liabilities of the disposal group classified as held-for-sale in the consolidated balance sheet of December 31, 2019:

As of December 31, 2019

As previously disclosed Held-for-sale adjustment Adjusted balance

Property, plant and equipment $ 161,809 $ ( 1,861 ) $ 159,948

Intangible assets 72,320 ( 1,085 ) 71,235

Goodwill 214,794 ( 302 ) 214,492

The following table presents a reconciliation of the major classes of line items constituting reported operating loss of discontinued operations to net loss of discontinued operations for the three and nine months ended September 30, 2019:

Three months ended September 30, 2019 Nine months ended September 30, 2019

As previously disclosed Held-for-sale adjustment Adjusted balance As previously disclosed Held-for-sale adjustment Adjusted balance

Operating expenses $ 27,597 $ ( 36 ) $ 27,561 $ 60,126 $ ( 76 ) $ 60,050

Other income (loss) 634,920 — 634,920 1,161,677 ( 13 ) 1,161,664

Net income (loss) from continuing operations 604,128 36 604,164 1,104,004 63 1,104,067

(f) Reclassifications

Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the three and nine months ended September 30, 2020.

These reclassifications have no effect on the results of reported operating loss, net income, shareholders’ equity or cash flows.

See Note 2(e) and Note 24.

Corporate expense reclassifications within segment disclosures:

In the three months ended September 30, 2020, the Company recorded a reclassification related to the allocation of operating expenses that was determined to be corporate expenses in nature to its segments, which decreased its Rest of World segment net loss by $ 4,626 and increased net loss attributable to corporate expenses by the same amount.

This reclassification had no effect on the Company's consolidated statement of net income (loss).

Had all these amounts been classified in this manner for the three-month periods ended March 31, 2020 and June 30, 2020, net income (loss) attributable to the Rest of World segment would have increased by $ 2,899 and $ 1,727 , respectively, and increased net loss attributable to corporate expenses by the same amounts.

The Company does not consider the effect on year-to-date 2020 results or the effect on comparable quarterly periods to be material, and there was no impact on 2019 full year results.

After evaluating the quantitative and qualitative aspects of these reclassifications, the Company concluded that its prior period financial statements were not materially misstated, and, therefore, no restatement was required .

Revision of previously issued financial statements:

During the three months ended September 30, 2020, the Company identified an error in the manner in which it calculated diluted earnings (loss) per share for the three months ended September 30, 2019.

The error had no impact on diluted earnings (loss) per share for the nine months ended September 30, 2019.

While the Company had excluded the anti-dilutive effect of the one warrant of the Company (the “Altria Warrant”), refer to Note 15(a) in the calculation of weighted average number of common shares for computation of diluted income (loss) per share, the gain on revaluation of derivative liabilities attributable to the Altria Warrant was incorrectly included in the calculation of diluted earnings (loss) per share, which resulted in an error in the previously reported amount for the three months ended September 30, 2019.

Because the average market price of the Company’s common stock remained above the strike price of the Altria Warrant for the nine months ended September 30, 2019, there was no impact on the reported amount for the nine months ended September 30, 2019, and there was no impact in prior or subsequent quarterly periods.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

After evaluating the quantitative and qualitative aspects of this error, the Company concluded that its prior period financial statements were not materially misstated, and, therefore, no restatement was required.

However, the Company is revising the previously presented September 30, 2019 diluted earnings (loss) per share and adjustment for gain (loss) on revaluation of derivative liabilities, as follows:

Three months ended September 30, 2019

As previously disclosed Adjusted

Diluted earnings (loss) per share $ 0.42 $ 1.62

Adjustment for gain (loss) on revaluation of derivative liabilities ( 488,041 ) ( 6,952 )

New Accounting Pronouncements

(a) Adoption of new accounting pronouncements

On January 1, 2020, the Company adopted ASU No.

2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820) (“ASU No.

2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements.

The adoption of this standard was applied prospectively and did not have a material impact on the Company’s condensed consolidated financial statements.

On January 1, 2020, the Company adopted ASU No.

2018-15, Intangibles – Goodwill and Other Internal-use-software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU No.

2018-15 amends current guidance to align the accounting for costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs associated with developing or obtaining internal-use software.

The guidance in ASU No.

2018-15 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

The adoption of this standard was applied prospectively and did not have a material impact on the Company’s condensed consolidated financial statements.

Operating results for the three months ended March 31, 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 shareholder’s equity.

(d) Adoption of new accounting pronouncements

On January 1, 2021, the Company adopted ASU No.

2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU No.

2017-04 eliminates step 2 from the goodwill impairment test and instead requires an entity to measure the impairment of goodwill assigned to a reporting unit if the carrying value of assets and liabilities assigned to the reporting unit, including goodwill, exceeds the reporting unit’s fair value.

The guidance in ASU No.

2017-04 is effective for annual and interim goodwill tests completed by the Company beginning on January 1, 2020.

The adoption of this standard was applied prospectively and the Company follows a one-step model for goodwill impairment.

(b) New accounting pronouncements not yet adopted

In January 2020, the Financial Accounting Standards Board (“FASB”) issued 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 clarifies the interaction of accounting for the transition into and out of the equity method.

The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments.

The guidance in ASU No.

2020-01 is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the effect of the adoption of ASU No.

2020-01, but anticipates that the adoption will not have a material impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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 forwards 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.

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GAAP-related changes in enacted tax laws or rates and employee stock option plans.

2019-12 is effective for annual and interim periods beginning after December 15, 2020.

Early adoption is permitted.

The Company is currently evaluating the effect of the adoption of ASU No.

2019-12, but anticipates that the adoption will not have a material impact on its condensed consolidated financial statements.

The adoption of ASU No.

2019-12 did not have an impact on the Company’s interim condensed consolidated financial statements.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(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 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.

2020-6 is effective for fiscal years beginning after December 15, 2021, and interim

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

periods within those fiscal years.

2020-06 is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S.

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 financial statements .

Revenues from Contracts with Customers

Cronos Group disaggregates net revenues based on product type.

For further discussion, see Note 18.

Receivables were $ 6,086 as of September 30, 2020 (December 31, 2019 – $ 4,638 ).

The Company recorded a current expected credit loss allowance on receivables of $ 64 as of September 30, 2020 (December 31, 2019 – $ 136 ).

The Company offers discounts to customers for prompt payment and calculates cash discounts as a percentage of the list price based on historical experience and agreed-upon payment terms.

The Company records an allowance for cash discounts, which is included as a contra-asset against receivables on the Company’s condensed consolidated balance sheets.

Revenue is measured net of returns.

As a result, the Company is required to estimate the amount of returns based on the historical data by customer and product type, adjusted for forward-looking information.

This is recorded as a provision against accounts receivable on the Company’s consolidated balance sheets.

The Company estimates sales returns based principally on historical volume and return rates, as a reduction to revenues.

The difference between actual sales and estimated sales returns is recorded in the period in which the actual amounts become known.

These differences, if any, have not had a material impact on the Company’s condensed consolidated financial statements.

Upon return, products can be extracted from dried cannabis, resold, or destroyed depending on the nature of the product.

The Company has assessed that the amount recoverable from returned products for the nine months ended September 30, 2020 is not material.

2020-06 will have on its interim condensed consolidated financial statements.

Inventory, net

Inventory is comprised of the following items:

September 30, 2020 December 31, 2019

Raw materials $ 10,214 $ 2,469

Work-in-progress – dry cannabis 25,799 11,538

Work-in-progress – cannabis extracts 13,436 17,975

Finished goods – dry cannabis 4,514 1,798

Finished goods – cannabis extracts 2,067 2,624

Inventory, net is comprised of the following items:

As of March 31, 2021 As of December 31, 2020

Raw materials, net $ 11,182 $ 11,489

Work-in-progress – dry cannabis, net 21,590 20,520

Work-in-progress – cannabis extracts, net 5,036 5,758

Finished goods – dry cannabis, net 5,677 4,894

Finished goods – cannabis extracts, net 2,141 1,011

Supplies and consumables 811 330

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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.

For the nine months ended September 30, 2020, the Company recorded write-downs related to inventory of $ 11,024 (for the three and nine months ended September 30, 2019 – $ 5,424 ).

No inventory write-downs were recorded during the three months ended September 30, 2020.

As of September 30, 2020, an inventory reserve of $ 1,403 was recorded (September 30, 2019 – $nil)

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Investments and Advances to Joint Ventures

Variable interest entities

For the three months ended March 31, 2021 and 2020, the Company recorded write-downs related to inventory of $ nil and $ 7,962 , respectively.

Investments in Equity Accounted Investees, net

The Company holds variable interests in Cronos Growing Company Inc.

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(“MedMen Canada”) and Cannasoul Lab Services Ltd.

Cronos GrowCo is a joint venture incorporated under the Canada Business Corporations Act (“CBCA”) on June 14, 2018 with the objective of building a cannabis production greenhouse, applying for cannabis licenses under the Cannabis Act (Canada), and growing, cultivating, extracting, producing and selling cannabis in accordance with such licenses.

Cronos Group holds variable interests in Cronos GrowCo through its ownership of 50 % of Cronos GrowCo’s common shares and senior secured debt in Cronos GrowCo.

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.

Natuera is a joint venture registered in Luxembourg with the objective of cultivating and commercializing hemp and cannabis products to serve the export market.

Cronos holds variable interests in Natuera through its ownership of 50 % of Natuera’s common shares and other debt in the entity.

Natuera’s economic performance is driven by the quantity and strains of cannabis to be grown.

The joint venture partners mutually determine the quantity and strains of cannabis grown.

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.

Cronos holds variable interests in MedMen Canada through its ownership of 50 % of MedMen Canada’s common shares and other subordinated debt in the entity.

Cronos 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.

Cronos holds variable interests in Natuera through its ownership of 50 % of Natuera’s common shares and other debt.

Natuera’s economic performance is driven by the quantity and strains of cannabis grown, which is mutually determined by the joint venture partners.

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 entities’ economic 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” in the consolidated balance sheets.

These investments are accounted for as equity method investments classified as “Investments in equity accounted investees, net” in the consolidated balance sheets.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

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 will advance ILS 8,297 (approximately $ 2,446 ) by a non-recourse loan to CLS over a period of two years from April 1, 2020 for the capital and operating expenditures of the laboratory.

The loan will bear interest at 3.5 % annually.

Cronos Israel agreed to advance up to ILS 8,297 ($ 2,483 ) by a non-recourse 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.

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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 10 for further information regarding loans receivable.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

(a) Net investment in equity accounted investees

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:

Carrying Amount

Ownership % September 30, 2020 December 31, 2019

Cronos Australia (i)

31 % $ — $ ( 346 )

Cronos GrowCo (ii)

50 % 19,059 1,501

MedMen Canada 50 % — —

Ownership interest As of March 31, 2021 As of December 31, 2020

Cronos Australia 31 % $ — $ —

Cronos GrowCo 50 % $ 19,221 $ 19,235

Natuera 50 % — —

$ 19,221 $ 19,235

(i) On October 25, 2019, Cronos Australia issued 40 million new shares in an initial public offering at an offering price of A$ 0.50 per share.

The Company’s ownership in Cronos Australia decreased from 50 % to 31 % on November 7, 2019 when Cronos Australia began trading on the Australian Securities Exchange.

This resulted in a reconsideration event, which required the reassessment of the Company’s variable interest entity conclusion.

Upon reconsideration, the Company determined that the entity was no longer a variable interest entity as of December 31, 2019 and is now reported under the equity method.

(ii) On September 25, 2020, the Company and 2645485 Ontario Inc.

(“Mucci”), the other joint venture partner of Cronos GrowCo, agreed to capitalize certain historical advances made by each shareholder to Cronos GrowCo.

Total aggregate gross advances to Cronos GrowCo, excluding any amounts advanced by the Company to Cronos GrowCo under the GrowCo Credit Facility, were C$ 49,300 ($ 37,932 ), of which the Company advanced 50 % and Mucci advanced the remaining 50 % for an amount of C$ 24,650 ($ 18,505 ) each.

As a result, the Company transferred the advances of C$ 24,650 ($ 18,505 ) to investments in equity accounted investees in respect of Cronos GrowCo..

The Company’s share of net earnings (losses) from equity investments accounted for under the equity method of accounting:

For the three months ended September 30, For the nine months ended September 30,

2020 2019 2020 2019

Whistler Medicinal Marijuana Company (“Whistler”)

For the three months ended March 31,

Cronos GrowCo $ ( 299 ) $ ( 311 )

( 1,344 ) ( 861 )

Cronos Australia (i)

$ ( 1,643 ) $ ( 1,172 )

(i) The Company’s share of accumulated net losses in excess of its equity investment in Natuera has been applied as a loss allowance on the loan receivable.

Loans Receivable, net.

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 March 31, 2021 and December 31, 2020:

Ownership interest As of March 31, 2021 As of December 31, 2020

Cronos Australia 31 % $ 1,553 $ 1,530

Cronos GrowCo 50 % 21,433 21,125

MedMen Canada 50 % 487 467

( 869 ) ( 286 ) ( 2,099 ) ( 590 )

$ ( 1,327 ) $ ( 565 ) $ ( 3,293 ) $ ( 1,504 )

(i) The Company’s share of accumulated net losses in excess of its equity investment and advances in Cronos Australia was $ 512 for the nine months ended September 30, 2020 (September 30, 2019 – $ nil ).

(ii) The Company’s share of accumulated net losses in excess of its equity investment in Natuera has been applied as a loss allowance on the loan receivable.

See Note 6(b) and Note 10.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

(b) Advances to joint venture

MedMen Canada (i)

Cronos GrowCo (ii)

Cronos Australia (iii)

Natuera Total

As of January 1, 2020 $ 471 $ 18,966 $ — $ — $ 19,437

Transfer to investments in equity accounted investees (ii)

— ( 18,505 ) — — ( 18,505 )

Interest on advances — — 35 — 35

Advances to joint ventures recovered from (applied to) carrying amount of investments — — ( 36 ) — ( 36 )

Effect from foreign exchange ( 10 ) ( 461 ) 1 — ( 470 )

As of September 30, 2020 $ 461 $ — $ — $ — $ 461

MedMen Canada (i)

Cronos GrowCo (ii)

Cronos Australia (iii)

Natuera Total

As of January 1, 2019 $ 1,244 $ 2,970 $ 475 $ — $ 4,689

Advances (repayment) ( 852 ) 15,494 274 219 15,135

Advances to joint ventures recovered from (applied to) carrying amount of investments 35 22 ( 779 ) ( 224 ) ( 946 )

Effect from foreign exchange 44 480 30 5 559

As of December 31, 2019 $ 471 $ 18,966 $ — $ — $ 19,437

(i) Advance is unsecured, non-interest bearing, and there are no terms of repayment.

(ii) On September 25, 2020, the Company and Mucci agreed to capitalize historical advances made by each shareholder to Cronos GrowCo.

The Company capitalized C$ 24,650 ($ 18,505 ) through a transfer of aggregate gross advances from advances to joint ventures to investments in equity accounted investees in respect of Cronos GrowCo.

Refer to Note 6(a)(ii).

(iii) A$ 1,500 is governed by an unsecured loan bearing interest at a rate of 12 % per annum, calculated and compounded daily, in arrears, on the amounts advanced from the date of each advance.

The loan is due on January 1, 2022.

If the loan is overdue, the outstanding amount bears interest at an additional 2 % per annum.

Other Investments

Other investments consist of investments in common shares and warrants of several companies in the cannabis industry.

As of September 30, 2020, the Company did not hold any other investments.

The gain and losses on sale of other investments are classified as fair value through net income.

During the three months ended September 30, 2020, in connection with the achievement of the final milestone related to the Whistler Transaction (defined below), the Company received 402,561 shares of Aurora Cannabis Inc.

The Company subsequently sold all 402,561 of the Aurora shares during the three months ended September 30, 2020 for gross proceeds of approximately $ 3,974 (C$ 5,354 ) recorded as a gain on disposal of other investments in other income (expense).

During the nine months ended September 30, 2020, in connection with the achievement of certain milestones related to the Whistler Transaction, the Company received 980,662 shares of Aurora.

The Company sold all 980,662 of the Aurora shares during the nine months ended September 30, 2020 for gross proceeds of approximately $ 4,743 (C$ 6,404 ) recorded as a gain on disposal of other investments in other income (expense).

On March 4, 2019, the Company sold all 2,563 shares of Whistler, representing approximately 19.0 % of Whistler’s issued and outstanding common shares, to Aurora, in connection with Aurora's acquisition of Whistler (the “Whistler Transaction”).

As a result of the closing of the Whistler Transaction, the Company received 2,524,341 Aurora common shares.

During the nine months ended September 30, 2019, the Company sold all 2,524,341 common shares of Aurora, for gross proceeds of $ 19,259 recorded as a gain on disposal of other investments in other income (expense).

No transactions occurred during the three months ended September 30, 2019.

During the nine months ended September 30, 2019, the Company sold all remaining 11,062 common shares of Canopy Growth Corporation (“Canopy”) for net proceeds of $ 355 recorded as an other item in the other income (expense).

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Accumulated Other Comprehensive Income (Loss)

The following are continuity schedules of accumulated other comprehensive income (loss):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Net unrealized gain (loss) on revaluation and disposal of other investments

Balance beginning of period $ 5 $ 5 $ 5 $ 5

Balance as of September 30 $ 5 $ 5 $ 5 $ 5

Net foreign exchange gain (loss) on translation

Balance beginning of period $ ( 33,975 ) $ 11,968 $ 27,833 $ ( 9,875 )

Net unrealized (loss) gain 26,150 ( 12,414 ) ( 35,658 ) 9,429

Balance as of September 30 ( 7,825 ) ( 446 ) ( 7,825 ) ( 446 )

Total accumulated other comprehensive income (loss) $ ( 7,820 ) $ ( 441 ) $ ( 7,820 ) $ ( 441 )

The Company has entered into leases primarily for land-use rights, office premises and equipment used in the production of cannabis and related products.

The Company’s leases have terms which range from three years to six years , excluding land use rights, which generally extend to 15 years.

These leases often include options to extend the term of the lease for up to 10 years.

When it is reasonably certain that an option will be exercised, the impact of such option is included in the lease term for purposes of determining total future lease payments.

Operating leases greater than one year are included in right-of-use assets and operating lease liabilities.

Finance leases are included in property, plant and equipment on the Company’s consolidated balance sheet.

During the nine months ended September 30, 2020, the Company recognized two new operating leases for office premises which are included within the lease obligation and right-of-use lines in the condensed consolidated balance sheet.

In June 2020, the Company terminated an operating lease for an office premise.

The lease was removed from the lease obligation and right-of-use balances in the condensed consolidated balance sheet.

The Company’s finance leases were not material as of September 30, 2020 and December 31, 2019.

Natuera 50 % 8,160 8,154

Total $ 31,633 $ 31,276

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Loans Receivable, net

September 30, 2020 December 31, 2019

Current portion

As of March 31, 2021 As of December 31, 2020

Natuera Series A loan (i)

$ 2,013 $ 3,518

GrowCo Credit Facility (ii)

GrowCo Facility (ii)

Accrued interest 3,908 428

Total current portion of loans receivable 6,717 7,083

Long term portion

GrowCo Credit Facility (ii)

GrowCo Facility (ii)

76,043 69,939

4 unchanged sentences

Total long-term portion of loans receivable 90,953 87,191

Total loans receivable $ 83,929 $ 49,631

(i) On July 24, 2020, the Company and its joint venture partner entered into an amendment to the Series A Loan with Natuera to increase the principal amount of the Series A Loan by $ 6,350 , to an aggregate principal amount of $ 15,500 , of which the Company has committed to fund 50 % and its joint venture partner has committed to fund the remaining 50 %.

Outstanding principal amounts continue to bear interest at a fixed annual rate of 5.67 % and the maturity date of the Series A Loan has been extended to March 1, 2021.

For the nine months ended September 30, 2020, a loss allowance of $ 2,552 was recorded against the Natuera Series A Loan related to the Company’s share of net loss from Natuera in excess of the carrying value of the equity method investment.

Refer to Note 6.

(ii) On August 23, 2019, the Company entered into a credit agreement with Cronos GrowCo in respect of a C$ 100,000 ($ 75,140 ) secured non-revolving term loan credit facility (the “GrowCo Credit Facility”).

The GrowCo Credit Facility will mature on March 31, 2031 and will bear interest at varying rates based on the Canadian prime rate as announced by the Bank of Montreal.

Interest began to accrue as of the closing date of the GrowCo Credit Facility and is payable on a quarterly basis until maturity, except that any interest accrued prior to March 31, 2021 will be payable no later than December 31, 2021.

Repayment of principal will be made on a quarterly basis commencing on March 31, 2021.

The credit facility is secured by substantially all present and after acquired property of Cronos GrowCo and its subsidiaries.

Mucci, the other 50 % shareholder of Cronos GrowCo, has provided a limited recourse guarantee in favor of Cronos GrowCo, secured by Mucci’s shares in Cronos GrowCo.

As of September 30, 2020, Cronos GrowCo had drawn C$ 85,150 ($ 63,981 ) from the Cronos GrowCo Credit Facility.

For the nine months ended September 30, 2020, a current expected credit loss allowance of $ 1,317 was recorded against the GrowCo Facility.

(iii) On June 28, 2019, the Company entered into a promissory note receivable agreement (the “Mucci Promissory Note”) for C$ 16,350 ($ 12,285 ) with Mucci.

The outstanding principal amount of the Mucci Promissory Note bears interest at 3.95 % annually and is due within 90 days of demand.

The Company does not intend to demand the loan within 12 months.

Interest accrued under the Mucci Promissory Note until July 1, 2021 is payable by way of capitalization on the principal amount and interest thereafter must be paid in cash on a quarterly basis.

The Mucci Promissory Note is secured by a general security agreement covering all the assets of Mucci.

For the nine months ended September 30, 2020, a current expected credit loss allowance of $ 258 has been recorded against the Mucci loan.

(iv) On April 1, 2020, Cronos Israel entered into the Cannasoul Collaboration.

Cronos Israel has agreed to advance approximately ILS 8,297 (approximately $ 2,495 ) by a non-recourse loan to CLS over a period of two years for the capital and operating expenditures of the laboratory.

The outstanding principal on the loan bears interest at 3.5 % annually and will be repaid through the profits generated from the Cannasoul Collaboration.

As of September 30, 2020, CLS has received ILS 4,149 (approximately $ 1,198 ).

For the nine months ended September 30, 2020, a current expected credit loss allowance of $ 25 has been recorded against the Cannasoul Collaboration loan.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Total loans receivable, net $ 97,670 $ 94,274

(i) As of March 31, 2021 and December 31, 2020, a current expected credit loss allowance of $ 1,151 and $ 685 , respectively, was recorded against the master loan agreement entered into with Natuera on September 27, 2019 (the “Series A loan”).

As of March 31, 2021 and December 31, 2020, a loss allowance of $ 4,582 and $ 3,024 , respectively, was recorded against the Series A Loan related to the Company’s share of net loss from Natuera in excess of the carrying value of the equity method investment.

Refer to Note 3 and Note 14.

(ii) As of March 31, 2021 and December 31, 2020, Cronos GrowCo had drawn C$ 98,500 ($ 78,405 ) and C$ 95,150 ($ 74,626 ), respectively, from a credit agreement it entered into with the Company in August 2019 (the “GrowCo Facility”).

As of March 31, 2021 and December 31, 2020, a current expected credit loss allowance of $ 1,569 and $ 1,470 , respectively, was recorded against the GrowCo Facility.

(iii) As of March 31, 2021 and December 31, 2020, a current expected credit loss allowance of $ 274 and $ 259 , respectively, was recorded against the Mucci promissory note.

(iv) As of March 31, 2021 and December 31, 2020 CLS has received ILS 4,149 (approximately $ 1,241 ) from a non-recourse loan.

As of March 31, 2021 and December 31, 2020 a current expected credit loss allowance of $ 26 and $ 25 , respectively, was recorded against the Cannasoul collaboration loan.

Derivative Liabilities

1 unchanged sentence

(“Altria”), pursuant to a subscription agreement dated December 7, 2018.

As of the closing date of the Altria Investment, the Altria Investment consisted of 149,831,154 common shares of the Company as of the closing date, issued to a wholly owned subsidiary of Altria and the Altria Warrant, issued to a wholly owned subsidiary of Altria.

As of the closing date of the Altria Investment, the Altria Investment consisted of 149,831,154 common shares of the Company and one warrant of the Company (the “Altria Warrant”), all of which were issued to a wholly owned subsidiary of Altria.

As of the closing date of the Altria Investment, Altria beneficially held an approximately 45 % ownership interest in the Company (calculated on a non-diluted basis).

2 unchanged sentences

The summaries below are qualified entirely by the terms and conditions fully set out in the Investor Rights Agreement and the Altria Warrant, as applicable.

The Altria Warrant entitles the holder, subject to certain qualifications and limitations, to subscribe for and purchase up to an additional 10 % of the common shares of Cronos (approximately 79.1 million common shares at September 30, 2020) at a per share exercise price of C$ 19.00 which expires on March 8, 2023.

The Altria Warrant entitles the holder, subject to certain qualifications and limitations, to subscribe for and purchase up to an additional 10 % of the common shares of Cronos (approximately 82.6 million common shares at March 31, 2021) at a per share exercise price of C$ 19.00 , which expires on March 8, 2023.

The Company granted to Altria, subject to certain qualifications and limitations, upon the occurrence of certain issuances of common shares of the Company executed by the Company (including issuances pursuant to the R&D partnership with Ginkgo Bioworks Inc.

(“Ginkgo”) (the “Ginkgo Strategic Partnership”), which is discussed in Note 19(a)(i) below, the right to purchase up to such number of common shares of the Company in order to maintain their ownership percentage of issued and outstanding common shares of the Company immediately preceding any issuance of shares by the Company (“Pre-emptive Rights”), at the same price per common share of the Company at which the common shares are sold in the relevant issuance.

(“Ginkgo”) (the “Ginkgo Strategic Partnership”)), the right to purchase up to such number of common shares of the Company in order to maintain their ownership percentage of issued and outstanding common shares of the Company immediately preceding any issuance of shares by the Company (“Pre-emptive Rights”), at the same price per common share of the Company at which the common shares are sold in the relevant issuance.

The price per common share of the Company to be paid by Altria pursuant to its exercise of its Pre-emptive Rights related to the Ginkgo Strategic Partnership will be C$ 16.25 per common share.

These rights may not be exercised if Altria’s ownership percentage of the issued and outstanding shares of the Company falls below 20 %.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

In addition to (and without duplication of) the Pre-emptive Rights, the Company granted to Altria, subject to certain qualifications and limitations, the right to subscribe for common shares of the Company issuable in connection with the exercise, conversion or exchange of convertible securities of the Company issued prior to March 8, 2019 or thereafter (excluding any convertible securities of the Company owned by Altria or any of its subsidiaries), a share incentive plan of the Company, the exercise of any right granted by the Company pro rata to all shareholders of the Company to purchase additional common shares and/or securities of the Company, bona fide bank debt, equipment financing or non-equity interim financing transactions that contemplate an equity component or bona fide acquisitions (including acquisitions of assets or rights under a license or otherwise), mergers or similar business combination transactions or joint ventures involving the Company in order to maintain their ownership percentage of issued and outstanding common shares of the Company immediately preceding any such transactions (“Top-up Rights”).

2 unchanged sentences

The Altria Warrant, Pre-emptive Rights, and fixed price Top-up Rights have been classified as derivative liabilities.

related transaction costs of $ 22,355 were expensed as financing costs during the year ended December 31, 2019.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

A reconciliation of the carrying amounts of the derivative liability is presented below:

As of July 1, 2020 (Gain) / loss on revaluation Exercise of rights Effect from foreign exchange As of September 30, 2020

A reconciliation of the carrying amounts of the derivative liability for the three months ended March 31, 2021 and 2020:

As of January 1, 2021 Revaluation (gain)/loss Exercise of rights Foreign exchange effect As of March 31, 2021

(a) Altria Warrant $ 138,858 $ 92,964 $ — $ 2,834 $ 234,656

2 unchanged sentences

$ 163,410 $ 116,874 $ ( 11,278 ) $ 3,294 $ 272,300

As of January 1, 2020 (Gain) / loss on revaluation Exercise of rights Effect from foreign exchange As of September 30, 2020

As of January 1, 2020 Revaluation (gain)/loss Exercise of rights Foreign exchange effect As of March 31, 2020

(a) Altria Warrant $ 234,428 $ ( 88,104 ) $ — $ ( 13,958 ) $ 132,366

5 unchanged sentences

Share price is one of the significant observable inputs used in the fair value measurement of each of the Company’s derivative instruments.

During the nine months ended September 30, 2020, the Company’s share price decreased from December 31, 2019 resulting in a gain on revaluation of $ 182,795 .

The fair values of the derivative liabilities were determined using the Black-Scholes pricing model as of September 30, 2020 and December 31, 2019 applying the following inputs:

As of September 30, 2020 As of December 31, 2019

During the three months ended March 31, 2021, the Company’s share price increased from December 31, 2020 resulting in a loss on revaluation of $ 116,874 .

During the three months ended March 31, 2020, the Company’s share price decreased from December 31, 2019 resulting in a gain on revaluation of $ 113,368 .

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

The fair values of the derivative liabilities were determined using the Black-Scholes pricing model as of March 31, 2021 and December 31, 2020 applying the following inputs:

As of March 31, 2021 As of December 31, 2020

Altria Warrant Pre-emptive Rights Top-up Rights Altria Warrant Pre-emptive Rights Top-up Rights

Share price at valuation date (per share in C$) $ 6.69 $ 6.69 $ 6.69 $ 9.97 $ 9.97 $ 9.97

Subscription price (per share in C$) $ 19.00 $ 16.25 $ 16.25 $ 19.00 $ 16.25 $ 16.25

Weighted average risk-free interest rate (i)

Share price at valuation date (i)

$ 11.88 $ 11.88 $ 11.88 $ 8.84 $ 8.84 $ 8.84

Weighted average expected life (in years) (ii)

Subscription price (i)

$ 19.00 $ 16.25 $ 16.25 $ 19.00 $ 16.25 $ 16.25

Expected annualized volatility (iii)

Weighted average risk-free interest rate (ii)

0.22 % 0.17 % 0.14 % 0.21 % 0.17 % 0.13 %

Weighted average expected life (iii)

1.93 1.25 0.72 2.18 1.50 0.98

Expected annualized volatility (iv)

82 % 82 % 82 % 81 % 81 % 81 %

Expected dividend yield — % — % — % — % — % — %

(i) The risk-free interest rate was based on Bank of Canada government treasury bills and bonds with a remaining term equal to the expected life of the derivative liabilities.

The risk-free interest rate uses a range of approximately 0.12 % to 0.36 % as of September 30, 2020 (December 31, 2019 – 1.66 % to 1.73 %) for the Pre-emptive Rights and Top-up Rights.

(ii) The expected life in years represents the period of time that the derivative liabilities are expected to be outstanding.

(i) Per share in C$.

(ii) The risk-free interest rate was based on Bank of Canada government treasury bills and bonds with a remaining term equal to the expected life of the derivative liabilities.

As of March 31, 2021 and December 31, 2020, the risk-free interest rate uses a range of approximately 0.09 % to 0.86 % and 0.10 % to 0.39 %, respectively, for the Pre-emptive Rights and Top-up Rights.

(iii) The expected life represents the period of time, in years, that the derivative liabilities are expected to be outstanding.

The expected life of the Pre-emptive Rights and Top-up Rights is determined based on the expected term of the underlying options, warrants, and shares, to which the Pre-emptive Rights and Top-up Rights are linked.

The expected life uses a range of approximately 0.25 year to 5.25 years as of September 30, 2020 (December 31, 2019 – 0.25 year to 6 years).

(iii) Volatility was based on an equally weighted blended historical volatility level of the underlying equity securities of the Company and peer companies.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

As of March 31, 2021 and December 31, 2020, the expected life uses a range of approximately 0.25 year to 4.50 years and 0.50 year to 5.00 years, respectively.

(iv) Volatility was based on an equally weighted blended historical and implied volatility level of the underlying equity securities of the Company as of March 31, 2021.

As of December 31, 2020, volatility was based on the blended historical volatility levels of the Company and peer companies.

The following table quantifies each of the significant inputs described above and provides a sensitivity analysis of the impact on the reported values of the derivative liabilities.

The sensitivity analysis for each significant input is performed by assuming a 10% decrease in the input while other significant inputs remain constant at management’s best estimate as of the respective dates.

A decrease in the inputs noted below would cause a decrease in derivative liability and as of September 30, 2020, there would be an equal but opposite impact on net income (loss).

Decrease as of September 30, 2020 Decrease as of December 31, 2019

Altria Warrant Pre-emptive Rights Top-up Rights Altria Warrant Pre-emptive Rights Top-up Rights

While a decrease in the inputs noted below would cause a decrease in the carrying value of the derivative liability, there would also be an equal but opposite impact on net income (loss) as of March 31, 2021.

Increase as of March 31, 2021

Altria Warrant Pre-emptive Rights Top-up Rights

Share price $ 42,479 $ 4,133 $ 4,376

2 unchanged sentences

These inputs are classified in Level 3 on the fair value hierarchy and are subject to volatility and several factors outside of the Company’s control, which could significantly affect the fair value of these derivative liabilities in future periods.

Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:

September 30, 2020 December 31, 2019

Land $ 3,037 $ 3,071

Building 148,112 149,690

Furniture and equipment 17,161 10,079

Computer equipment 669 526

Leasehold improvements 3,400 1,758

Construction in progress 14,267 3,569

accumulated depreciation ( 15,242 ) ( 8,745 )

Total $ 171,404 $ 159,948

Depreciation expense included in cost of sales relating to manufacturing equipment and production facilities for the nine months ended September 30, 2020 was $ 1,935 (September 30, 2019 – $ 1,628 ).

Depreciation expense included in operating expenses related to general office space and equipment for the nine months ended September 30, 2020 was $ 1,682 (September 30, 2019 – $ 577 ).

The remaining depreciation is included in inventory.

For the nine months ended September 30, 2020, there was no capitalized interest included in construction in progress (September 30, 2019 – $ 367 ).

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Intangible Assets and Goodwill

The ongoing restrictions and closures experienced by retail stores in the U.S.

as a result of the COVID-19 pandemic have negatively impacted sales and demand which has resulted in slower than expected revenue growth in the U.S.

reporting unit.

The Company expects the revenue growth and operating results in the U.S.

reporting unit to continue to be negatively impacted as the decrease in customer demand and retail closures are expected to continue as a result of the pandemic.

The Company performed an interim impairment test as of June 30, 2020 on the U.S.

reporting unit, which holds the Redwood goodwill, as well as the indefinite-lived intangible asset (Lord Jones™ brand) to determine whether the carrying amount of the reporting unit and intangible asset exceeded their respective fair values.

The Company reassessed its estimates and forecasts during the second quarter of 2020 to determine the fair values of the reporting unit and intangible asset.

The fair values were determined using a discounted cash flow method on the reporting unit and the relief-from-royalty method on the Lord Jones™ brand.

Based on these valuations, the carrying value exceeded the fair value resulting in an impairment on both the reporting unit as well as the Lord Jones™ brand.

The Company does not believe the declines in fair values are temporary.

The Company recorded $ 35,000 of impairment charges on the U.S.

reporting unit and $ 5,000 on the Lord Jones™ brand for the nine months ended September 30, 2020.

No impairment loss was recorded for either goodwill or intangible assets during the three months ended September 30, 2020 or during the three and nine months ended September 30, 2019.

(a) Intangible assets

Intangible assets are comprised of the following items:

Weighted average amortization period (in years) As of September 30, 2020

Cost Accumulated amortization Impairment charges Net

Software 5 $ 575 $ ( 234 ) $ — $ 341

5 2,851 ( 130 ) — 2,721

Health Canada licenses 17 7,211 ( 1,102 ) 6,109

Lord Jones ™ brand

N/A 64,000 — ( 5,000 ) 59,000

Trademarks N/A 146 — — 146

Israeli codes (i)

25 300 ( 13 ) — 287

$ 75,083 $ ( 1,479 ) $ ( 5,000 ) $ 68,604

(i) The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities specified above.

Weighted average amortization period (in years) As of December 31, 2019

Cost Accumulated amortization Net

Software 5 $ 541 $ ( 202 ) $ 339

Health Canada licenses 17 7,387 ( 821 ) 6,566

Lord Jones ™ brand

N/A 64,000 — 64,000

Trademarks N/A 36 — 36

Israeli codes (i)

25 298 ( 4 ) 294

$ 72,262 $ ( 1,027 ) $ 71,235

(i) The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities specified above.

The aggregate amortization for the nine months ended September 30, 2020 was $ 570 (September 30, 2019 – $ 480 ).

There were no disposals of software during the three months ended September 30, 2020 and 2019.

The amortization expense for the next five years on intangible assets in use is estimated to be as follows:

2021 – $ 573 ;

2022 – $ 562 ;

2024 – $ 524 ;

2025 – $ 509 .

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

As of December 31, 2019 Additions Impairment charges Effect of foreign exchange As of September 30, 2020

Peace Naturals 1,078 — — ( 33 ) 1,045

Redwood 213,414 — ( 35,000 ) — 178,414

$ 214,492 $ — $ ( 35,000 ) $ ( 33 ) $ 179,459

General and Administrative Expenses

General and administrative expense are comprised of the following items:

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Salaries and wages $ 4,611 $ 7,789 $ 18,412 $ 13,137

Professional and consulting 4,295 4,694 13,144 11,948

Office and general 4,449 1,643 11,064 7,166

Review costs related to restatement of 2019 interim financial statements (i)

958 — 8,824 —

Other 4,547 2,076 9,604 2,736

Total $ 18,860 $ 16,202 $ 61,048 $ 34,987

(i) These financial statement review costs include costs related to the restatement of the Company’s 2019 interim financial statements, costs related to the Company’s responses to requests for information from various regulatory authorities relating to such restatement and legal costs defending shareholder class action complaints brought against the Company as a result of the restatement.

Share-based Payments

The following is a summary of the changes in warrants during the nine months ended September 30, 2020 and 2019:

Weighted average exercise price (C$) Number of warrants

Balance as of January 1, 2020 $ 0.26 18,066,662

Exercise of warrants 0.27 ( 5,626,410 )

Balance as of September 30, 2020 $ 0.25 12,440,252

Balance as of January 1, 2019 $ 0.26 25,457,623

Exercise of warrants 0.26 ( 7,390,961 )

Balance as of September 30, 2019 $ 0.26 18,066,662

As of September 30, 2020, the Company had outstanding warrants as follows.

For a description of the Altria Warrant, see Note 11.

Grant date Expiry date Weighted average exercise price (C$) Number of warrants

October 8 – 28, 2015 October 8 – 28, 2020 $ 0.31 452,903

May 13 – 27, 2016 May 13 – 27, 2021 0.25 11,987,349

As of September 30, 2020 $ 0.25 12,440,252

(a) Share-based award plans

The Company has granted stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees and non-employee directors under the Stock Option Plan dated May 26, 2015 (the “2015 Stock Option Plan”), the 2018 Stock Option Plan dated June 28, 2018 (the “2018 Stock Option Plan” and, together with the 2015 Stock Option Plan, the “Prior Option Plans”), the 2020 Omnibus Equity Incentive Plan dated March 29, 2020 (the “2020 Omnibus Plan”) and the DSU plan dated August 10, 2019 (the “DSU Plan”).

The Company can no longer make grants under the Prior Option Plans.

The following table summarizes the total stock-based compensation expense associated with the Company’s stock options and RSUs for the three months ended March 31, 2021 and 2020:

For the three months ended March 31,

Vesting of stock options $ 2,064 $ 1,730

Vesting of RSUs 435 706

Total share-based payments $ 2,499 $ 2,436

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(b) Stock options

(i) Stock option plans

The Company adopted an amended and restated stock option plan dated May 26, 2015 (the “2015 Stock Option Plan”) which was approved by shareholders of the Company at the annual general meeting of shareholders held on June 28, 2017.

The 2015 Stock Option Plan allowed the Company’s Board of Directors (the “Board”) to award options to purchase shares to directors, officers, key employees and service providers of the Company.

As of June 28, 2018, no further awards will be granted under the 2015 Stock Option Plan;

however, shares may be purchased via option exercise by the holders of any outstanding options previously issued under the 2015 Stock Option Plan.

As of September 30, 2020, options to purchase 10,443,447 Company common shares were outstanding under the 2015 Stock Option Plan.

On June 28, 2018, the shareholders of the Company approved a stock option plan (the “2018 Stock Option Plan”), which replaced the 2015 Stock Option Plan.

As of June 25, 2020, the date on which the 2020 Omnibus Plan (as defined below) was approved by the shareholders of the Company, no further awards will be granted under the 2018 Stock Option Plan;

however, shares may be purchased via option exercise by the holders of any outstanding options previously issued under the 2018 Stock Option Plan.

As of September 30, 2020, options to purchase 1,641,759 Company common shares were outstanding under the 2018 Stock Option Plan.

On March 29, 2020, the Board adopted a new omnibus equity incentive plan (the “2020 Omnibus Plan”), which was approved by the shareholders of the Company at the annual and special meeting of shareholders held on June 25, 2020.

The 2020 Omnibus Plan provides for grants of stock options, share appreciation rights, restricted shares, restricted share units (“RSUs”) and other share-based or cash-based awards, which are subject to terms as determined by the Compensation Committee of the Board, and awards may be granted to eligible employees, non-employee directors and consultants.

As of September 30, 2020, options to purchase 2,000,000 Company common shares were outstanding under the 2020 Omnibus Plan.

For the three and nine months ended September 30, 2020, the total stock-based compensation expense associated with the stock options was $ 1,551 and $ 5,051 respectively (September 30, 2019 – $ 3,531 and $ 7,949 , respectively).

(ii) Summary of changes

The following is a summary of the changes during the nine months ended September 30, 2020 and 2019:

Weighted average exercise price (C$) Number of options Weighted average remaining contractual term (years)

Vesting conditions for grants of options are determined by the Compensation Committee of the Company’s Board of Directors.

The typical vesting for stock option grants made under the 2020 Omnibus Plan is annual vesting over three to five years with a maximum term of ten years .

The typical vesting for stock option grants made under the Prior Option Plans is quarterly vesting over three to five years with a maximum term of seven years .

The Prior Option Plans did not and the 2020 Omnibus Plan does not authorize grants of options with an exercise price below fair market value.

The following is a summary of the changes during the three months ended March 31, 2021 and 2020:

Weighted average exercise price (C$) (i)

Number of options Weighted average remaining contractual term (years)

Balance as of January 1, 2021 $ 5.40 13,755,148 2.30

Issuance of options (i)

6.96 2,000,000

Exercise of options 2.13 ( 5,230,550 )

Cancellation, forfeiture and expiry of options 14.71 ( 25,771 )

Balance as of September 30, 2020 $ 5.34 14,085,206 2.54

Exercisable as of September 30, 2020 $ 3.56 9,381,601 1.57

Balance as of March 31, 2021 $ 7.38 8,498,827 2.82

Exercisable as of March 31, 2021 $ 5.75 4,896,820 1.46

(i) The weighted average exercise price reflects the conversion of foreign currency-denominated stock options translated into C$ using the average foreign exchange rate as of the date of issuance.

Weighted average exercise price (C$) Number of options Weighted average remaining contractual term (years)

Balance as of January 1, 2020 $ 4.84 14,149,502 2.56

Issuance of options 20.08 1,534,162

Exercise of options 3.72 ( 254,199 )

Cancellation, forfeiture and expiry of options 17.17 ( 42,889 )

Balance as of September 30, 2019 $ 4.83 14,177,875 2.81

Exercisable as of September 30, 2019 $ 2.66 7,442,390 2.47

(i) On September 9, 2020, options to purchase 2,000,000 Company common shares were granted to Kurt Schmidt in connection with his appointment as President and Chief Executive Officer of the Company under the 2020 Omnibus Plan.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

(iii) Fair value of options issued

The fair value of the options issued was determined using the Black-Scholes option pricing model, using the following inputs:

For the nine months ended September 30,

Share price at grant date (per share) C$ 6.96

C$ 15.34 - C$ 24.75

Exercise price (per option) C$ 6.96

C$ 15.34 - C$ 24.75

Risk-free interest rate 0.43 %

1.39 % - 1.62 %

Expected life of options (in years) (i)

Expected annualized volatility 91 % 89 %

Expected dividend yield — % — %

Weighted average Black-Scholes value at grant date (per option) C$ 4.84

C$ 10.6 - C$ 15.91

Forfeiture rate — % — %

(i) The expected life of the awards represents the period of time stock options are expected to be outstanding and is estimated considering vesting terms and employees’ and non-employees’ historical exercise and post-vesting employment termination behavior.

Volatility was based on an equally weighted blended historical volatility level of the underlying equity securities of the Company and peer companies.

The risk-free interest rate was based on the Bank of Canada government bonds with a remaining term equal to the expected life of the options at the grant date.

During the nine months ended September 30, 2020, the weighted average fair value per share at grant date of options was C$ 4.84 (nine months ended September 30, 2019 - C$ 13.32 ).

Balance as of March 31, 2020 $ 4.80 14,106,613 2.06

Exercisable as of March 31, 2020 $ 3.11 9,783,544 1.66

The following table summarizes stock options outstanding for the 2020 Omnibus Plan, the 2018 Stock Option Plan, and the 2015 Stock Option Plan:

Stock options outstanding as of

March 31, 2021 December 31, 2020

2020 Omnibus Plan 2,000,000 2,000,000

2018 Stock Option Plan 1,591,944 1,627,715

2015 Stock Option Plan 4,906,883 10,127,433

Total stock options outstanding 8,498,827 13,755,148

For the three and nine months ended September 30, 2020, the Company reco rded $ 6,365 and $ 7,847 , respectively (for three and nine months ended September 30, 2019 – $ 186 ) in share-based compensation expense related to the issuance of RSUs during such periods.

The following is a summary of the changes in RSUs from January 1, 2020 to September 30, 2020:

Number of RSUs Weighted average grant date fair value (C$)

The following is a summary of the changes in RSUs for the three months ended March 31, 2021 and 2020:

Number of RSUs (i)

Weighted average grant date fair value (C$) (ii)

Balance as of January 1, 2021 948,357 $ 7.66

Vested and issued (ii)

265,904 13.27

Cancellation and forfeitures ( 9,497 ) 7.52

Balance as of September 30, 2020 805,377 $ 7.32

(i) On September 9, 2020, the Company issued 450,000 RSUs to Mr.

Schmidt in connection with his appointment as President and Chief Executive Officer of the Company under the 2020 Omnibus Plan.

The RSUs vest on September 10, 2023, subject to Mr.

Schmidt’s continued employment through such date.

The vesting of such RSUs is not subject to the achievement of any performance criteria.

In August 2020 and May 2020, the Company issued an aggregate of 85,597 and 279,277 RSUs, respectively, to certain employees under the 2020 Omnibus Plan.

Each RSU entitles the holder thereof to receive upon vesting one common share of the Company.

The RSUs vest annually in equal installments over a three-year period following the grant date, subject to such holder’s continued employment through each vesting date.

Balance as of March 31, 2021 1,214,261 $ 8.89

(i) RSUs issued in the period vest annually in equal installments over a three-year period following the grant date, subject to such holder’s continued employment through each vesting date.

The vesting of such RSUs is not subject to the achievement of any performance criteria.

(ii) On July 20, 2020, the Company entered into separation agreements with Robert Rosenheck and another Redwood Wellness, LLC (“Redwood”) employee pursuant to which they resigned from their employment with Redwood.

In connection with such separation agreements, 732,972 outstanding and unvested RSUs were accelerated and vested during the three months ended September 30, 2020.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

The following is a summary of the changes in RSUs from January 1, 2019 to September 30, 2019:

(ii) The weighted average exercise price reflects the conversion of foreign currency-denominated RSUs translated into C$ using the foreign exchange rate as of the date of issuance.

Number of RSUs Weighted average grant date fair value (C$)

Balance as of January 1, 2019 — $ —

732,972 15.34

Balance as of September 30, 2019 732,972 $ 15.34

(i) During the three months ended September 30, 2019, the Company issued an aggregate of 732,972 RSUs to Mr.

Rosenheck and another Redwood employee in connection with the acquisition of four Redwood Holding Group, LLC subsidiaries.

These RSUs were accelerated and vested during the three months ended September 30, 2020.

Balance as of January 1, 2020 and March 31, 2020 732,972 $ 15.34

All RSUs outstanding as of March 31, 2021 and December 31, 2020 were granted under the 2020 Omnibus Plan.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(d) Deferred share units

On August 10, 2019, the Company established a cash-settled deferred share unit plan (“DSU Plan”) pursuant to which its non-executive directors receive deferred share units (“DSUs”).

The DSU Plan is designed to promote a greater alignment of long-term interests between non-executive directors and shareholders.

The number of DSUs granted under the DSU Plan (including fractional DSUs) is determined by dividing the amount of remuneration payable by the closing price as reported by the TSX on the trading day immediately preceding the day of grant.

DSUs are payable at the time a non-executive director ceases to hold the office of director for any reason and are settled by a lump-sum cash payment, in accordance with the terms of the DSU Plan, based on the fair value of the DSUs at such time.

The fair value of the cash payout is determined by multiplying the number of DSUs vested at the payout date by the closing price as reported by the TSX on the trading day immediately preceding the payout date.

The fair value of the cash payout is determined at each reporting date based on the fair value of the Company’s common shares at the reporting date and is recorded within other liabilities.

The following is a summary of the changes in DSUs from January 1, 2020 to September 30, 2020:

The following is a summary of the changes in DSUs during the three months ended March 31, 2021 and 2020:

Number of DSUs Financial liability

Balance as of January 1, 2021 83,293 $ 577

Granting and vesting of DSUs 58,380 338

Liabilities settled ( 8,484 ) ( 46 )

Loss (gain) on revaluation — 211

Balance as of September 30, 2020 83,293 $ 419

The following is a summary of the changes in DSUs from January 1, 2019 to September 30, 2019:

Balance as of March 31, 2021 83,293 $ 788

Number of DSUs Financial liability

Balance as of January 1, 2020 33,937 $ 255

Granting and vesting of DSUs 33,937 454

Loss (gain) on revaluation — ( 50 )

Balance as of September 30, 2019 33,937 $ 307

Balance as of March 31, 2020 33,937 $ 205

All DSUs outstanding as of March 31, 2021 and December 31, 2020 were granted under the DSU Plan.

The following is a summary of the changes in warrants during the three months ended March 31, 2021 and 2020:

Weighted average exercise price (C$) Number of warrants

Balance as of January 1, 2021 $ 0.25 7,987,349

Exercise of warrants 0.25 ( 7,977,349 )

Balance as of March 31, 2021 (i)

$ 0.25 10,000

(i) The outstanding warrants were granted in the second quarter of 2016 and expire on May 27, 2021.

Weighted average exercise price (C$) Number of warrants

Balance as of January 1, 2020 and March 31, 2020 $ 0.26 18,066,662

Derivative Liabilities for further description on the Altria Warrant.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Earnings (Loss) per Share

Basic and diluted earnings (loss) per share from continuing operations are calculated using the following numerators and denominators:

For the three months ended September 30, For the nine months ended September 30,

2020 2019 2020 2019

For the three months ended March 31,

Basic earnings per share computation

10 unchanged sentences

Dilutive effect of stock options — 7,962,252

Dilutive effect of RSUs 126,753 732,972 215,934 732,972

Dilutive effect of Altria Warrant — — — 1,833,853

Dilutive effect of Top-up Rights – exercised and exercisable fixed price — 1,349,720 — 1,976,828

Weighted average number of common shares for computation of diluted income (loss) per share 363,012,740 374,330,168

1 unchanged sentence

$ ( 0.44 ) $ 0.20

(i) Basic and dilutive earnings per share from discontinued operations were $ 0.00 for the three and nine months ended September 30, 2020 and 2019.

(i) Basic and dilutive earnings per share from discontinued operations were $ 0.00 and $ 0.00 for the three months ended March 31, 2021 and 2020, respectively.

(ii) In computing diluted earnings per share, incremental common shares are not considered in periods in which a net loss is reported as the inclusion of the common share equivalents would be anti-dilutive.

The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive or because conditions for contingently issuable shares were not satisfied at the end of the reporting periods.

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Three months ended March 31,

Ginkgo equity milestones 14,674,904 14,674,904

4 unchanged sentences

Stock options 8,522,086 2,240,456

Warrants 5,563,176 —

Restricted share units 572,970 732,972

Total anti-dilutive securities 136,945,023 134,222,870

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Related Party Transactions and Balances

On March 8, 2019, in connection with the Altria Investment, Altria, through certain of its wholly owned subsidiaries, purchased a 45 % equity interest in the Company.

The Company incurred the following expenses for consulting services from Altria Pinnacle LLC, a subsidiary of Altria (“Altria Pinnacle”):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Altria Pinnacle – expense

$ 160 $ 1,772 $ 1,113 $ 1,772

Total $ 160 $ 1,772 $ 1,113 $ 1,772

The following is a summary of amounts payable related to the consulting services with Altria Pinnacle:

September 30, 2020 December 31, 2019

Altria Pinnacle – payable

Total $ 5 $ 1,152

During 2019, the Company purchased machinery and equipment amounting to $ 1,258 from a subsidiary of Altria.

Refer to Note 19 for additional information.

Refer to Note 11 for further information on the derivative liabilities related to the Altria Investment.

There were no other material related party transactions for the three and nine months ended September 30, 2020 and 2019.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Segment Information

6 unchanged sentences

The results of each segment are regularly reviewed by the CODMs to assess the performance of the segment and make decisions regarding the allocation of resources.

The CODMs review operating income (loss) as the measure of segment profit or loss to evaluate performance of and allocate resources for its reportable segments.

Operating income (loss) is defined as net revenue less cost of sales and operating expenses.

Corporate expenses are expenses that relate to the consolidated business and not to an individual operating segment.

The Company’s method of allocating corporate costs is refined periodically.

Reporting by operating segments follows the same accounting policies as those used to prepare the consolidated financial statements.

The operating segments are presented in accordance with the same criteria used for internal reporting prepared for the CODMs.

Intersegment transactions are recorded at the stated values as agreed to by the segments.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Segment data was as follows for the three months ended September 30, 2020:

Three months ended September 30, 2020

The CODMs review adjusted earnings (loss) before interest, tax, depreciation and amortization (“Adjusted EBITDA”) as the measure of segment profit or loss to evaluate performance of and allocate resources for its reportable segments.

Adjusted EBITDA is defined as earnings before interest, tax, depreciation, non-cash items and items that do not reflect management’s assessment of on-going business performance.

Segment data was as follows for the three months ended March 31, 2021 and 2020:

Three months ended March 31, 2021

United States Rest of World Corporate expenses Total

Consolidated statements of net income (loss) and comprehensive income (loss)

Cannabis flower $ — $ 9,434 $ — $ 9,434

6 unchanged sentences

Interest income, net $ 3 $ 2,326 $ — $ 2,329

Impairment loss on goodwill and intangible assets $ — $ — $ — $ —

Depreciation and amortization $ 71 $ 664 $ — $ 735

Income tax expense 143 845 — 988

Income (loss) from discontinued operations — ( 473 ) — ( 473 )

Net income (loss) ( 14,004 ) 93,447 ( 10,979 ) 68,464

Segment data was as follows for the nine months ended September 30, 2020:

Nine months ended September 30, 2020

Impairment loss on property, plant and equipment and right-of-use assets 1,741 — — 1,741

Loss from discontinued operations — 21 — 21

Adjusted EBITDA ( 9,510 ) ( 22,184 ) ( 5,381 ) ( 37,075 )

Total assets 252,449 394,442 1,234,391 1,881,282

Investments in equity accounted investees — 19,221 — 19,221

Goodwill 178,416 1,115 — 179,531

Purchase of property, plant and equipment, net 80 6,600 — 6,680

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Three months ended March 31, 2020

United States Rest of World Corporate expenses Total

Consolidated statements of net income (loss) and comprehensive income (loss)

Cannabis flower $ — $ 2,741 $ — $ 2,741

6 unchanged sentences

Interest income, net $ 7 $ 7,744 $ — $ 7,751

Impairment loss on goodwill and intangible assets $ 40,000 $ — $ — $ 40,000

Depreciation and amortization 33 654 — 687

Income tax expense 143 845 — 988

Income (loss) from discontinued operations — ( 519 ) — ( 519 )

Adjusted EBITDA $ ( 5,782 ) $ ( 29,010 ) $ ( 2,263 ) $ ( 37,055 )

Adjusted EBITDA is reconciled to net income (loss) as follows for the three months ended March 31, 2021 and 2020:

(In thousands of U.S.

dollars) Three months ended March 31, 2021

US ROW Corporate

Expenses Total

Net income (loss) $ ( 12,092 ) $ ( 142,147 ) $ ( 7,386 ) $ ( 161,625 )

Consolidated balance sheets

Total assets $ 251,835 $ 369,621 $ 1,297,473 $ 1,918,929

Investments in equity accounted investees — 19,059 — 19,059

Goodwill 178,414 1,045 — 179,459

Purchase of property, plant and equipment, net 294 21,040 — 21,334

Interest income, net ( 3 ) ( 2,326 ) — ( 2,329 )

Impairment loss on property, plant and equipment and right-of-use assets 1,741 — — 1,741

Loss on revaluation of derivative liabilities — 116,874 — 116,874

Other loss — 1,859 — 1,859

Loss from discontinued operations — 21 — 21

Share-based payments 745 1,754 — 2,499

Review costs related to restatement of 2019 interim financial statements — — 2,005 2,005

Adjusted EBIT ( 9,609 ) ( 23,965 ) ( 5,381 ) ( 38,955 )

Depreciation and amortization 99 1,781 — 1,880

Adjusted EBITDA $ ( 9,510 ) $ ( 22,184 ) $ ( 5,381 ) $ ( 37,075 )

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Sources of net revenue for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

dollars) Three months ended March 31, 2020

US ROW Corporate

Expenses Total

Net income (loss) $ ( 6,516 ) $ 88,867 $ ( 6,670 ) $ 75,681

Interest income, net ( 7 ) ( 7,744 ) — ( 7,751 )

Gain on revaluation of derivative liabilities — ( 113,368 ) — ( 113,368 )

Other loss — 378 — 378

Share-based payments 706 1,730 — 2,436

Review costs related to restatement of 2019 interim financial statements — — 4,407 4,407

Adjusted EBIT ( 5,817 ) ( 30,137 ) ( 2,263 ) ( 38,217 )

Depreciation and amortization 35 1,127 — 1,162

Adjusted EBITDA $ ( 5,782 ) $ ( 29,010 ) $ ( 2,263 ) $ ( 37,055 )

Sources of net revenue for the three months ended March 31, 2021 and 2020 were as follows:

Three months ended March 31,

Cannabis flower $ 9,434 $ 2,741

Cannabis extracts 3,144 5,576

Other 257 19 490 117

Net revenue $ 12,611 $ 8,432

Net revenue attributed to a geographic region based on the location of the customer were as follows:

Three months ended September 31, Nine months ended September 31,

2020 2019 2020 2019

Three months ended March 31,

Canada $ 7,582 $ 6,091

Israel 2,518 —

United States 2,441 2,176

2 unchanged sentences

Property, plant and equipment assets were physically located in the following geographic regions:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

Canada $ 167,363 $ 162,163

Israel 23,480 23,143

United States 1,280 2,293

Other countries 22,810 18,685

Total $ 192,123 $ 187,599

2 unchanged sentences

United States

During the three and nine months ended September 30, 2020 and 2019, the U.S.

During the three months ended March 31, 2021 and 2020, the U.S.

segment had no major customers.

As of September 30, 2020, $ 41 (December 31, 2019 – $ 12 ) in expected credit losses has been recognized on receivables from contracts with customers.

Rest of World

During the three months ended September 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $ 9,790 from four major customers, Société Québécoise du Cannabis, Alberta Gaming, Liquor and Cannabis Commission, Ontario Cannabis Retail Corporation, and BC Liquor Distribution Branch accounting for 26 %, 22 %, 20 % and 14 %, respectively, of the Company’s total revenue (three months ended September 30, 2019 – $ 3,351 from two major customers, together accounting for 58 % of the Company’s total revenues).

During the nine months ended September 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $ 22,142 from the same four major customers as mentioned above, accounting for 18 %, 23 %, 16 %, and 17 %, respectively, of the Company’s total revenue (nine months ended September 30, 2019 – $ 7,101 from two major customers, together accounting for 43 % of the Company’s total revenues).

As of September 30, 2020, $ 23 (December 31, 2019 – $ 124 ) in expected credit losses has been recognized on receivables from contracts with customers.

During the three months ended September 30, 2020, the Company classified OGBC as held-for-sale.

The loss from discontinued operations from the Rest of World segment for the three and nine months ended September 30, 2020 was $ 473 and $ 519 , respectively.

The loss from discontinued operations from the Rest of World segment for the three and nine months ended September 30, 2019 was $ 36 and $ 63 , respectively.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

(a) R&D commitments

On September 4, 2018, the Company announced an R&D partnership with Ginkgo to develop scalable and consistent production of eight target cannabinoids, including THC, CBD and a variety of other lesser known and rarer cannabinoids.

As part of this partnership, Cronos Group has agreed to issue up to 14,674,903 common shares of the Company (aggregate value of approximately $ 100,000 as of July 17, 2018 assuming all milestones are met) (collectively the “Ginkgo Equity Milestones”) in tranches and $ 22,000 in cash subject to Ginkgo’s achievement of certain milestones and to fund certain R&D expenses, including foundry access fees.

(ii) Technion.

On October 15, 2018, the Company entered into a sponsored research agreement with the Technion Research and Development Foundation of the Technion – Israel Institute of Technology (“Technion”).

Research will be focused on the use of cannabinoids and their role in regulating skin health and skin disorders.

The Company has committed to $ 1,784 of research funding over a period of three years .

An additional $ 4,900 of cash payments will be paid to Technion upon the achievement of certain milestones.

(b) Altria consulting services

On February 18, 2019, the Company entered into an agreement with a wholly owned subsidiary of Altria (which agreement was subsequently amended and restated to substitute Altria Pinnacle as a party thereto), to receive strategic advisory and project management services from Altria Pinnacle (the “Services Agreement”).

Pursuant to the Services Agreement, the Company will pay Altria Pinnacle a monthly fee equal to the product of 105 % and the sum of:

(i) all costs directly associated with the services incurred during the monthly period, and (ii) a reasonable and appropriate allocation of indirect costs incurred during the monthly period.

The Company will also pay all third-party direct charges incurred during the monthly period in connection with the services, including any reasonable and documented costs, fees and expenses associated with obtaining any consent, license or permit.

The Services Agreement will remain in effect until terminated by either party.

On December 23, 2019, the Company issued 856,017 restricted common shares to Kristen Bell, an accredited investor, in a private placement (“Private Placement – 2019”) in reliance on Section 4(a)(2) of the Securities Act of 1933 in connection with the use of certain publicity rights in the brand development of Happy Dance™.

One-third of such common shares vested on January 31, 2020 with the remaining shares vesting in two equal installments on June 23, 2021, and December 23, 2022.

The issuance did not involve a public offering and was made without general solicitation or advertising.

The total fair value of the consideration paid for the issuance of such common shares was approximately $ 6,000 .

The fair value of the shares was calculated using the ten -day volume weighted average price per share of the Company’s common shares on Nasdaq.

Additional restricted common shares are issued when certain performance milestones are achieved:

(i) First Performance Issuance:

if, prior to December 23, 2022, the product line generates at least $ 50,000 in net revenue, additional common shares with an aggregate value of $ 1,000 will be issued.

(ii) Second Performance Issuance:

if, prior to December 23, 2022, the product line generates at least $ 100,000 in net revenue, additional common shares with an aggregate value of $ 1,000 will be issued (together with the First Performance Issuance noted above).

The number of common shares that would be issued upon achieving the foregoing milestones will be determined based on the ten -day volume weighted average price per share of the Company’s common shares on Nasdaq as of the trading day immediately prior to the date of filing with the SEC of the Company’s audited year-end financial statements for the first fiscal year during which such milestones are achieved.

As of March 31, 2021 and December 31, 2020, the Company had $ 36 and $ 65 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Contingencies

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Rest of World

During the three months ended March 31, 2021, the Rest of World segment earned a total net revenue before excise taxes of $ 8,963 from four major customers, Société Québécoise du Cannabis, Novolog Group, Alberta Gaming, Liquor and Cannabis Commission and Ontario Cannabis Retail Corporation, accounting for 18 %, 17 %, 13 % and 13 %, respectively, of the Company’s total net revenue before excise taxes.

During the three months ended March 31, 2020, the Rest of World segment earned a total net revenue before excise taxes of $ 4,121 from 3 major customers, together accounting for 49 % of the Company’s total net revenues before excise taxes.

As of March 31, 2021 and December 31, 2020, the Company had $ 30 and $ 9 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

The loss from discontinued operations from the Rest of World segment for the three months ended March 31, 2021 and 2020 was $ 21 and $ nil , respectively.

Commitments and Contingencies

(a) Commitments

There has been no material change in the information regarding commitments as disclosed in the Company’s Annual Financial Statements.

(b) Contingencies

The Company is subject to various legal proceedings in the ordinary course of its business and in connection with its marketing, distribution and sale of its products.

Many of these legal proceedings are in the early stages of litigation and seek damages that are unspecified or not quantified.

Although the outcome of these matters cannot be predicted with certainty, the Company does not believe these legal proceedings, individually or in the aggregate, will have a material adverse effect on the its financial condition but could be material to the its results of operations for a quarterly period depending, in part, on its results for that quarter.

(a) Class action complaints relating to restatement

Although the outcome of these matters cannot be predicted with certainty, the Company does not believe these legal proceedings, individually or in the aggregate, will have a material adverse effect on its financial condition but could be material to its results of operations for a quarterly period depending, in part, on its results for that quarter.

(i) Class action complaints relating to restatement

On March 11 and 12, 2020, two alleged shareholders of the Company separately filed two putative class action complaints in the U.S.

District Court for the Eastern District of New York against the Company and its former Chief Executive Officer (now Executive Chairman) and Chief Financial Officer alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and Section 20(a) of the Exchange Act against the individual defendants.

The complaints generally allege that certain of the Company’s prior public statements about revenues and internal controls were incorrect based on the Company’s March 2, 2020, disclosure that the Audit Committee of its Board of Directors was conducting a review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel.

The complaints do not quantify a damage request.

Defendants have not yet responded to the complaints.

On June 3, 2020, an alleged shareholder filed a Statement of Claim in the Ontario Superior Court of Justice in Toronto, Ontario, Canada, seeking, among other things, an order certifying the action as a class action on behalf of a putative class of shareholders and damages of an unspecified amount.

The Statement of Claim names the Company, its former Chief Executive Officer (now Executive Chairman), Chief Financial Officer, former Chief Financial Officer and Chief Commercial Officer, and current and former members of its Board of Directors as defendants and alleges breaches of the Ontario Securities Act, oppression under the Ontario Business Corporations Act and common law misrepresentation.

The Statement of Claim generally alleges that certain of the Company’s prior public statements about revenues and internal controls were misrepresentations based on the Company’s March 2, 2020 disclosure that the Audit Committee of its Board of Directors was conducting a review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel, and the Company’s subsequent restatement.

The Statement of Claim does not quantify its damage request.

The Company and the other named defendants have not yet filed a response to the Statement of Claim.

(b) Regulatory reviews relating to restatement

District Court for the Eastern District of New York against the Company and its former Chief Executive Officer (now Executive Chairman) and Chief Financial Officer.

The court has consolidated the cases, and the consolidated amended complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and Section 20(a) of the Exchange Act against the individual defendants.

The consolidated amended complaint generally alleges that certain of the Company’s prior public statements about revenues and internal controls were incorrect based on the Company’s disclosures relating to the Audit Committee of the Board of Directors’ review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel.

The consolidated amended complaint does not quantify a damage request.

Defendants moved to dismiss on February 8, 2021.

On June 3, 2020, an alleged shareholder filed a Statement of Claim, as amended on August 12, 2020, in the Ontario Superior Court of Justice in Toronto, Ontario, Canada, seeking, among other things, an order certifying the action as a class action on behalf of a putative class of shareholders and damages of an unspecified amount.

The Amended Statement of Claim names the Company, its former Chief Executive Officer (now Executive Chairman), Chief Financial Officer, former Chief Financial Officer and Chief Commercial Officer, and current and former members of the Board of Directors as defendants and alleges breaches of the Ontario Securities Act, oppression under the Ontario Business Corporations Act and common law misrepresentation.

The Amended Statement of Claim generally alleges that certain of the Company’s prior public statements about revenues and internal controls were misrepresentations based on the Company’s March 2, 2020 disclosure that the Audit Committee of the Board of Directors was conducting a review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel, and the Company’s subsequent restatement.

The Amended Statement of Claim does not quantify a damage request.

(ii) Regulatory reviews relating to restatement

The Company has been responding to requests for information from various regulatory authorities relating to its previously disclosed restatement of its financial statements for the first three quarters of 2019.

1 unchanged sentence

The Company cannot predict the outcome of any such regulatory review or investigation and it is possible that additional investigations or one or more formal proceedings may be commenced against the Company and its current and former officers and directors in connection with these regulatory reviews and investigations.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(iii) Litigation relating to marketing, distribution and sale of products

On June 16, 2020, an alleged consumer filed a Statement of Claim on behalf of a class in the Court of Queen’s Bench of Alberta in Alberta, Canada, against the Company and other Canadian cannabis manufacturers and/or distributors.

The Statement of Claim alleges claims related to the defendants’ advertised content of cannabinoids in cannabis products for medicinal use on or after June 16, 2010 and cannabis products for adult use on or after October 17, 2018.

The Statement of Claim seeks a total of C$ 500 million for breach of contract, compensatory damages, and unjust enrichment or such other amount as may be proven in trial and C$ 5 million in punitive damages against each defendant, including the Company.

The Statement of Claim also seeks interest and costs associated with the action.

The Company has not responded to the Statement of the Claim.

On December 4, 2020, a Third Amended Statement of Claim was filed, which added a second alleged consumer.

The Third Amended Statement of Claim alleges claims related to the defendants’ advertised content of cannabinoids in cannabis products for medicinal use on or after June 16, 2010 and cannabis products for adult use on or after October 17, 2018.

The Third Amended Statement of Claim seeks a total of C$ 500 million for breach of contract, compensatory damages, and unjust enrichment or such other amount as may be proven in trial and C$ 5 million in punitive damages against each defendant, including the Company.

The Third Amended Statement of Claim also seeks interest and costs associated with the action.

The Company has not responded to the Third Amended Statement of Claim.

A number of claims, including purported class actions, have been brought in the U.S.

2 unchanged sentences

On April 8, 2020, a putative class action complaint was filed in the U.S.

District Court for the Central District of California against Redwood, alleging violations of California’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, and breaches of the California Commercial Code for breach of express warranties and implied warranty of merchantability with respect to Redwood’s marketing and sale of U.S.

District Court for the Central District of California against Redwood Holding Group, LLC (“Redwood”), alleging violations of California’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, and breaches of the California Commercial Code for breach of express warranties and implied warranty of merchantability with respect to Redwood’s marketing and sale of U.S.

hemp products.

The complaint does not quantify a damage request.

The complaint did not quantify a damage request.

On April 10, 2020, the class action complaint was dismissed for certain pleading deficiencies and the plaintiff was granted leave until April 24, 2020 to amend the complaint to establish federal subject matter jurisdiction.

1 unchanged sentence

As of the date of this Quarterly Report, the plaintiff has not refiled the complaint.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

The Company expects litigation and regulatory proceedings relating to the marketing, distribution and sale of its products to increase.

Financial Instruments

The Company’s activities expose it to a variety of financial risks, including credit risk, liquidity risk, and market risk (including interest rate risk) and foreign currency risk.

(a) Credit risk

(a) Fair Value Measurement

The Company complies with ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

In general, fair values are determined by:

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.

• Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

March 31, 2021

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,024,450 $ — $ — $ 1,024,450

Short-term investments 214,925 — — 214,925

Derivative liabilities — — 272,300 272,300

December 31, 2020

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,078,023 $ — $ — $ 1,078,023

Short-term investments 211,766 — — 211,766

Derivative liabilities — — 163,410 163,410

There were no transfers between categories during the periods presented.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(b) Financial Risks

The Company’s activities expose it to a variety of financial risks, including credit risk, market risk, interest rate risk, liquidity risk, and foreign currency rate risk.

(i) Credit 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, loan receivable, and advances to joint ventures.

The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $ 1,401,606 as of September 30, 2020 (December 31, 2019 – $ 1,586,978 ).

(i) Accounts receivable

The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $ 1,348,325 and $ 1,403,491 as of March 31, 2021 and December 31, 2020, respectively.

(a) C ash and cash equivalents, short-term investments, and other receivables

The Company held cash and cash equivalents of $ 1,024,450 and $ 1,078,023 as of March 31, 2021 and December 31, 2020, respectively.

The short-term investments and related interest receivable of $ 214,925 and $ 211,766 , as of March 31, 2021 and December 31, 2020 respectively, represents short-term investments with a maturity of less than a year and accrued interest as of period end.

The cash and cash equivalents and short-term investments, including guaranteed investment certificates and bankers’ acceptances, are held with central banks and financial institutions that are highly rated.

In addition to interest receivable, other receivables include sales taxes receivable from the government.

As such, the Company has assessed an insignificant loss allowance on these financial instruments.

(b) Accounts receivable

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses.

3 unchanged sentences

Indicators that there is no reasonable expectation of recovery include, among 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.

For the three months ended September 30, 2020, the Company recorded a current expected credit loss allowance of $ 64 (December 31, 2019 – $ 136 ).

The Company has assessed that there is a concentration of credit risk, as 59 % of the Company’s accounts receivable were due from four customers as of September 30, 2020 (December 31, 2019 – 56 % due from two customers) with an established credit history with the Company.

(ii) C ash and cash equivalents, short-term investments, and other receivables

The Company held cash and cash equivalents of $ 1,097,846 as of September 30, 2020 (December 31, 2019 – $ 1,199,693 ).

The short-term investments and related interest receivable of $ 202,883 as of September 30, 2020 (December 31, 2019 – $ 306,347 ) represents short-term investments with a maturity of less than a year and accrued interest as of period end.

In addition to interest receivable, other receivables include sales taxes receivable from the government.

As such, the Company has assessed an insignificant loss allowance on these financial instruments.

(iii) Advances to joint ventures

The Company has assessed the credit risk of advances to joint ventures based on the financial position of the borrowers, and the regulatory and economic environment of the borrowers.

The expected loss rates are based on the historical credit losses experienced.

Where appropriate, the historical loss rates are adjusted to reflect current and forward-looking information.

The Company has assessed an expected credit loss allowance on these advances as of September 30, 2020 to be $ nil (December 31, 2019 – $ nil ).

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due and arises principally from the Company’s accounts payable and other liabilities.

The Company’s policy is to review liquidity resources and ensure that sufficient funds are available to meet financial obligations as they become due.

Further, the Company’s management is responsible for ensuring funds exist and are readily accessible to support business opportunities as they arise.

The Company’s funding is primarily provided in the form of capital raised through the issuance of common shares and warrants.

As of September 30, 2020, the Company had no concentration risk of vendors (December 31, 2019 – 42 % due to three vendors).

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

As of March 31, 2021 and December 31, 2020, the Company recorded a current expected credit loss allowance of $ 66 and $ 74 , respectively.

As of March 31, 2021, the Company has assessed that there is a concentration of credit risk, as 63 % of the Company’s accounts receivable were due from three customers with an established credit history with the Company.

As of December 31, 2020, 78 % of the Company’s accounts receivable were due from four customers with an established credit history with the Company.

(ii) Market risk

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate due to changes in market prices.

3 unchanged sentences

The Company manages market risk by having a portfolio of securities from multiple issuers so that the Company is not materially exposed to any one issuer.

(d) Interest rate risk

(iii) Interest rate risk

Interest rate risk is the risk that the value or yield of fixed-income investments may decline if interest rates change.

Fluctuations in interest rates may impact the level of income and expense recorded on the cash equivalents and short-term investments, and the market value of all interest-earning assets, other than those which possess a short-term to maturity.

A 10% change in the interest rate in effect on September 30, 2020 and December 31, 2019, would not have a material effect on (i) fair value of the cash equivalents and short-term investments as the majority of the portfolio has a maturity date of three months or less, or (ii) interest income.

A 10% change in the interest rate in effect on March 31, 2021 and December 31, 2020 would not have a material effect on (i) fair value of the cash equivalents and short-term investments as the majority of the portfolio has a maturity date of three months or less or (ii) interest income.

Management continues to monitor external interest rates and revise the Company’s investment strategy as a result.

During the nine months ended September 30, 2020, the Company had net interest income of $ 15,266 (September 30, 2019 – $ 20,455 ).

During the three and nine months ended September 30, 2020, the Company’s average variable interest rate fell 0.03 % and 1.44 %, respectively.

Had the interest rates been consistent, net interest income would have increased by $ 303 and $ 15,214 , respectively for the three and nine months ended September 30, 2020.

(e) Currency rate risk

During the three months ended March 31, 2021 and 2020, the Company had net interest income of $ 2,329 and $ 7,751 , respectively.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

(iv) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due and arises principally from the Company’s accounts payable and other liabilities.

The Company’s policy is to review liquidity resources and ensure that sufficient funds are available to meet financial obligations as they become due.

Further, the Company’s management is responsible for ensuring funds exist and are readily accessible to support business opportunities as they arise.

The Company’s funding was primarily provided in the form of capital raised through the issuance of common shares and warrants.

As of March 31, 2021, the Company had assessed a concentration risk of vendors as 26 % of accounts payables were due to two vendors.

As of December 31, 2020, the Company had assessed a concentration risk of vendors as 64 % due to four vendors.

(v) Foreign currency risk

Currency rate risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate due to changes in foreign exchange rates.

The Company is exposed to this risk on advances to joint ventures denominated in A$ and C$.

The Company is exposed to this risk on investments in equity investees denominated in dollars, A$ and C$, and other assets and liabilities denominated in A$ and C$.

The Company is further exposed to this risk through subsidiaries operating in Israel and the U.S.

2 unchanged sentences

As such, the Company’s financial position and financial results may be adversely affected by the unfavorable fluctuations in currency exchange rates.

As of September 30, 2020, the Company had foreign currency gain (loss) on translation of $( 35,654 ) (September 30, 2019 – $ 9,424 ).

During the three months ended March 31, 2021 and 2020, the Company had foreign currency gain (loss) on translation of $ 16,284 and $( 113,692 ), respectively.

A 10% change in the exchange rates for the U.S.

dollar would affect the carrying value of net assets by approximately $ 176,449 as of September 30, 2020 (December 31, 2019 –$ 174,902 ).

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

Fair Value Measurement

In general, fair values are determined by:

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.

• Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

September 30, 2020 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,097,846 $ — $ — $ 1,097,846

Short-term investments 202,883 — — 202,883

Derivative liabilities — — 102,655 102,655

December 31, 2019 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,199,693 $ — $ — $ 1,199,693

Short-term investments 306,347 — — 306,347

Derivative liabilities — — 297,160 297,160

There were no transfers between categories during the periods presented.

Supplementary Cash Flow Information

The net changes in non-cash working capital items are as follows:

For the nine months ended September 30,

Accounts receivable $ ( 1,448 ) $ ( 1,991 )

Other receivables ( 3,169 ) ( 3,315 )

Prepaids and other assets ( 1,137 ) ( 5,930 )

Current portion of loans receivable — ( 4,607 )

Inventory, net ( 18,316 ) ( 33,903 )

Accounts payable and other liabilities 3,711 23,676

Cumulative effect from foreign exchange ( 8,764 ) —

net working capital assumed on acquisition — 972

Total $ ( 29,123 ) $ ( 25,098 )

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2020

(In thousands of U.S.

dollars, except for gram and share amounts, unaudited)

dollar would affect the carrying value of net assets by approximately $ 156,828 and $ 170,817 as of March 31, 2021 and December 31, 2020, respectively.

Held-For-Sale Assets and Discontinued Operations

During the three months ended September 30, 2020, the Company advanced its plans for the sale and disposal of substantially all of the assets of OGBC.

As a result, OGBC’s results of operations have been reclassified as discontinued operations in the accompanying condensed consolidated financial statements.

Accordingly, the assets and liabilities of OGBC are separately reported as assets and liabilities “held-for-sale” as of September 30, 2020 on the consolidated balance sheet.

For comparative purposes, amounts in the prior periods have been reclassified to conform to current year presentation, as disclosed in Note 2(e).

The Company recorded $ 919 as a valuation allowance upon reclassification of assets as held-for-sale on OGBC for the three and nine months ended September 30, 2020.

During the year ended December 31, 2020, the Company advanced its plans for the sale and disposal of substantially all of the assets of Original B.C.

(“OGBC”) and as a result, OGBC’s results of operations were reclassified as discontinued operations in the accompanying condensed consolidated financial statements.

As of March 31, 2021, the assets and liabilities of OGBC continue to meet the definition of discontinued operations and are included as “held-for-sale” assets on the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, and loss from discontinued operations on the condensed consolidated statements of net income and comprehensive income for the three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2021, the Company advanced its plans for the sale of land and office premises (approximately 80,173 combined square feet) located in Winnipeg, Manitoba, Canada and accounted for in the Rest of World segment.

The sale is expected to be made within the next twelve months and the criteria for the land and office premises to be classified as “held-for-sale” were met during the three months ended March 31, 2021.

As a result, the assets are classified as “held-for-sale” assets as of March 31, 2021.

The following table summarizes the financial information for discontinued operations:

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Consolidated statements of net income (loss) and comprehensive income (loss)

OGBC income from discontinued operations, net of income taxes $ ( 473 ) $ ( 36 ) $ ( 519 ) $ ( 63 )

September 30, 2020 December 31, 2019

Consolidated balance sheets

Long-term assets classified as discontinued operations 2,066 3,248

Non-monetary Transactions

During the nine months ended September 30, 2020, the Company had no non-monetary transactions.

On March 28, 2019, the Company entered into two transactions to simultaneously purchase and sell inventory to a third party.

The Company purchased cannabis resin from the third party and in turn sold cannabis dry flower to the third party.

The transactions involved the exchange of work in progress inventory and were accounted for at the carrying value of inventory transferred by the Company, which equaled the value of the cannabis resin received.

No revenue was recognized as a result of this transaction and no gain or loss was recognized in the condensed consolidated statements of net income (loss) and comprehensive income (loss).

In September 2019, the Company entered into three transactions to simultaneously purchase and sell inventory to a third party.

The Company purchased cannabis resin and cannabis tincture oil and in turn sold cannabis dry flower to the third party.

The transactions involved the exchange of work in progress inventory and were accounted for in accordance with ASC 845 Non-monetary transactions at the carrying value of inventory transferred by the Company.

$ 2,300 was recognized in revenue as a result of this transaction and no gain or loss was recognized in the consolidated statements of net income (loss) and comprehensive income (loss).

Three months ended March 31,

Loss from discontinued operations, net of income taxes $ ( 21 ) $ —

March 31, 2021 December 31, 2020

OGBC assets classified as held-for-sale $ 1,195 $ 1,176

Other property, plant and equipment classified as held-for-sale 774 —

Held-for-sale assets $ 1,969 $ 1,176

Related Party Transactions and Balances

There have been no material related party transactions during the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020 there were no material related party receivables or payables.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts) Table of Contents

Impairment Loss on Property, Plant and Equipment and Right-of-Use Assets

During the three months ended March 31, 2021, the Company recognized an impairment charge of $ 1,019 related to leasehold improvements located within leased premises, encompassing approximately 6,000 square feet, in Los Angeles, California, which the Company determined it no longer had plans to use.

The significant change in the extent and manner in which the leasehold improvements are being used and the expectation that, more likely than not, the leasehold improvements will be disposed of before the end of their useful life triggered an impairment.

The right-of-use lease asset associated with the leasehold improvements was also written down as a result of our decision to no longer use the leased premises.

The Company recognized an impairment charge on the de-recognition of the right-of-use asset of $ 702 during the three months ended March 31, 2021.

Both the impairment charges are recognized in the statement of net income (loss) as an impairment loss on property, plant and equipment and right-of-use assets.

Subsequent Events

On April 1, 2021, the Company and an affiliate of Agroidea (“AGI”), the other joint venture partner of Natuera, agreed to convert all advances made to Natuera under the Series A Loan, plus accrued interest, into equity.

Total aggregate gross advances to Natuera under the Series A Loan were $ 15,500 , of which the Company advanced 50 % and AGI advanced the remaining 50 %, for an amount of $ 7,750 each.

As a result, the Company transferred the carrying value of the loan of $ 2,013 plus accrued interest, which approximates fair value, to investments in equity accounted investees in respect of Natuera.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements