What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-08 · 214 added, 173 removed, 655 unchanged (37% of the section changed)

Financial Statements

Condensed Consolidated Balance Sheets as of June 30 , 2023 (Unaudited) and December 31, 2022

Condensed Consolidated Statements of Net Loss and Comprehensive Loss for the three and six months ended June 30 , 2023 and 2022 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022

Condensed Consolidated Statements of Net Loss and Comprehensive Loss for the three and ni ne months ended September 30, 2023 and 2022 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the three and ni ne months ended September 30, 2023 and 2022 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the ni ne months ended Septem ber 30, 2023 and 2022 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

3 unchanged sentences

dollars, except share amounts) Table of Contents

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

Current assets

27 unchanged sentences

Non-current portion of lease obligation 1,754 2,546

Deferred tax liability 675 —

Total liabilities 33,347 72,045

Shareholders’ equity

Share capital (authorized for issue as of June 30, 2023 and December 31, 2022:

shares outstanding as of June 30, 2023 and December 31, 2022:

Share capital (authorized for issue as of September 30, 2023 and December 31, 2022:

shares outstanding as of September 30, 2023 and December 31, 2022:

381,113,564 and 380,575,403 , respectively)

2 unchanged sentences

Retained earnings 461,509 490,682

Accumulated other comprehensive income (loss) 18,067 ( 797 )

Accumulated other comprehensive loss

( 2,110 ) ( 797 )

Total equity attributable to shareholders of Cronos Group 1,119,822 1,143,885

4 unchanged sentences

Cronos Group Inc.

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

Condensed Consolidated Statements of Net Loss and Comprehensive Loss

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

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

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

2023 2022 2023 2022

3 unchanged sentences

Cost of sales 20,124 17,265 52,614 50,540

Inventory write-down 716 — 716 —

Gross profit 3,970 3,144 9,996 14,176

9 unchanged sentences

Operating loss ( 21,775 ) ( 27,334 ) ( 63,164 ) ( 84,396 )

Other income (expense)

Interest income, net 13,375 7,208 37,021 13,028

3 unchanged sentences

Impairment loss on other investments — ( 28,972 ) — ( 40,210 )

Foreign currency transaction loss ( 3,174 ) ( 2,852 ) ( 4,817 ) ( 4,724 )

Foreign currency transaction gain (loss) 8,816 2,387 3,999 ( 2,337 )

Other, net 966 ( 581 ) 1,025 ( 397 )

Total other income 14,777 7,467 16,075 11,224

Total other income (expense) 18,931 ( 3,653 ) 35,006 7,571

Loss before income taxes ( 2,844 ) ( 30,987 ) ( 28,158 ) ( 76,825 )

3 unchanged sentences

Net loss ( 1,772 ) ( 36,886 ) ( 29,526 ) ( 89,877 )

Net loss attributable to non-controlling interest ( 137 ) ( 117 ) ( 225 ) ( 132 )

Net income (loss) attributable to non-controlling interest ( 128 ) 105 ( 353 ) ( 27 )

Net loss attributable to Cronos Group $ ( 1,644 ) $ ( 36,991 ) $ ( 29,173 ) $ ( 89,850 )

Comprehensive income (loss)

Comprehensive loss

Net loss $ ( 1,772 ) $ ( 36,886 ) $ ( 29,526 ) $ ( 89,877 )

Other comprehensive income (loss)

Foreign exchange gain (loss) on translation 16,580 ( 24,161 ) 18,994 ( 8,184 )

Comprehensive income (loss) 8,083 ( 44,499 ) ( 8,760 ) ( 61,175 )

Foreign exchange loss on translation ( 20,090 ) ( 60,572 ) ( 1,096 ) ( 68,756 )

Comprehensive loss ( 21,862 ) ( 97,458 ) ( 30,622 ) ( 158,633 )

Comprehensive income (loss) attributable to non-controlling interests ( 41 ) 201 ( 136 ) 62

Comprehensive income (loss) attributable to Cronos Group $ 8,170 $ ( 44,621 ) $ ( 8,665 ) $ ( 61,036 )

Comprehensive loss attributable to Cronos Group $ ( 21,821 ) $ ( 97,659 ) $ ( 30,486 ) $ ( 158,695 )

Net loss per share

1 unchanged sentence

Basic and diluted - discontinued operations ( 0.00 ) ( 0.01 ) ( 0.01 ) ( 0.03 )

Basic and diluted $ ( 0.02 ) $ ( 0.05 ) $ ( 0.07 ) $ ( 0.14 )

Basic and diluted - total

$ ( 0.00 ) $ ( 0.10 ) $ ( 0.08 ) $ ( 0.24 )

See notes to condensed consolidated interim financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Equity

For the six months ended June 30, 2023 and 2022

For the nine months ended September 30, 2023 and 2022

(In thousands of U.S.

10 unchanged sentences

Balance as of June 30, 2023 381,089,357 $ 613,152 $ 45,317 $ 463,153 $ 18,067 $ ( 3,016 ) $ 1,136,673

Activities relating to share-based compensation 24,207 138 1,816 — — — 1,954

Net loss — — — ( 1,644 ) — ( 128 ) ( 1,772 )

Foreign exchange gain (loss) on translation — — — — ( 20,177 ) 87 ( 20,090 )

Balance as of September 30, 2023 381,113,564 $ 613,290 $ 47,133 $ 461,509 $ ( 2,110 ) $ ( 3,057 ) $ 1,116,765

Cronos Group Inc.

Condensed Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2023 and 2022

(In thousands of U.S.

dollars, except share amounts, unaudited)

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

9 unchanged sentences

Balance as of June 30, 2022 377,896,371 $ 604,626 $ 35,198 $ 606,557 $ 41,688 $ ( 3,106 ) $ 1,284,963

Activities relating to share-based compensation 449,889 603 3,124 — — — 3,727

Net income (loss) — — — ( 36,991 ) — 105 ( 36,886 )

Foreign exchange gain (loss) on translation — — — — ( 60,668 ) 96 ( 60,572 )

Balance as of September 30, 2022 378,346,260 $ 605,229 38,322 569,566 ( 18,980 ) ( 2,905 ) 1,191,232

See notes to condensed consolidated interim financial statements.

