What changed in this filing

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Item 1. Financial Statements

2022-02-18 compared with 2021-08-06 · 609 added, 329 removed, 619 unchanged (60% of the section changed)

Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three and six months ended June 3 0 , 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 3 0 , 2021 and 20 20 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

3 unchanged sentences

dollars, except share amounts) Table of Contents

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

Assets (Unaudited) (Audited)

9 unchanged sentences

Total current assets 1,103,864 1,372,172

Advances to joint ventures 499 467

Investments in equity accounted investees, net 19,094 19,235

5 unchanged sentences

Goodwill 1,104 179,522

Other assets 780 467

Total assets $ 1,535,199 $ 1,925,682

9 unchanged sentences

Shareholders’ equity

Share capital (i, ii)

Share capital (Shares authorized for issuance as of September 30, 2021 and December 31, 2020:

Shares issued and outstanding as of September 30, 2021 and December 31, 2020:

373,302,861 and 360,253,332 , respectively)

586,878 569,260

6 unchanged sentences

Total liabilities and shareholders’ equity $ 1,535,199 $ 1,925,682

(i) Authorized for issuance as of June 30, 2021:

unlimited and December 31, 2020:

(ii) Shares issued as of June 30, 2021:

371,805,547 and December 31, 2020:

360,253,332 .

See notes to condensed consolidated financial statements.

See notes to condensed consolidated interim financial statements.

Cronos Group Inc.

1 unchanged sentence

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

Three months ended June 30, Six months ended June 30,

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

2021 2020 2021 2020

4 unchanged sentences

Inventory write-down — — 11,961 11,024

Gross loss ( 15,784 ) ( 2,922 ) ( 18,747 ) ( 9,398 )

Gross profit ( 730 ) ( 1,537 ) ( 19,477 ) ( 10,935 )

Operating expenses

Sales and marketing 10,821 7,236 34,284 20,849

Research and development (“R&D”) 5,199 3,631 10,301 8,221

Research and development 6,473 4,734 16,774 12,955

General and administrative 32,546 18,860 76,869 61,048

1 unchanged sentence

Depreciation and amortization 1,251 886 3,029 2,252

Impairment loss on goodwill and indefinite-lived intangible assets 142 — 235,056 40,000

Impairment loss on long-lived assets 1,784 — 4,739 —

Total operating expenses 55,684 39,632 378,482 150,002

Operating loss ( 56,414 ) ( 41,169 ) ( 397,959 ) ( 160,937 )

Other income (loss)

Other income (expense)

Interest income, net 2,064 3,781 6,686 15,266

Gain (loss) on revaluation of derivative liabilities 115,248 ( 35,880 ) ( 1,626 ) 77,488

Impairment loss on long-lived assets — ( 40,000 ) ( 1,741 ) ( 40,000 )

Gain on revaluation of derivative liabilities 132,916 105,307 131,290 182,795

Share of loss from equity accounted investments ( 1,414 ) ( 1,327 ) ( 4,172 ) ( 3,293 )

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

Other, net 273 ( 641 ) 1,184 ( 625 )

Total other income (loss) 117,553 ( 72,949 ) ( 592 ) 47,792

Total other income 133,839 111,094 134,988 198,886

Income (loss) before income taxes 77,425 69,925 ( 262,971 ) 37,949

Income tax expense (benefit) ( 159 ) 988 ( 159 ) 988

Income (loss) from continuing operations 77,584 68,937 ( 262,812 ) 36,961

Loss from discontinued operations ( 561 ) ( 46 ) ( 582 ) ( 46 )

Income (loss) from discontinued operations 82 ( 473 ) ( 500 ) ( 519 )

Net income (loss) 77,666 68,464 ( 263,312 ) 36,442

10 unchanged sentences

Net income (loss) per share

Basic and diluted - continuing operations $ 0.15 $ ( 0.31 ) $ ( 0.28 ) $ ( 0.09 )

Weighted average number of outstanding shares

Basic 371,721,382 349,075,408 367,391,118 348,946,439

Diluted 375,349,856 349,075,408 367,391,118 348,946,439

See notes to condensed consolidated financial statements.

Basic - continuing operations $ 0.21 $ 0.20 $ ( 0.71 ) $ 0.11

Diluted - continuing operations 0.21 0.18 ( 0.71 ) 0.10

See notes to condensed consolidated interim financial statements.

Cronos Group Inc.

Condensed Consolidated Statements of Changes in Equity

For the three months ended June 30, 2021 and 2020

For the three months ended September 30, 2021 and 2020

(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 Non-controlling interests Total shareholders’ equity

Balance at April 1, 2021 371,656,590 $ 584,912 $ 32,090 $ 895,503 $ 58,144 $ ( 2,370 ) $ 1,568,279

Warrants exercised 10,000 4 ( 2 ) — — — 2

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

Balance at July 1, 2021 371,805,547 $ 572,858 $ 32,368 $ 719,593 $ 71,729 $ ( 2,764 ) $ 1,393,784

Vesting of options — — 1,886 — — — 1,886

1 unchanged sentence

Restricted share units settled 23,150 162 ( 162 ) — — — —

Withholding taxes paid on share-based awards — — ( 183 ) ( 63 ) — — ( 246 )

Share issuance pursuant to research and development milestones 1,467,490 9,042 — — — — 9,042

Withholding taxes on share-based awards — — ( 31 ) ( 4,232 ) — — ( 4,263 )

Vesting of restricted share units — — 781 — — — 781

Vesting of common shares issued in connection with the use of certain publicity rights in brand development — — 343 — — — 343

Top-up rights out-of-period adjustment — ( 14,505 ) — 3,227 — — ( 11,278 )

Accelerated restricted share units vesting out-of-period adjustment — 4,802 ( 4,802 ) — — — —

Net income (loss) — — — 77,916 — ( 250 ) 77,666

Foreign exchange gain (loss) on translation — — — — 13,585 ( 115 ) 13,470

Balance at June 30, 2021 371,805,547 $ 572,858 $ 32,368 $ 955,721 $ 71,729 $ ( 2,764 ) $ 1,629,912

Foreign exchange loss on translation — — — — ( 22,803 ) ( 15 ) ( 22,818 )

Balance at September 30, 2021 373,302,861 $ 586,878 $ 30,373 $ 793,277 $ 48,926 $ ( 3,029 ) $ 1,456,425

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

Balance at April 1, 2020 348,817,472 $ 563,165 $ 25,483 $ 1,213,686 $ ( 85,877 ) $ ( 1,189 ) $ 1,715,268

Balance at July 1, 2020 349,886,402 $ 565,211 $ 27,046 $ 1,106,709 $ ( 33,970 ) $ ( 1,951 ) $ 1,663,045

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

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

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

Withholding taxes on share-based awards — — ( 2,148 ) — — — ( 2,148 )

Vesting of restricted share units 414,088 — 6,365 — — — 6,365

1 unchanged sentence

Top-up Rights exercised — 690 — — — — 690

Net loss — — — ( 106,977 ) — ( 726 ) ( 107,703 )

Foreign exchange gain (loss) on translation — — — — 51,907 ( 36 ) 51,871

Balance at June 30, 2020 349,886,402 $ 565,211 $ 27,046 $ 1,106,709 $ ( 33,970 ) $ ( 1,951 ) $ 1,663,045

See notes to condensed consolidated financial statements.

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

Foreign exchange gain on translation — — — — 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

See notes to condensed consolidated interim financial statements.

Cronos Group Inc.

Condensed Consolidated Statements of Changes in Equity

For the six months ended June 30, 2021 and 2020

For the nine months ended September 30, 2021 and 2020

(In thousands of U.S.

6 unchanged sentences

Restricted share units settled 81,504 507 ( 507 ) — — — —

Withholding taxes paid on share-based awards — — ( 1,162 ) ( 7,757 ) — — ( 8,919 )

Share issuance pursuant to research and development milestones 1,467,490 9,042 — — — — 9,042

Withholding taxes on share-based awards — — ( 1,193 ) ( 11,989 ) — — ( 13,182 )

Vesting of restricted share units — — 1,917 — — — 1,917

Vesting of common shares issued in connection with the use of certain publicity rights in brand development — 2,000 ( 974 ) — — — 1,026

Accelerated restricted share units vesting out-of-period adjustment — 4,802 ( 4,802 ) — — — —

Top-up rights out-of-period adjustment — ( 3,227 ) — 3,227 — — —

1 unchanged sentence

Foreign exchange gain on translation — — — — 5,927 1,009 6,936

Balance at June 30, 2021 371,805,547 $ 572,858 $ 32,368 $ 955,721 $ 71,729 $ ( 2,764 ) $ 1,629,912

Balance at September 30, 2021 373,302,861 $ 586,878 $ 30,373 $ 793,277 $ 48,926 $ ( 3,029 ) $ 1,456,425

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

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

Vesting of options — — 5,051 — — — 5,051

Options exercised 1,094,464 1,386 ( 1,381 ) — — — 5

Withholding taxes on share-based awards — — ( 2,148 ) — — — ( 2,148 )

Vesting of restricted share units 414,088 — 7,847 — — — 7,847

1 unchanged sentence

Top-up Rights exercised — 1,407 — — — — 1,407

Net loss — — — ( 30,937 ) — ( 1,085 ) ( 32,022 )

Foreign exchange loss on translation — — — — ( 61,808 ) ( 13 ) ( 61,821 )

Balance at June 30, 2020 349,886,402 $ 565,211 $ 27,046 $ 1,106,709 $ ( 33,970 ) $ ( 1,951 ) $ 1,663,045

See notes to condensed consolidated financial statements.

Net income (loss) — — — 38,096 — ( 1,654 ) 36,442

Foreign exchange gain (loss) on translation — — — — ( 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

See notes to condensed consolidated interim financial statements.

Cronos Group Inc.

2 unchanged sentences

dollars, except share amounts, unaudited) Table of Contents

Six months ended June 30,

Nine months ended September 30,

Operating activities

Net loss $ ( 104,850 ) $ ( 32,022 )

Adjustments to reconcile net loss to cash provided by operating activities:

Net income (loss) $ ( 263,312 ) $ 36,442

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Share-based payments 7,731 12,898

Depreciation and amortization 8,911 5,095

Share of loss from investments in equity accounted investees 2,758 1,966

Gain (loss) on revaluation of derivative liabilities 1,626 ( 77,488 )

Impairment loss on goodwill and indefinite-lived intangible assets 235,056 40,000

Impairment loss on long-lived assets 4,739 —

Share of loss from investments in equity accounted investees 4,172 3,293

Gain on revaluation of derivative liabilities ( 131,290 ) ( 182,795 )

Gain on disposal of other investments — ( 4,743 )

Expected credit losses on long-term financial assets 13,162 1,573

4 unchanged sentences

Prepaids and other current assets 1,054 ( 1,338 )

Inventory, net ( 1,010 ) ( 24,292 )

Inventory write-down 11,961 11,024

Inventory 14,335 ( 14,961 )

Accounts payable and other liabilities ( 11,089 ) 1,333

4 unchanged sentences

Purchase of other investments ( 110,392 ) —

Proceeds from sale of other investments — 4,743

Purchase of property, plant and equipment ( 10,651 ) ( 21,334 )

2 unchanged sentences

Advances on loans receivable ( 6,905 ) ( 37,000 )

Proceeds from sale of other investments — 769

Cash flows provided by (used in) investing activities ( 110,236 ) 37,811

1 unchanged sentence

Withholding taxes paid on share-based awards ( 13,182 ) ( 2,148 )

Proceeds from exercise of warrants and options 12 1

Cash flows provided by (used in) financing activities ( 8,907 ) 1

Other financing activities, net 18 ( 182 )

Cash flows used in financing activities ( 13,164 ) ( 2,330 )

Effect of foreign currency translation on cash and cash equivalents 5,622 ( 30,785 )

6 unchanged sentences

Income taxes paid 873 —

See notes to condensed consolidated financial statements.

See notes to condensed consolidated interim financial statements.

Cronos Group Inc.

6 unchanged sentences

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.

Cronos Group is an innovative global cannabinoid company, with international production and distribution across four continents.

The Company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development and is seeking to build an iconic brand portfolio.

Cronos Group’s brand portfolio includes PEACE NATURALS ™ , a global wellness platform;

two adult-use brands, COVE ™ and Spinach ™ ;

and three U.S.

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

Cronos Group’s diverse international brand portfolio includes Spinach ® , PEACE NATURALS ® , Lord Jones ® , Happy Dance ® and PEACE+™.

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

4 unchanged sentences

Pharmacy Ltd.) and is consolidated for financial reporting purposes.

The Company also holds approximately 31 % of the issued capital of Cronos Australia Limited (“Cronos Australia”) and accounts for its investment in Cronos Australia under the equity method of accounting.

As of September 30, 2021, the Company also held approximately 31% of the issued capital of Cronos Australia Limited (“Cronos Australia”) and accounted 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.

1 unchanged sentence

During the three months ended March 31, 2021, the Company identified an error in the accounting related to the withholding taxes on the net exercise of stock options, which resulted in an understatement of accounts payable and other liabilities of $ 966 and overstatements of other receivables, retained earnings, and share capital of $ 3,202 , $ 3,838 and $ 330 , respectively, as of December 31, 2020.

The error was deemed immaterial, and thus the Company has recorded an out-of-period adjustment to the condensed consolidated balance sheet and the condensed consolidated statement of changes in equity during the first quarter of 2021 to correct the error.

This error had no impact to the condensed consolidated statement of net income (loss) and comprehensive income (loss).

The impact of the out-of-period adjustments are included within the changes in operating assets and liabilities and withholding taxes paid on share-based awards lines in the Company’s condensed consolidated statements of cash flows.

During the three months ended September 30, 2021, the Company identified an error in the accounting related to the withholding taxes on the net exercise of stock options, which resulted in overstatements of retained earnings, other comprehensive income and accumulated other comprehensive income of $ 4,167 , $ 34 , and $ 34 , respectively, and understatements of accounts payables and other liabilities and general and administrative expenses of $ 4,201 , and $ 268 , respectively, as of March 31, 2021, as well as overstatements of retained earnings, share capital, other comprehensive income, and accumulated other comprehensive income of $ 3,881 , $ 315 , $ 62 , and $ 96 , respectively, as well as an understatement of accounts payables and other liabilities of $ 4,258 , as of June 30, 2021.

These errors were deemed immaterial, and thus the Company has recorded out-of-period adjustments to the condensed consolidated balance sheet and the condensed consolidated statement of changes in equity during the first and third quarters of 2021 to correct the errors.

During the three months ended June 30, 2021, the Company identified an error in the accounting related to the exercise of Top-up Rights (as defined herein), which resulted in an overstatement of share capital and an understatement of gain on revaluation of derivative liabilities of $ 3,227 as of December 31, 2020, and overstatements of share capital and loss on revaluation of derivative liabilities and an understatement of retained earnings of $ 14,505 , $ 11,278 and $ 3,227 , respectively, as of March 31, 2021.

1 unchanged sentence

The impact of the out-of-period adjustments are included within the adjustments to net loss in the Company’s condensed consolidated statements of cash flows.

During the three months ended September 30, 2021, the Company identified an error in the accounting related to shares issued pursuant to the accelerated vesting of RSUs in the third quarter of 2020, which resulted in an understatement of share capital of $ 4,802 and an overstatement of additional paid-in-capital of $ 4,802 , as of September 30, 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 statements of changes in equity during the third quarter of 2021 to correct the error.

The impact of the out-of-period adjustments had no impact on the condensed consolidated statements of net income (loss) and comprehensive income (loss) or the condensed consolidated statements of cash flows.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

6 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 six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other reporting period.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Financial Statements”).

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for any other reporting period.

Certain prior year amounts have been reclassified to conform to the current year presentation of our condensed consolidated financial statements.

These reclassifications had no effect on the reported results of operations and ending shareholders’ equity.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

(d) Adoption of new accounting pronouncements

15 unchanged sentences

2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

The Company is currently evaluating the impact ASU No.

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

The Company does not expect the adoption of ASU No.

2020-06 to have a material impact on its condensed consolidated financial statements.

Inventory, net

Inventory, net is comprised of the following items:

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

Raw materials $ 6,588 $ 11,489

3 unchanged sentences

Total $ 31,769 $ 44,002

Inventory is written down for any obsolescence such as slow-moving or non-marketable products, or when the net realizable value of inventory is less than the carrying value.

During the three months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $ 11,961 and $ 3,062 , respectively.

During the six months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $ 11,961 and $ 11,024 , respectively.

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 amount.

During the nine months ended September 30, 2021 and 2020, the Company recorded write-downs related to inventory of $ 11,961 and $ 11,024 , respectively.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

(a) Variable interest entities and investments in equity accounted investees, net

7 unchanged sentences

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.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Cronos GrowCo’s economic performance is driven by the day-to-day operations of Cronos GrowCo, which are controlled by 2645485 Ontario Inc.

(“Mucci”), the Company’s joint venture partner.

During the three months ended September 30, 2021, the Company concluded that lower than expected sales forecasts combined with the increase to the aggregate principal amount of the GrowCo Facility (as defined below) were indicators of impairment for the Company’s equity method investment in Cronos GrowCo.

Accordingly, the Company performed an interim impairment assessment to compare the fair value of the investment in Cronos GrowCo to its carrying amount.

The fair value was estimated using the discounted cash flow method.

Significant inputs include discount rate, growth rates, and cash flow projections.

As a result of this analysis, the Company concluded that as of September 30, 2021, the estimated fair value was higher than the carrying amount and no impairment charges were recorded.

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.

5 unchanged sentences

The Company holds variable interests in Natuera through its ownership of 50 % of Natuera’s common shares.

An affiliate of Agroidea owns the remaining 50 % of Natuera’s common shares (such affiliate, the “Natuera JV Partner”).

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

8 unchanged sentences

Loans Receivable, net for further information regarding loans receivable.

Cronos Australia Limited

On September 14, 2021, Cronos Australia entered into a merger agreement to acquire 100 % of the issued shares of CDA Health Pty Ltd, an Australian medicinal cannabis company, subject to customary closing conditions, including shareholder approval (the “Cronos Australia Merger”).

The Cronos Australia Merger closed on December 16, 2021.

In connection with the closing of the Cronos Australia Merger, the Company converted all advances made under its A$ 1,500 unsecured loan to Cronos Australia, plus accrued interest and certain royalties payable, into ordinary shares of Cronos Australia.

As a result of the closing of the Cronos Australia Merger, the Company’s ownership interest in Cronos Australia decreased to approximately 10 % and the Company’s number of Cronos Australia board seats has been reduced from two to one .

This reduction in ownership interest and board seats constitutes a loss of significant influence and will result in a change on the condensed consolidated balance sheet from equity method to mark-to-market accounting commencing on December 16, 2021, with unrealized holding gains and losses to be included in net income (loss) on the condensed consolidated statements of net income (loss) and comprehensive income (loss).

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

A reconciliation of the carrying amount of the investments in associates and joint ventures is as follows:

Ownership interest As of June 30, 2021 As of December 31, 2020

Cronos Australia 31 % $ — $ —

Ownership interest As of September 30, 2021 As of December 31, 2020

Cronos Australia (i)

Cronos GrowCo 50 % 17,394 19,235

$ 19,094 $ 19,235

(i) On April 1, 2021, the Company and an affiliate of Agroidea (“AGI”), the other joint venture partner of Natuera, converted all advances made to Natuera under the master loan agreement entered into with Natuera on September 27, 2019 (the “Natuera Series A Loan”), plus accrued interest, into equity of Natuera.

Total aggregate gross advances to Natuera under the Natuera Series A Loan were $ 15,500 , of which the Company advanced 50 % and AGI advanced the remaining 50 %, or $ 7,750 each.

As a result, the Company transferred the carrying value of the Natuera Series A Loan of approximately $ 2,013 plus accrued interest of $ 540 , for a total investment value of $ 2,553 , which approximates fair value, to investments in equity accounted investees in respect of Natuera.

(i) The gross investment balance in Cronos Australia has been offset by the equity losses as of September 30, 2021 and December 31, 2020.

(ii) On April 1, 2021, the Company and the Natuera JV Partner, converted all advances made to Natuera under the master loan agreement entered into with Natuera on September 27, 2019 (the “Natuera Series A Loan”), plus accrued interest, into equity of Natuera.

Total aggregate gross advances to Natuera under the Natuera Series A Loan were $ 15,500 , of which the Company advanced 50 % and the Natuera JV Partner advanced the remaining 50 %, or $ 7,750 each.

As a result, the Company transferred the carrying amount of the Natuera Series A Loan of approximately $ 2,013 plus accrued interest of $ 540 , for a total investment value of $ 2,553 , which approximates fair value, to investments in equity accounted investees in respect of Natuera.

Loans Receivable, net.

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

For the three months ended June 30, For the six months ended June 30,

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

2021 2020 2021 2020

3 unchanged sentences

$ ( 1,414 ) $ ( 1,327 ) $ ( 4,172 ) $ ( 3,293 )

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The Company determined that the maximum exposure of loss on investments in non-consolidated investments is limited to the Company’s initial investment, advances and/or loans for each variable interest entity.

The following is a summary of the maximum exposure to loss as of June 30, 2021 and December 31, 2020:

Ownership interest As of June 30, 2021 As of December 31, 2020

Cronos Australia 31 % $ 1,573 $ 1,530

Cronos GrowCo 50 % 21,723 21,125

MedMen Canada 50 % 494 467

Natuera 50 % 8,047 8,154

Total $ 31,837 $ 31,276

(b) Other investments

Other investments consist of investments in options of companies in the cannabis industry.

PharmaCann, Inc.

On June 14, 2021, the Company purchased an option to acquire 473,787 shares of Class A Common Stock of PharmaCann, Inc.

4 unchanged sentences

The Company has elected to measure the fair value of the option at cost less impairment, if any, and subsequently adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The option is reported as other investments on the condensed consolidated balance sheet for the period ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, the Company did not hold any additional other investments.

The option is reported as other investments on the condensed consolidated balance sheet for the period ended September 30, 2021.

Whistler Medical Marijuana Corporation

On March 4, 2019, the Company sold all 2,563 shares of Whistler Medical Marijuana Corporation (“Whistler”), representing approximately 19.0 % of Whistler’s issued and outstanding common shares, to Aurora Cannabis Inc.

(“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 three months ended September 30, 2020, in connection with the achievement of the final milestone related to the Whistler Transaction, the Company received 402,561 shares of Aurora.

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).

As of September 30, 2021 and December 31, 2020, the Company did not hold any additional other investments.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Loans Receivable, net

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

Natuera Series A Loan (i)

4 unchanged sentences

64,402 69,939

Mucci Promissory Note (iii)

Mucci Promissory Note

13,965 13,324

Cannasoul Collaboration Loan (iv)

Cannasoul Collaboration Loan (iii)

Accrued interest 1,468 2,667

1 unchanged sentence

Total loans receivable, net $ 87,243 $ 94,274

(i) On April 1, 2021, the Company and AGI converted all advances made to Natuera under the Series A Loan, plus accrued interest, into equity of Natuera.

Total aggregate gross advances to Natuera under the Natuera Series A Loan were $ 15,500 , of which the Company advanced 50 % and AGI advanced the remaining 50 %, or $ 7,750 each.

(ii) As of June 30, 2021 and December 31, 2020, Cronos GrowCo had drawn C$ 100,000 ($ 80,678 ) 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 June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $ 1,590 and $ 1,470 , respectively, recorded against the GrowCo Facility.

(iii) As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $ 278 and $ 259 , respectively, recorded against the promissory note receivable agreement entered into with Mucci on June 28, 2019 (the “Mucci Promissory Note”).

(iv) As of June 30, 2021 and December 31, 2020 CLS has received ILS 6,223 and ILS 4,149 (approximately $ 1,909 and $ 1,287 respectively) from the Cannasoul Collaboration Loan.

As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $ 39 and $ 25 , respectively, recorded against the Cannasoul Collaboration Loan.

(i) On April 1, 2021, the Company and the Natuera JV Partner converted all advances made to Natuera under the Series A Loan, plus accrued interest, into equity of Natuera (“the Natuera Debt Conversion”).

Total aggregate gross advances to Natuera under the Natuera Series A Loan were $ 15,500 , of which the Company advanced 50 % and the Natuera JV Partner advanced the remaining 50 %, or $ 7,750 each.

(ii) In August 2019, the Company, as lender, and Cronos GrowCo, as borrower, entered into a senior secured credit agreement for an aggregate principal amount of C$ 100,000 (the “GrowCo Facility”).

In August 2021, the GrowCo Facility was amended to increase the aggregate principal amount available to C$ 105,000 .

As a result of the increase in the aggregate principal amount of the GrowCo Facility and lower than expected sales forecasts from Cronos GrowCo, the Company revalued its allowance for credit loss on the GrowCo Facility resulting in an increase in the allowance of $ 13,074 , which was recorded in general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss) in both the three and nine months ended September 30, 2021.

In conjunction with the aforementioned revaluation, the Company changed its expected credit loss valuation methodology from the historical credit loss method to the probability of default method.

As of September 30, 2021 and December 31, 2020, Cronos GrowCo had drawn C$ 103,000 ($ 81,230 ) and C$ 95,150 ($ 74,626 ), respectively, from the GrowCo Facility.

(iii) As of September 30, 2021 and December 31, 2020, CLS has received ILS 6,223 and ILS 4,148 , respectively (approximately $ 1,928 and $ 1,287 , respectively), from the Cannasoul Collaboration Loan.

Expected credit loss allowances on the Company’s long-term financial assets for the three and nine months ended September 30, 2021 and 2020 were comprised of the following items:

As of July 1, 2021 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2021

GrowCo Facility $ 1,590 $ 13,074 $ ( 202 ) $ 14,462

Mucci Promissory Note 278 ( 184 ) ( 4 ) 90

Cannasoul Collaboration Loan 39 272 ( 9 ) 302

$ 1,907 $ 13,162 $ ( 215 ) $ 14,854

As of July 1, 2020 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2020

GrowCo Facility $ 1,089 $ 211 $ 17 $ 1,317

Natuera Series A Loan — — — —

Mucci Promissory Note 250 5 3 258

Cannasoul Collaboration Loan 24 — 1 25

$ 1,363 $ 216 $ 21 $ 1,600

As of January 1, 2021 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2021

GrowCo Facility $ 1,546 $ 13,074 $ ( 158 ) $ 14,462

Natuera Series A Loan 721 ( 737 ) 16 —

Mucci Promissory Note 270 ( 184 ) 4 90

Cannasoul Collaboration Loan 26 272 4 302

$ 2,563 $ 12,425 $ ( 134 ) $ 14,854

Cronos Group Inc.

1 unchanged sentence

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

As of January 1, 2020 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2020

GrowCo Facility $ — $ 1,295 $ 22 $ 1,317

Natuera Series A Loan — — — —

Mucci Promissory Note — 254 4 258

Cannasoul Collaboration Loan — 24 1 25

$ — $ 1,573 $ 27 $ 1,600

(i) During the nine months ended September 30, 2021, $ 737 of expected credit losses on long-term financial assets was transferred to investments in equity method investees in relation to the Natuera Debt Conversion, as the carrying amount of the loan receivable, net, approximated fair value as of the date of transfer.

During the three and nine months ended September 30, 2021, $ 13,162 and $ 13,162 , respectively, were recorded to general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as a result of adjustments to our expected credit losses.

During the three and nine months ended September 30, 2020, $ 216 and $ 1,573 , respectively, were recorded to general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as a result of adjustments to our expected credit losses.

Goodwill and Intangible Assets, Net

(a) Intangible assets, net

Intangible assets, net are comprised of the following items:

Useful life (in years) As of September 30, 2021

Cost Accumulated amortization Accumulated impairment charges Net

Software 5 $ 5,696 $ ( 1,299 ) $ — $ 4,397

Health Canada licenses 17 8,627 ( 1,577 ) ( 1,059 ) 5,991

Ginkgo exclusive license (i)

10 9,143 ( 83 ) ( 1,762 ) 7,298

Israeli codes (ii)

20 319 ( 34 ) — 285

Total definite-lived intangible assets 23,785 ( 2,993 ) ( 2,821 ) 17,971

Lord Jones ® brand

N/A 64,000 — ( 61,500 ) 2,500

Trademarks N/A 142 — ( 142 ) —

Total intangible assets $ 87,927 $ ( 2,993 ) $ ( 64,463 ) $ 20,471

Useful life (in years) As of December 31, 2020

Cost Accumulated amortization Accumulated impairment charges

Software 5 $ 4,565 $ ( 565 ) $ — $ 4,000

Health Canada licenses 17 8,579 ( 1,254 ) ( 1,053 ) 6,272

Israeli code (ii)

20 322 ( 22 ) — 300

Total definite-lived intangible assets 13,466 ( 1,841 ) ( 1,053 ) 10,572

Lord Jones ® brand

N/A 64,000 — ( 5,000 ) 59,000

Trademarks N/A 148 — — 148

Total intangible assets $ 77,614 $ (1,841) $ (6,053) $ 69,720

(i) In August 2021, the Company announced the achievement of the final productivity target in respect of cannabigerolic acid (“CBGA”) under its collaboration and license agreement (the “Ginkgo Collaboration Agreement”) with Ginkgo Bioworks Holdings, Inc.

As a result of this achievement, on August 21, 2021, the Company issued 1,467,490 common shares at a share price of C$ 7.90 for total consideration given of C$ 11,593 ($ 9,042 ) to Ginkgo through its collaboration and license agreement (the “Ginkgo Collaboration Agreement”) for the achievement of commercialization and productivity milestones for CBGA.

Pursuant to the terms of the Ginkgo Collaboration Agreement, the Company was and will be granted an exclusive right to use and commercialize certain key intellectual property for the use of the microorganisms developed for the production of up to eight different cannabinoids, including CBGA.

The estimated fair value of the exclusive license for CBGA was $ 7,300 determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows.

The definite lived intangible asset is being amortized using the straight-line method over its estimated useful life of ten years.

The difference between the consideration paid Ginkgo and the fair value of the exclusive license intangible asset of $ 1,784 (including the effect of foreign currency of $ 42 ) was recognized as an impairment charge on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the three months ended September 30, 2021.

(ii) The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities as discussed in Part II, Item 8.

Note 2(c) “Basis of consolidation” and Note 2(h) “Definite life intangible assets” of the Company’s Annual Report.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Accumulated impairment charges on intangible assets for the three and nine months ended September 30, 2021 and 2020 consist of:

As of July 1, 2021 Impairment charges Foreign exchange effect As of September 30, 2021

Health Canada licenses $ ( 1,083 ) $ — $ 24 $ ( 1,059 )

Ginkgo exclusive license — ( 1,784 ) 22 ( 1,762 )

Lord Jones ® brand

( 61,500 ) — — ( 61,500 )

Trademarks — ( 142 ) — ( 142 )

$ ( 62,583 ) $ ( 1,926 ) $ 46 $ ( 64,463 )

As of July 1, 2020 Impairment charges (i)

Foreign exchange effect As of September 30, 2020

Health Canada licenses $ — $ ( 113 ) $ — $ ( 113 )

Lord Jones ® brand

( 5,000 ) — — ( 5,000 )

$ ( 5,000 ) $ ( 113 ) $ — $ ( 5,113 )

As of January 1, 2021 Impairment charges Foreign exchange effect As of September 30, 2021

Health Canada licenses $ ( 1,053 ) $ — $ ( 6 ) $ ( 1,059 )

Ginkgo exclusive license — ( 1,784 ) 22 ( 1,762 )

Lord Jones ® brand

( 5,000 ) ( 56,500 ) — ( 61,500 )

Trademarks — ( 142 ) — ( 142 )

$ ( 6,053 ) $ ( 58,426 ) $ 16 $ ( 64,463 )

As of January 1, 2020 Impairment charges (i)

Foreign exchange effect As of September 30, 2020

Health Canada licenses $ — $ ( 113 ) $ — $ ( 113 )

Lord Jones ® brand

— ( 5,000 ) — ( 5,000 )

$ — $ ( 5,113 ) $ — $ ( 5,113 )

(i) Impairment charges to Health Canada licenses are related to the discontinuation of Original B.C.

(“OGBC”) and were included in other, net on the condensed consolidated statement of net income (loss) and comprehensive income (loss) for the three and nine months ended September 30, 2020.

Amortization expense was $ 641 and $ 224 for the three months ended September 30, 2021 and 2020, respectively, and $ 1,084 and $ 570 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the estimated future amortization of definite-lived intangible assets is as follows:

As of September 30, 2021

Remainder of 2021 (3 months) $ 583

Thereafter 7,408

Definite-lived intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Impairment charges are recognized when the carrying amount of a definite-lived intangible asset is not recoverable and its carrying amount exceeds its fair value.

For definite-lived intangible assets, the Company assessed the factors and circumstances present as of September 30, 2021.

As a result of this assessment, the Company performed an interim impairment test on the Ginkgo exclusive license intangible asset.

The fair value of the Ginkgo exclusive license was determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows and resulted in a difference between the consideration paid to Ginkgo and the fair value of the exclusive license intangible asset of $ 1,784 , which was recognized as an impairment charge on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the three and nine months ended September 30, 2021.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Indefinite-lived intangible assets are reviewed for impairment annually or more frequently when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Indefinite-lived intangible assets are subject to a qualitative assessment, which requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows as potential indicators when determining the need for a quantitative assessment of impairment.

The Company has reassessed the existence of impairment indicators on goodwill associated with the U.S.

reporting unit derived from the acquisition of four Redwood Holding Group, LLC subsidiaries (collectively, “Redwood”) and the Lord Jones ® brand indefinite-lived intangible asset as of June 30, 2021, and determined that quantitative impairment analyses were required as of June 30, 2021 due to slower actual revenue growth as compared to previous revenue growth forecasts and significant pricing pressures brought about by increased competition and aggressive discounting in the U.S.

reporting unit and associated with the Lord Jones ® brand indefinite-lived intangible asset.

As such, the Company reassessed its estimates and forecasts as of June 30, 2021, to determine the fair values of the reporting unit and intangible asset using a discounted cash flow method on the reporting unit and the relief-from-royalty method on the Lord Jones ® brand.

Significant inputs include discount rate, growth rates, and cash flow projections, and, for the Lord Jones ® brand, royalty rates.

These valuation inputs would be considered Level 3 inputs as defined by ASC 820 Fair Value Measurement .

As a result of the analysis as of June 30, 2021, the Company concluded the carrying amount of the Lord Jones ® brand exceeded its fair value, which resulted in impairment charges of $ 56,500 on its Lord Jones ® brand on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the nine months ended September 30, 2021.

In June 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 quarter, represented indicators of impairment for the U.S.

reporting unit’s Lord Jones ® brand.

Accordingly, the Company performed an interim impairment analysis, which concluded the carrying amount of the brand exceeded its fair value.

As a result of the analysis, the Company recorded an impairment charge of $ 5,000 on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the nine months ended September 30, 2020.

Goodwill assets are comprised of the following items as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Cost Accumulated impairment charges Net

OGBC $ 309 $ ( 309 ) $ —

Peace Naturals Project Inc.

(“Peace Naturals”) 1,104 — 1,104

Redwood 213,414 ( 213,414 ) —

$ 214,827 $ ( 213,723 ) $ 1,104

As of December 31, 2020

Cost Accumulated impairment charges Net

OGBC $ 307 $ ( 307 ) $ —

Peace Naturals 1,108 — 1,108

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

$ 214,829 $ ( 35,307 ) $ 179,522

Accumulated impairment charges on goodwill for three and nine months ended September 30, 2021 and 2020, consist of:

As of July 1, 2021 Impairment charges Foreign exchange effect As of September 30, 2021

OGBC $ ( 312 ) $ — $ 3 $ ( 309 )

Redwood ( 213,414 ) — — ( 213,414 )

$ ( 213,726 ) $ — $ 3 $ ( 213,723 )

As of July 1, 2020 Impairment charges (i)

Foreign exchange effect As of September 30, 2020

OGBC $ — $ ( 290 ) $ ( 5 ) $ ( 295 )

Redwood ( 35,000 ) — — ( 35,000 )

$ ( 35,000 ) $ ( 290 ) $ ( 5 ) $ ( 35,295 )

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

As of January 1, 2021 Impairment charges Foreign exchange effect As of September 30, 2021

OGBC $ ( 307 ) $ — $ ( 2 ) $ ( 309 )

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

$ ( 35,307 ) $ ( 178,414 ) $ ( 2 ) $ ( 213,723 )

As of January 1, 2020 Impairment charges (i)

Foreign exchange effect As of September 30, 2020

OGBC $ — $ ( 290 ) $ ( 5 ) $ ( 295 )

Redwood — ( 35,000 ) — ( 35,000 )

$ — $ ( 35,290 ) $ ( 5 ) $ ( 35,295 )

(i) Impairment charges to OGBC goodwill were related to the discontinuation of OGBC and included in other, net on the condensed consolidated statement of net income (loss) and comprehensive income (loss) for the three and nine months ended September 30, 2020.

The Company is required to perform a quantitative analysis of goodwill to test for impairment on an annual basis or more frequently when events or changes in circumstances indicate that fair value of the reporting unit may be less than its carrying amount.

Under ASC 350, Intangibles - Goodwill and Other , the qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows or planned revenue or earnings of the reporting unit as indicators when determining the need for a quantitative assessment of impairment.

As a result of the reassessment of impairment indicators and interim impairment analysis as of June 30, 2021, as described above, the Company concluded that the carrying amount of the U.S.

reporting unit exceeded its fair value, which resulted in an impairment charge of $ 178,414 on goodwill associated with the U.S.

reporting unit on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the nine months ended September 30, 2021.

reporting unit.

Accordingly, the Company performed an interim impairment analysis, which revealed the carrying amount of the reporting unit exceeded its fair value.

As a result, the Company recorded an impairment charge of $ 35,000 on goodwill associated with its U.S.

reporting unit for the nine months ended September 30, 2020.

Derivative Liabilities

2 unchanged sentences

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).

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

As summarized in this note, if exercised in full on such date, the exercise of the Altria Warrant would have resulted in Altria holding a total ownership interest in the Company of approximately 55 % (calculated on a non-diluted basis).

As of June 30, 2021, Altria beneficially held an approximately 42 % ownership interest in the Company (calculated on a non-diluted basis).

As of September 30, 2021, Altria beneficially held an approximate 42 % ownership interest in the Company (calculated on a non-diluted basis).

Pursuant to the investor rights agreement between the Company and Altria, entered into in connection with the closing of the Altria Investment (the “Investor Rights Agreement”), the Company granted Altria certain rights, among others, summarized in this note.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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 approximate 10 % of the common shares of Cronos (approximately 83 million common shares at June 30, 2021) at a per share exercise price of C$ 19.00 , which expires on March 8, 2023.

(“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 Altria Warrant entitles the holder, subject to certain qualifications and limitations, to subscribe for and purchase up to an additional approximate 10 % of the common shares of Cronos (approximately 83 million common shares at September 30, 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 research and development (“R&D”) partnership with 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.

4 unchanged sentences

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

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

A reconciliation of the carrying amounts of the derivative liability for the three months ended June 30, 2021 and 2020:

As of April 1, 2021 Revaluation gain Out-of-period adjustment Foreign exchange effect As of June 30, 2021

A reconciliation of the carrying amounts of the derivative liability for the three months ended September 30, 2021 and 2020:

As of July 1, 2021 Revaluation gain Exercise of rights Foreign exchange effect As of September 30, 2021

(a) Altria Warrant $ 150,083 $ ( 116,285 ) $ — $ ( 1,736 ) $ 32,062

2 unchanged sentences

$ 169,563 $ ( 132,916 ) $ — $ ( 2,119 ) $ 34,528

As of April 1, 2020 Revaluation loss Exercise of rights Foreign exchange effect As of June 30, 2020

As of July 1, 2020 Revaluation gain Exercise of rights Foreign exchange effect As of September 30, 2020

(a) Altria Warrant $ 165,958 $ ( 82,495 ) $ — $ 2,374 $ 85,837

2 unchanged sentences

$ 205,714 $ ( 105,307 ) $ ( 690 ) $ 2,938 $ 102,655

A reconciliation of the carrying amounts of the derivative liability for the six months ended June 30, 2021 and 2020:

As of January 1, 2021 Revaluation loss/(gain) Exercise of rights Foreign exchange effect As of June 30, 2021

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

A reconciliation of the carrying amounts of the derivative liability for the nine months ended September 30, 2021 and 2020:

As of January 1, 2021 Revaluation gain Exercise of rights Foreign exchange effect As of September 30, 2021

(a) Altria Warrant $ 138,858 $ ( 109,099 ) $ — $ 2,303 $ 32,062

2 unchanged sentences

$ 163,410 $ ( 131,290 ) $ — $ 2,408 $ 34,528

As of January 1, 2020 Revaluation loss/(gain) Exercise of rights Foreign exchange effect As of June 30, 2020

As of January 1, 2020 Revaluation gain Exercise of rights Foreign exchange effect As of September 30, 2020

(a) Altria Warrant $ 234,428 $ ( 140,547 ) $ — $ ( 8,044 ) $ 85,837

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 three months ended June 30, 2021, the Company’s share price decreased from April 1, 2021 and we recorded an out-of-period adjustment of $ 11,278 .

Background, Basis of Presentation and Accounting Policies for more information on the out-of-period adjustment.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The fair values of the derivative liabilities were determined using the Black-Scholes pricing model as of June 30, 2021 and December 31, 2020 applying the following inputs:

As of June 30, 2021 As of December 31, 2020

During the three and nine months ended September 30, 2021, the Company’s share price decreased, resulting in a gain on revaluation of $ 132,916 and $ 131,290 , respectively.

The fair values of the derivative liabilities were determined using the Black-Scholes pricing model as of September 30, 2021 and December 31, 2020, applying the following inputs:

As of September 30, 2021 As of December 31, 2020

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

12 unchanged sentences

(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 June 30, 2021 and December 31, 2020, the risk-free interest rate uses a range of approximately 0.15 % to 0.85 % and 0.10 % to 0.39 %, respectively, for the Pre-emptive Rights and Top-up Rights.

As of September 30, 2021 and December 31, 2020, the risk-free interest rate uses a range of approximately 0.12 % to 0.89 % 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.

As of June 30, 2021 and December 31, 2020, the expected life uses a range of approximately 0.25 year to 4.25 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 June 30, 2021.

As of September 30, 2021 and December 31, 2020, the expected life uses a range of approximately 0.25 year to 4.00 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 September 30, 2021.

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

1 unchanged sentence

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.

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).

Decrease as of June 30, 2021 Decrease as of December 31, 2020

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

Decrease as of September 30, 2021 Decrease as of December 31, 2020

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

10 unchanged sentences

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

The following table summarizes the total share-based payments associated with the Company’s stock options and RSUs for the three and six months ended June 30, 2021 and 2020:

For the three months ended June 30, For the six months ended June 30,

The following table summarizes the total share-based payments associated with the Company’s stock options and RSUs for the three and nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

7 unchanged sentences

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 in stock options during the six months ended June 30, 2021 and 2020:

The following is a summary of the changes in stock options during the nine months ended September 30, 2021 and 2020:

Weighted-average exercise price (C$) (i)

1 unchanged sentence

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

Issuance of options 9.19 900,000

Exercise of options 2.14 ( 5,360,050 )

Cancellation, forfeiture and expiry of options 10.73 ( 90,274 )

Balance as of June 30, 2021 $ 7.45 8,371,631 2.66

Exercisable as of June 30, 2021 $ 6.49 4,679,240 1.43

(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 September 30, 2021 $ 7.62 9,204,824 3.15

Exercisable as of September 30, 2021 $ 6.25 5,844,094 1.46

Weighted-average exercise price (C$) (i)

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 6.96 2,000,000

Exercise of options 2.04 ( 1,841,863 )

Cancellation, forfeiture and expiry of options 15.06 ( 222,433 )

Balance as of June 30, 2020 $ 5.13 12,214,548 2.05

Exercisable as of June 30, 2020 $ 3.42 8,688,645 1.78

No stock options were granted during the six months ended June 30, 2021 and 2020.

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

(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.

During the nine months ended September 30, 2021 and 2020, the fair value per share at grant date of options was C$ 6.39 and C$ 4.84 , respectively.

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

Cronos Group Inc.

1 unchanged sentence

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

September 30, 2021 September 30, 2020

Share price at grant date (per share) C$ 9.19 C$ 6.96

Exercise price (per option) C$ 9.19 C$ 6.96

Risk-free interest rate 1.39 % 0.43 %

Expected life of options (in years) (i)

Expected annualized volatility 75 % 91 %

Expected dividend yield — % — %

Black-Scholes value at grant date (per option) C$ 6.39 C$ 4.84

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.

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

June 30, 2021 December 31, 2020

As of September 30, 2021 As of December 31, 2020

2020 Omnibus Plan 2,900,000 2,000,000

3 unchanged sentences

The following is a summary of the changes in RSUs for the six months ended June 30, 2021 and 2020:

Number of RSUs (i)

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

The following is a summary of the changes in RSUs for the nine months ended September 30, 2021 and 2020:

Weighted-average grant date fair value (C$) (i)

Number of RSUs

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

1 unchanged sentence

Vested and issued 7.11 ( 115,500 )

Balance as of June 30, 2021 1,373,878 $ 9.03

Number of RSUs (i)

Cancellation and forfeitures 8.04 ( 36,971 )

Balance as of September 30, 2021 $ 9.12 1,372,604

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

Number of RSUs

Balance as of January 1, 2020 $ 15.34 732,972

Balance as of June 30, 2020 1,012,249 $ 13.18

(i) RSUs granted 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.

Vested and issued 15.34 ( 732,972 )

Cancellation and forfeitures 7.52 ( 9,497 )

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

(i) RSUs granted in the period vest annually in equal installments over a three-year period from either the grant date or after a five year “cliff-period.” All RSUs are 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) The weighted-average grant date fair value reflects the conversion of foreign currency-denominated RSUs translated into C$ using the foreign exchange rate as of the date of issuance.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

(d) Deferred share units

The following is a summary of the changes in DSUs during the six months ended June 30, 2021 and 2020:

The following is a summary of the changes in DSUs during the nine months ended September 30, 2021 and 2020:

Number of DSUs Financial liability

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

Loss on revaluation — 141

Balance as of June 30, 2021 83,293 $ 718

Granting and vesting of DSUs 48,913 354

DSU liabilities settled ( 27,764 ) ( 203 )

Gain on revaluation — ( 139 )

Balance as of September 30, 2021 104,442 $ 589

Number of DSUs Financial liability

Balance as of January 1, 2020 33,397 $ 255

Granting and vesting of DSUs 58,380 338

DSU liabilities settled ( 8,484 ) ( 46 )

Gain on revaluation — ( 128 )

Balance as of June 30, 2020 24,913 $ 153

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The following is a summary of the changes in warrants during the six months ended June 30, 2021 and 2020:

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

The following is a summary of the changes in warrants during the nine months ended September 30, 2021 and 2020:

Weighted-average exercise price (C$) Number of warrants

1 unchanged sentence

Exercise of warrants 0.25 ( 7,987,349 )

Balance as of June 30, 2021 $ — —

Balance as of September 30, 2021 $ — —

Weighted-average exercise price (C$) Number of warrants

Balance as of January 1, 2020 and June 30, 2020 $ 0.26 18,066,662

As of June 30, 2021, there are no warrants outstanding other than the Altria Warrant.

Derivative Liabilities for further description on the Altria Warrant.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

As of September 30, 2021, there are no warrants outstanding other than the Altria Warrant.

Derivative Liabilities for further description of the Altria Warrant.

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 June 30, For the six months ended June 30,

Basic and diluted earnings (loss) per share from continuing and discontinued operations are calculated as follows (in thousands, except share and per share amounts):

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

2021 2020 2021 2020

2 unchanged sentences

Weighted-average number of common shares outstanding 372,456,354 350,288,783 369,097,920 349,397,156

Basic earnings (loss) from continuing operations per share (i)

$ 0.15 $ ( 0.31 ) $ ( 0.28 ) $ ( 0.09 )

Basic earnings (loss) from continuing operations per share $ 0.21 $ 0.20 $ ( 0.71 ) $ 0.11

Loss from discontinued operations attributable to the shareholders of Cronos Group $ 82 $ ( 473 ) $ ( 500 ) $ ( 519 )

Weighted-average number of common shares outstanding 372,456,354 350,288,783 369,097,920 349,397,156

Basic earnings from discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00

Basic loss from discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

2021 2020 2021 2020

Diluted earnings (loss) per share computation

Net income (loss) used in the computation of basic earnings (loss) from continuing operations per share $ 77,834 $ 69,506 $ ( 261,970 ) $ 38,615

Adjustment for gain (loss) on revaluation of derivative liabilities — ( 729 ) — ( 729 )

Adjustment for exercise of rights on derivative liabilities — ( 690 ) — ( 1,407 )

Net income (loss) used in the computation of diluted earnings (loss) from continuing operations per share $ 77,834 $ 68,816 $ ( 261,970 ) $ 37,208

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Dilutive effect of RSUs 581,481 195,750 — 72,099

Dilutive effect of Top-up Rights – market price 107,942 81,573 — 30,069

Weighted-average number of common shares for computation of diluted earnings (loss) from continuing operations per share (i)

375,653,248 373,863,414 369,097,920 374,121,557

Diluted earnings (loss) from continuing operations per share $ 0.15 $ ( 0.31 ) $ ( 0.28 ) $ ( 0.09 )

Loss from discontinued operations attributable to the shareholders of Cronos Group $ ( 561 ) $ ( 46 ) $ ( 582 ) $ ( 46 )

Weighted average number of common shares for computation of diluted loss from discontinued operations per share 375,349,856 349,075,408 367,391,118 348,946,439

Diluted earnings from discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00

Diluted earnings (loss) per share from continuing operations $ 0.21 $ 0.18 $ ( 0.71 ) $ 0.10

Income (loss) from discontinued operations attributable to the shareholders of Cronos Group $ 82 $ ( 473 ) $ ( 500 ) $ ( 519 )

Weighted-average number of common shares for computation of diluted earnings (loss) from discontinued operations per share 375,653,248 373,863,414 369,097,920 374,121,557

Diluted loss from discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00

(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.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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 June 30, Six months ended June 30,

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

2021 2020 2021 2020

8 unchanged sentences

Total anti-dilutive securities 118,255,677 134,391,999 127,137,014 134,504,541

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Segment Information

2 unchanged sentences

United States and Rest of World.

The United States operating segment consists of the manufacture and distribution of hemp-derived CBD infused products.

The United States operating segment consists of the manufacture and distribution of U.S.

hemp-derived CBD infused products.

The Rest of World operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets .

5 unchanged sentences

dollars for the periods presented.

Our condensed consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods .

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Segment data was as follows for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, 2021

United States Rest of World Corporate Expenses Total

The Company’s condensed consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that the Company will achieve in future periods .

Segment data was as follows for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30, 2021

United States Rest of World Corporate Total

Cannabis flower $ — $ 15,306 $ — $ 15,306

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Interest income, net $ 4 $ 2,060 $ — $ 2,064

Total assets $ 709,956 $ 386,805 $ 741,850 $ 1,838,611

Depreciation and amortization $ 70 $ 1,181 $ — $ 1,251

Impairment loss on goodwill and indefinite-lived assets 105 37 — 142

Impairment loss on long-lived assets — 1,784 — 1,784

Gain from discontinued operations — ( 82 ) — ( 82 )

Adjusted EBITDA ( 12,200 ) ( 29,760 ) ( 4,813 ) ( 46,773 )

Purchase of property, plant and equipment, net 101 2,203 — 2,304

Three months ended June 30, 2020

United States Rest of World Corporate Expenses Total

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Three months ended September 30, 2020

United States Rest of World Corporate Total

Cannabis flower $ — $ 7,958 $ — $ 7,958

6 unchanged sentences

Interest income, net $ ( 30 ) $ 3,811 $ — $ 3,781

Total assets $ 250,470 $ 348,569 $ 1,311,248 $ 1,910,287

Depreciation and amortization $ 35 $ 851 $ — $ 886

Impairment loss on long-lived assets 40,000 — — 40,000

Adjusted EBITDA ( 5,687 ) ( 14,371 ) ( 10,021 ) ( 30,079 )

Purchase of property, plant and equipment, net 75 7,915 — 7,990

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Six months ended June 30, 2021

United States Rest of World Corporate Expenses Total

Nine months ended September 30, 2021

United States Rest of World Corporate Total

Cannabis flower $ — $ 36,337 $ — $ 36,337

8 unchanged sentences

Depreciation and amortization 209 2,820 — 3,029

Impairment loss on goodwill and indefinite-lived intangible assets 235,019 37 — 235,056

Impairment loss on long-lived assets 2,955 1,784 — 4,739

Loss from discontinued operations — 500 — 500

Adjusted EBITDA ( 32,421 ) ( 84,549 ) ( 16,136 ) ( 133,106 )

Purchase of property, plant and equipment, net 420 10,231 — 10,651

Six months ended June 30, 2020

United States Rest of World Corporate Expenses Total

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Nine months ended September 30, 2020

United States Rest of World Corporate Total

Cannabis flower $ — $ 16,373 $ — $ 16,373

8 unchanged sentences

Depreciation and amortization 104 2,148 — 2,252

Impairment loss on long-lived assets 40,000 — — 40,000

Impairment loss on goodwill and indefinite-lived intangible assets 40,000 — — 40,000

Income tax expense 143 845 — 988

Adjusted EBITDA ( 16,254 ) ( 61,999 ) ( 15,867 ) ( 94,120 )

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

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The following tables set forth a reconciliation of net income (loss) as determined in accordance with U.S.

GAAP to Adjusted EBITDA for the periods indicated:

Three months ended June 30, 2021

United States Rest of World Corporate Expenses Total

Three months ended September 30, 2021

United States Rest of World Corporate Total

Net income (loss) $ ( 13,499 ) $ 97,198 $ ( 6,033 ) $ 77,666

Interest income, net ( 4 ) ( 2,060 ) — ( 2,064 )

Income tax benefit — ( 159 ) — ( 159 )

Share of loss from equity accounted investments — 1,414 — 1,414

Gain on revaluation of derivative liabilities (ii)

Impairment loss on goodwill and indefinite-lived intangible assets (i)

Impairment loss on long-lived assets (ii)

— 1,784 — 1,784

Transaction costs (iii)

Gain on revaluation of derivative liabilities (iii)

— ( 132,916 ) — ( 132,916 )

Other, net (iv)

Transaction costs (iv)

Other, net (vi)

— ( 273 ) — ( 273 )

Loss from discontinued operations (v)

Share-based payments (vi)

Income from discontinued operations (vii)

— ( 82 ) — ( 82 )

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

Share-based payments (viii)

967 1,700 — 2,667

Financial statement review costs (ix)

Depreciation and amortization 231 3,597 — 3,828

Adjusted EBITDA $ ( 12,200 ) $ ( 29,760 ) $ ( 4,813 ) $ ( 46,773 )

Three months ended June 30, 2020

United States Rest of World Corporate

Expenses Total

Net loss $ ( 45,566 ) $ ( 55,095 ) $ ( 7,042 ) $ ( 107,703 )

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Three months ended September 30, 2020

United States Rest of World Corporate Total

Net income (loss) $ ( 12,425 ) $ 91,868 $ ( 10,979 ) $ 68,464

Interest income, net 30 ( 3,811 ) — ( 3,781 )

Income tax expense 143 845 — 988

Share of loss from equity accounted investments — 1,327 — 1,327

Impairment loss on long-lived assets (i)

40,000 — — 40,000

Loss on revaluation of derivative liabilities (ii)

Gain on revaluation of derivative liabilities (iii)

— ( 105,307 ) — ( 105,307 )

Other, net (iv)

Loss from discontinued operations (v)

Share-based payments (vi)

Gain on disposal of other investments (v)

— ( 3,974 ) — ( 3,974 )

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

Other, net (vi)

Loss from discontinued operations (vii)

Share-based payments (viii)

6,469 1,447 — 7,916

Financial statement review costs (ix)

Depreciation and amortization 35 2,181 — 2,216

Adjusted EBITDA $ ( 5,687 ) $ ( 14,371 ) $ ( 10,021 ) $ ( 30,079 )

Six months ended June 30, 2021

United States Rest of World Corporate Expenses Total

Net loss $ ( 23,811 ) $ ( 62,520 ) $ ( 18,519 ) $ ( 104,850 )

Nine months ended September 30, 2021

United States Rest of World Corporate Total

Net income (loss) $ ( 273,438 ) $ 34,678 $ ( 24,552 ) $ ( 263,312 )

Interest income, net ( 27 ) ( 6,659 ) — ( 6,686 )

Income tax benefit — ( 159 ) — ( 159 )

Share of loss from equity accounted investments — 4,172 — 4,172

Impairment loss on long-lived assets (i)

Impairment loss on goodwill and indefinite-lived intangible assets (i)

235,019 37 — 235,056

Loss on revaluation of derivative liabilities (ii)

Impairment loss on long-lived assets (ii)

2,955 1,784 — 4,739

Transaction costs (iii)

Gain on revaluation of derivative liabilities (iii)

— ( 131,290 ) — ( 131,290 )

Other, net (iv)

Transaction costs (iv)

— — 3,801 3,801

Loss from discontinued operations (v)

Share-based payments (vi)

Other, net (vi)

— ( 1,184 ) — ( 1,184 )

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

Loss from discontinued operations (vii)

Share-based payments (viii)

2,534 5,197 — 7,731

Financial statement review costs (ix)

— — 4,615 4,615

Depreciation and amortization 536 8,375 — 8,911

3 unchanged sentences

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

Six months ended June 30, 2020

United States Rest of World Corporate Expenses Total

Nine months ended September 30, 2020

United States Rest of World Corporate Total

Net income (loss) $ ( 64,507 ) $ 125,640 $ ( 24,691 ) $ 36,442

Interest income, net 14 ( 15,280 ) — ( 15,266 )

Income tax expense 143 845 — 988

Share of loss from equity accounted investments — 3,293 — 3,293

Impairment loss on long-lived assets (i)

Impairment loss on goodwill and indefinite-lived intangible assets (i)

40,000 — — 40,000

Loss on revaluation of derivative liabilities (ii)

Gain on revaluation of derivative liabilities (iii)

— ( 182,795 ) — ( 182,795 )

Other, net (iv)

Gain on disposal of other investments (v)

— ( 4,743 ) — ( 4,743 )

Loss from discontinued operations (v)

Share-based payments (vi)

Other, net (vi)

Loss from discontinued operations (vii)

Share-based payments (viii)

7,931 4,967 — 12,898

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

Financial statement review costs (ix)

— — 8,824 8,824

1 unchanged sentence

Adjusted EBITDA $ ( 16,254 ) $ ( 61,999 ) $ ( 15,867 ) $ ( 94,120 )

(i) For the six months ended June 30, 2021, impairment loss on long-lived assets relates to impairment on a leased premise in the U.S.

segment, and for the three and six months ended June 30, 2020, impairment loss on long-lived assets relates to impairment on goodwill and intangibles related to our U.S.

segment in 2020.

Impairment Loss on Long-Lived Assets.

(ii) For the three and six months ended June 30, 2021 and 2020, gain/loss on revaluation of derivative liabilities represents the fair value changes on the derivative liabilities.

(i) For the nine months ended September 30, 2021, and three and nine months ended September 30, 2020, impairment loss on goodwill and indefinite-lived intangible assets relates to impairment on goodwill and intangible assets related to the Company’s U.S.

For the three months ended September 30, 2021, impairment loss on goodwill and indefinite-lived intangible assets relates to impairment on goodwill and intangible assets related to the Company’s U.S.

segment and impairment on an indefinite-lived trademark related to the Company’s ROW segment.

Goodwill and Intangible Assets, net.

(ii) For the three months ended September 30, 2021, impairment loss on long-lived assets relates to impairment charges for the difference between the consideration paid to Ginkgo for the achievement of certain milestones in connection with the Ginkgo Collaboration Agreement and the fair value of the Ginkgo exclusive license intellectual property .

For the nine months ended September 30, 2021, impairment loss on long-lived assets relates to an impairment on leased premises in the U.S.

segment, impairment on property, plant and equipment in the U.S.

segment and the aforementioned impairment of the Ginkgo intellectual property.

For the three and nine months ended September 30, 2020, there was no impairment loss on long-lived assets.

Impairment Loss on Long-lived Assets and Note 5.

Goodwill and Intangible Assets, net.

(iii) For the three and nine months ended September 30, 2021 and 2020, gain on revaluation of derivative liabilities represents the fair value changes on the derivative liabilities.

Derivative Liabilities.

(iii) For the three and six months ended June 30, 2021, transaction costs represents legal, financial and other advisory fees and expenses incurred in connection with various strategic investments.

(iv) For the three and nine months ended September 30, 2021, transaction costs represents legal, financial and other advisory fees and expenses incurred in connection with various strategic investments.

These costs are included in general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss).

(iv) For the three and six months ended June 30, 2021, other, net is related to gain recorded on sale of the Company’s Winnipeg facility previously designated as held-for-sale in the first quarter of 2021, For the three and six months ended June 30, 2020, other, net is primarily comprised of the gain recorded related to the sale of common shares of Aurora Cannabis, Inc.

(“Aurora”), which were received in connection with the achievement of a milestone related to Aurora’s acquisition of Whistler Medical Marijuana Corporation.

(v) For the three and six months ended June 30, 2020, loss from discontinued operations relates to the discontinuance of Original B.C.

There were no transaction costs during the three and nine months ended September 30, 2020.

(v) For the three and nine months ended September 30, 2020, gain on disposal of other investments is primarily comprised of the gain recorded related to the sale of common shares of Aurora, which were received in connection with the achievement of a milestone related to Aurora’s acquisition of Whistler.

There were no disposals of investments during the three and nine months ended September 30, 2021.

(vi) For the three and nine months ended September 30, 2021 and 2020, other, net is primarily related to (gain) loss on reclassification of held-for-sale assets, (gain) loss recognized on the revaluation of financial liabilities and (gain) loss on disposal of assets.

(vii) For the three and nine months ended September 30, 2021 and 2020, loss (income) from discontinued operations relates to the discontinuance of OGBC.

Held-For-Sale Assets and Discontinued Operations.

(vi) For the three and six months ended June 30, 2021 and 2020, share-based payments relates to the vesting expenses of share-based compensation awarded to employees under the Company’s share-based award plans as described in Note 6.

(viii) For the three and nine months ended September 30, 2021 and 2020, share-based payments relates to the vesting expenses of share-based compensation awarded to employees under the Company’s share-based award plans as described in Note 7.

Share-based Payments.

(vii) For the three and six months ended June 30, 2021 and 2020, the 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.

(ix) For the three and nine months ended September 30, 2021 and 2020, financial statement review costs include costs related to the restatements 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.

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

Three months ended June 30, Six months ended June 30,

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

2021 2020 2021 2020

4 unchanged sentences

Net revenue $ 20,407 $ 11,358 $ 48,640 $ 29,673

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

As of June 30, 2021 As of December 31, 2020

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

As of September 30, 2021 As of December 31, 2020

Canada $ 164,490 $ 162,163

4 unchanged sentences

Major customers are defined as customers that each individually accounted for greater than 10% of the Company’s revenues.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

United States

During the three and six months ended June 30, 2021 and 2020, the U.S.

During the three and nine months ended September 30, 2021 and 2020, the U.S.

segment had no major customers.

As of June 30, 2021 and December 31, 2020, the Company had $ 106 and $ 65 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

As of September 30, 2021 and December 31, 2020, the Company had $ 106 and $ 65 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

There was no loss from discontinued operations from the U.S.

Segment for the three and six months ended June 30, 2021 and 2020.

segment for the three and nine months ended September 30, 2021 and 2020.

Rest of World

During the three months ended June 30, 2021, the Rest of World segment earned a total net revenue before excise taxes of $ 8,497 from three major customers, Ontario Cannabis Retail Corporation, Alberta Gaming, Liquor and Cannabis Commission and Société Québécoise du Cannabis, accounting for 19 %, 14 % and 12 %, respectively, of the Company’s total net revenue before excise taxes.

During the three months ended June 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $ 7,040 from four major customers, together accounting for 71 % of the Company’s total net revenues before excise taxes.

During the six months ended June 30, 2021, the Rest of World segment earned a total net revenue before excise taxes of $ 18,250 from four major customers, Ontario Cannabis Retail Corporation, Novolog Group, Société Québécoise du Cannabis and Alberta Gaming, Liquor and Cannabis Commission, accounting for 15 %, 14 %, 13 %, and 12 % respectively, of the Company’s total net revenue before excise taxes.

During the six months ended June 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $ 11,819 from four major customers, together accounting for 65 % of the Company’s total net revenues before excise taxes.

As of June 30, 2021 and December 31, 2020, the Company had $ 158 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 June 30, 2021 and 2020 was $ 561 and $ 46 , respectively.

The loss from discontinued operations from the Rest of World segment for the six months ended June 30, 2021 and 2020 was $ 582 and $ 46 , respectively.

During the three months ended September 30, 2021, the Rest of World segment earned a total net revenue before excise taxes of $ 12,256 from three major customers, Ontario Cannabis Retail Corporation, Société Québécoise du Cannabis, and Alberta Gaming, Liquor and Cannabis Commission accounting for 31 %, 16 %, and 13 % respectively, of the Company’s total net revenue before excise taxes.

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, together accounting for 82 % of the Company’s total net revenues before excise taxes.

During the nine months ended September 30, 2021, the Rest of World segment earned a total net revenue before excise taxes of $ 25,667 from three major customers, Ontario Cannabis Retail Corporation, Société Québécoise du Cannabis and Alberta Gaming, Liquor and Cannabis Commission, accounting for 24 %, 16 %, and 13 % respectively, of the Company’s total net revenue before excise taxes.

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 four major customers, together accounting for 74 % of the Company’s total net revenues before excise taxes.

As of September 30, 2021 and December 31, 2020, the Company had $ 158 and $ 9 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

The Company recorded income from discontinued operations of $ 82 from the Rest of World segment for the three months ended September 30, 2021 and a loss from discontinued operations of $ 473 for the three months ended September 30, 2020.

The loss from discontinued operations from the Rest of World segment for the nine months ended September 30, 2021 and 2020 was $ 500 and $ 519 , respectively.

Commitments and Contingencies

(a) Commitments

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

There have been no material changes in the information regarding commitments as disclosed in the Company’s Annual Report.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

(b) Contingencies

2 unchanged sentences

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

(i) Class action complaints relating to restatement of 2019 interim financial statements

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.

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

2 unchanged sentences

Defendants moved to dismiss on February 8, 2021.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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 names (i) the Company, (ii) its former Chief Executive Officer (now Executive Chairman), (iii) now former Chief Financial Officer, (iv) former Chief Financial Officer and Chief Commercial Officer, and (v) 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.

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On June 28, 2021, the Ontario Court dismissed motions brought by the plaintiff for leave to commence a claim for misrepresentation under the Ontario Securities Act and for certification of the action as a class action.

The plaintiff appealed the Court’s dismissal of the motions, except with respect to the former Chief Financial Officer and Chief Commercial Officer, who agreed not to seek costs from plaintiff in connection with the dismissal of the motions

The plaintiff has appealed the Court’s dismissal of the motions only with respect to the Company, the former Chief Executive Officer (now Executive Chairman), and the now former Chief Financial Officer;

the remaining defendants were dismissed from the matter with prejudice and the Company and all individual defendants agreed not to seek costs from plaintiff in connection with the dismissal of the motions.

(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 as well as the previously disclosed restatement of the second quarter of 2021 interim financial statements.

The Company is responding to all such requests for information and cooperating with all regulatory authorities.

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)

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

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

On January 31, 2022, upon consent of the Company and the plaintiffs, the court dismissed the case in its entirety as to the Company.

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

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• 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.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

June 30, 2021

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

September 30, 2021

Level 1 Level 2 Level 3 Total

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Derivative liabilities — — 163,410 163,410

There were no transfers between categories during the periods presented.

There were no transfers between fair value categories during the periods presented.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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(b) Financial risks

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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, loans 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 $ 1,210,287 and $ 1,403,491 as of June 30, 2021 and December 31, 2020, respectively.

The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $ 1,144,143 and $ 1,403,491 as of September 30, 2021 and December 31, 2020, respectively.

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

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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.

As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $ 264 and $ 74 , respectively.

As of June 30, 2021, the Company has assessed that there is a concentration of credit risk, as 74 % of the Company’s accounts receivable were due from four customers with an established credit history with the Company.

As of September 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $ 202 and $ 74 , respectively.

As of September 30, 2021, the Company has assessed that there is a concentration of credit risk, as 84 % of the Company’s accounts receivable were due from four 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.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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(ii) Market risk

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The value of financial instruments can be affected by changes in interest rates, market and economic conditions, and equity and commodity prices.

The Company is exposed to market risk in divesting its investments, such that unfavorable market conditions could result in dispositions of investments at less than their carrying values.

The Company is exposed to market risk in divesting its investments, such that unfavorable market conditions could result in dispositions of investments at less than their carrying amounts.

Further, the revaluation of securities classified as fair value through net income could result in significant write-downs of the Company’s investments, which would have an adverse impact on the Company’s financial position, unless these would flow through other comprehensive income.

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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 June 30, 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.

A 10% change in the interest rate in effect on September 30, 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 three months ended June 30, 2021 and 2020, the Company recorded net interest income of $ 2,293 and $ 3,734 , respectively.

During the six months ended June 30, 2021 and 2020, the Company recorded net interest income of $ 4,622 and $ 11,485 , respectively.

During the three months ended September 30, 2021 and 2020, the Company recorded net interest income of $ 2,064 and $ 3,781 , respectively.

During the nine months ended September 30, 2021 and 2020, the Company recorded net interest income of $ 6,686 and $ 15,266 , respectively.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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(iv) Liquidity risk

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

As of June 30, 2021, the Company had assessed a concentration risk of vendors as 32 % of accounts payables were due to one vendor.

As of September 30, 2021, the Company had assessed a concentration risk of vendors as 21 % 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.

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As such, the Company’s financial position and financial results may be adversely affected by the unfavorable fluctuations in currency exchange rates.

During the three months ended June 30, 2021 and 2020, the Company had foreign currency gain on translation of $ 13,470 and $ 51,871 , respectively.

During the six months ended June 30, 2021 and 2020, the Company had foreign currency gain (loss) on translation of $ 29,754 and $( 61,821 ), respectively.

During the three months ended September 30, 2021 and 2020, the Company had foreign currency gain (loss) on translation of $( 22,818 ) and $ 26,167 , respectively.

During the nine months ended September 30, 2021 and 2020, the Company had foreign currency gain (loss) on translation of $ 6,936 and $( 35,654 ), respectively.

A 10% change in the exchange rates for the U.S.

dollar would affect the carrying value of net assets by approximately $ 162,991 and $ 170,817 as of June 30, 2021 and December 31, 2020, respectively.

dollar would affect the carrying amount of net assets by approximately $ 99,056 and $ 97,237 as of September 30, 2021 and December 31, 2020, respectively.

Held-For-Sale Assets and Discontinued Operations

During the year ended December 31, 2020, the Company advanced its plans for the sale and disposal of substantially all of the assets of OGBC and as a result, OGBC’s results of operations were reclassified as discontinued operations in the accompanying condensed consolidated financial statements for all periods presented.

During the quarter ended June 30, 2021, the Company determined that the fair value of OGBC was lower than the carrying value of the assets.

During the quarter ended June 30, 2021, the Company determined that the fair value of OGBC was lower than the carrying amount of the assets.

As such, a write-down to these held-for-sale assets of $ 561 was recorded in the second quarter of 2021.

As of June 30, 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 June 30, 2021 and December 31, 2020, and loss from discontinued operations on the condensed consolidated statements of net income and comprehensive income for the three and six months ended June 30, 2021 and 2020.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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On September 10, 2021, OGBC was sold for $ 727 , net of costs to sell.

As a result, the Company recorded $ 82 in income (loss) on discontinued operations in its condensed consolidated income statement for the three and nine months ended September 30, 2021.

On June 10, 2021, the land and office building located in Winnipeg, Manitoba Canada, previously designated as held-for-sale in the first quarter of 2021, was sold for $ 2,059 , net of costs to sell.

As a result, the Company recorded a gain on the sale of $ 1,279 in other, net in its condensed consolidated income statement for the three and six months ended June 30, 2021.

As a result, the Company recorded a gain on the sale of $ 1,279 in other, net in its condensed consolidated income statement for the nine months ended September 30, 2021.

The following table summarizes the financial information for discontinued operations:

Three months ended June 30, Six months ended June 30,

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

2021 2020 2021 2020

Loss from discontinued operations, net of income taxes $ ( 561 ) $ ( 46 ) $ ( 582 ) $ ( 46 )

As of June 30, 2021 As of December 31, 2020

Income (loss) from discontinued operations, net of income taxes $ 82 $ ( 473 ) $ ( 500 ) $ ( 519 )

As of September 30, 2021 As of December 31, 2020

OGBC assets classified as held-for-sale $ — $ 1,176

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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Impairment Loss on Long-lived Assets

(a) Property, plant, and equipment, net and right-of-use assets

During the six months ended June 30, 2021, the Company recognized an impairment charge of $ 1,039 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.

(a) Right-of-use assets and property, plant, and equipment, net

During the nine months ended September 30, 2021, the Company recognized an impairment charge of $ 1,039 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 six months ended June 30, 2021.

Both of the impairment charges are recognized in the statement of net income (loss) as impairment loss on property, plant and equipment and right-of-use assets.

No impairment charges were recorded during the three months ended June 30, 2021 and the three and six months ended June 30, 2020 on property, plant and equipment and right-of-use assets.

(b) Intangible assets, net and goodwill

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.

During the three months ended June 30, 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 quarter, represented potential indicators of impairment for the Company’s U.S.

reporting unit as well as its Lord Jones brand acquired in September 2019.

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

As a result of this analysis, the Company recorded impairment charges of $ 35,000 on its U.S.

reporting unit and $ 5,000 on its Lord Jones™ brand for the three and six months ended June 30, 2020, when the carrying value of these assets exceeded their fair value.

No triggering events were identified or impairment charges recorded during the three and six months ended June 30, 2021 on intangible assets and goodwill.

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The right-of-use lease asset associated with the leasehold improvements was also written down as a result of the Company’s 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 nine months ended September 30, 2021.

Both of the impairment charges described above are recognized on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as impairment loss on long-lived assets.

Additionally, during the nine months ended September 30, 2021, the Company reassessed the existence of impairment indicators on property, plant and equipment associated with sales channels in the U.S.

The Company determined that slower actual revenue growth as compared to previous revenue growth forecasts and significant pricing pressures brought about by increased competition and aggressive discounting in sales channels in the U.S.

segment represented indicators of impairment.

As a result, a quantitative impairment analysis was required as of June 30, 2021.

As such, the Company reassessed its estimates and forecasts as of June 30, 2021, to determine the fair values of the property, plant and equipment using an undiscounted cash flow methodology.

Significant inputs include growth rates and cash flow projections.

As a result of the analysis as of June 30, 2021, the Company concluded the carrying amount of the property, plant and equipment associated with sales channels in the U.S.

segment exceeded its fair value, which resulted in impairment charges of $ 1,214 on the condensed consolidated statements of net income (loss) and comprehensive income (loss) for the nine months ended September 30, 2021.

No impairment charges were recorded during the three months ended September 30, 2021 and the three and nine months ended September 30, 2020 on property, plant and equipment and right-of-use assets.

(b) Intangible assets, net

During the three and nine months ended September 30, 2021, the Company recognized an impairment charge of $ 1,784 on definite-lived intangible assets for the difference between the consideration paid to Ginkgo for the achievement of certain milestones in connection with the Ginkgo Collaboration Agreement and the fair value of the Ginkgo exclusive license intellectual property .

Goodwill and Intangible Assets, Net.

The impairment charge is recognized on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as impairment loss on long-lived assets.

No impairment charges were recorded during the three and nine months ended September 30, 2020 on definite-lived intangible assets.

Subsequent Events

(a) PharmaCann

On October 12, 2021, PharmaCann announced that it had entered into a definitive merger agreement pursuant to which PharmaCann will acquire LivWell Holdings, Inc.

LivWell is a multi-state cannabis cultivation and retail leader based in Colorado.

Based upon the terms of the proposed merger, upon the closing of the proposed merger, the Company’s best estimate is that its ownership percentage in PharmaCann on a fully-diluted basis would decrease to approximately 6.7 %.

Under the terms of the Company’s investment in PharmaCann, the Company’s rights to nominate an observer or a director to the PharmaCann board of directors could be lost if the Company’s ownership drops below 6.0 % on a fully diluted basis and it sells or transfers all or any portion of the option (subject to certain exceptions).

Further dilution, therefore, could adversely affect the Company’s rights under the PharmaCann option.

As a result of the merger, the value of the Company’s option in PharmaCann could be materially impacted.

(b) Ginkgo Collaboration Agreement

On November 12, 2021, the Company announced the achievement of the final productivity target in respect of cannabigerovarinic acid (“CBGVA”) under the Ginkgo Collaboration Agreement with Ginkgo.

As a result of this achievement on November 12, 2021, the Company issued 1,467,490 common shares at a share price of C$ 7.12 for total consideration given of C$ 10,449 ($ 8,150 ) to Ginkgo.

The estimated fair value of the exclusive license for CBGVA is still being evaluated.

The definite-lived intangible asset will be amortized using the straight-line method over its estimated useful life of ten years .

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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The Cronos Australia Merger closed on December 16, 2021.

In connection with the closing of the Cronos Australia Merger, all advances made under the Company’s A$ 1,500 unsecured loan to Cronos Australia, plus accrued interest and certain royalties payable, were converted into ordinary shares of Cronos Australia.

In addition, the Company’s ownership interest in Cronos Australia decreased to approximately 10 % and the Company’s number of Cronos Australia board seats was reduced from two to one .

The reduction in ownership interest and board seats constitutes a loss of significant influence and will result in a change beginning in the fourth quarter of 2021 on the condensed consolidated balance sheet from equity method to mark-to-market accounting, with unrealized holding gains and losses included in net income (loss) on the condensed consolidated statements of net income (loss) and comprehensive income (loss).

The fair value of the Company’s investment in Cronos Australia was valued at approximately $ 8,300 as of December 16, 2021.

(d) MedMen Enterprises, Inc.

On December 31, 2021, the Company and MedMen Enterprises, Inc., the joint venture partner (“the MedMen JV partner”), agreed to fully dissolve MedMen Canada (“the MedMen dissolution agreement”) due to its prolonged inactivity and a lack of business operations.

In accordance with the MedMen dissolution agreement, cash of $ 256 and $ 220 was distributed to the Company and the MedMen JV partner, respectively.

The remaining $ 118 of cash held by MedMen Canada will be used to settle any remaining legal fees and related charges.

Any remaining funds will then be distributed 50/50 between the Company and the MedMen JV partner.

(e) Realignment

In the first quarter of 2022, the Company initiated a strategic plan to realign the business around its brands, centralize functions and evaluate the Company’s supply chain (the “Realignment”).

The organizational and cost initiatives being undertaken are intended to position the Company to drive profitable and sustainable growth over time.

The Company expects to incur charges associated with the Realignment over a one-year period of approximately $1,219, the majority of which are expected to be incurred in the first half of 2022, relating to one-time severance charges.

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