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Item 1. Business

2022-03-01 compared with 2021-02-26 · 205 added, 179 removed, 365 unchanged (51% of the section changed)

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Description of the Business

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

Cronos Group is committed to building disruptive intellectual property by advancing cannabis research, technology and product development and are building 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 is an innovative global cannabinoid company 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 diverse international brand portfolio includes Spinach ® , PEACE NATURALS ® , Lord Jones ® , Happy Dance ® and PEACE+™.

Cronos Group seeks to create value for shareholders by focusing on four core strategic priorities:

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Redwood manufactures, markets and distributes U.S.

hemp-derived supplements and cosmetic products through e-commerce, retail and hospitality partner channels in the United States under the brands Lord Jones™ and Happy Dance™.

hemp-derived cannabinoid supplements and cosmetic products through e-commerce, retail and hospitality partner channels in the United States under the brands Lord Jones ® , Happy Dance ® and PEACE+™.

Strategic Investment in PharmaCann, Inc.

On June 14, 2021, Cronos USA Holdings Inc., a wholly owned subsidiary of the Company, purchased an option (the “PharmaCann Option”), with an exercise price of $0.0001 per share, to acquire an approximately 10.5% ownership stake in PharmaCann, Inc.

(“PharmaCann”) on a fully-diluted basis for total consideration of approximately $110.4 million.

PharmaCann is a leading vertically integrated U.S.

cannabis company that has a broad geographic footprint in the U.S.

and has built an efficient, effective and scalable operating model.

The PharmaCann Option exercise will be based upon various factors, including the status of U.S.

federal cannabis legalization, as well as regulatory approvals, including in the states where PharmaCann operates that may be required upon exercise.

Following the exercise of the PharmaCann Option, the Company and PharmaCann will enter into commercial agreements that would permit each party to offer its products through either party’s distribution channels.

On October 12, 2021, PharmaCann announced that it had entered into a definitive merger agreement with LivWell Holdings, Inc.

(“LivWell”) pursuant to which PharmaCann will acquire LivWell (the “LivWell Transaction”).

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

On February 28, 2022, PharmaCann closed the LivWell Transaction.

Based upon the terms of the definitive merger agreement, the Company’s best estimate is that its ownership percentage in PharmaCann on a fully-diluted basis decreased 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% on a fully-diluted basis and it sells or transfer all or any portion of the option (subject to certain exceptions).

As a result, further dilution could adversely affect the Company’s rights under the PharmaCann Option.

Table of Con tents

Schedule I Cannabis-Related Activities

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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.

In Canada, Cronos Group operates through a wholly owned license holder under the Cannabis Act (Canada) (the “Cannabis Act”), Peace Naturals Project Inc.

(“Peace Naturals”), which has production facilities near Stayner, Ontario (the “Peace Naturals Campus”).

Cronos Group has established four strategic joint ventures in Canada, Israel and Colombia and holds approximately 31% of the issued capital of Cronos Australia Limited (“Cronos Australia”), which is listed on the Australian Securities Exchange under the trading symbol “CAU.” Cronos Group currently exports cannabis products to countries that permit the import of such products, such as Germany, Israel and Australia.

In Canada, Cronos Group operates through two wholly owned license holders under the Cannabis Act (Canada) (the “Cannabis Act”), Peace Naturals Project Inc.

(“Peace Naturals”), which has production facilities near Stayner, Ontario (the “Peace Naturals Campus”) and Thanos Holdings Ltd., known as Cronos Fermentation (“Cronos Fermentation”), which has a production facility in Winnipeg, Manitoba.

Cronos Group has established three strategic joint ventures in Canada, Israel and Colombia and holds approximately 10% of the issued capital of Cronos Australia Limited (“Cronos Australia”), which is listed on the Australian Securities Exchange under the trading symbol “CAU.” Cronos Group currently exports cannabis products to countries that permit the import of such products, such as Germany and Israel.

Peace Naturals

The production facilities at the Peace Naturals Campus are licensed by Health Canada under the Cannabis Act to engage in, among other things, the cultivation, processing, distribution and sale of dried cannabis flower, cannabis resin, cannabis seeds, cannabis plants, cannabis extracts, cannabis topicals and cannabis edibles, among other prescribed activities.

The production facilities at the Peace Naturals Campus are licensed by Health Canada under the Cannabis Act to engage in the cultivation, processing, distribution and sale of dried cannabis flower, cannabis resin, cannabis seeds, cannabis plants, cannabis extracts, cannabis topicals and cannabis edibles, among other prescribed activities.

Cronos Fermentation

The production facility at Cronos Fermentation is licensed by Health Canada under the Cannabis Act to engage in the processing and distribution and sale of cannabis seeds and cannabis plants, among other prescribed activities, which includes the production of cultured cannabinoids.

The facility also holds a license for Analytical Testing under the Cannabis Regulations.

In Israel, the Company operates under the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and cannabis oils in the Israeli medical market.

Operations Outside of Canada and the U.S.

Cronos Group anticipates expanding in the geographic markets outside of Canada and the U.S.

in which we currently participate and entering new geographic markets.

By leveraging operational, manufacturing and regulatory expertise, quality standards and procedures and intellectual property, we believe that we are well-positioned to effectively access these markets.

Subject to applicable regulatory approvals, strategic international business opportunities pursued by us could include:

• production, distribution, sales and marketing in jurisdictions which have passed legislation to legalize the production, distribution and possession of cannabis and cannabis products at all relevant levels of government;

• the export of cannabis and cannabis products to markets that permit the import of such products.

We seek to conduct business only in jurisdictions where we believe it is legal to do so and where such operations remain compliant with our listing obligations with the TSX and Nasdaq.

Determining whether a business activity is legal in a jurisdiction may require judgment since laws, rules, regulations and licenses may not be clear and legal interpretation and advice of counsel may vary.

If a business activity in which we engage in any jurisdiction is determined to be illegal, we could be subject to fines, penalties, reputational harm, delisting from securities exchanges and material civil, criminal and regulatory litigation and proceedings or be enjoined from doing business in the applicable jurisdiction.

See “ Risk Factors - Risks Relating to Regulation and Compliance - We operate in highly regulated sectors where the regulatory environment is rapidly developing, and we may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.

Joint Ventures/Strategic Investment

We have established four strategic joint ventures in Canada, Israel and Colombia and also hold approximately 31% of the issued capital of Cronos Australia, which we account for under the equity method of accounting.

We have established three strategic joint ventures in Canada, Israel and Colombia and also hold approximately 10% of the issued capital of Cronos Australia, which we account for under the fair value method of accounting, as of December 31, 2021.

Table of Con tents

Our ownership interest in each of our joint ventures is summarized in the table below.

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Israel 70%/90%

Cronos Growing Company Inc.

Cronos GrowCo (iii)

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(“Natuera”) (iv)

MedMen Canada Inc.

(“MedMen Canada”) (v)

(i) We define ownership interest as the proportionate share of net income to which we are entitled;

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We consolidate the financial results of Cronos Israel and account for our other joint ventures under the equity method of accounting.

See Note 2 and Note 6 of our audited consolidated financial statements included in Item 8 of this Annual Report.

See Note 1 “ Background, Basis of Presentation, and Summary of Significant Accounting Policies ” and Note 3 “ Investments ” to our consolidated financial statements in Item 8 of this Annual Report.

(ii) A strategic joint venture with Kibbutz Gan Shmuel (“Gan Shmuel”), an Israeli agricultural collective settlement, for the production, manufacture and global distribution of medical cannabis, consisting of a cultivation company (Cronos Israel G.S.

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Natuera intends to develop, cultivate, manufacture, and export cannabis-based medical and consumer products for the Latin American and global markets.

(v) A strategic joint venture with MedMen Enterprises USA, LLC (“MedMen”) for retail in provinces in Canada that permit private retail.

Each of the Company and MedMen owns a 50% equity interest in MedMen Canada, and has equal representation on the board of directors of MedMen Canada.

Operations Outside of Canada and the U.S.

Cronos Group anticipates expanding in the geographic markets outside of Canada and the U.S.

in which we currently participate and entering new geographic markets.

Subject to applicable regulatory approvals, strategic international business opportunities pursued by us could include:

• the export of cannabis and cannabis products to markets that permit the import of such products.

We seek to conduct business only in jurisdictions where we believe it is legal to do so and where such operations remain compliant with our listing obligations with the TSX and Nasdaq.

Brand Portfolio

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In the U.S., we market and distribute solely U.S.

hemp-derived supplements and cosmetic products through e-commerce, retail and hospitality channels under the brands Lord Jones™ and Happy Dance™.

In Canada, we sell a variety of cannabis and cannabis products, including dried cannabis, pre-rolls and cannabis extracts (in the form of tinctures and vaporizers) through wholesale and direct-to-client channels under our wellness platform, PEACE NATURALS™, and under our two adult-use brands, COVE™ and Spinach™.

In addition, PEACE NATURALS™ dried cannabis and cannabis oils are currently exported for sale to Australia, Germany and Israel.

Brand Positioning Wellness Premium adult-use

Mainstream adult-use Prestige adult consumer goods Masstige adult consumer goods Mass market

Product Offering Dried cannabis, cannabis tinctures, vaporizers Dried cannabis, cannabis tinctures,

pre-rolls, vaporizers

Dried cannabis, pre-rolls, vaporizers

hemp-derived supplements, cosmetics U.S hemp-derived cosmetics In development (not yet offered for sale)

Geographic Availability Australia, Canada, Germany and Israel

Canada Canada U.S.

Anticipated U.S.

Wellness Brands

hemp-derived cannabinoid supplements and cosmetic products through e-commerce, retail and hospitality channels under the brands Lord Jones ® , Happy Dance ® and PEACE+™.

In Canada, we sell a variety of cannabis and cannabis products, including dried cannabis, pre-rolls, edibles, concentrates and cannabis extracts (in the form of tinctures and vaporizers) through wholesale channels under our wellness platform, PEACE NATURALS ® , and under our adult-use brand, Spinach ® .

In addition, PEACE NATURALS ® dried cannabis and cannabis oils are currently exported for sale to Israel.

Brand Positioning Mainstream adult-use Wellness Prestige adult consumer goods Masstige adult consumer goods Mass market adult consumer goods

Product Offering Dried cannabis, pre-rolls, vaporizers, edibles, concentrates Dried cannabis, cannabis tinctures, vaporizers U.S.

hemp-derived cannabinoid supplements, cosmetics U.S.

hemp-derived cannabinoid cosmetics U.S.

hemp-derived cannabinoid supplements

Geographic Availability Canada Australia, Canada, Germany and Israel

Wellness Brand

We currently distribute products under PEACE NATURALS ® for the Canadian and non-U.S.

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PEACE NATURALS ® is focused on building and shaping the global cannabis wellness market and promoting a holistic approach to wellness.

The brand’s goal is to improve the lives of others, one client at a time.

Adult-Use Brands

COVE™ is a premium positioned brand focused on creating crafted experiences.

COVE™’s indoor, strain-specific grow rooms seek to maintain the highest quality standards throughout the entire process.

The goal of this premium brand is to Make Each Experience a Discovery™.

Spinach ™ is positioned as a mainstream adult-use brand with High Expectations™, which is geared towards a wide range of consumers who are looking for entertaining and fun ways to enhance activities.

A lighthearted and playful brand, Spinach™ is focused on offering Farm-To-Bowl™ products that bring friends together and make experiences more enjoyable.

Adult-Use Brand

Spinach ® is the Company’s adult-use cannabis brand focused on friends, fun and legendary cannabis experience.

The Spinach ® brand portfolio includes cannabinoid products in a wide range of formats including dried flower, pre-rolls, vaporizers, edibles and concentrates.

The Spinach ® brand’s sub-brand, SPINACH FEELZ™, prominently features rare cannabinoids in a range of product formats, designed to deliver unique and enhanced experiences made possible through proprietary blends of rare cannabinoids alongside common cannabinoids, like THC and CBD.

Each product is formulated to help adult consumers, “Feelz.

The Way You Want.”

COVE ® was a premium positioned adult-use brand focused on creating crafted experiences.

The Company no longer produces or distributes products under the COVE ® brand.

Table of Con tents

Adult Consumer Product Brands

The Company operates Lord Jones ® , a preeminent U.S.

hemp-derived CBD brand in the U.S., for the adult consumer goods market.

hemp-derived cannabinoid brand in the U.S., for the adult consumer goods market.

Lord Jones ® is a prestige beauty and lifestyle brand focusing on high-quality U.S.

hemp-derived personal care products.

Lord Jones™ U.S.

hemp-derived supplements and cosmetics products are distributed online and to approximately 900 premium stores and retail channels, including Sephora, Neiman Marcus and SoulCycle.

During the fourth quarter of 2020, the Company launched Happy Dance™, a U.S.

hemp-derived CBD skincare and personal care brand, in partnership with Kristen Bell.

hemp-derived cannabinoid personal care products.

The Company also operates Happy Dance ® , a U.S.

hemp-derived cannabinoid skincare and personal care brand, in partnership with Kristen Bell.

Happy Dance ® products are made with CBD from premium full-spectrum hemp extract and provide consumers with high quality skincare at an accessible price point.

Happy Dance™ launched with three product offerings:

All-Over Whipped Body Butter +CBD, Head-To-Toe Coconut Melt +CBD and Stress Away Bath Bomb +CBD, all of which are currently available online.

Happy Dance™ continues its expansion by securing its first major U.S.

retailer, ULTA Beauty™.

The full collection of Happy Dance™ products is expected to launch online at ULTA.com and in-store at over 550 ULTA Beauty™ locations across the U.S.

in the coming weeks.

Through the partnership with Ms.

Bell, Cronos Group looks forward to future introductions of innovative products to the hemp-derived CBD market.

The Company launched PEACE+™, a U.S.

hemp-derived CBD brand in the U.S.

hemp-derived CBD products are currently under development and are not yet offered for sale.

The Company also operates PEACE+™, a U.S.

hemp-derived cannabinoid offering that is positioned in the mainstream market.

PEACE+™ is about more than making a better, high-quality U.S.

hemp-derived CBD product;

hemp-derived cannabinoid product;

it stems from the belief that well-being can lead to a better world, full of positivity and possibility.

It is a belief that extends beyond the products and into everything the brand seeks to do and stand for.

The brand intends to distribute its products through the mass market focused retail channel in the U.S.

in the future.

Cronos Group Marketing Code

In 2021, Cronos Group released its Marketing Code, which was designed to responsibly move the emerging cannabis industry forward.

Cronos Group believes that those below the legal age of consumption should not be targeted in an adult-use cannabis market.

Cronos Group recognizes there is a clear need for standards.

The principles in the Cronos Group Marketing Code apply to all marketing activities of all Cronos Group brands globally and are communicated to all business partners in any work they do on the Company’s behalf.

The Marketing Code represents Cronos Group’s commitment to responsible marketing standards.

The code standards are:

• Our advertising will be targeted to adults.

• We will highlight responsible cannabis consumption and any people depicted in any imagery will be adults.

• Our brand websites and social media will be designed for adults.

• Our marketing events will be targeted to adults and will promote responsible cannabis consumption.

• We will provide our customers with facts and substantiate our claims.

Global Sales and Distribution - Principal Markets

Cronos Group has developed a diversified global sales and distribution network by leveraging established partners for their scale, sales force and market expertise.

We have also built a distribution footprint in Canada through the direct-to-client medical market and the adult-use market, as well as a distribution footprint for U.S.

hemp-derived consumer products in the U.S.

Cronos Group has developed a diversified global sales and distribution network.

We have built a distribution footprint in Canada through the adult-use market, as well as a distribution footprint for U.S.

hemp-derived cannabinoid consumer products in the U.S.

through e-commerce, retail and hospitality channels.

We have also built a distribution channel for the Israeli medical market.

We have exited the direct-to-client medical cannabis market in Canada in the fourth quarter of 2021.

Beginning in the first quarter of 2022, our PEACE NATURALS ® medical cannabis products will be sold in Canada through the Medical Cannabis by Shoppers Drug Mart platform.

United States Market and Distribution

Through Redwood, the Company manufactures, markets and distributes U.S.

hemp-derived supplements and cosmetic products through e-commerce, retail and hospitality partner channels in the U.S.

under the Lord Jones™ and Happy Dance™ brands.

Redwood’s products use high-quality U.S.

hemp-derived cannabinoid supplements and cosmetic products through e-commerce, retail and hospitality partner channels in the U.S.

under the Lord Jones ® , Happy Dance ® and PEACE+™ brands.

Redwood’s products use high-quality cannabinoids from U.S.

hemp extract that retains naturally occurring phytocannabinoids and terpenes found in the plant.

We plan to use our resources to capitalize on market demand and to further create and scale U.S.

hemp-derived consumer products and brands.

hemp-derived cannabinoid consumer products and brands.

We do not engage in any commercial activities related to the cultivation, distribution or possession of U.S.

Schedule I cannabis in the U.S.

The Company has also launched its PEACE+™ brand for U.S.

hemp-derived CBD products in the U.S.

hemp-derived CBD products are currently under development and are not yet offered for sale.

The Company intends to access the U.S.

mass market focused retail channel in the future.

Rest of World

Canadian Market and Distribution

• Direct-to-Client .

We currently sell dried cannabis and cannabis extracts directly to clients through our wellness platform, PEACE NATURALS™.

These clients are typically sourced through physician and clinic referrals or word-of-mouth recommendations from existing clients.

• Adult-Use .

We currently sell dried flower, pre-rolls and cannabis extracts through our adult-use brands, COVE™ and Spinach™, to cannabis control authorities in various provinces, including Ontario, Québec, British Columbia, Alberta, Manitoba, Nova Scotia, New Brunswick, and Prince Edward Island, as well as to private-sector retailers in Saskatchewan, subject to the relevant province’s product or other restrictions and requirements.

• Medical Market.

The Company exited the direct-to-client medical cannabis market in Canada in the fourth quarter of 2021.

Beginning in the first quarter of 2022, our PEACE NATURALS ® medical cannabis products will be sold in Canada through the Medical Cannabis by Shoppers Drug Mart platform.

We currently sell dried flower, pre-rolls, edibles, concentrates and cannabis extracts through our adult-use brand, Spinach ® , to cannabis control authorities in all provinces of Canada except Saskatchewan, where we sell to private-sector retailers, subject to the relevant province’s product or other restrictions and requirements.

As the Company’s supply chain grows, the Company continues to expand its portfolio of cannabis products for the existing markets in Canada.

The rate of the Company’s expansion of distribution remains subject to factors that are beyond the Company’s control, including evolving regulations, the development of sufficient supply chain and manufacturing infrastructure and development of distribution and retail channels across Canada.

Markets and Distribution Outside of Canada

Cronos Israel has received the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel.

In the second quarter of 2020, Cronos Israel began distributing PEACE NATURALS ™ branded cannabis products to the Israeli medical cannabis market.

Cronos Israel holds the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel.

Cronos Israel distributes PEACE NATURALS ® branded cannabis products to the Israeli medical cannabis market through pharmacies.

See “- Licenses and Regulatory Framework in Israel.”

We have distributed and anticipate continuing to distribute PEACE NATURALS™ branded cannabis products in Germany through an exclusive distribution relationship with G.

We have distributed PEACE NATURALS ® branded cannabis products in Germany through an exclusive distribution relationship with G.

Pohl-Boskamp GmbH & Co.

KG (“Pohl-Boskamp”), an international pharmaceutical manufacturer and distributor with a distribution network of pharmacies.

We have also entered into a strategic distribution partnership with Delfarma Sp.

Zo.o (“Delfarma”), a pharmaceutical wholesaler in Poland.

We and Delfarma are currently in the process of obtaining the necessary regulatory approvals to sell cannabis products in Poland.

• Latin America .

We intend to distribute cannabis and cannabis products to the Latin American and other cannabis markets through the operations of Natuera.

In 2020, Natuera began commercial cultivation of non-psychoactive (hemp) cultivars registered with the Colombian Agricultural Institute.

Also in 2020, Natuera completed a number of test exports of hemp-derived CBD extract to the U.S.

and United Kingdom for business development and R&D purposes, as well as its first export of hemp-derived CBD extract to the U.S.

for commercial purposes.

Table of Con tents

• Australia and Asia-Pacific.

Cronos Australia has received an import license from the Australian Office of Drug Control (the “ODC”), together with all necessary permits, to import PEACE NATURALS ™ branded cannabis products for sale in the Australian medical market under the terms of the relevant permits.

Cronos Australia facilitates distribution of the Company’s products in Australia, New Zealand and South East Asia, bolstering the Company’s distribution network in the Australia and Asia-Pacific region.

Cronos Australia holds an import license from the Australian Office of Drug Control to import PEACE NATURALS ® branded cannabis products for sale in the Australian medical market under the terms of the relevant permits, which Cronos Australia applies for on a case-by-case basis.

Following the merger by which Cronos Australia acquired 100% of the issued shares of CDA Health Pty Ltd, an Australian medicinal cannabis company.

Cronos Australia holds a license for the PEACE NATURALS ® brand and distributes cannabis products purchased from third parties under the PEACE NATURALS ® brand.

Cronos Australia did not import PEACE NATURALS ® branded cannabis products from the Company during 2021.

We continue to seek new international distribution channels in jurisdictions that have legalized the production, distribution and possession of cannabis and cannabis products at all relevant levels of government.

Global Supply Chain

Cronos Group is focused on establishing an efficient global supply chain by seeking to develop industry-leading methodologies and best practices at the Peace Naturals Campus and leveraging this expertise to create beneficial production partnerships.

Cronos Group is focused on establishing an efficient global supply chain by seeking to develop industry-leading methodologies and best practices at Cronos Fermentation and the Peace Naturals Campus and leveraging this expertise to create beneficial production partnerships.

We plan to continue to develop a global supply chain, which will employ a combination of wholly owned production facilities, third party suppliers and global production partnerships, all of which will support the manufacturing of cannabinoid-based consumer goods.

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We supply these third party manufacturers with U.S.

hemp extract or infused bulk product, fragrances and/or packaging that we source from other third-party suppliers.

hemp-derived cannabinoids or infused bulk product, fragrances and/or packaging that we source from other third party suppliers.

The contract manufacturers supply any other necessary ingredients to manufacture products using our formulas and fill and package our finished products.

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Canadian Supply Chain

• Production Facilities at Peace Naturals .

The Peace Naturals Campus is licensed for cannabis production and the manufacturing of certain cannabis products.

• Production Facilities at Cronos Fermentation and Peace Naturals .

Cronos Fermentation and the Peace Naturals Campus are licensed for cannabis production and the manufacturing of certain cannabis products.

Cronos Fermentation engages in R&D to produce high-quality cultured cannabinoids at commercial scale.

In addition to manufacturing cultured cannabinoids, scientists at the facility create cannabinoid product formulations, and engage in product development.

The Peace Naturals Campus is engaged in cultivation, processing, finishing, packaging and shipping activities, as well as R&D activities, including cannabinoid product formulation, product development, tissue culture and micro propagation.

The production processes at the Peace Naturals Campus are GMP-certified under relevant European Economic Area GMP directives by the national competent authority of Germany.

The Peace Naturals Campus is engaged in cultivation, processing, finishing, packaging and shipping activities, as well as tissue culture and micro propagation, providing a year-round supply of cannabis.

The Peace Naturals Campus also engages in R&D to pilot various production technologies, with any tests yielding favorable operational improvements evaluated for dissemination to the Company’s other partnership facilities.

In addition, the Peace Naturals Campus engages in R&D on cannabinoid formulations, delivery systems and product development.

• Cronos GrowCo.

Cronos GrowCo completed construction of the structure of its greenhouse in Kingsville, Ontario in 2019.

Full completion of construction of the facility, including all fixtures within the greenhouse and all post-harvest activity areas was completed in 2020.

In November 2020, Cronos GrowCo obtained a cultivation license for the operations contemplated by the first phase of the project.

The Company expects the facility to become operational in phases beginning in the first half of 2021.

Full commencement of operations at Cronos GrowCo will be subject to obtaining the appropriate licenses and other customary approvals under applicable law.

The Cronos GrowCo production facility is licensed for cannabis production and the manufacturing of certain cannabis products.

Under its current licenses, Cronos GrowCo is permitted to sell certain cannabis products to other license holders in the wholesale channel.

In October 2021, Cronos GrowCo applied for an amendment to its processing license, which, if granted by Health Canada, would permit Cronos GrowCo to sell certain cannabis products to provincial cannabis control authorities.

• Third Party Supply and Manufacturing Agreements.

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Our supply agreements, for the most part, do not obligate us to purchase minimum quantities of products and generally contain provisions permitting cancellation of orders or termination on notice.

We also enter into contract manufacturing agreements with other license holders, pursuant to which such license holders provide cannabis extract and services related to the filling and packaging of vaporizer devices for the Canadian cannabis adult-use and wellness markets.

We also enter into contract manufacturing agreements with other license holders for certain manufacturing and processing services related to our products.

Supply Chain Outside of Canada

• Cronos Israel .

Cronos Israel has received the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel.

In the second quarter of 2020, Cronos Israel began distributing PEACE NATURALS™ branded cannabis products to the Israeli medical cannabis market.

Cronos Israel holds the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel.

Cronos Israel distributes PEACE NATURALS ® branded cannabis products to the Israeli medical cannabis market.

See “ - Licenses and Regulatory Framework in Israel.

Natuera is currently focused on accessing new markets and product development, including developing additional bulk offerings of hemp-derived CBD distillate and water-soluble hemp-derived CBD solutions.

In 2020, Natuera began commercial cultivation of non-psychoactive (hemp) cultivars registered with the Colombian Agricultural Institute.

Also in 2020, Natuera completed a number of test exports of hemp-derived CBD extract to the U.S.

and United Kingdom for business development and R&D purposes, as well as its first export of hemp-derived CBD extract to the U.S.

for commercial purposes.

In 2021, Natuera began commercial exports of U.S.

hemp-derived CBD bulk ingredients to the U.S., applied for Novel Foods Authorization in the U.K., and completed test exports to Germany, France and the Czech Republic.

Also in 2021, Natuera obtained commercial quotas to produce psychoactive cannabis in derivatives for export, and began commercial cultivation of THC cultivars, completing the first export of high THC extract from Colombia to the U.S.

for R&D purposes.

Table of Con tents

Major Customers

Four major customers (sales to each of which equaled or exceeded 10% of the Company’s consolidated net revenues for the year ended December 31, 2020), Alberta Gambling and Liquor Commission, B.C.

Liquor Distribution Branch, Ontario Cannabis Retail Corporation, and Société Québécoise du Cannabis (the “SQDC”) (the cannabis control authorities in Alberta, British Columbia, Ontario and Québec, respectively), accounted for approximately 19%, 13%, 16% and 15%, respectively, of our consolidated net revenues for the year ended December 31, 2020.

Major customers are customers for which sales equaled or exceeded 10% of our consolidated net revenues for the year.

We had three major customers, Ontario Cannabis Retail Corporation, Société Québécoise du Cannabis (the “SQDC”), and Alberta Gaming, Liquor and Cannabis Commission, which accounted for approximately 26%, 15% and 15%, respectively, of our consolidated net revenues, after excises taxes, for the year ended December 31, 2021.

We mitigate credit risk through verification of the customers’ liquidity prior to the authorization of material transactions.

Government Contracts

In Canada, we sell cannabis and cannabis products to cannabis control authorities in various provinces, including, Ontario, Québec, British Columbia, Alberta, Manitoba, Nova Scotia, New Brunswick and Prince Edward Island, where each such cannabis control authority is the sole wholesale distributor and in certain provinces, the sole retailer, of cannabis and cannabis products.

In Canada, we sell cannabis and cannabis products to cannabis control authorities in all provinces of Canada except for Saskatchewan, where we sell to private-sector retailers, where each such cannabis control authority is the sole wholesale distributor and in certain provinces, the sole retailer, of cannabis and cannabis products.

We sell these products to the various cannabis control authorities under supply agreements that are subject to terms that allow for renegotiation of sale prices and termination at the election of the applicable cannabis control authority.

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The collaboration and license agreement between Ginkgo and the Company (the “Ginkgo Collaboration Agreement”) could enable us to produce certain cultured cannabinoids at commercial scale at a fraction of the cost compared to traditional cultivation practices.

The Ginkgo Collaboration Agreement was amended in June 2021 to enable accelerated commercialization of such cultured cannabinoids, ultimately resulting in the Company’s launching of its first cultured cannabinoid product containing cannabigerol (“CBG”) in the second half of 2021.

These cultured cannabinoid molecules are identical to those produced by plants grown using traditional cultivation but are created by leveraging the power of biological manufacturing via fermentation.

In addition to tetrahydrocannabinol (“THC”) and CBD, these cultured cannabinoids include rare cannabinoids that are economically impractical or nearly impossible to produce at high purity and scale through traditional cultivation.

If the Ginkgo Strategic Partnership is ultimately successful, Cronos Group expects to be able to produce large volumes of these cultured cannabinoids from custom yeast strains by leveraging existing fermentation infrastructure at Cronos Fermentation in Winnipeg, Manitoba without incurring significant capital expenditures to build new cultivation and extraction facilities.

In addition to tetrahydrocannabinol (“THC”) and CBD, these cultured cannabinoids include rare cannabinoids that are difficult to produce at high purity and scale through traditional cultivation.

Cronos Group expects to be able to produce large volumes of these cultured cannabinoids from custom yeast strains, as they are successfully created through the Ginkgo Strategic Partnership, by leveraging existing fermentation infrastructure at Cronos Fermentation in Winnipeg, Manitoba without incurring significant capital expenditures to build new cultivation and extraction facilities.

The Ginkgo Strategic Partnership contemplates the performance of licensed R&D activities in the U.S.

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The state-of-the-art facility includes fully equipped laboratories covering microbiology, organic and analytical chemistry, quality control and method development as well as two large-scale microbial fermentation production areas, three downstream processing plants, and bulk product and packaging capabilities.

The facility is expected to provide the fermentation and manufacturing capabilities we need in order to capitalize on the progress underway with Ginkgo, by enabling us to produce the target cannabinoids contemplated under the Ginkgo Collaboration Agreement at commercial scale with high quality and high purity.

We have begun to work on developing scale-up and downstream processes at Cronos Fermentation, while in parallel Ginkgo develops microorganisms for producing cultured compounds.

As we develop the processes and parameters, these learnings will be used for the strains that will be used for commercial production of cultured cannabinoids.

Commercial production at the facility is subject to completion of the equipment alignment for cannabinoid-based production, the receipt of the appropriate licenses from Health Canada for the production of cultured cannabinoids under the Cannabis Act and the achievement of the relevant milestones under the Ginkgo Strategic Partnership.

The facility has and will continue to provide the fermentation and manufacturing capabilities we need in order to capitalize on the progress underway with Ginkgo, by enabling us to produce the target cannabinoids contemplated under the Ginkgo Collaboration Agreement at commercial scale with high quality and high purity.

Table of Con tents

Commercial production at the facility commenced in June 2021 for CBG following the receipt of the appropriate licenses from Health Canada for the production of cultured cannabinoids under the Cannabis Act and the licenses granted to Cronos Group for the accelerated commercialization of cultured cannabinoids pursuant to the amendments made to the Ginkgo Strategic Partnership.

The Company is prioritizing rare cannabinoids, such as CBG, over common cannabinoids, such as THC and CBD, and will be sequencing commercial production and subsequent product launches based upon this approach.

The Company currently expects to achieve its first equity milestone by the third quarter of 2021.

The achievement of equity milestones for the remaining seven target cannabinoids will occur sequentially based on the Company’s future commercialization plans, which will depend on consumer insights, customer preferences and competitive opportunities.

The Company achieved its first two equity milestones in 2021.

The achievement of equity milestones for the remaining six target cannabinoids will occur sequentially based on the Company’s future commercialization plans, which will depend on consumer insights, consumer preferences and competitive opportunities.

Technion Skin Health Research Partnership

We have a sponsored research agreement (the “Technion Research Agreement”) with the Technion Research and Development Foundation of the Technion - Israel Institute of Technology (“Technion”) to explore the use of cannabinoids and their role in regulating skin health and skin disorders.

Preclinical studies are being conducted by Technion over a three-year period and will focus on three skin conditions:

We entered into a sponsored research agreement (the “Technion Research Agreement”) with the Technion Research and Development Foundation of the Technion - Israel Institute of Technology (“Technion”) to explore the use of cannabinoids and their role in regulating skin health and skin disorders.

Preclinical studies focused on three skin conditions:

acne, psoriasis and skin repair.

Research is led by Technion faculty members Dr.

These studies were conducted by Technion over a three-year period and concluded during the fourth quarter of 2021.

Our sponsored research at Technion in Israel was governed by the university’s Code for Responsible Conduct of Research and complies with Institutional Animal Care and Use Committee (IACUC) Guidelines when applicable.

Research was led by Technion faculty members Dr.

David “Dedi” Meiri and Dr.

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Lokey Interdisciplinary Center of Life Sciences and Engineering in Haifa, Israel.

Enterprise Initiatives

In the third quarter of 2020, the Company implemented a new enterprise resource planning (“ERP”) system across the Canadian business.

Cronos Group has also commenced work to broaden the scope of our ERP system to the U.S.

business, which is currently expected to be launched in the first half of 2021.

The new ERP system will be a meaningful component of the Company’s internal control over financial reporting and is expected to enable us to realize efficiencies throughout our supply chain and operations.

Technion has filed certain patent applications pertaining to use of certain cannabinoids for the treatment of these conditions to protect the intellectual property developed as part of the research progressing under the Technion Research Agreement.

Under the partnership, Cronos Group will use commercially reasonable efforts to obtain market authorizations for the commercialization of intellectual property covered by the patent applications.

Competitive Conditions

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hemp brands are product quality, innovation, intellectual property, brand recognition and price.

We believe the Company’s strong capitalization resulting from the Altria Investment, along with the Lord Jones™, Happy Dance™ and PEACE+™ brand equity, recognition and differentiation in the U.S.

We believe the Company’s strong capitalization resulting from the Altria Investment, along with the Lord Jones ® , Happy Dance ® and PEACE+™ brand recognition and differentiation in the U.S.

hemp retail channel, will enable us to provide better quality consumer products, grow our U.S.

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Hemp Regulatory Framework ” for further information on regulatory framework on U.S.

Rest of World

Competitive Conditions in Rest of World

Competitive Conditions in Canada

We face competition in all aspects of our business in the Canadian medical and adult-use markets.

We face competition in all aspects of our business in the Canadian adult-use and medical markets.

As the demand for cannabis increases as a result of the legalization of adult-use cannabis in Canada under the Cannabis Act, we believe that new competitors will continue to enter the market.

The principal factors on which we compete with other Canadian license holders are product quality, innovation, intellectual property, brand recognition and price.

We believe the Company’s strong capitalization resulting from the Altria Investment will enable us to provide better quality consumer products, grow our Canadian business and strengthen our market position in Canada.

We believe the Company’s strong capitalization resulting from the Altria Investment, along with the Spinach ® brand recognition and differentiation in the Canadian adult-use market, will enable us to provide better quality consumer products, grow our Canadian business and strengthen our market position in Canada.

However, a rapidly evolving and stringent federal regulatory framework affects all areas of our business.

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Any inability of the Canadian federal or provincial law enforcement authorities to enforce existing laws prohibiting the unlicensed cultivation and sale of cannabis and cannabis-based products could result in the perpetuation of the illegal market for cannabis.

Table of Con tents

Competitive Conditions in Europe and Israel

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We believe these factors will enable us to develop greater market penetration, provide a greater variety of quality consumer products and enter into new markets and strengthen our existing market position in Europe and Israel.

However, a patchwork of regulatory frameworks and federal regulations in these various regions also affect our ability to compete in emerging markets as evolving regulations and federal frameworks have the potential to affect all areas of our business.

However, a patchwork of regulatory frameworks and federal regulations in these various regions also affects our ability to compete in emerging markets as evolving regulations and federal frameworks have the potential to affect all areas of our business.

Altria Strategic Investment

Altria Investment and Investor Rights Agreement

As of December 31, 2020, Altria beneficially owned 156,573,537 of our common shares, had the right to acquire up to an additional 80,056,296 common shares on or prior to March 8, 2023 under the Altria Warrant, which has not been exercised, and the right to acquire additional common shares under its pre-emptive and top-up rights as discussed under “ Pre-Emptive Rights and Top-Up Rights ” below.

As of December 31, 2021, Altria beneficially owned 156,573,537 of our common shares, had the right to acquire up to an additional 83,322,820 common shares on or prior to March 8, 2023 under the Altria Warrant, which has not been exercised, and had the right to acquire additional common shares under its pre-emptive and top-up rights as discussed under “ Pre-Emptive Rights and Top-Up Rights ” below.

Investor Rights Agreement

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• subject to certain exceptions, enter into any contract or other agreement, arrangement, or understanding with respect to, or consummate, any transaction or series of related transactions between us or any of our subsidiaries, on the one hand, and any related parties, on the other hand, involving consideration or any other transfer of value required to be disclosed pursuant to Item 404 of Regulation S-K promulgated pursuant to the United States Securities Act of 1933, as amended (the “Securities Act”);

• engage in the production, cultivation, advertisement, marketing, promotion, sale or distribution of cannabis or any Related Products and Services (as defined herein) in any jurisdiction, including the U.S., where such activity is prohibited by applicable law as of the date of the Investor Rights Agreement (subject to certain limitations).

Table of Con tents

• engage in the production, cultivation, advertisement, marketing, promotion, sale or distribution of cannabis or any Related Products and Services (as defined in the Investor Rights Agreement) in any jurisdiction, including the U.S., where such activity is prohibited by applicable law as of the date of the Investor Rights Agreement (subject to certain limitations).

Exclusivity Covenant

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in each case, other than (A) common shares issued pursuant to Altria’s pre-emptive right and (B) common shares issued pursuant to the Ginkgo Collaboration Agreement.

The price per common share to be paid by Altria pursuant to the exercise of its top-up rights will be, subject to certain limited exceptions, the volume-weighted average price of our common shares on the TSX for the 10 full days preceding such exercise by Altria;

provided that the price per common share to be paid by Altria pursuant to the exercise of its top-up rights in connection with the issuance of common shares pursuant to the exercise of options or warrants that were outstanding on the date of closing of the Altria Investment will be C$16.25 per common share without any set off, counterclaim, deduction or withholding.

Table of Con tents

Standstill Covenant

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Currently, we rely on trademarks, patents, copyrights, trade secrets, technical know-how and proprietary information.

We protect our intellectual property by strategically seeking and obtaining registered protection where possible, developing and implementing standard operating procedures to protect inventions, germplasm, trade secrets, technical know-how and proprietary information and entering into agreements with parties that have access to our inventions, germplasm, trade secrets, technical know-how and proprietary information, such as our partners, collaborators, employees and consultants, to protect confidentiality and ownership.

We seek to protect our intellectual property by strategically seeking and obtaining registered protection where appropriate, developing and implementing standard operating procedures to protect inventions, germplasm, trade secrets, technical know-how and proprietary information and entering into agreements with parties that have access to our inventions, germplasm, trade secrets, technical know-how and proprietary information, such as our partners, collaborators, employees and consultants, to protect confidentiality and ownership.

We also seek to preserve the integrity and confidentiality of our inventions, germplasm, trade secrets, trademarks, technical know-how and proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems.

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The Company’s people strategy seeks to build a winning team and to foster a community where everyone feels included and empowered to do to their best work.

As of December 31, 2020, we had 665 full-time employees and 2 full-time contractors.

As of February 28, 2022, we had 626 full-time employees and 2 full-time contractors.

Of our full-time employees, 419 were in Canada, 104 were in the U.S., and 103 were in Israel.

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We believe we offer competitive compensation and benefits in each of our locations, including long-term equity awards to eligible employees under our 2020 Omnibus Equity Incentive Plan to reward and retain talented individuals and align employee and shareholder interests.

Table of Con tents

Safety, Health and Well-being .

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In response to COVID-19, we implemented extensive safety measures throughout the Company to protect our employees from COVID-19, including complying with social distancing and other health and safety standards as required by federal, provincial, state, local and municipal government agencies, taking into consideration guidelines of applicable public health authorities.

These measures include reducing the number of employees working on-site at our production facilities to only the roles that are necessary to be performed on-site, implementing work-from-home policies for employees whose work can be performed off-site, and implementing other additional health and safety measures such as enhanced hygiene and sanitation procedures, modified work schedules, social distancing protocols at our production facilities and travel restrictions.

These measures include increased frequency of cleaning and sanitizing throughout the workplace, providing hand sanitizer and/or hand washing stations located throughout the workplace, mandatory mask wearing in all office and production areas, social distancing protocols at our production facilities, and travel restrictions.

Employee Engagement, Development and Training .

We are committed to developing our talent and building an agile and resilient organization with a workforce with the skillset to effectively adapt to changing business needs in order to best position the Company for success.

We seek to foster a culture of employee learning and resiliency through a talent development strategy that adapts to changing business needs.

We seek to foster a culture of employee learning, innovation and a drive to succeed through a talent development strategy that adapts to changing business needs.

Management is an active enabler of our people strategy as we seek to recruit, retain and engage top talent that will maximize our business performance.

Employees are enabled to succeed through the Company’s core competencies, our performance management program and pay for performance philosophy, and using their voice in our employee engagement survey.

Diversity, Equity and Inclusion and Ethical Business Practices .

We believe that a diverse and inclusive work environment mitigates the risk of group-think, ensures that the Company has the opportunity to benefit from all available talent and enhances, among other things, our organizational strength, problem-solving ability and opportunity for innovation.

We believe that a diverse, equitable and inclusive work environment mitigates the risk of group-think, ensures that the Company has the opportunity to benefit from all available talent and enhances, among other things, our organizational strength, problem-solving ability and opportunity for innovation.

We continue to focus on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress.

We are committed to hiring, developing, and promoting employees with diverse backgrounds.

We are actively reviewing diversity across our Company to drive greater progress.

We welcome, embrace, and celebrate all our employees.

We seek to ensure this inclusivity is achieved through our regular anti-bias training and support for our employees.

We maintain a whistleblower policy and anonymous hotline for the confidential reporting of any suspected policy violations, and provide training and education to our global workforce with respect to our Code of Business Conduct and Ethics and related policies.

Employee Retention and Challenges.

Like many organizations, we have faced challenges arising from COVID-19 related government-mandated stay-at-home orders and adjusting to remote work.

Additionally, our employees have been challenged by our two restatements, and six material weaknesses in the last three years.

These challenges, as well as record levels of resignations in the labor market generally, impacted our employee morale and retention and led to very high turnover, including in our accounting and financial reporting areas, which placed increased demands on the remaining employees.

Regulatory Framework in the U.S.

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with an effective date of March 22, 2021.

There remains some possibility that the effective date of the final rule could be extended, but the USDA has not so indicated that it intends to extend the effective date of the final rule.

The USDA’s final rule establishes a federal licensing plan for regulating U.S.

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The final rule also includes provisions for producers to dispose or remediate violative hemp plants without the use of a DEA-registered reverse distributor or law enforcement.

States may adopt regulatory schemes that impose different levels of regulation and costs on the production of U.S.

Table of Con tents

States may adopt regulatory schemes that impose more stringent levels of regulation and costs on the production of U.S.

Moreover, the 2018 Farm Bill provides that its provisions do not pre-empt or limit state laws that regulate the production of U.S.

Accordingly, some states may choose to restrict or prohibit some or all U.S.

hemp production or sales within the state and variances in states’ laws and regulations on U.S.

hemp production or sales within the state.

Variances in states’ laws and regulations on U.S.

hemp are likely to persist.

Further, each state has discretion to develop and implement its own laws and regulations governing the manufacturing, marketing, labeling and sale of U.S.

Further, each state has discretion to develop and implement its own laws and regulations governing the manufacturing, composition, marketing, labeling and sale of U.S.

hemp products, which has created a patchwork of different regulatory schemes applicable to such products.

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hemp and U.S.

hemp-derived ingredients, including CBD.

Moreover, states have retained regulatory authority through their own analogues to the Federal Food, Drug, and Cosmetic Act, and the states may diverge from the federal treatment of the use of U.S.

hemp-derived ingredients, including CBD and other cannabinoids.

Moreover, states have retained regulatory authority through their own analogues to the Federal Food, Drug, and Cosmetic Act (the “FFDCA”), and the states may diverge from the federal treatment of the use of U.S.

hemp as, or in, food, dietary supplements or cosmetic products.

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Schedule I cannabis, is prohibited from use as an ingredient in food and dietary supplements.

This stems from its interpretation of the exclusionary clauses in the Federal Food, Drug, and Cosmetic Act because CBD has been approved as a prescription drug and is the subject of substantial clinical investigations as a drug, which have been made public.

The exclusionary clauses under the Federal Food, Drug, and Cosmetic Act provide that a substance that has been approved or has been subject to substantial clinical investigations as a drug may not be used in a food or dietary supplement, unless the substance was first marketed in a food or dietary supplement prior to the initiation of substantial clinical investigations of the substance as a drug.

This stems from its interpretation of the exclusionary clauses in the FFDCA because CBD has been approved as a prescription drug and is the subject of substantial clinical investigations as a drug, which have been made public.

The exclusionary clauses under the FFDCA provide that a substance that has been approved or has been subject to substantial clinical investigations as a drug may not be used in a food or dietary supplement, unless the substance was first marketed in a food or dietary supplement prior to the initiation of substantial clinical investigations of the substance as a drug.

The exclusionary clause does not apply to cosmetics.

Cosmetics containing CBD could be viewed as drug products by the FDA if disease claims are made, or if the FDA determines the use of CBD in the product has a structure or function effect on the body (i.e., a drug effect).

The FDA has not issued regulations that elaborate on the exclusionary clauses and the FDA has not taken any enforcement action in the courts asserting a violation of the exclusionary clauses.

To date, the FDA has not issued regulations that elaborate on the exclusionary clauses and the FDA has not taken any enforcement action in the courts asserting a violation of the exclusionary clauses.

To date, the FDA has issued a number of warning letters to companies unlawfully marketing CBD products.

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The settlements included monetary penalties ranging from $20,000 to $85,000.

The FDA has also issued one warning letter to a dietary supplement manufacturer objecting to a CBD supplement on the basis that CBD was not a permissible dietary supplement ingredient.

In November 2019, the FDA published a revised “Consumer Update” on CBD.

The update noted that, as at the time of the Consumer Update, the FDA has approved only one CBD product, a prescription drug product to treat two rare, severe forms of epilepsy.

The FTC announced another such enforcement action and settlement in May 2021, ordering consumer redress of over $30,000.

The FDA has also issued warning letters to dietary supplement manufacturers objecting to CBD supplements on the basis that CBD was not a permissible dietary supplement ingredient.

The FDA periodically updates its “Consumer Update” on CBD.

The latest update noted that, as at the time of the Consumer Update, the FDA has approved only one CBD product, a prescription drug product to treat three rare, severe forms of epilepsy.

The update also stated that it is illegal to market CBD by adding it to a food or labeling it as a dietary supplement, that the FDA has seen only limited data about CBD safety and these data point to real risks that need to be considered before taking CBD for any reason and that some CBD products are being marketed with unproven medical claims and are of unknown quality.

Lastly, the FDA stated that it continues to evaluate the regulatory frameworks that apply to certain cannabis-derived products that are intended for non-drug uses, including whether and/or how they might consider updating their regulations, as well as whether potential legislation might be appropriate.

Table of Con tents

The FDA has stated that it recognizes the potential opportunities and significant interest in drug and other consumer products containing CBD, is committed to evaluating the agency’s regulatory policies related to CBD and has established a dedicated internal working group to explore potential pathways for various types of CBD products to be lawfully marketed.

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This guidance remained under review at the OMB until January 2021, when it was withdrawn by the FDA as a part of the regulatory moratorium Executive Order issued by President Biden.

The timeline for further CBD policy development remains uncertain while the new administration is put into place and as the FDA faces competing regulatory priorities.

The timeline for further CBD policy development remains uncertain while the administration and the FDA face competing regulatory priorities.

In December 2020, the FDA announced a framework for leveraging real world evidence to better understand CBD safety and a number of research projects the agency plans to develop to address gaps in current CBD research.

At the same time, the FDA reiterated that CBD remains subject to the same safety standard as any other ingredient based on its intended use, and that there remain a number of safety issues that need to be addressed in order to support the safety of CBD as a food or dietary supplement ingredient.

The FDA also announced an expansion of its market sampling and analytical testing of CBD products, as well as issued a new series of Warning Letters against companies marketing CBD products with serious disease claims, including products that the agency viewed as posing serious health risks based on their route of administration, including nasal, ophthalmic and inhalable products.

Accordingly, the Company could be required to submit a New Dietary Ingredient Notification (“NDIN”) to the FDA with respect to U.S.

hemp-derived ingredients, including CBD and other cannabinoids, used in dietary supplement products.

Such an NDIN submitted by one of our competitors was objected to by the FDA in August 2021.

The FDA has also announced an expansion of its market sampling and analytical testing of CBD products, as well as issued a new series of Warning Letters against companies marketing CBD products with serious disease claims, including products that the agency viewed as posing serious health risks based on their route of administration, including nasal, ophthalmic and inhalable products.

Furthermore, with respect to Company’s development of CBG and other cannabinoids and additional cannabinoid product lines, the FDA has provided no guidance as to how cannabinoids other than CBD (such as CBG) are to be regulated under the FFDCA, and it is unclear at this time how such potential regulation could affect the results of the operations or prospects of the Company or this product line.

For more information regarding certain risks facing our business in connection with the U.S.

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The Cannabis Regulations set out certain requirements for the sale of cannabis products, including limiting the THC content and serving size of certain product forms.

Table of Con tents

Health Canada allows license holders to export cannabis and cannabis products with appropriate export permits.

Export permits issued by Health Canada are specific to each shipment and may only be obtained for medical or scientific purposes.

To apply for a permit to export cannabis, a license holder must submit significant information to the minister including information about the substance to be exported (including description, intended use, quantity) and the importer.

As part of the application, applicants are also required to provide a copy of the import permit issued by a competent authority in the jurisdiction of final destination and to make a declaration to the minister that the shipment does not contravene the laws of the jurisdiction of the final destination or any country of transit or transshipment.

The Cannabis Act requires the federal government to conduct a review of the Cannabis Act beginning in October 2021 .

This statutory review is required to include, among other things, consideration of (i) the administration and operation of the Cannabis Act, (ii) the impact of the Cannabis Act on public health, (iii) the health and consumption habits of young persons, (iv) the impact of cannabis on indigenous persons and communities and (v) the impact of the cultivation of cannabis plants in a dwelling-house.

This statutory review may lead to the amendment, removal or addition of provisions in or to the Cannabis Act which could adversely affect our business .

To apply for a permit to export cannabis, a license holder must submit significant information to Health Canada including information about the substance to be exported (including description, intended use, quantity) and the importer.

As part of the application, applicants are also generally required to provide a copy of the import permit issued by a competent authority in the jurisdiction of final destination and to make a declaration to Health Canada that the shipment does not contravene the laws of the jurisdiction of the final destination or any country of transit or transshipment.

The Cannabis Act requires the federal government to conduct a review of the Cannabis Act after three years, which commenced in October 2021 .

The scope of this statutory review includes, among other things, consideration of (i) the administration and operation of the Cannabis Act, (ii) the impact of the Cannabis Act on public health, (iii) the health and consumption habits of young persons, (iv) the impact of cannabis on indigenous persons and communities and (v) the impact of the cultivation of cannabis plants in a dwelling-house.

The report resulting from the statutory review may recommend and/or lead to the amendment, removal or addition of provisions in or to the Cannabis Act which could adversely affect our business .

In addition to the current medical and adult-use regimes under the Cannabis Act, Health Canada has also been considering the implementation of a cannabis health product regime for products with potential therapeutic uses that would not require practitioner oversight.

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Given the results of the consultation, Health Canada has indicated that it intends to obtain external scientific advice on the appropriate evidence standards required to demonstrate safety, efficacy and quality in cannabis health products, with the information it gathers informing the next steps on a potential implementation of a cannabis health product regime.

In June 2021, Health Canada opened a consultation into the use of flavors in inhaled cannabis extracts as it claims that the availability of flavors is one of the factors that contributes to the increase in cannabis vaping in youth and young adults.

As part of this consultation, Health Canada released proposed regulations that contemplate prohibiting the production, sale, promotion, packaging and labelling of inhaled cannabis extracts from having a flavor, other than the flavor of cannabis.

The proposed amendments would apply equally to inhaled cannabis extracts sold for medical and non-medical purposes.

The consultation period closed in September 2021 and the new regulations are expected to come into force in 2022.

Provincial and Territorial Developments

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Most provinces and territories have announced a minimum age for possession and consumption of 19 years old, except for Québec and Alberta, where the minimum age is 21 and 18, respectively.

In addition, provinces and territories may impose restrictions on sales, distribution and promotion which are more stringent than those at the federal level.

In addition, provinces and territories may impose additional licensing requirements and restrictions on sales, distribution and promotion which are more stringent than those at the federal level.

For example, the SQDC, the exclusive distributor of cannabis in the province and the sole retail and online vendor in Québec, does not permit cannabis vaporizers or other high THC non-edible cannabis products to be sold through its channels.

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In Israel, cannabis is subject to the Israeli Dangerous Drugs Ordinance [New Version], 5733 - 1973, and its sale and use are prohibited unless applicable licenses have been obtained.

Licenses to cultivate, possess and use cannabis for medical or research purposes in Israel are granted by the Israel Medical Cannabis Agency within the Israeli Ministry of Health (the “Yakar” and the “Israeli MOH”, respectively).

Licenses to cultivate, produce, possess and use cannabis for medical or research purposes in Israel are granted by the Israel Medical Cannabis Agency within the Israeli Ministry of Health (the “Yakar” and the “Israeli MOH”, respectively).

Patients also must obtain licenses either directly from physicians who have been authorized to grant patient licenses or from the Yakar following a request from the patient’s physician in order to purchase and consume medical cannabis.

Table of Con tents

In January 2019, the Israeli government approved, in principle, the export from Israel of medical cannabis products that meet applicable quality standards under the strict supervision of the Israeli authorities.

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These guidelines set forth the process and conditions for obtaining an export license, which can only be issued to an applicant already holding a valid Yakar license.

In December 2021, the Director General of the Israeli MOH announced the appointment of a committee intended to examine the possibility of excluding CBD from being considered a “dangerous drug” under the Israeli Dangerous Drugs Ordinance.

The committee is expected to submit its recommendations to the Director General of the Israeli MOH in early 2022.

As of the end of January 2022, no information regarding the committee’s recommendation have been made public.

Cronos Israel Licenses

During the first quarter of 2020, the Yakar granted Cronos Israel:

Cronos Israel maintains the following certificates and corresponding permits:

(1) full Good Agricultural Practices (“GAP”) certification, including a permit to cultivate at the full capacity of the greenhouse;

and (2) GMP and Good Distribution Practices (“GDP”) certificates and permits to produce and distribute dried flower.

During the third quarter of 2020, Cronos Israel also received GMP and GDP certificates and permits to produce and distribute cannabis oils and pre-rolls.

and (2) GMP and Good Distribution Practices (“GDP”) certificates and permits to produce and distribute dried flower, cannabis oils and pre-rolls.

Licenses and Regulatory Framework in Other Jurisdictions

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• Twitter ( https://twitter.com/cronosgroup );

• LinkedIn (https://www.linkedin.com/company/cronosgroupcron/?viewAsMember=true).

• LinkedIn ( https://www.linkedin.com/company/cronosgroupcron/ ).

It is possible that certain information we post on our website or these social media sites could be deemed to be material information, and we encourage investors, the media and others interested in the Company to review the business and financial information we or our officers post on our website or these social media sites.

None of the information on our website or disclosed through these social media sites is incorporated by reference into this Annual Report.

Table of Con tents

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-K

Item 1. Business