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Item 1. Business

2023-02-28 compared with 2022-03-01 · 171 added, 208 removed, 362 unchanged (51% of the section changed)

Cronos Group is incorporated under the laws of the Province of British Columbia with principal executive offices located at 111 Peter Street, Suite 300, Toronto, Ontario M5V 2H1.

Cronos is incorporated under the laws of the Province of British Columbia with principal executive offices located at 111 Peter Street, Suite 300, Toronto, Ontario M5V 2H1.

Our telephone number is +1-416-504-0004, our website is https://thecronosgroup.com/ and the investor relations section of our website is https://ir.thecronosgroup.com/.

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Description of the Business

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:

Cronos is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development.

With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio.

Cronos’ diverse international brand portfolio includes Spinach ® , PEACE NATURALS ® and Lord Jones ® .

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

• growing a portfolio of iconic brands that responsibly elevate the consumer experience;

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Business Segments

Cronos Group reports through two segments:

Cronos reports through two segments:

“United States” and “Rest of World.” These two segments represent the geographic regions in which the Company operates and the different product offerings within each geographic region.

United States

On September 5, 2019, as a result of the acquisition (the “Redwood Acquisition”) of four Redwood Holding Group, LLC subsidiaries (collectively, “Redwood”), the Company established the United States segment.

Redwood manufactures, markets and distributes U.S.

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+™.

operational subsidiaries (collectively, “Redwood”) manufacture, market and distribute U.S.

hemp-derived cannabinoid products through e-commerce, retail and hospitality partner channels in the United States under the Lord Jones ® brand.

Strategic Investment in PharmaCann, Inc.

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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”).

On February 28, 2022, PharmaCann closed its merger transaction with LivWell Holdings, Inc.

(“LivWell”) pursuant to which PharmaCann acquired 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 of the LivWell Transaction, the Company’s ownership percentage in PharmaCann on a fully diluted basis decreased to approximately 6.4%.

As of December 31, 2022, the Company’s ownership percentage in PharmaCann on a fully diluted basis was approximately 6.3%.

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 transfers 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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Rest of World

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

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

In Canada, Cronos 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 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 has established two strategic joint ventures in Canada and Israel and holds approximately 10% of the issued capital of Vitura Health Limited (“Vitura”), formerly known as Cronos Australia Limited, which is listed on the Australian Securities Exchange under the trading symbol “VIT.” Cronos seeks to export cannabis products to countries that permit the import of such products.

Peace Naturals Campus / Cronos GrowCo

The production facilities at the Peace Naturals Campus and the production facilities of Cronos GrowCo 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

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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 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 oils in the Israeli medical market.

Operations Outside of Canada, Israel, and the U.S.

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

in which we currently participate and entering new geographic markets.

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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.

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

• the export of 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.

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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 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

Joint Ventures/Strategic Investments

We have established two strategic joint ventures in Canada and Israel.

Additionally, we hold approximately 10% of the issued capital of Vitura, which we account for as equity securities with a readily determinable fair value, and approximately 13.7% of the issued capital of NatuEra S.à.r.l.

(“Natuera”), which we account for as equity securities without a readily determinable fair value, as of December 31, 2022.

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

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Cronos GrowCo (iii)

NatuEra S.à.r.l.

(“Natuera”) (iv)

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

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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.

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

Cultivation Ltd.), a manufacturing company (Cronos Israel G.S.

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(iii) A strategic joint venture with a group of investors led by Bert Mucci (the “Greenhouse Partners”), a Canadian large-scale greenhouse operator.

Each of Cronos Group and the Greenhouse Partners owns a 50% equity interest in Cronos GrowCo and has equal representation on its board of directors.

(iv) A strategic joint venture with an affiliate of Agroidea SAS (“AGI”), a Colombian agricultural services provider.

Each of the Company and AGI owns a 50% equity interest in Natuera.

Cronos Group has three manager nominees on the board of managers of Natuera, while AGI has four manager nominees on the board of managers.

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

Each of Cronos and the Greenhouse Partners owns a 50% equity interest in Cronos GrowCo and has equal representation on its board of directors.

Brand Portfolio

We are committed to building a portfolio of iconic brands that responsibly elevate the consumer experience.

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

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.

international medical cannabis markets.

PEACE NATURALS ® is a global wellness platform committed to producing high-quality cannabis and cannabis products.

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

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

hemp-derived cannabinoid products through e-commerce, retail and hospitality channels under the Lord Jones ® brand.

In Canada, we sell a variety of cannabis products through wholesale channels under both our adult-use brand, Spinach ® , and under our wellness platform, PEACE NATURALS ® .

In addition, PEACE NATURALS ® cannabis products are currently available in the Israeli medical market.

Brand Positioning Mainstream adult-use Wellness Prestige adult consumer goods

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

hemp-derived cannabinoid products

Geographic Availability Canada Canada and Israel

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.

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

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

The Spinach ® brand also has two sub-brands, SOURZ by Spinach ® and SPINACH FEELZ™.

SOURZ by Spinach ® is a line of dual-colored, dual-flavored edibles in a variety of cannabinoid ratios in a distinctive “S” shared gummy, featuring proprietary flavor masking technology.

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.

Wellness Brand

PEACE NATURALS ® is a global wellness platform committed to producing high-quality cannabis products.

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

The Company currently distributes products under PEACE NATURALS ® for the Canadian and non-U.S.

medical cannabis markets.

Hemp-derived Cannabinoid Brands

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

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 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.

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 cannabinoid product;

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

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.

Happy Dance ® and PEACE+ ® were brands focused on the production and distribution of U.S.

hemp-derived cannabinoid products.

The Company no longer produces or distributes products under the Happy Dance ® and PEACE+ ® brands.

Cronos Marketing Code

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

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

Cronos recognizes there is a clear need for standards.

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

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

The code standards are:

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Global Sales and Distribution - Principal Markets

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

Cronos 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.

hemp-derived cannabinoid 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.

Our PEACE NATURALS ® medical cannabis products are 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 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.

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

under the Lord Jones ® brand.

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

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

hemp-derived cannabinoid consumer products and brands.

hemp-derived cannabinoid products and brands.

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

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• 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.

Our PEACE NATURALS ® medical cannabis products are sold in Canada through the Medical Cannabis by Shoppers Drug Mart platform.

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

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See “- Licenses and Regulatory Framework in Israel.”

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.

Table of Con tents

We have previously distributed PEACE NATURALS ® branded cannabis products in Germany.

• Australia and Asia-Pacific.

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.

Vitura 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 Vitura applies for on a case-by-case basis.

On November 29, 2022, the shareholders of Cronos Australia approved a proposal to change the name of the company to “Vitura Health Limited” (the “CAU Name Change”), which change became effective on February 6, 2023.

On December 2, 2022, in connection with the CAU Name Change, Vitura and the Company mutually agreed to terminate the intellectual property license that granted Vitura the right to use certain intellectual property of the Company, including, but not limited to, the “Cronos” name and the PEACE NATURALS ® brand.

Vitura has 180 days following the date of termination to cease all usage of the Company’s intellectual property.

Vitura did not import PEACE NATURALS ® branded cannabis products from the Company during 2022.

We continue to seek new international distribution channels in jurisdictions that have legalized the production, distribution and possession of 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 Cronos Fermentation and the Peace Naturals Campus and leveraging this expertise to create beneficial production partnerships.

Cronos 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.

United States

In the ordinary course of our business, we enter into contract manufacturing agreements with suppliers of our cosmetic products.

We supply these third party manufacturers with U.S.

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

In the ordinary course of our business, we enter into contract manufacturing agreements with suppliers of our products.

We may supply these third-party manufacturers with U.S.

hemp-derived cannabinoids or infused bulk product, and other inputs such as 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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We have not entered into any contracts that obligate us to purchase a minimum quantity or exclusively from any supplier.

Our supplements are manufactured at our facilities in Los Angeles, California according to Good Manufacturing Practices (“GMP”).

We are obligated to purchase our supply of certain U.S.

hemp extract from one supplier unless that supplier cannot provide the agreed-upon quantities in relation to certain brands in the U.S.

Our supplements are manufactured according to Good Manufacturing Practices (“GMP”), which we employ at our facility in Los Angeles, California.

Rest of World

Canadian Supply Chain

• Production Facilities at Cronos Fermentation and Peace Naturals .

• Facilities at Cronos Fermentation and Peace Naturals Campus .

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

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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 processing, finishing, packaging and shipping activities, as well as R&D activities, including cannabinoid product formulation, product development, tissue culture and micro propagation.

The GMP certificate issued under relevant European Economic Area GMP directives by the national competent authority of Germany was retracted in 2022 due to the announcement of the closure of the Peace Naturals Campus.

• Cronos GrowCo.

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.

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

Cronos GrowCo holds Global GAP and ICANN GAP certifications (equivalent to IMC-GAP) for the export of dried cannabis to Israel.

• Third Party Supply and Manufacturing Agreements.

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• Cronos Israel .

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.

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

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

See “ - Licenses and Regulatory Framework in Israel.

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

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 had three major customers, Ontario Cannabis Retail Corporation, Alberta Gaming, Liquor and Cannabis Commission, and Société Québécoise du Cannabis (the “SQDC”), which accounted for approximately 28%, 17% and 10%, respectively, of our consolidated net revenues, before excises taxes, for the year ended December 31, 2022.

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 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.

In Canada, we sell cannabis products to cannabis control authorities in all provinces of Canada and the Yukon territory, 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 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.

In particular, the cannabis control authorities have in the past and may in the future choose to stop purchasing our products, may change the prices at which they purchase our products, may return our products to us and, in certain circumstances, may cancel purchase orders at any time including after products have been shipped.

For the year ended December 31, 2021, we had approximately $49.7 million in sales to cannabis control authorities.

For the year ended December 31, 2022, we had approximately $77.6 million in sales to cannabis control authorities in Canada.

Research and Development Activities and Intellectual Property

Cronos Research Labs

Cronos Research Labs Ltd.

(“Cronos Research Labs”) is our Israel-based global research and development center for innovation.

The state-of-the-art facility is equipped with advanced technology and analytical testing infrastructure and is home to an experienced team of scientific talent.

The Cronos Research Labs team is comprised of scientific researchers, mechanical, electrical and software engineers, and analytical and formulation scientists.

Cronos Group engages in both understanding the fundamental science behind the interactions of cannabinoids with each other and how those interactions can be leveraged to best deliver on the consumer’s needs.

Cronos Group’s work spans many aspects of cannabis research from strain development, to growing conditions to extraction technology to biosynthesis to product development, all supported by advances in analytical sciences.

This global R&D center is expected to significantly enhance Cronos Group’s innovation capabilities and accelerate development of the next-generation of cannabinoid products.

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 collaboration and license agreement between Ginkgo and the Company (the “Ginkgo Collaboration Agreement”) has enabled 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 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.

These cultured cannabinoids include rare cannabinoids that are difficult to produce at high purity and scale through traditional cultivation.

Cronos is 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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Ginkgo has filed certain patent applications pertaining to biosynthesis of cannabinoids to protect the intellectual property developed as part of the research progressing under the Ginkgo Strategic Partnership.

Under the partnership, Cronos Group is the exclusive licensee of the intellectual property covered by the patent applications for the target cannabinoids.

Under the partnership, Cronos is the exclusive licensee of the intellectual property covered by the patent applications for the target cannabinoids.

Cronos Fermentation

Cronos Fermentation is a GMP-standard fermentation and manufacturing facility in Winnipeg, Manitoba.

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 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.

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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 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 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.

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.

Yaron Fuchs, two of the world’s leading researchers in cannabis and skin stem cell research, respectively.

Meiri heads the Laboratory of Cannabis and Cancer Research with vast experience in cannabis and endocannabinoid research.

Fuchs heads the Laboratory of Stem Cell Biology and Regenerative Medicine with years of experience in the biology of the skin and its pathologies.

Development and implementation of the research is being conducted at Technion’s Laboratory of Cancer Biology and Cannabis Research and the Lorry I.

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

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.

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, chemical manufacturing production areas, three downstream processing plants, and bulk product and packaging capabilities.

The facility provides 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.

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

The Company achieved its first two equity milestones in 2021, and an additional three equity milestones in 2022.

The achievement of equity milestones for the remaining target cannabinoids generally will occur sequentially based on Ginkgo’s ability to produce such target cannabinoids as contemplated under the Ginkgo Collaboration Agreement.

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 recognition and differentiation in the U.S.

In the second quarter of 2022, the Company began a phased exit of the wholesale beauty category in the U.S.

business to focus the portfolio on adult-use product formats within the direct-to-consumer channel.

We believe the Company’s strong capitalization resulting from the Altria Investment, along with the Lord Jones ® 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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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.

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Competitive Conditions in Europe and Israel

We face competition when entering new markets in Europe and in Israel.

We face competition when entering new markets.

The principal factors on which we compete are product quality, innovation, intellectual property, brand recognition, price and physician familiarity.

We believe we are positioned to enter certain markets in Europe and Israel in a meaningful way while continuing to operate and penetrate the markets we currently serve, such as in Israel and Germany, due to our strong capitalization resulting from the Altria Investment, extensive experience and expertise in the highly regulated cannabis industry in Canada, which can be leveraged when entering new markets or growing existing operations, and strong partnerships with local pharmaceutical distributors.

We believe we are positioned to enter certain markets in Europe in a meaningful way while continuing to operate and penetrate the markets we currently serve, such as in Israel, due to our strong capitalization resulting from the Altria Investment, extensive experience and expertise in the highly regulated cannabis industry in Canada, which can be leveraged when entering new markets or growing existing operations, and strong partnerships with local distributors.

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.

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Altria Investment and Investor Rights Agreement

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.

As of December 31, 2022, Altria beneficially owned 41% of our common shares 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.

Prior to December 16, 2022, Altria had the right to acquire up to an additional 84,243,223 of our common shares at a per share exercise price of C$19.00 (the “ Warrant ”) .

On December 16, 2022, Altria notified the Company that its wholly owned subsidiary, Altria Summit LLC, irrevocably relinquished the Warrant and all rights that it may have held in the Warrant or any common shares underlying the Warrant for no consideration.

The voluntary irrevocable relinquishment of the Warrant does not affect any rights of Altria under the Investor Rights Agreement between the Company and Altria, dated March 8, 2019 (the “Investor Rights Agreement”), and Altria continues to beneficially own 156,573,537 of our common shares.

Investor Rights Agreement

In connection with the Altria Investment, we entered into the investor rights agreement (the “Investor Rights Agreement”) with Altria pursuant to which Altria received certain governance rights which are summarized below.

In connection with the Altria Investment, we entered into the Investor Rights Agreement with Altria pursuant to which Altria received certain governance rights that are summarized below.

Board Representation

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At least one Altria Nominee must be independent as long as Atria has the right to designate at least three Altria Nominees and the Altria Group’s beneficial ownership of our issued and outstanding common shares does not exceed 50%.

The Investor Rights Agreement also provides that, subject to certain exceptions, for so long as Altria is entitled to designate one or more Altria Nominees, we agree to appoint to each committee established by the Board such number of Altria Nominees that represents Altria’s proportionate share of the number of directors comprising the applicable Board committee (rounded up to the next whole number) based on the percentage of our issued and outstanding common shares beneficially owned by the Altria Group at the relevant time.

whole number) based on the percentage of our issued and outstanding common shares beneficially owned by the Altria Group at the relevant time.

Approval Rights

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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”);

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• 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).

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Pursuant to the terms of the Investor Rights Agreement, until the earlier of:

(i) the six-month anniversary of the date on which the Altria Group beneficially owns less than 10% of our issued and outstanding common shares;

(ii) the six-month anniversary of the termination of the Investor Rights Agreement,

• the six-month anniversary of the date on which the Altria Group beneficially owns less than 10% of our issued and outstanding common shares;

• the six-month anniversary of the termination of the Investor Rights Agreement,

Altria has agreed to make us its exclusive partner for pursuing cannabis opportunities throughout the world (subject to certain limited exceptions).

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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.

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Standstill Covenant

For a period commencing on the date of the Investor Rights Agreement and ending on the earlier of (i) the date on which the Altria Warrant has been exercised in full by Altria, and (ii) the expiry or termination of the Altria Warrant, the Investor Rights Agreement provides that, without the prior approval of an independent committee of the Board, no member of the Altria Group shall, directly or indirectly, acquire our common shares (other than upon settlement of any of our common shares issued, sold and delivered pursuant to the proper exercise of rights contemplated by the Altria Warrant Certificate or the exercise of pre-emptive rights or top-up rights).

The Altria Group, however, may make a take-over bid or commence a tender offer, in each case, to acquire not less than all of our issued and outstanding common shares (other than any such common shares beneficially owned by any member of the Altria Group and its affiliates) in accordance with applicable law.

The Altria Group is permitted to acquire our common shares in the open market upon the falling away of the standstill covenant under the Investor Rights Agreement.

The Investor Rights Agreement specifies that the standstill covenant falls away on the expiry or termination of the Warrant.

Registration Rights

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Human Capital Resources

Cronos Group 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 is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development.

With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio.

Our employees are critical to achieving this mission.

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

As of December 31, 2022, we had 447 full-time employees.

Of our full-time employees, 269 were in Canada, 69 were in the U.S., and 109 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.

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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 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.

These measures have included 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.

Currently, we continue to follow safety standards as recommended by applicable public health authorities, which may include isolation after symptoms and optional mask wearing.

Employee Engagement, Development and Training .

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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.

Employees are enabled to succeed through our communicated behaviors, development training opportunities, 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, 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 believe that a diverse, equitable and inclusive work environment mitigates the risk of groupthink, 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.

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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 seek to ensure this inclusivity is achieved through regular 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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hemp and its derivatives in the U.S.

The 2018 Farm Bill tasks the USDA with promulgating regulations in relation to the cultivation and production of U.S.

The 2018 Farm Bill also directs the USDA to promulgate federal regulations that would apply to the production of U.S.

The 2018 Farm Bill tasked the USDA with promulgating regulations in relation to the cultivation and production of U.S.

The 2018 Farm Bill also directed the USDA to promulgate federal regulations that would apply to the production of U.S.

hemp in every state that does not put forth a state U.S.

hemp plan for approval by the USDA.

In January 2021, the USDA issued a final rule governing U.S.

hemp production in the U.S.

with an effective date of March 22, 2021.

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.

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

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In many of these cases, the manufacturers made unsubstantiated claims about the product being able to treat medical conditions (e.g., cancer, Alzheimer’s disease, opioid withdrawal, anxiety and COVID-19) and had not obtained drug approvals.

Others were issued to companies marketing CBD products as dietary supplements despite those products which contain CBD not meeting the definition of a dietary supplement, adding CBD to human and animal foods and marketing CBD products for infants and children and other vulnerable populations, selling CBD products that people may confuse for traditional foods or beverages and that may result in unintentional consumption or overconsumption of CBD, and selling unapproved animal drugs containing CBD that are intended for use in food-producing animals.

Some of these letters were co-signed with the FTC and cited the companies for making claims about the efficacy of CBD and other ingredients which were not substantiated by competent and reliable scientific evidence.

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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.

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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.

Through these Consumer Updates, the FDA has noted that it has approved only one CBD product, a prescription drug product to treat three rare, severe forms of epilepsy.

The FDA has 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.

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, the Cannabis Product Committee, to explore potential pathways for various types of CBD products to be lawfully marketed.

The FDA held a public hearing in May 2019 to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling and sale of products containing cannabis or cannabis-derived compounds.

The rules and regulations and enforcement in this area continue to evolve and develop.

The rules and

regulations and enforcement in this area continue to evolve and develop.

In July 2020, the FDA sent to the White House Office of Management and Budget (the “OMB”) for review a draft guidance, “Cannabidiol Enforcement Policy,” the details of which were not made public.

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.

On January 26, 2023, the FDA stated its views publicly that a new regulatory pathway for CBD is needed and it is prepared to work with Congress to create such a pathway.

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.

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.

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Regulations and Compliance.

Cosmetics Regulation

On December 29, 2022, President Biden signed into law the Modernization of Cosmetics Regulation Act of 2022, which significantly expands the FDA’s enforcement authorities over cosmetics products and imposes new obligations on the cosmetics industry, including requirements relating to GMP, labeling, safety substantiation, facility registration and product listing with the FDA, adverse event reporting, recordkeeping, among others.

Under the new legislation, the FDA is required over the next several years to issue additional regulations and reports to clarify requirements.

Most enforcement of requirements under the new legislation will not go into effect until a year or later from the date of enactment;

however, we expect that regulation of our cosmetic products in the U.S.

will become increasingly complex, and compliance with regulatory requirements may take significant additional resources.

Regulatory Framework in Canada

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The Cannabis Act and Cannabis Regulations include, among other things, strict specifications for the plain packaging and labeling and analytical testing of all cannabis products as well as stringent physical and personnel security requirements for all federally licensed cultivation, processing and sales sites.

On October 17, 2019, the Regulations Amending the Cannabis Regulations (the “Further Regulations”) came into effect.

On October 17, 2019, the Regulations Amending the Cannabis Regulations (New Classes of Cannabis) (the “Further Regulations”) came into effect.

The Further Regulations amend the Cannabis Act and Cannabis Regulations to, among other things, permit the production and sale of cannabis extracts (including concentrates), cannabis topicals and cannabis edibles, in addition to dried cannabis, cannabis oil, fresh cannabis, cannabis plants and cannabis seeds for parties holding the appropriate licenses.

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.

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

Health Canada allows license holders to export 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.

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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 Cannabis Act requires the federal government to conduct a review of the Cannabis Act after three years, which commenced in September 2022 .

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.

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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.

As part of this consultation, Health Canada released proposed regulations that contemplate restricting 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.

The proposed amendments were pre-published in June 2021 and the consultation period closed in September 2021.

No expected in-force date has been publicly announced.

Provincial and Territorial Developments

While the Cannabis Act provides for the regulation by the Canadian federal government of, among other things, the commercial cultivation and processing of cannabis and the sale of medical cannabis, the various provinces and territories of Canada regulate certain aspects of adult-use cannabis, such as distribution, sale, minimum age requirements, places where cannabis can be consumed, and a range of other matters.

The governments of each Canadian province and territory have implemented their regulatory regimes for the distribution and sale of cannabis for adult-use purposes which continue to evolve over time.

While the Cannabis Act provides for the regulation by the Canadian federal government of, among other things, the commercial production of cannabis and the sale of medical cannabis, the various provinces and territories of Canada regulate certain aspects of adult-use cannabis, including but not limited to distribution, sale, minimum age requirements and places where cannabis can be consumed.

The governments of each Canadian province and territory have implemented regulatory regimes for the distribution and sale of cannabis for adult-use purposes which continue to evolve over time.

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.

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The SQDC has also placed significant restrictions on the types of edibles that may be sold through its channels, prohibiting edibles that are sweet, confectionary, dessert, chocolate or any other product attractive to persons under 21 years of age.

Similarly, the Prince Edward Island Cannabis Management Corporation and the province of Newfoundland and Labrador also do not allow cannabis vaporizers to be sold through their channels.

Similarly, the Prince Edward Island Cannabis Management Corporation does not allow cannabis vaporizers to be sold through its channels.

Licenses and Regulatory Framework in Israel

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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.

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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.

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

In February 2022, the CBD Committee published its recommendations.

The CBD Committee concluded that it would be advisable to exclude CBD from the Ordinance and to allow CBD use, other than in food and cosmetics products, provided that the aggregate concentration of THC does not exceed 0.2%.

The CBD Committee further recommended that during the next two years, CBD components not be approved as a component in food, food supplements, and cosmetics and that this issue be re-examined by a committee designated by the Israeli MOH.

In March 2022, the Israeli MOH adopted the conclusions of the CBD Committee and published a draft order for public comments which excludes CBD from the Ordinance while setting the threshold of aggregate concentration of THC (or any structural derivative of THC) in any product, to 0.3%.

Cosmetics and food products be handled by specific regulations in such fields.

As of January 2023, no final order was issued, and CBD has yet to be excluded from the Ordinance.

On January 31, 2022, the Economic Affairs Committee of the Israeli Parliament held a discussion regarding the adverse effect on the local cannabis industry of significant import of medical cannabis.

The discussion was concluded with a request to the Israeli MOH to study the matter and consider banning medical cannabis import until a balance is reached in the market between the import and export of medical cannabis.

The Israeli MOH has not yet publicly issued a study on the matter.

In July 2022, a committee appointed by the Director General of the Israeli MOH concluded that it would be advisable to reform the medical cannabis regulatory framework by transitioning from the grant of personal patient licenses to the issuance of prescriptions available through public healthcare services.

In August 2022, the new regulations adopting this reform (the “Reform Regulations”) were presented for public comments.

The Reform Regulations propose to amend the Ordinance to allow medical cannabis to be prescribed by trained and certified physicians and to be held and distributed by pharmacies.

The Reform Regulations will enter into effect 180 days following the adoption by the Israeli Parliament of the HMOs collection plan.

As of January 2023, the Reform Regulations have not yet been adopted and are not yet in effect.

In June 2022, 11 cannabis manufacturers (including Cronos Israel G.S Manufacturing Ltd.) (the “Petitioners”) filed an administrative petition to the District Court in Jerusalem regarding the Yakar’s decision to issue a constructive license (i.e., a license for dealing with medical cannabis, without a direct contact with the drug, such as brokering medical cannabis transactions) (the “Constructive License”).

The Petitioners claim that the procedure and requirements for other licenses (e.g., for cultivation or production), granted by the Yakar, are unreasonably more stringent than those of the Constructive License.

On January 5, 2023, the District Court in Jerusalem ordered the Israeli MOH to stop the issuance of Constructive Licenses, for 60 days, and to formulate a clear policy regarding the issuance of such Constructive Licenses.

On February 12, 2023, the director general of the Yakar published a decision regarding the Constructive Licenses, in response to the District Court’s order.

The decision clarifies the Yakar’s authority to grant Constructive Licenses for the import/export of medical cannabis.

Cronos Israel Licenses

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;

(1) full Good Agricultural Practices (“GAP”) certification, including a permit to propagate and 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, cannabis oils and pre-rolls.

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+1-416-504-0004.

We also provide access without charge to all of our SEC filings, including copies of this Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after filing or furnishing, on our website located at https://thecronosgroup.com .

We also provide access without charge to all of our SEC filings, including copies of this Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as Section 16 reports on Forms 3, 4 or 5, as soon as reasonably practicable after filing or furnishing, on our website located at https://thecronosgroup.com.

In addition, our website includes, among other things, our Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics is also available in print to any shareholder upon request without charge from our Corporate Secretary, corporate.secretary@thecronosgroup.com, telephone:

+1-416-504-0004.

Within the time period required by the SEC, we will post on our website any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any executive officer, director or senior financial officer.

From time to time, we use our website, as well as the following social media sites, as an additional means of disclosing public information to investors, the media and others interested in the Company.

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

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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