3 unchanged sentences

dollars, except share amounts, unaudited) Table of Contents

Six months ended June 30,

Nine months ended September 30,

Operating activities

8 unchanged sentences

Changes in expected credit losses on long-term financial assets ( 1,339 ) ( 577 )

Foreign currency transaction loss 4,817 4,724

Foreign currency transaction (gain) loss

( 3,999 ) 2,337

Other non-cash operating activities, net ( 1,918 ) 3,680

13 unchanged sentences

Dividends received from equity method investment 1,301 —

Dividend proceeds

Proceeds from repayment on loan receivables 14,151 2,339

28 unchanged sentences

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

The Company continues to monitor the conflict in Israel and potential impacts the conflict could have on the Company’s personnel and business in Israel and the recorded amounts of assets and liabilities related to the Company’s operations in Israel.

The extent to which the conflict may impact the Company’s personnel, business and activities will depend on future developments which remain highly uncertain and cannot be predicted.

It is possible that the recorded amounts of assets and liabilities related to the Company’s operations in Israel could change materially in the near term.

(b) Basis of presentation

5 unchanged sentences

GAAP for complete financial statements.

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

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for any other reporting period.

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

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for any other reporting period.

These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”).

5 unchanged sentences

The exit of the U.S.

operations represented a strategic shift that has a major effect on the Company’s operations and financial results, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive income (loss).

Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S.

For more information, see Note 2 “ Discontinued Operations ”.

(d) Segment information

8 unchanged sentences

The following tables present the Company's revenue by major product category for continuing operations:

Three months ended June 30,

Cannabis flower $ 14,014 $ 15,739

Cannabis extracts 4,926 5,582

Net revenue $ 19,021 $ 21,602

Cronos Group Inc.

2 unchanged sentences

dollars, except share amounts) Table of Contents

Six months ended June 30,

Three months ended September 30,

Cannabis flower $ 17,414 $ 13,674

2 unchanged sentences

Net revenue $ 24,810 $ 20,409

Nine months ended September 30,

Cannabis flower $ 44,556 $ 48,038

Cannabis extracts 18,495 16,197

Other 275 481

Net revenue $ 63,326 $ 64,716

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

Three months ended June 30,

Three months ended September 30,

Canada $ 18,738 $ 13,370

Israel 5,673 7,039

Other countries 399 —

Net revenue $ 24,810 $ 20,409

Six months ended June 30,

Nine months ended September 30,

Canada $ 46,767 $ 41,335

Israel 16,160 23,381

Other countries 399 —

Net revenue $ 63,326 $ 64,716

2 unchanged sentences

The Company is exposed to credit risk from its operating activities, primarily accounts receivable and other receivables, and its investing activities, including cash held with banks and financial institutions, short-term investments and loans receivable.

The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $ 943,884 and $ 987,836 as of June 30, 2023 and December 31, 2022, respectively.

The Company’s maximum exposure to this risk is equal to the carrying amount of these financial assets, which amounted to $ 945,179 and $ 987,836 as of September 30, 2023 and December 31, 2022, respectively.

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

3 unchanged sentences

Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan and a failure to make contractual payments for a period of greater than 120 days past due.

As of June 30, 2023 and December 31, 2022, the Company had $ 69 and $ 219 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

As of June 30, 2023, the Company assessed that there is a concentration of credit risk, as 41 % of the Company’s accounts receivable were due from two customers with an established credit history with the Company.

As of September 30, 2023 and December 31, 2022, the Company had $ 45 and $ 2 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers.

As of September 30, 2023, the Company assessed that there is a concentration of credit risk, as 43 % of the Company’s accounts receivable were due from two customers with an established credit history with the Company.

As of December 31, 2022, 56 % of the Company’s accounts receivable were due from three customers with an established credit history with the Company.

The Company sells products to a limited number of major customers.

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

During the three months ended June 30, 2023, the Company earned a total net revenue before excise taxes of $ 16,839 from three major customers, together accounting for 67 % of the Company’s total net revenues before excise taxes.

During the three months ended June 30, 2022, the Company earned a total net revenue before excise taxes of $ 12,767 from three major customers, together accounting for 59 % of the Company’s total net revenues before excise taxes.

During the six months ended June 30, 2023, the Company earned a total net revenue before excise taxes of $ 34,732 from three major customers, together accounting for 67 % of the Company’s total net revenues before excise taxes.

During the six months ended June 30, 2022, the Company earned a total net revenue before excise taxes of $ 24,690 from three major customers, together accounting for 56 % of the Company’s total net revenues before excise taxes.

Cronos Group Inc.

2 unchanged sentences

dollars, except share amounts) Table of Contents

The Company sells products to a limited number of major customers.

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

During the three months ended September 30, 2023, the Company earned a total net revenue before excise taxes of $ 22,618 from three major customers, together accounting for 67 % of the Company’s total net revenues before excise taxes.

During the three months ended September 30, 2022, the Company earned a total net revenue before excise taxes of $ 12,094 from three major customers, together accounting for 60 % of the Company’s total net revenues before excise taxes.

During the nine months ended September 30, 2023, the Company earned a total net revenue before excise taxes of $ 57,398 from three major customers, together accounting for 67 % of the Company’s total net revenues before excise taxes.

During the nine months ended September 30, 2022, the Company earned a total net revenue before excise taxes of $ 36,564 from three major customers, together accounting for 58 % of the Company’s total net revenues before excise taxes.

(g) Adoption of new accounting pronouncements

On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU No.

2022-02 eliminates the existing troubled debt restructuring recognition and measurement guidance, and instead aligns the accounting treatment to that of other loan modifications.

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

ASU 2022-02 eliminates the existing troubled debt restructuring recognition and measurement guidance, and instead aligns the accounting treatment to that of other loan modifications.

The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

The adoption of ASU No.

2022-02 did not have a material impact on the Company’s condensed consolidated interim financial statements.

ASU 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

The adoption of ASU 2022-02 did not have a material impact on the Company’s condensed consolidated interim financial statements.

(h) New accounting pronouncements not yet adopted

In June 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU No.

2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value.

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value.

The amendments also require additional disclosures for equity securities subject to contractual sale restrictions.

ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, and we expect to adopt ASU 2022-03 prospectively.

The Company does not expect the adoption of ASU No.

2022-03 to have a material impact on its condensed consolidated interim financial statements.

The Company does not expect the adoption of ASU 2022-03 to have a material impact on its condensed consolidated interim financial statements.

Discontinued Operations

2 unchanged sentences

Accordingly, the net loss of the U.S.

operations for the three and six months ended June 30, 2023 and 2022 are reported separately as loss from discontinued operations on the condensed consolidated statements of net loss and comprehensive income (loss).

The following table presents the major components comprising loss from discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:

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

operations for the three and nine months ended September 30, 2023 and 2022 are reported separately as loss from discontinued operations on the condensed consolidated statements of net loss and comprehensive loss.

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

The following table presents the major components comprising loss from discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

1 unchanged sentence

Cost of sales — 2,501 2,044 6,274

Inventory write-down 839 — 839 —

Inventory write-down (i)

Gross profit — ( 1,987 ) ( 1,854 ) ( 1,973 )

2 unchanged sentences

Research and development

18 108 20 226

General and administrative 190 813 926 2,769

5 unchanged sentences

Interest income 1 1 9 2

Other, net (i)

Other, net (iii)

31 ( 112 ) ( 132 ) ( 159 )

Total other loss ( 160 ) ( 47 ) ( 155 ) ( 46 )

Total other income (loss)

32 ( 111 ) ( 123 ) ( 157 )

Loss before income taxes ( 182 ) ( 3,781 ) ( 4,238 ) ( 10,880 )

1 unchanged sentence

Net loss from discontinued operations $ ( 182 ) $ ( 3,781 ) $ ( 4,238 ) $ ( 10,880 )

(i) For the three and six months ended June 30, 2023 and June 30, 2022, Other, net related to loss on disposal of assets that were part of the U.S.

(ii) During the three and six months ended June 30, 2023, as a result of the exit of the U.S.

(i) For the nine months ended September 30, 2023, Inventory write-down relates to the disposal of obsolete inventory as a result of the exit of the U.S.

(ii) During the nine months ended September 30, 2023, as a result of the exit of the U.S.

operations, the Company recognized an impairment charge of $ 205 related to the right-of-use lease assets associated with the Company’s former U.S.

manufacturing facility in Los Angeles, California.

(iii) For the three and nine months ended September 30, 2023 and September 30, 2022, Other, net related to gain and loss on disposal of assets that were part of the U.S.

The following tables present the Company's discontinued operations revenue by major product category:

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

Three months ended June 30, 2023

Three months ended September 30,

Cannabis extracts — 514

Net revenue $ — $ 514

Six months ended June 30,

Nine months ended September 30,

Cannabis extracts 1,029 4,301

Net revenue $ 1,029 $ 4,301

The following tables summarize the Company’s discontinued operations restructuring activity for the three and six months ended June 30, 2023 and 2022:

Accrual as of April 1, 2023 Expenses Payments/Write-offs Accrual as of June 30, 2023

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

The following tables summarize the Company’s discontinued operations restructuring activity for the three and nine months ended September 30, 2023 and 2022:

Accrual as of June 30, 2023 Expenses Payments/Write-offs Accrual as of September 30, 2023

Employee Termination Benefits $ 219 $ 28 $ ( 169 ) $ 78

1 unchanged sentence

Total $ 311 $ 28 $ ( 261 ) $ 78

Accrual as of January 1, 2023 Expenses Payments/Write-offs Accrual as of June 30, 2023

Accrual as of January 1, 2023 Expenses Payments/Write-offs Accrual as of September 30, 2023

Employee Termination Benefits $ — $ 470 $ ( 392 ) $ 78

1 unchanged sentence

Total $ — $ 562 $ ( 484 ) $ 78

Accrual as of April 1, 2022 Expenses Payments/Write-offs Accrual as of June 30, 2022

Accrual as of June 30, 2022 Expenses Payments/Write-offs Accrual as of September 30, 2022

Employee Termination Benefits $ 66 $ 137 $ ( 93 ) $ 110

Total $ 66 $ 137 $ ( 93 ) $ 110

Accrual as of January 1, 2022 Expenses Payments/Write-offs Accrual as of June 30, 2022

Accrual as of January 1, 2022 Expenses Payments/Write-offs Accrual as of September 30, 2022

Employee Termination Benefits $ — $ 1,482 $ ( 1,372 ) $ 110

Total $ — $ 1,482 $ ( 1,372 ) $ 110

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

The following table presents a reconciliation of assets and liabilities of the discontinued operations presented in the condensed consolidated balance sheets:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

Current assets

15 unchanged sentences

Current liabilities of discontinued operations $ 210 $ 1,388

For the six months ended June 30, 2023, purchases of property plant and equipment related to discontinued operations were $ 67 .

For the six months ended June 30, 2022 purchases of property plant and equipment related to discontinued operations were $ 133 .

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

For the nine months ended September 30, 2023, purchases of property plant and equipment related to discontinued operations were $ 67 .

For the nine months ended September 30, 2022, purchases of property plant and equipment related to discontinued operations were $ 133 .

Inventory, net

Inventory, net is comprised of the following items:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

Raw materials $ 6,739 $ 7,421

3 unchanged sentences

Total $ 35,847 $ 37,559

Cronos Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of U.S.

dollars, except share amounts) Table of Contents

(a) Equity method investments, net

A reconciliation of the carrying amount of the investments in equity method investees, net is as follows:

Ownership interest As of June 30, 2023 As of December 31, 2022

Ownership interest As of September 30, 2023 As of December 31, 2022

Cronos Growing Company Inc.

2 unchanged sentences

$ 18,258 $ 18,755

On June 30, 2023, the Company received a dividend of C$ 1,750 ($ 1,322 ) from Cronos GrowCo, which reduced the Company’s carrying amount in the investment.

The following is a summary of the Company’s share of net gain (loss) from equity method investments:

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

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

2023 2022 2023 2022

8 unchanged sentences

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

As of June 30, 2023, the Company’s proforma ownership percentage in PharmaCann on a fully-diluted basis was approximately 6.3 %.

As of September 30, 2023, the Company’s proforma ownership percentage in PharmaCann on a fully-diluted basis was approximately 6.3 %.

The decrease in the Company’s ownership percentage since acquisition does not materially affect the Company’s rights under the PharmaCann Option.

The PharmaCann Option is measured at fair value on a non-recurring basis and is a level 3 asset.

See Note 11 “ Fair Value Measurements ” for more information on the fair value hierarchy.

Vitura Health Limited (formerly known as Cronos Australia)

1 unchanged sentence

The investment is considered an equity security with a readily determinable fair value.

Changes in the fair value of the investment are recorded as gain (loss) on revaluation of financial instruments on the condensed consolidated statements of net loss and comprehensive income (loss).

The PharmaCann Option is measured at fair value on a non-recurring basis and is a level 3 asset.

See Note 11 “ Fair Value Measurements ” for more information on the fair value hierarchy.

Changes in the fair value of the investment are recorded as gain (loss) on revaluation of financial instruments on the condensed consolidated statements of net loss and comprehensive loss.

During the three months ended September 30, 2023, Vitura declared a dividend of A$ 0.01 per ordinary share.

Based on the Company’s holding of 55,176,065 ordinary shares in the capital of Vitura, the Company recorded dividend income of $ 346 within other, net on the condensed consolidated statements of net loss and comprehensive loss.

Cronos Group Inc.

3 unchanged sentences

The following table summarizes the Company’s other investments activity:

As of April 1, 2023 Unrealized gain Impairment charges Foreign exchange effect As of June 30, 2023

As of July 1, 2023 Unrealized loss Impairment charges Foreign exchange effect As of September 30, 2023

PharmaCann $ 49,000 $ — $ — $ — $ 49,000

1 unchanged sentence

$ 67,925 $ ( 5,204 ) $ — $ ( 578 ) $ 62,143

As of January 1, 2023 Unrealized loss Impairment charges Foreign exchange effect As of June 30, 2023

As of January 1, 2023 Unrealized loss Impairment charges Foreign exchange effect As of September 30, 2023

PharmaCann $ 49,000 $ — $ — $ — $ 49,000

1 unchanged sentence

$ 70,993 $ ( 7,933 ) $ — $ ( 917 ) $ 62,143

As of April 1, 2022 Unrealized loss Impairment charges Foreign exchange effect As of June 30, 2022

As of July 1, 2022 Unrealized gain Impairment charges Foreign exchange effect As of September 30, 2022

PharmaCann $ 99,154 $ — $ ( 28,972 ) $ — $ 70,182

1 unchanged sentence

$ 108,669 $ 17,118 $ ( 28,972 ) $ ( 2,258 ) $ 94,557

As of January 1, 2022 Unrealized gain Impairment charges Foreign exchange effect As of June 30, 2022

As of January 1, 2022 Unrealized gain Impairment charges Foreign exchange effect As of September 30, 2022

PharmaCann $ 110,392 $ — $ ( 40,210 ) $ — $ 70,182

1 unchanged sentence

$ 118,392 $ 19,114 $ ( 40,210 ) $ ( 2,739 ) $ 94,557

During the six months ended June 30, 2022, the Company identified adverse forecast changes in the financial performance of PharmaCann as indicators of impairment related to the PharmaCann Option and conducted analyses comparing the PharmaCann Option’s carrying amount to its estimated fair value.

During both the three months ended March 31, 2022, and the three months ended September 30, 2022, the Company identified adverse forecast changes in the financial performance of PharmaCann as indicators of impairment related to the PharmaCann Option and conducted analyses comparing the PharmaCann Option’s carrying amount to its estimated fair value.

The fair value was estimated using a combination of the market and income approaches.

1 unchanged sentence

Under the market valuation approach, the key assumptions that require judgment under the Guideline Public Companies method are cash flow projections, selected multiples and the discount for lack of marketability.

As a result of this analysis, the Company recorded a non-cash impairment charge of $ 11,238 during the six months ended June 30, 2022, as the difference between the carrying amount of the PharmaCann Option and its estimated fair value in the condensed consolidated statements of net loss and comprehensive income (loss).

As a result of this analysis, the Company recorded non-cash impairment charges of $ 11,238 and $ 28,972 during the three months ended March 31, 2022, and September 30, 2022, respectively, as the difference between the carrying amount of the PharmaCann Option and its estimated fair value in the condensed consolidated statements of net loss and comprehensive loss.

Cronos Group Inc.

4 unchanged sentences

Loans receivable, net consists of the following:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

GrowCo Credit Facility

12 unchanged sentences

On August 23, 2019, the Company, as lender, and Cronos GrowCo, as borrower, entered into a senior secured credit agreement for an aggregate principal amount of C$ 100,000 (the “GrowCo Credit Facility”).

The GrowCo Credit Facility is secured by substantially all present and after-acquired personal and real property of Cronos GrowCo.

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

As of both June 30, 2023 and December 31, 2022, Cronos GrowCo had drawn C$ 104,000 ($ 78,538 and $ 76,730 , respectively) from the GrowCo Credit Facility.

As of both September 30, 2023, and December 31, 2022, Cronos GrowCo had drawn C$ 104,000 ($ 76,600 and $ 76,730 , respectively) from the GrowCo Credit Facility.

The interest rate on the outstanding borrowings is the Canadian Prime Rate plus 1.25 %, with interest payments due on December 2021, December 2022, and quarterly thereafter.

Principal payments of C$ 1,000 commenced in March 2022 and are due quarterly thereafter.

As of June 30, 2023, Cronos GrowCo had repaid C$ 8,167 ($ 6,167 ) and C$ 16,486 ($ 12,450 ) in principal and interest, respectively, under the terms of the GrowCo Credit Facility.

For the three months ended September 30, 2023, Cronos GrowCo repaid C$ 1,666 ($ 1,076 ) in principal and C$ 2,032 ($ 1,189 ) in interest related to the GrowCo Credit Facility.

For the nine months ended September 30, 2023, Cronos GrowCo repaid C$ 5,833 ($ 4,170 ) in principal and C$ 11,458 ($ 8,430 ) in interest related to the GrowCo Credit Facility.

As of September 30, 2023, Cronos GrowCo had repaid C$ 9,833 ($ 7,243 ) and C$ 18,518 ($ 13,639 ) in principal and interest, respectively, under the terms of the GrowCo Credit Facility.

Mucci Promissory Note

4 unchanged sentences

As of July 1, 2022, interest was accrued and to be paid in cash beginning on July 1, 2023.

On June 30, 2023, Mucci made a payment of C$ 1,750 (approximately $ 1,322 ) under the Mucci Promissory Note, with C$ 1,187 ($ 897 ) related to accrued interest and C$ 563 ($ 425 ) related to outstanding principal.

Prior to 2023, there were no repayments of principal or interest on the Mucci Promissory Note.

For the nine months ended September 30, 2023, Mucci repaid C$ 563 ($ 415 ) in principal and C$ 1,187 ($ 874 ) in interest related to the Mucci Promissory Note.

For the three months ended September 30, 2023, there were no repayments of principal or interest on the Mucci Promissory Note.

Cannasoul Collaboration Loan

As of both June 30, 2023 and December 31, 2022, Cannasoul Lab Services Ltd.

As of both September 30, 2023 and December 31, 2022, Cannasoul Lab Services Ltd.

has received ILS 8,297 (approximately $ 2,175 and $ 2,359 , respectively), from the Cannasoul Collaboration Loan.

3 unchanged sentences

dollars, except share amounts) Table of Contents

Expected credit loss allowances on the Company’s long-term financial assets for the three and six months ended June 30, 2023 and 2022 were comprised of the following items:

As of April 1, 2023 Increase (decrease) (i)

Foreign exchange effect As of June 30, 2023

Expected credit loss allowances on the Company’s long-term financial assets for the three and nine months ended September 30, 2023 and 2022 were comprised of the following items:

As of July 1, 2023 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2023

GrowCo Credit Facility $ 11,579 $ ( 199 ) $ ( 283 ) $ 11,097

2 unchanged sentences

$ 12,168 $ ( 193 ) $ ( 299 ) $ 11,676

As of April 1, 2022 Increase (decrease) (i)

Foreign exchange effect As of June 30, 2022

As of July 1, 2022 Increase (decrease) (i)

Foreign exchange effect As of September 30, 2022

GrowCo Credit Facility $ 13,293 $ 74 $ ( 929 ) $ 12,438

3 unchanged sentences

As of January 1, 2023 Increase (decrease) (i)

Foreign exchange effect As of June 30, 2023

Foreign exchange effect As of September 30, 2023

GrowCo Credit Facility $ 12,455 $ ( 1,348 ) $ ( 10 ) $ 11,097

2 unchanged sentences

$ 13,066 $ ( 1,339 ) $ ( 51 ) $ 11,676

As of January 1, 2022 Increase (decrease) Foreign exchange effect As of June 30, 2022

As of January 1, 2022 Increase (decrease) Foreign exchange effect As of September 30, 2022

GrowCo Credit Facility $ 14,089 $ ( 590 ) $ ( 1,061 ) $ 12,438

2 unchanged sentences

$ 14,594 $ ( 577 ) $ ( 1,121 ) $ 12,896

(i) During the three and six months ended June 30, 2023, $ 382 and $ 1,146 , respectively, were recorded as decreases to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive income (loss) as a result of principal and interest payments made by Cronos GrowCo reducing our expected credit losses on loans receivable.

During both the three and six months ended June 30, 2022, $ 655 was recorded as a decrease to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive income (loss) as a result of adjustments to our expected credit losses.

(i) During the three and nine months ended September 30, 2023, $ 193 and $ 1,339 , respectively, were recorded as decreases to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive loss as a result of principal and interest payments made by Cronos GrowCo reducing our expected credit losses on loans receivable.

During the three months ended September 30, 2022, $ 78 was recorded as an increase to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive loss as a result of adjustments to our expected credit losses.

During the nine months ended September 30, 2022, $ 577 was recorded as a decrease to general and administrative expenses on the condensed consolidated statements of net loss and comprehensive loss as a result of adjustments to our expected credit losses.

Derivative Liabilities

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

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

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

provided that if the consideration paid in connection with any such issuance is non-cash, the price per common share of the Company that would have been received had such common shares been issued for cash consideration will be determined by an independent committee (acting reasonably and in good faith);

10 unchanged sentences

The Pre-emptive Rights, and fixed price Top-up Rights have been classified as derivative liabilities on the Company’s consolidated balance sheet.

As of June 30, 2023, Altria beneficially held 156,573,537 of the Company’s common shares, an approximate 41 % ownership interest in the Company (calculated on a non-diluted basis).

As of September 30, 2023, Altria beneficially held 156,573,537 of the Company’s common shares, an approximate 41 % ownership interest in the Company (calculated on a non-diluted basis).

Reconciliation of the Company’s derivative liabilities activity are as follows:

As of April 1, 2023 Revaluation (gain) loss Foreign exchange effect As of June 30, 2023

As of July 1, 2023 Revaluation (gain) loss Foreign exchange effect As of September 30, 2023

Pre-emptive Rights $ 37 $ ( 7 ) $ ( 1 ) $ 29

1 unchanged sentence

$ 37 $ ( 8 ) $ — $ 29

As of April 1, 2022 Revaluation gain Foreign exchange effect

As of June 30, 2022

As of July 1, 2022 Revaluation gain Foreign exchange effect

As of September 30, 2022

Altria Warrant $ 491 $ ( 336 ) $ ( 121 ) $ 34

2 unchanged sentences

$ 574 $ ( 375 ) $ ( 126 ) $ 73

As of January 1, 2023 Revaluation (gain) loss Foreign exchange effect As of June 30, 2023

As of January 1, 2023 Revaluation (gain) loss Foreign exchange effect As of September 30, 2023

Pre-emptive Rights $ — $ 29 — $ 29

1 unchanged sentence

$ 15 $ 14 $ — $ 29

As of January 1, 2022 Revaluation gain Foreign exchange effect As of June 30, 2022

As of January 1, 2022 Revaluation gain Foreign exchange effect As of September 30, 2022

Altria Warrant $ 13,720 $ ( 13,592 ) $ ( 94 ) $ 34

10 unchanged sentences

The fair values of the derivative liabilities were determined using the Black-Scholes pricing model using the following inputs:

As of June 30, 2023

As of September 30, 2023

Pre-emptive Rights Top-up Rights

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

As of June 30, 2023 and December 31, 2022, the risk-free interest rate uses a range of approximately 4.46 % to 4.89 % and 3.81 % to 4.37 %, respectively, for the Pre-emptive Rights and Top-up Rights.

As of September 30, 2023 and December 31, 2022, the risk-free interest rate uses a range of approximately 4.79 % to 5.05 % and 3.81 % to 4.37 %, respectively, for the Pre-emptive Rights and Top-up Rights.

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

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

As of June 30, 2023 and December 31, 2022, the expected life uses a range of approximately 1.00 years to 2.25 years and 0.25 years to 2.75 years, respectively, for the Pre-emptive Rights and Top-up Rights.

As of September 30, 2023 and December 31, 2022, the expected life uses a range of approximately 0.75 years to 2.00 years and 0.25 years to 2.75 years, respectively, for the Pre-emptive Rights and Top-up Rights.

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

3 unchanged sentences

On February 27, 2023, the Board approved revisions to the Realignment, which are expected to result in the Company maintaining select components of its operations at the Peace Naturals Campus, namely distribution warehousing, certain research and development activities and manufacturing of certain of the Company’s products, while seeking to sell and lease back all or some of the Peace Naturals Campus or to lease certain portions of the Peace Naturals Campus to third parties.

In the third quarter of 2023, the Board approved revisions to the Realignment to wind-down operations at its Winnipeg, Manitoba facility (“Cronos Fermentation”), list the Cronos Fermentation facility for sale, and implement additional organization-wide cost reductions as the Company continues its Realignment initiatives.

The Realignment initiatives were intended to position the Company to drive profitable and sustainable growth over time.

During the three and six months ended June 30, 2022, the Company recognized $ 978 and $ 3,009 , respectively, of restructuring costs in connection with the Realignment, including the change in the nature of operations at the Peace Naturals Campus.

During the three months ended September 30, 2023, the Company performed an assessment under ASC 360, Property Plant and Equipment , of the recovery of the carrying value of the Canada asset group, which includes Cronos Fermentation, and determined the carrying value of the asset group was recoverable.

As of September 30, 2023, Cronos Fermentation did not meet the criteria to be classified as held-for-sale.

During both the three and nine months ended September 30, 2023, the Company incurred $ 1,423 of restructuring costs in its continuing operations in connection with the Realignment.

During the three and nine months ended September 30, 2022, the Company recognized $ 387 and $ 3,396 , respectively, of restructuring costs in continuing operations in connection with the Realignment.

Charges related thereto include employee-related costs such as severance, relocation and other termination benefits, as well as contract termination and other related costs.

During the three and six months ended June 30, 2023, the Company incurred no restructuring costs in its continuing operations.

Restructuring costs incurred in the Company’s discontinued operations during the three and six months ended June 30, 2023 and 2022 is presented in Note 2 “ Discontinued Operations .”

During the three and nine months ended September 30, 2023, as a result of the decision to wind down operations at Cronos Fermentation, the Company recognized an inventory write-down of $ 716 related to certain obsolete raw materials.

Restructuring costs and inventory write-downs incurred in the Company’s discontinued operations during the three and nine months ended September 30, 2023 and 2022 is presented in Note 2 “ Discontinued Operations .”

Cronos Group Inc.

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dollars, except share amounts) Table of Contents

The following table summarizes the Company’s restructuring activity for the three and six months ended June 30, 2022:

Accrual as of April 1, 2022 Expenses Payments/Write-offs Accrual as of June 30, 2022

The following table summarizes the Company’s restructuring activity for the three and nine months ended September 30, 2023 and 2022:

Accrual as of July 1, 2023 Expenses Payments/Write-offs Accrual as of September 30, 2023

Employee Termination Benefits $ 61 $ 1,420 $ ( 947 ) $ 534

1 unchanged sentence

Total $ 61 $ 1,423 $ ( 950 ) $ 534

Accrual as of January 1, 2022 Expenses Payments/Write-offs Accrual as of June 30, 2022

Accrual as of January 1, 2023 Expenses Payments/Write-offs Accrual as of September 30, 2023

Employee Termination Benefits $ 403 $ 1,420 $ ( 1,289 ) $ 534

1 unchanged sentence

Total $ 424 $ 1,423 $ ( 1,313 ) $ 534

Accrual as of July 1, 2022 Expenses Payments/Write-offs Accrual as of September 30, 2022

Employee Termination Benefits $ 822 $ 195 $ ( 569 ) $ 448

Other Restructuring Costs 21 192 ( 192 ) 21

Total $ 843 $ 387 $ ( 761 ) $ 469

Accrual as of January 1, 2022 Expenses Payments/Write-offs Accrual as of September 30, 2022

Employee Termination Benefits $ — $ 1,785 $ ( 1,337 ) $ 448

Other Restructuring Costs — 1,611 ( 1,590 ) 21

Total $ — $ 3,396 $ ( 2,927 ) $ 469

Share-based Compensation

2 unchanged sentences

The Company can no longer make grants under the Prior Option Plans or the Employment Inducement Award Plan.

The following table summarizes the total share-based compensation expense associated with the Company’s stock options, RSUs and liability-classified awards for the three and six months ended June 30, 2023 and 2022:

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

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

2023 2022 2023 2022

1 unchanged sentence

RSUs 1,922 2,573 5,682 5,902

Liability-classified awards (i)

Total share-based compensation $ 1,957 $ 4,247 $ 6,823 $ 10,446

(b) Stock options

Vesting conditions for grants of options are determined by the Compensation Committee.

(i) Represents share-based payment awards conditionally approved for grant in the three months ended September 30, 2022 to one of the Company’s former executives for a fixed monetary value, but a variable number of shares.

These awards were liability-classified until the number of shares was determined.

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

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

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dollars, except share amounts) Table of Contents

The following is a summary of the changes in stock options for the six months ended June 30, 2023 and 2022:

The following is a summary of the changes in stock options for the nine months ended September 30, 2023 and 2022:

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

3 unchanged sentences

Cancellation, forfeiture and expiry of options 7.75 ( 3,435,716 )

Balance as of June 30, 2023 $ 14.50 2,103,201 2.34

Exercisable as of June 30, 2023 $ 18.72 1,426,612 1.00

Balance as of September 30, 2023 $ 14.50 2,103,201 2.09

Exercisable as of September 30, 2023 $ 16.02 1,845,841 1.50

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

3 unchanged sentences

Cancellation, forfeiture and expiry of options 11.26 ( 186,992 )

Balance as of June 30, 2022 $ 8.61 7,369,075 1.53

Exercisable as of June 30, 2022 $ 8.28 4,686,991 1.04

Balance as of September 30, 2022 $ 9.71 6,168,646 2.97

Exercisable as of September 30, 2022 $ 9.99 4,037,319 1.99

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

For the six months ended June 30, 2023, the weighted-average fair value per option at grant date was C$ 2.07 .

For the nine months ended September 30, 2023, the weighted-average fair value per option at grant date was C$ 2.07 .

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

8 unchanged sentences

The following table summarizes stock options outstanding:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

2020 Omnibus Plan 702,264 2,788,947

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dollars, except share amounts) Table of Contents

The following is a summary of the changes in RSUs for the six months ended June 30, 2023 and 2022:

(b) Restricted share units

The following is a summary of the changes in RSUs for the nine months ended September 30, 2023 and 2022:

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

4 unchanged sentences

Cancellation and forfeitures 3.65 ( 510,342 )

Balance as of June 30, 2023 $ 3.87 7,554,739

Balance as of September 30, 2023 $ 3.86 7,334,572

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

4 unchanged sentences

Cancellation and forfeitures 6.91 ( 168,610 )

Balance as of June 30, 2022 $ 4.84 4,915,580

Balance as of September 30, 2022 $ 4.77 5,327,894

(i) RSUs granted in the period vest annually in equal installments over a three-year period from either the grant date or after a three or five year “cliff-period.” All RSUs are subject to such holder’s continued employment through each vesting date.

1 unchanged sentence

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

(d) Deferred share units

The following is a summary of the changes in DSUs for the six months ended June 30, 2023 and 2022:

The following is a summary of the changes in DSUs for the nine months ended September 30, 2023 and 2022:

Financial liability Number of DSUs

Balance as of January 1, 2023 $ 674 265,732

Granting and vesting of DSUs 450 255,947

Gain on revaluation ( 82 ) —

Balance as of June 30, 2023 $ 524 265,732

Balance as of September 30, 2023 $ 1,042 521,679

Financial liability Number of DSUs

1 unchanged sentence

Gain on revaluation ( 116 ) —

Balance as of June 30, 2022 $ 247 104,442

Balance as of September 30, 2022 $ 292 104,442

Cronos Group Inc.

4 unchanged sentences

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

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

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

2023 2022 2023 2022

3 unchanged sentences

381,100,005 378,114,160 380,900,334 376,400,902

Basic loss from continuing operations per share $ ( 0.01 ) $ ( 0.05 ) $ ( 0.06 ) $ ( 0.12 )

Diluted loss per share from continuing operations $ ( 0.01 ) $ ( 0.05 ) $ ( 0.06 ) $ ( 0.12 )

Basic earnings (loss) from continuing operations per share $ ( 0.00 ) $ ( 0.09 ) $ ( 0.07 ) $ ( 0.21 )

Diluted earnings (loss) per share from continuing operations $ ( 0.00 ) $ ( 0.09 ) $ ( 0.07 ) $ ( 0.21 )

Loss from discontinued operations attributable to the shareholders of Cronos Group $ ( 182 ) $ ( 3,781 ) $ ( 4,238 ) $ ( 10,880 )

4 unchanged sentences

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

For the three months ended June 30, 2023 and 2022, total securities of 28,769,758 and 119,589,123 , respectively, were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive.

For the six months ended June 30, 2023 and 2022, total securities of 29,428,093 and 118,906,603 , respectively, were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive.

For the three months ended September 30, 2023 and 2022, total securities of 23,340,811 and 117,100,621 , respectively, were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive.

For the nine months ended September 30, 2023 and 2022, total securities of 27,399,000 and 118,304,608 , respectively, were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive.

Commitments and Contingencies

24 unchanged sentences

On September 26, 2022, the Court of Appeal for Ontario reversed the Superior Court’s dismissal of the leave and certification motions, granted the plaintiff leave to proceed to bring a claim for misrepresentation under the Ontario Securities Act, and remitted the certification motion back to the Superior Court.

On October 10, 2023, the Superior Court certified a class that includes shareholders that acquired shares on the TSX and NASDAQ exchanges.

(ii) Regulatory reviews relating to restatements

23 unchanged sentences

The lawsuit seeks a total of ILS 420 million.

The Cronos Israel defendants moved to dismiss the action on August 13, 2023.

Fair Value Measurements

5 unchanged sentences

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis:

June 30, 2023

September 30, 2023

Level 1 Level 2 Level 3 Total

15 unchanged sentences

Derivative liabilities — — 15 15

(i) As of June 30, 2023 and December 31, 2022, the Company’s influence on Vitura is deemed non-significant and the investment is considered an equity security with a readily determinable fair value.

(i) As of September 30, 2023 and December 31, 2022, the Company’s influence on Vitura is deemed non-significant and the investment is considered an equity security with a readily determinable fair value.

See Note 4 “ Investments ” for additional information.

1 unchanged sentence

The following tables present information about the Company’s assets that are measured at fair value on a non-recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

As of June 30, 2023

As of September 30, 2023

Level 1 Level 2 Level 3 Total

10 unchanged sentences

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 both June 30, 2023 and December 31, 2022, the Company’s ownership percentage in PharmaCann on a fully diluted basis was approximately 6.3 %.

As of both September 30, 2023 and December 31, 2022, the Company’s ownership percentage in PharmaCann on a fully diluted basis was approximately 6.3 %.

See Note 4 “ Investments .”

2 unchanged sentences

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

During the six months ended June 30, 2022, the Company recognized an impairment charge of $ 1,986 related to the right-of-use lease asset associated with the Company’s corporate headquarters, encompassing approximately 29,000 square feet, in Toronto, Ontario, Canada, for which the Company determined it would seek a sublease.

In addition, the Company recognized an impairment charge of $ 1,507 during the six months ended June 30, 2022 related to leasehold improvements and other office equipment that it plans to include in any potential sublease agreement.

During the nine months ended September 30, 2022, the Company recognized an impairment charge of $ 1,986 related to the right-of-use lease asset associated with the Company’s corporate headquarters, encompassing approximately 29,000 square feet, in Toronto, Ontario, Canada, for which the Company determined it would seek a sublease.

In addition, the Company recognized an impairment charge of $ 1,507 during the nine months ended September 30, 2022 related to leasehold improvements and other office equipment that it plans to include in any potential sublease agreement.

The determination to seek a sublease of the property and include leasehold improvements and other office equipment in any potential sublease agreement triggered the impairment charges.

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

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

Related Party Transactions

3 unchanged sentences

The Company made the following purchases of cannabis products from Cronos GrowCo:

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

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

2023 2022 2023 2022

4 unchanged sentences

dollars, except share amounts) Table of Contents

As of June 30, 2023, and December 31, 2022, the Company had payables outstanding to Cronos GrowCo of $ 2,682 and $ 2,519 , respectively.

As of September 30, 2023, and December 31, 2022, the Company had payables outstanding to Cronos GrowCo of $ 307 and $ 2,519 , respectively.

During the third quarter of 2023, the Company, as supplier, entered into a cannabis germplasm supply agreement with Cronos GrowCo as buyer.

For germplasm supplied to GrowCo whose cannabis Cronos expects to purchase, a deferred inventory liability is recorded and subsequently amortized into cost of goods sold.

For germplasm supplied to GrowCo whose cannabis Cronos expects to be sold to unrelated third parties, revenue is recorded.

In relation to this agreement, Cronos recognized $ 353 of revenue and a reduction to cost of goods sold of $ 181 during both the three and nine months ended September 30, 2023.

Also in relation to this agreement, Cronos recorded $ 126 of deferred inventory liabilities and a reduction to inventory of $ 2 as of September 30, 2023.

Also during the third quarter of 2023, the Company sold certain held for sale assets with carrying value of $ 324 and certain other previously expensed assets with a zero net book value to Cronos GrowCo and recognized a $ 433 gain.

Additionally, on August 23, 2019, the Company, as lender, and Cronos GrowCo, as borrower, entered into the GrowCo Facility.

3 unchanged sentences

The vendor then subcontracted out a portion of those services to another company whose chief executive officer is an immediate family member of an executive of the Company.

The Company has no direct contractual relationship with the related party.

During the three and six months ended June 30, 2023, the Company purchased $ 603 and $ 1,436 , respectively, of products and services under this agreement and had outstanding accounts payable related to the agreement of $ 45 and $ nil as of June 30, 2023 and December 31, 2022, respectively.

Subsequent Events

(a) Planned Exit of the Fermentation Facility

On August 4, 2023, the Board approved plans to wind-down operations at its Winnipeg, Manitoba facility (“Cronos Fermentation”) and list the Cronos Fermentation facility for sale.

The Company expects to incur approximately $ 1,200 in restructuring costs associated with the exit of Cronos Fermentation facility.

These charges include employee-related costs such as severance, relocation and other termination benefits, as well as contract termination and other related costs, which are expected to be incurred primarily in the second half of 2023, but do not include any impairment charges to property, plant or equipment.

These anticipated charges are subject to a number of assumptions, including the ability to wind down Cronos Fermentation efficiently and effectively, the length of the sales process, the bids received in the sale process, market factors and others.

As a result of these assumptions, actual results may differ materially.

The Company cannot, at this time, quantify the impairment charges, if any, to long-lived assets associated with the wind-down.

(b) Cost Reductions

Also on August 4, 2023, the Board approved additional organization-wide cost reductions.

Expected restructuring costs of approximately $ 2,000 , with the majority expected to be incurred in the second half of 2023, include mostly one-time employee-related severance charges.

These anticipated costs are subject to a number of assumptions, including the ability of the Company to effectively and efficiently further streamline operations, the number of employee reductions, the timing of employee reductions, the level of the Company’s operations, market factors and others.

As a result of these assumptions, actual results may differ materially.

In late October 2023, the Company was negotiating a direct contract with the related party subcontractor.

During the three and nine months ended September 30, 2023, the Company purchased $ 406 and $ 1,842 , respectively, of products and services under this agreement and had outstanding accounts payable related to the agreement of $ 15 and $ nil as of September 30, 2023 and December 31, 2022, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements