What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 248 added, 154 removed, 311 unchanged (56% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read together with other information, including Cronos Group’s condensed consolidated interim financial statements and the related notes to those statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (this “Quarterly Report”), consolidated financial statements appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), Part I, Item 1A, Risk Factors, of the Annual Report and Part II, Item 1A, Risk Factors, of this Quarterly Report.

The following discussion and analysis should be read together with other information, including Cronos Group’s condensed consolidated interim financial statements and the related notes to those statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this “Quarterly Report”), consolidated financial statements appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), Part I, Item 1A, Risk Factors, of the Annual Report and Part II, Item 1A, Risk Factors, of this Quarterly Report.

Forward-Looking Statements

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Forward-Looking Statements include, but are not limited to, statements with respect to:

• the ongoing impact of the public investigation into Canadian licensed producers of alleged dumping of medical cannabis imports from Canada into Israel by the Israel Trade Levies Commissioner of the Israel Ministry of Economy and Industry (the “Anti-Dumping Investigation”);

• expectations related to the conflict involving Israel, Hamas, Iran and other stakeholders in the region (the “Middle East Conflict”) and its impact on our operations in Israel, the supply of product in the market and the demand for product by medical patients in Israel, as well as any regional or global escalations and their impact to global commerce and stability;

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• expectations related to our announced realignment (the “Realignment”) and any progress, challenges and effects related thereto as well as changes in strategy, metrics, investments, reporting structure, costs, operating expenses, employee turnover and other changes with respect thereto;

• the timing of the change in the nature of operations at, and the announced sale-leaseback of, our facility in Stayner, Ontario (the “Peace Naturals Campus”) and the expected costs and benefits from the wind-down of certain production activities at the Peace Naturals Campus;

• our ability to complete the sale and leaseback of the Peace Naturals Campus pursuant to the agreement with Future Farmco Canada Inc.

(“Future Farmco”);

• our ability to acquire raw materials from suppliers, including Cronos Growing Company Inc.

(“Cronos GrowCo”), and the costs and timing associated therewith;

• the timing of the change in the nature of operations at our facility in Stayner, Ontario (the “Peace Naturals Campus”);

• our ability to acquire raw materials from suppliers, including Cronos GrowCo, and the costs and timing associated therewith;

• expectations regarding the potential success of, and the costs and benefits associated with, our joint ventures, strategic alliances and equity investments, including the strategic partnership (the “Ginkgo Strategic Partnership”) with Ginkgo Bioworks Holdings, Inc.

• expectations related to the expansion of Cronos GrowCo’s purpose-built cannabis facility;

• our ability or plans to identify, develop, commercialize or expand our technology and research and development (“R&D”) initiatives in cannabinoids, or the success thereof;

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The Forward-Looking Statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including:

(i) our ability to effectively navigate developments related to the Middle East Conflict and its impact on our employees and operations in Israel, the supply of product in the market and demand for product by medical patients in Israel;

(ii) our ability to efficiently and effectively distribute our PEACE NATURALS ® brand in Germany with our strategic partner Cansativa and in the UK with our strategic partner GROW ® Pharma and our ability to efficiently and effectively distribute products in Australia with our strategic partner Vitura;

(iii) our ability to realize the expected cost-savings and other benefits related to the wind-down of our operations at our Winnipeg, Manitoba facility, (iv) our ability to realize the expected cost-savings, efficiencies and other benefits of our Realignment and other announced cost-cutting measures and employee turnover related thereto;

(v) our ability to efficiently and effectively wind down certain production activities at the Peace Naturals Campus, receive the benefits of the change in the nature of our operations at, and the announced sale-leaseback of, our Peace Naturals Campus and acquire raw materials on a timely and cost-effective basis from third parties, including Cronos GrowCo;

(vi) our ability to satisfy all conditions for the sale and leaseback of the Peace Naturals Campus;

(vii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our acquisitions and strategic investments;

(viii) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments;

(ix) government regulation of our activities and products including, but not limited to, the areas of cannabis taxation and environmental protection;

(x) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses;

(xi) consumer interest in our products;

(xii) our ability to differentiate our products, including through the utilization of rare cannabinoids;

(xiii) competition;

(xiv) anticipated and unanticipated costs;

(xv) our ability to generate cash flow from operations;

(xvi) our ability to conduct operations in a safe, efficient and effective manner;

(xvii) our ability to hire and retain qualified staff, and acquire equipment and services in a timely and cost-efficient manner;

(xviii) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann;

(xix) our ability to complete planned dispositions, and, if completed, obtain our anticipated sales price;

(xx) general economic, financial market, regulatory and political conditions in which we operate;

(xxi) management’s perceptions of historical trends, current conditions and expected future developments;

and (xxii) other considerations that management believes to be appropriate in the circumstances.

(i) our ability to effectively navigate developments related to the Anti-Dumping Investigation and its impact on our operations in Israel;

(ii) our ability to effectively navigate developments related to the Middle East Conflict and its impact on our employees and operations in Israel, the supply of product in the market and demand for product by medical patients in Israel;

(iii) our ability to efficiently and effectively distribute our PEACE NATURALS ® brand in Germany with our strategic partner Cansativa and in the UK with our strategic partner GROW ® Pharma and our ability to efficiently and effectively distribute products in Australia with our strategic partner Vitura;

(iv) our ability to realize the expected cost-savings and other benefits related to the wind-down of our operations at our Winnipeg, Manitoba facility, (v) our ability to realize the expected cost-savings, efficiencies and other benefits of our Realignment and other announced cost-cutting measures and employee turnover related thereto;

(vi) our ability to efficiently and effectively wind down certain production activities at the Peace Naturals Campus, receive the benefits of the change in the nature of our operations at our Peace Naturals Campus and acquire raw materials on a timely and cost-effective basis from third parties, including Cronos GrowCo;

(vii) the timely completion of the expansion of Cronos GrowCo’s purpose-built cannabis facility and the ability of Cronos GrowCo to repay the Term Loan B;

(viii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our acquisitions and strategic investments;

(ix) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments;

(x) government regulation of our activities and products including, but not limited to, the areas of cannabis taxation and environmental protection;

(xi) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses;

(xii) consumer interest in our products;

(xiii) our ability to differentiate our products, including through the utilization of rare cannabinoids;

(xiv) competition;

(xv) anticipated and unanticipated costs;

(xvi) our ability to generate cash flow from operations;

(xvii) our ability to conduct operations in a safe, efficient and effective manner;

(xviii) our ability to hire and retain qualified staff, and acquire equipment and services in a timely and cost-efficient manner;

(xix) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann;

(xx) our ability to complete planned dispositions, and, if completed, obtain our anticipated sales price;

(xxi) general economic, financial market, regulatory and political conditions in which we operate;

(xxii) management’s perceptions of historical trends, current conditions and expected future developments;

and (xxiii) other considerations that management believes to be appropriate in the circumstances.

While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.

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A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the Forward-Looking Statements in this Quarterly Report and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf.

Such factors include, without limitation, negative impacts on our employees, business and operations in Israel due to the Middle East Conflict, including that we may not be able to produce, import or sell our products or protect our people or facilities in Israel during the Middle East Conflict, the supply of product in the market and the demand for product by medical patients in Israel;

Such factors include, without limitation, negative impacts on our business and operations in Israel due to the Anti-Dumping Investigation, including that we may not be able to produce, import or sell our products in Israel as a result thereof;

negative impacts on our employees, business and operations in Israel due to the Middle East Conflict, including that we may not be able to produce, import or sell our products or protect our people or facilities in Israel during the Middle East Conflict, the supply of product in the market and the demand for product by medical patients in Israel;

that we may not be able to successfully continue to distribute our products in Germany, Australia and the UK or generate material revenue from sales in those markets;

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market in the future;

that we may not be able to wind-down certain production activities at, and complete the sale-leaseback of, the Peace Naturals Campus in a disciplined manner or achieve the anticipated benefits of the change in the nature of our operations or be able to access raw materials on a timely and cost-effective basis from third-parties, including Cronos GrowCo;

that we may not be able to access raw materials on a timely and cost-effective basis from third-parties, including Cronos GrowCo;

that Cronos GrowCo may not be able to complete the expansion of its purpose-built cannabis facility within a reasonable time or repay its borrowings under Term Loan B;

the military conflict between Russia and Ukraine may disrupt our operations and those of our suppliers and distribution channels and negatively impact the demand for and use of our products;

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All references to “dollars” or “$” are to U.S.

The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of March 31, 2024, March 31, 2023, and December 31, 2023.

The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2024, June 30, 2023, and December 31, 2023.

Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates.

The condensed consolidated statements of net loss and comprehensive loss and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period as reported on Bloomberg.

The condensed consolidated statements of net loss and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period as reported on Bloomberg.

The exchange rates used to translate from Canadian dollars (“C$”) to dollars is shown below:

(Exchange rates are shown as C$ per $) As of

March 31, 2024 March 31, 2023 December 31, 2023

June 30, 2024 June 30, 2023 December 31, 2023

Spot rate 1.3674 1.3242 1.3243

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(Exchange rates are shown as ILS per $) As of

March 31, 2024 March 31, 2023 December 31, 2023

June 30, 2024 June 30, 2023 December 31, 2023

Spot rate 3.7742 3.7051 3.6163

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The exit of the U.S.

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

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

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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.

Brand and Product Portfolio

Throughout the first quarter of 2024, the Company expanded its brand and product portfolio in Canada with the following select new products:

• Lord Jones ® Live Resin vapes, offered in both all-in-one and 510 thread formats, offering flavorful full spectrum 100% pure live resin

• Lord Jones ® Chocolate Fusions edibles, a multi-dimensional cannabis experience with three layers of creamy chocolate, crunchy inclusions and a chewy core

• Spinach ® Fully Charged Party Pack infused pre-rolls infused with cold-filtered cannabis extract and coated in kief

• Spinach ® Stix pre-rolls, Cronos’ new cylindrical style pre-roll, offered in a 10-pack

• Spinach ® all-in-one disposable vapes, Spinach Hitz, which offer convenience and sampling ease

• Spinach ® Atomic Sour Grapefruit 28g flower

• SOURZ by Spinach ® Fully Blasted edibles, featuring 10mg of THC in one piece, launched in three flavors, Cherry Lime, Pink Lemonade and Blue Raspberry Watermelon

In May, Cronos entered the UK, with its first shipment of cannabis flower under the PEACE NATURALS ® medical brand.

The Company has partnered with GROW ® Pharma, a leading distributor of prescribed cannabis medicinal products in Europe and the UK.

Cronos expects to provide cannabis products to patients in the UK through its partnership with GROW ® Pharma.

On April 2, 2024, Adam Wagner was appointed Senior Vice President, Head of Cronos Israel.

Wagner will oversee the business and strategy of Cronos Israel.

Before becoming Head of Cronos Israel, he was the Vice President of Finance at Cronos Israel managing Cronos Israel finance department.

Before joining Cronos, Adam worked as a Director of Finance at Motus GI, a publicly traded medical device company, where he oversaw the Israel-based finance department.

Prior to Motus GI, Adam was a Finance Manager at Medtronic, a publicly traded medical equipment manufacturer, where he oversaw the Israel-based finance department.

Prior to Medtronic’s acquisitions, Adam was the Corporate Controller for Mazor Robotics, a dual listed public medical device company.

Adam began his career as a Senior Auditor at EY managing a team that performed audits for various publicly traded and private companies.

Adam is a Certified Public Accountant (Israel).

Transaction with Cronos GrowCo

On June 20, 2024, Cronos announced an expansion of Cronos GrowCo.

The investment will be funded by an additional credit facility provided by Cronos and is intended to assist GrowCo’s expansion of its purpose-built cannabis facility to address the increased global market demand for high-quality cannabis flower.

Key highlights of the investment:

• Investment in Expansion :

Cronos has provided an approximately $51 million ($70 million CAD) secured non-revolving credit facility to Cronos GrowCo to fund facility expansion, enabling growth opportunities in the markets Cronos operates in today as well as potentially enabling Cronos GrowCo to take advantage of future growth into new markets that open.

• Enhanced Governance :

As of July 1, 2024, the GrowCo board of directors expanded to five members, three of whom are appointed by Cronos.

• New Supply Agreement :

Prior to the commencement of sales from the expanded facility, Cronos will have the option to purchase up to 80% of Cronos GrowCo’s total production.

Thereafter, Cronos will have the option to purchase up to 70% of the total production from the expanded facility.

• Financial Consolidation :

Cronos will consolidate Cronos GrowCo’s results in its financial statements beginning in the third quarter of 2024.

The Canadian cannabis market has a shortage of high quality biomass and we anticipate the expansion will aid our ability to supply markets we operate in, while also fueling the potential for additional expansion.

See “ Risk Factors – We are anticipating shortages in raw materials and may be unable to obtain adequate supplies of raw materials in a timely manner and at commercially reasonable prices, ” for further discussion of the potential impact of this shortage on our business, results of operations and financial condition.

Termination of Agreement for Sale and Leaseback of Peace Naturals Campus

On May 28, 2024, the Company’s agreement with Future Farmco Canada Inc.

for the sale and leaseback of the Peace Naturals Campus was terminated pursuant to its terms.

The Company is continuing to evaluate its strategic options for the Peace Naturals Campus, which may include continuing and expanding operations at the facility.

Consolidated Results of Operations

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

(in thousands of USD) Three months ended March 31,

(in thousands of USD) Three months ended June 30, Six months ended June 30,

2024 2023 2024 2023

Net revenue, before excise taxes $ 38,678 $ 25,798 $ 74,045 $ 52,352

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Cost of sales 21,070 15,922 41,875 32,490

Inventory write-down 395 — 395 —

Gross profit 6,297 3,099 10,780 6,026

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Income tax benefit

2,174 180 2,732 1,616

Loss from discontinued operations — (2,834) — (4,056)

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Summary of select financial results

(in thousands of USD) Three months ended March 31, Change

(in thousands of USD) Three months ended June 30, Change Six months ended June 30, Change

2024 2023 $ % 2024 2023 $ %

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Gross margin (i)

18 % 15 % N/A 3 pp

23 % 16 % N/A 7 pp 20 % 16 % N/A 4 pp

(i) Gross margin is defined as gross profit divided by net revenue.

For the three months ended March 31, 2024, we reported consolidated net revenue of $25.3 million, representing an increase of $5.8 million from the three months ended March 31, 2023.

The increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market and higher cannabis flower sales in Israel, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

For the three months ended June 30, 2024, we reported consolidated net revenue of $27.8 million, representing an increase of $8.7 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, we reported consolidated net revenue of $53.1 million, representing an increase of $14.5 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

Inventory write-down

For both the three and six months ended June 30, 2024, we reported inventory write-downs of $0.4 million, compared to no inventory write-downs in the the three and six months ended June 30, 2023.

For both the three and six month comparative periods, the increase was primarily due to write-downs resulting from unusable inventory that was scrapped in the period.

Cost of sales

For the three months ended March 31, 2024, we reported consolidated cost of sales of $20.8 million, representing an increase of $4.2 million from the three months ended March 31, 2023.

The increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market and higher cannabis flower sales in Israel, partially offset by favorable labor, overhead and inventory variances.

For the three months ended March 31, 2024, we reported gross profit of $4.5 million, representing an increase of $1.6 million from the three months ended March 31, 2023.

The increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and favorable labor, overhead and inventory variances, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

For the three months ended June 30, 2024, we reported consolidated cost of sales of $21.1 million, representing an increase of $5.1 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, we reported consolidated cost of sales of $41.9 million, representing an increase of $9.4 million from the six months ended June 30, 2023.

For the three months ended June 30, 2024, we reported gross profit of $6.3 million, representing an increase of $3.2 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, we reported gross profit of $10.8 million, representing an increase of $4.8 million from the six months ended June 30, 2023.

Operating expenses

Three months ended March 31, Change

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

2024 2023 $ % 2024 2023 $ %

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General and administrative 12,767 13,451 (684) (5) % 21,674 25,307 (3,633) (14) %

Restructuring costs 83 — 83 N/M

Restructuring costs 547 — 547 N/M 630 — 630 N/M

Share-based payments 2,236 2,331 (95) (4) % 4,251 4,866 (615) (13) %

Depreciation and amortization 1,016 1,533 (517) (34) % 2,139 3,058 (919) (30) %

Impairment loss on long-lived assets 1,974 — 1,974 N/A

Impairment loss on long-lived assets — — — N/A 1,974 — 1,974 N/A

Total operating expenses $ 21,858 $ 23,719 $ (1,861) (8) % $ 42,289 $ 47,415 $ (5,126) (11) %

Sales and marketing

For the three months ended March 31, 2024, sales and marketing expenses were $5.3 million, representing a decrease of $0.4 million compared to the three months ended March 31, 2023.

The decrease was primarily due to lower advertising and marketing spend.

For the three months ended June 30, 2024, sales and marketing expenses were $4.3 million, representing a decrease of $1.0 million compared to the three months ended June 30, 2023.

For the six months ended June 30, 2024, sales and marketing expenses were $9.7 million, representing a decrease of $1.4 million compared to the six months ended June 30, 2023.

For both the three and six month comparative periods, the decrease was primarily due to lower advertising and marketing spend.

Research and development

For the three months ended March 31, 2024, research and development expenses were $1.0 million, representing a decrease of $1.0 million from the three months ended March 31, 2023.

The decrease was primarily due to lower costs associated with the collaboration and license agreement between Ginkgo Bioworks Holdings, Inc.

(“Ginkgo”) and the Company.

For the three months ended June 30, 2024, research and development expenses were $1.0 million, essentially unchanged from the three months ended June 30, 2023.

For the six months ended June 30, 2024, research and development expenses were $2.0 million, representing a decrease of $1.2 million from the six months ended June 30, 2023.

The decrease for the six months ended June 30, 2024, was primarily due to lower costs associated with the collaboration and license agreement between Ginkgo Bioworks Holdings, Inc.

and the Company.

General and administrative

For the three months ended March 31, 2024, general and administrative expenses were $8.9 million, representing a decrease of $2.9 million from the three months ended March 31, 2023.

The decrease was primarily due to lower professional fees, largely related to financial statement review costs, and lower bonus, payroll and insurance costs.

For the three months ended June 30, 2024, general and administrative expenses were $12.8 million, representing a decrease of $0.7 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, general and administrative expenses were $21.7 million, representing a decrease of $3.6 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the decrease was primarily due to lower professional fees, largely related to financial statement review costs, and lower salaries and benefits and insurance costs, partially offset by an increase in the expected credit loss allowance on loans receivable.

Restructuring costs

For the three months ended March 31, 2024, restructuring costs were $0.1 million, compared to zero for the three months ended March 31, 2023.

For the three and six months ended June 30, 2024, restructuring costs were $0.5 million and $0.6 million, respectively.

For further information, see Note 6 “ Restructuring ” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Share-based compensation

For the three months ended March 31, 2024, share-based compensation expense was $2.0 million, representing a decrease of $0.5 million from the three months ended March 31, 2023.

The decrease was primarily due to headcount reductions that occurred in the prior year.

For the three months ended June 30, 2024, share-based compensation expense was $2.2 million, essentially unchanged from the three months ended June 30, 2023.

For the six months ended June 30, 2024, share-based compensation expense was $4.3 million, representing a decrease of $0.6 million from the six months ended June 30, 2023.

The decrease for the six months ended June 30, 2024 was primarily due to headcount reductions that occurred in the prior year.

Depreciation and amortization

For the three months ended March 31, 2024, depreciation and amortization expenses were $1.1 million, representing a decrease of $0.4 million from the three months ended March 31, 2023.

The decrease was primarily due to lower amortization on Ginkgo-related intangible assets and lower depreciation on property, plant and equipment.

For the three months ended June 30, 2024, depreciation and amortization expenses were $1.0 million, representing a decrease of $0.5 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, depreciation and amortization expenses were $2.1 million, representing a decrease of $0.9 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the decrease was primarily due to lower amortization on Ginkgo-related intangible assets and lower depreciation on property, plant and equipment.

Impairment loss on long-lived assets

For the three months ended March 31, 2024, impairment loss on long-lived assets was $2.0 million and was primarily due to the cessation of operations at Cronos Fermentation during Q1 2024.

There was no such impairment loss on long-lived assets for the three months ended March 31, 2023.

For the six months ended June 30, 2024, impairment loss on long-lived assets was $2.0 million and was primarily due to the cessation of operations at Cronos Fermentation during Q1 2024.

There was no such impairment loss on long-lived assets for the three months ended June 30, 2024, or the three and six months ended June 30, 2023.

For further information, see Note 6 “ Restructuring ” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Other income and income tax benefit

Three months ended March 31, Change

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

2024 2023 $ % 2024 2023 $ %

Interest income, net $ 13,451 $ 12,471 $ 980 8 % $ 27,696 $ 23,646 $ 4,050 17 %

Loss on revaluation of derivative liabilities (18) (65) 47 72 %

Share of income (loss) from equity method investments 917 270 647 240 % 2,365 (226) 2,591 N/M

Loss on revaluation of financial instruments (2,642) (7,758) 5,116 66 %

Impairment loss on other investments (12,734) — (12,734) N/M

Foreign currency transaction gain (loss) 13,259 (1,643) 14,902 N/M

Other, net (652) 85 (737) N/M

Gain (loss) on revaluation of financial instruments (3,615) 5,193 (8,808) N/M (6,257) (2,565) (3,692) (144) %

Impairment loss on other investments (12,916) — (12,916) N/M (25,650) — (25,650) N/M

Foreign currency transaction gain (loss) 6,543 (3,174) 9,717 N/M 19,802 (4,817) 24,619 N/M

Other, net 248 17 231 N/M (422) 37 (459) N/M

Total other income 4,628 14,777 (10,149) (69) % 17,534 16,075 1,459 9 %

Income tax benefit 558 1,436 (878) (61) %

Income tax benefit 2,174 180 1,994 N/M 2,732 1,616 1,116 69 %

Loss from continuing operations (8,759) (5,663) (3,096) (55) % (11,243) (23,698) 12,455 53 %

Loss from discontinued operations — (1,222) 1,222 N/M

Loss from discontinued operations — (2,834) 2,834 N/M — (4,056) 4,056 N/M

$ (8,759) $ (8,497) $ (262) (3) % $ (11,243) $ (27,754) $ 16,511 59 %

1 unchanged sentence

Interest income, net

For the three months ended March 31, 2024, interest income, net was $14.2 million, representing an increase of $3.1 million from the three months ended March 31, 2023.

The increase in net interest income was primarily due to higher interest rates in the current period compared to the three months ended March 31, 2023.

Loss on revaluation of derivative liabilities

For the three months ended March 31, 2024, the loss on revaluation of derivative liabilities was $18 thousand, representing a decreased loss of $47 thousand from the three months ended March 31, 2023.

We expect continued changes in derivative valuations as our share price fluctuates period to period and the remaining expected terms of our derivative instruments change over time.

For the three months ended June 30, 2024, interest income, net was $13.5 million, representing an increase of $1.0 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, interest income, net was $27.7 million, representing an increase of $4.1 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the increase in net interest income was primarily due to higher interest rates in the current period compared to the prior periods.

Share of income (loss) from equity method investments

For the three months ended March 31, 2024, our share of income from equity method investments was $1.4 million, representing an increase of $1.9 million from the three months ended March 31, 2023.

The increase was due to higher income pick-ups from our equity method investment in Cronos GrowCo.

For the three months ended June 30, 2024, our share of income from equity method investments was $0.9 million, representing an increase of $0.6 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, our share of income from equity method investments was $2.4 million, representing an increase of $2.6 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the increase was due to higher income pick-ups from our equity method investment in Cronos GrowCo.

Periodic income and loss pickups from our equity method investment in Cronos GrowCo are impacted both by the profitability of Cronos GrowCo and any unsold inventory remaining at Cronos that originated from Cronos GrowCo.

Loss on revaluation of financial instruments

For the three months ended March 31, 2024, the loss on revaluation of financial instruments was $2.6 million, representing an improvement of $5.1 million from the three months ended March 31, 2023.

Gain (loss) on revaluation of financial instruments

For the three months ended June 30, 2024, the loss on revaluation of financial instruments was $3.6 million, representing a deterioration of $8.8 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, the loss on revaluation of financial instruments was $6.3 million, representing a deterioration of $3.7 million from the six months ended June 30, 2023.

The change was primarily related to the change in fair value of our investment in Vitura Health Limited (“Vitura”).

1 unchanged sentence

Impairment loss on other investments

For the three months ended March 31, 2024, we recognized $12.7 million of impairment loss on other investments, driven by an impairment charge recorded on our PharmaCann Option for the difference between its estimated fair value and its carrying amount.

There was no such impairment loss on other investments for the three months ended March 31, 2023.

For the three and six months ended June 30, 2024, we recognized $12.9 million and $25.7 million, respectively, of impairment loss on other investments, driven by impairment charges recorded on our PharmaCann Option for the difference between its estimated fair value and its carrying amount.

There was no such impairment loss on other investments for the three and six months ended June 30, 2023.

For further information, see Note 4 “ Investments ” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Foreign currency transaction gain (loss)

For the three months ended March 31, 2024, foreign currency translation gain was $13.3 million, representing an improvement of $14.9 million from the three months ended March 31, 2023.

The change was primarily due to certain foreign currency-denominated cash equivalents and certain foreign currency-denominated intercompany loans anticipated to be settled in the foreseeable future.

For the three months ended June 30, 2024, foreign currency translation gain was $6.5 million, representing an improvement of $9.7 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, foreign currency translation gain was $19.8 million, representing an improvement of $24.6 million from the six months ended June 30, 2023.

For both the three and six month comparative periods, the change was primarily due to certain foreign currency-denominated cash equivalents and certain foreign currency-denominated intercompany loans anticipated to be settled in the foreseeable future.

Other, net primarily includes gains and losses on the disposal of assets.

Income tax benefit

For the three months ended March 31, 2024, income tax benefit was $0.6 million, compared to $1.4 million for the three months ended March 31, 2023.

The decreased benefit was driven by lower current income tax benefits recorded on the losses that will be carried back to recover taxes paid in prior years.

For the three months ended June 30, 2024, income tax benefit was $2.2 million, compared to $0.2 million for the three months ended June 30, 2023.

For the six months ended June 30, 2024, income tax benefit was $2.7 million, compared to $1.6 million for the six months ended June 30, 2023.

For both the three and six month comparative periods, the increased benefit was driven by higher current income tax benefits recorded on the losses that will be carried back to recover taxes paid in prior years.

Loss from discontinued operations

There was no activity in discontinued operations for the three months ended March 31, 2024.

For the three months ended March 31, 2023, loss from discontinued operations was due to the exit of U.S.

There was no activity in discontinued operations for the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2023, loss from discontinued operations was due to the exit of U.S.

For more information, see Note 2 “ Discontinued Operations ” in our condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

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impairment loss on long-lived assets;

(gain) loss on revaluation of derivative liabilities;

-(gain) loss on revaluation of financial instruments;

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Adjusted EBITDA is reconciled to net income (loss) as follows:

Three months ended March 31, 2024

Three months ended June 30, 2024

Continuing Operations Discontinued Operations Total

2 unchanged sentences

Income tax benefit

(2,174) — (2,174)

Depreciation and amortization 1,513 — 1,513

2 unchanged sentences

(917) — (917)

Impairment loss on long-lived assets

1,974 — 1,974

Loss on revaluation of derivative liabilities (i)

Loss on revaluation of financial instruments (ii)

3 unchanged sentences

Foreign currency transaction gain (6,543) — (6,543)

Other, net (iv)

Restructuring costs (v)

Share-based compensation (vi)

Transaction costs (iv)

Other, net (v)

(248) — (248)

Financial statement review costs (vii)

Restructuring costs (vi)

Share-based compensation (vii)

2,236 — 2,236

Financial statement review costs (viii)

Adjusted EBITDA $ (11,051) $ — $ (11,051)

Three months ended March 31, 2023

Three months ended June 30, 2023

Continuing Operations Discontinued Operations Total

4 unchanged sentences

EBITDA (16,049) (2,722) (18,771)

Share of income from equity method investments (270) — (270)

Impairment loss on long-lived assets (i)

Gain on revaluation of financial instruments (ii)

(5,193) — (5,193)

Foreign currency transaction loss 3,174 — 3,174

Other, net (v)

Restructuring costs (vi)

Share-based compensation (vii)

2,331 5 2,336

Financial statement review costs (viii)

Inventory write-down (ix)

$ — $ 839 839

Adjusted EBITDA $ (15,905) $ (976) $ (16,881)

Six months ended June 30, 2024

Continuing Operations Discontinued Operations Total

$ (11,243) $ — $ (11,243)

Interest income, net (27,696) — (27,696)

Income tax benefit (2,732) — (2,732)

Depreciation and amortization 3,244 — 3,244

EBITDA (38,427) — (38,427)

Share of income from equity method investments

(2,365) — (2,365)

Impairment loss on long-lived assets (i)

1,974 — 1,974

Loss on revaluation of financial instruments (ii)

6,257 — 6,257

Impairment loss on other investments (iii)

25,650 — 25,650

Foreign currency transaction gain (19,802) — (19,802)

Transaction costs (iv)

Other, net (v)

Restructuring costs (vi)

Share-based compensation (vii)

4,251 — 4,251

Financial statement review costs (viii)

(506) — (506)

Adjusted EBITDA $ (21,720) $ — $ (21,720)

Six months ended June 30, 2023

Continuing Operations Discontinued Operations Total

$ (23,698) $ (4,056) $ (27,754)

Interest income, net (23,646) (8) (23,654)

Income tax benefit (1,616) — (1,616)

Depreciation and amortization 4,541 244 4,785

EBITDA (44,419) (3,820) (48,239)

Share of loss from equity method investments 226 — 226

Loss on revaluation of derivative liabilities (i)

Impairment loss on long-lived assets (i)

Loss on revaluation of financial instruments (ii)

1 unchanged sentence

Foreign currency transaction loss 4,817 — 4,817

Other, net (iv)

Share-based compensation (vi)

Other, net (v)

Restructuring costs (vi)

Share-based compensation (vii)

4,866 21 4,887

Financial statement review costs (vii)

Financial statement review costs (viii)

Inventory write-down (ix)

Adjusted EBITDA $ (31,587) $ (2,058) $ (33,645)

(i) For the three months ended March 31, 2024 and 2023, loss on revaluation of derivative liabilities represents the fair value changes on the derivative liabilities.

(ii) For the three months ended March 31, 2024 and 2023, loss on revaluation of financial instruments related primarily to the Company’s equity securities in Vitura.

(iii) For the three months ended March 31, 2024, loss on other investments represents the fair value change on the PharmaCann Option.

(iv) For the three months ended March 31, 2024 and 2023, other, net related to (gain) loss on disposal of assets.

(v) For the three months ended March 31, 2024, restructuring costs from continuing operations related to employee-related severance costs and other restructuring costs associated with the Realignment, as described in Note 6 “ Restructuring.

(vi) For the three months ended March 31, 2024 and 2023, share-based compensation related to the non-cash expenses of share-based compensation awarded to employees under the Company’s share-based award plans as described in Note 7 “ Share-based Compensation.

(vii) For the three months ended March 31, 2024 and 2023, financial statement review costs include costs and reserves taken related to the Restatements, costs related to the Company’s responses to requests for information from various regulatory authorities relating to the Restatements and legal costs incurred defending shareholder class action complaints brought against the Company as a result of the 2019 restatement.

For the three months ended March 31, 2024, a credit balance is presented due to an insurance recovery.

(i) For the three and six months ended June 30, 2024, impairment loss on long-lived assets related to the winding down of operations at Cronos Fermentation.

For the three and six months ended June 30, 2023, impairment loss on long-lived assets related to certain leased properties associated with the Company’s U.S.

(ii) For the three and six months ended June 30, 2024 and 2023, (gain) loss on revaluation of financial instruments related primarily to the Company’s equity securities in Vitura.

(iii) For the three and six months ended June 30, 2024, impairment loss on other investments represents the fair value change on the PharmaCann Option.

(iv) For the three and six months ended June 30, 2024, transactions costs represent advisory fees associated with the Cronos GrowCo expansion transaction.

(v) For the three and six months ended June 30, 2024 and 2023, other, net related to (gain) loss on disposal of assets and (gain) loss on revaluation of derivative liabilities.

(vi) For the three and six months ended June 30, 2024, restructuring costs from continuing operations related to shutdown costs at the Cronos Fermentation facility, as well as employee-related severance costs associated with the Realignment, as described in Note 6 “ Restructuring .” For the three and six months ended June 30, 2023, restructuring costs related to employee-related severance costs and other restructuring costs associated with our U.S.

operations as described in Note 2 “ Discontinued Operations .”

(vii) For the three and six months ended June 30, 2024 and 2023, share-based compensation related to the non-cash expenses of share-based compensation awarded to employees under the Company’s share-based award plans as described in Note 7 “ Share-based Compensation.

(viii) For the three and six months ended June 30, 2024 and 2023, financial statement review costs include costs and reserves taken related to the Restatements, costs related to the Company’s responses to requests for information from various regulatory authorities relating to the Restatements and legal costs incurred defending shareholder class action complaints brought against the Company as a result of the 2019 restatement.

For the six months ended June 30, 2024, a credit balance is presented due to an insurance recovery.

(ix) For the three and six months ended June 30, 2023, inventory write-downs relate to product destruction and obsolescence associated with the exit of our U.S.

operations as described in Note 2 “ Discontinued Operations.

Constant Currency

To supplement the consolidated financial statements presented in accordance with U.S.

GAAP, we have presented constant currency adjusted financial measures for net revenues, gross profit, gross profit margin, operating expenses, net income (loss) and Adjusted EBITDA for the three months ended March 31, 2024, as well as cash and cash equivalents and short-term investment balances as of March 31, 2024 compared to December 31, 2023, which are considered non-GAAP financial measures.

GAAP, we have presented constant currency adjusted financial measures for net revenues, gross profit, gross profit margin, operating expenses, net income (loss) and Adjusted EBITDA for the three and six months ended June 30, 2024, as well as cash and cash equivalents and short-term investment balances as of June 30, 2024 compared to December 31, 2023, which are considered non-GAAP financial measures.

We present constant currency information to provide a framework for assessing how our underlying operations performed excluding the effect of foreign currency rate fluctuations.

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See further discussion on foreign currency risk as noted in Item 3 “Quantitative and Qualitative Disclosures About Market Risk.”

The table below sets forth certain measures of consolidated results from continuing operations on a constant currency basis for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 as well as cash and cash equivalents and short-term investments as of March 31, 2024 and December 31, 2023, both on an as-reported and constant currency basis (in thousands):

The table below sets forth certain measures of consolidated results from continuing operations on a constant currency basis for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 as well as cash and cash equivalents and short-term investments as of June 30, 2024 and December 31, 2023, both on an as-reported and constant currency basis (in thousands):

As Reported As Adjusted for Constant Currency

Three months ended March 31, As Reported Change Three months ended March 31, Constant Currency Change

Three months ended June 30, As Reported Change Three months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

6 unchanged sentences

Adjusted EBITDA (11,051) (15,905) 4,854 31 % (10,863) 5,042 32 %

As of March 31, 2024 As of December 31, As Reported Change As of December 31, Constant Currency Change

Six months ended June 30, As Reported Change Six months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

Net revenue $ 53,050 $ 38,516 $ 14,534 38 % $ 53,795 $ 15,279 40 %

Gross profit 10,780 6,026 4,754 79 % 10,983 4,957 82 %

Gross margin 20 % 16 % N/A 4 pp 20 % N/A 4 pp

Operating expenses 42,289 47,415 (5,126) (11) % 42,336 (5,079) (11) %

Net loss from continuing operations

(11,243) (23,698) 12,455 53 % (10,643) 13,055 55 %

Adjusted EBITDA (21,720) (31,587) 9,867 31 % (21,508) 10,079 32 %

As of June 30, As of December 31, As Reported Change As of June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

Cash and cash equivalents $ 848,189 $ 669,291 $ 178,898 27 % $ 852,752 $ 183,461 27 %

2 unchanged sentences

As Reported As Adjusted for Constant Currency

Three months ended March 31, As Reported Change Three months ended March 31, Constant Currency Change

Three months ended June 30, As Reported Change Three months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

4 unchanged sentences

As Reported As Adjusted for Constant Currency

Three months ended March 31, As Reported Change Three months ended March 31, Constant Currency Change

Six months ended June 30, As Reported Change Six months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

Cannabis flower $ 38,186 $ 27,142 $ 11,044 41 % $ 38,812 $ 11,670 43 %

Cannabis extracts 14,791 11,227 3,564 32 % 14,909 3,682 33 %

Other 73 147 (74) (50) % 74 (73) (50) %

Net revenue $ 53,050 $ 38,516 $ 14,534 38 % $ 53,795 $ 15,279 40 %

As Reported As Adjusted for Constant Currency

Three months ended June 30, As Reported Change Three months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

Canada $ 19,844 $ 13,595 $ 6,249 46 % $ 20,210 $ 6,615 49 %

Israel 6,889 5,426 1,463 27 % 7,036 1,610 30 %

Other countries 1,029 — 1,029 N/M 1,044 1,044 N/M

Net revenue $ 27,762 $ 19,021 $ 8,741 46 % $ 28,290 $ 9,269 49 %

For the three months ended March 31, 2024, net revenue on a constant currency basis was $25.5 million, representing a 31% increase from the three months ended March 31, 2023.

On a constant currency basis, net revenue increased for the three months ended March 31, 2024 primarily due to higher cannabis flower and extract sales in the Canadian adult-use market and higher cannabis flower sales in Israel, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

For the three months ended March 31, 2024, gross profit on a constant currency basis was $4.5 million, representing a 55% increase from the three months ended March 31, 2023.

On a constant currency basis, gross profit increased for the three months ended March 31, 2024 primarily due to higher cannabis flower and extract sales in the Canadian adult-use market and higher cannabis flower sales in Israel and favorable labor, overhead and inventory variances, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

As Reported As Adjusted for Constant Currency

Six months ended June 30, As Reported Change Six months ended June 30, Constant Currency Change

2024 2023 $ % 2024 $ %

Canada $ 38,715 $ 28,029 $ 10,686 38 % $ 39,044 $ 11,015 39 %

Israel 13,306 10,487 2,819 27 % 13,707 3,220 31 %

Other countries 1,029 — 1,029 N/M 1,044 1,044 N/M

Net revenue $ 53,050 $ 38,516 $ 14,534 38 % $ 53,795 $ 15,279 40 %

For the three months ended June 30, 2024, net revenue on a constant currency basis was $28.3 million, representing a 49% increase from the three months ended June 30, 2023.

For the six months ended June 30, 2024, net revenue on a constant currency basis was $53.8 million, representing a 40% increase from the six months ended June 30, 2023.

On a constant currency basis, net revenue increased for the three and six months ended June 30, 2024, primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

For the three months ended June 30, 2024, gross profit on a constant currency basis was $6.4 million, representing a 108% increase from the three months ended June 30, 2023.

For the six months ended June 30, 2024, gross profit on a constant currency basis was $11.0 million, representing an 82% increase from the six months ended June 30, 2023.

On a constant currency basis, gross profit increased for the three and six months ended June 30, 2024, primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue and higher inventory write-downs.

Operating expenses

For the three months ended March 31, 2024, operating expenses on a constant currency basis were $20.5 million, representing a 14% decrease from the three months ended March 31, 2023.

On a constant currency basis, operating expenses decreased for the three months ended March 31, 2024, primarily due to lower advertising and marketing spend, lower costs associated with the achievement of Ginkgo milestones, lower professional fees, largely related to financial statement review costs, and lower bonus, payroll and insurance costs.

Net income (loss)

For the three months ended March 31, 2024, net income on a constant currency basis was $2.5 million, representing an improvement of $15.6 million from the three months ended March 31, 2023.

For the three months ended June 30, 2024, operating expenses on a constant currency basis were $21.9 million, representing an 8% decrease from the three months ended June 30, 2023.

For the six months ended June 30, 2024, operating expenses on a constant currency basis was $42.3 million, representing an 11% decrease from the six months ended June 30, 2023.

On a constant currency basis, operating expenses decreased for the three and six months ended June 30, 2024, primarily due to lower advertising and marketing spend, lower costs associated with the achievement of Ginkgo milestones, lower professional fees, largely related to financial statement review costs, and lower salaries and benefits and insurance costs.

Net loss from continuing operations

For the three months ended June 30, 2024, net loss from continuing operations on a constant currency basis was $8.2 million, representing an increased loss of $2.5 million from the three months ended June 30, 2023.

For the six months ended June 30, 2024, net loss from continuing operations on a constant currency basis was $10.6 million, representing an improvement of $13.1 million from the six months ended June 30, 2023.

Adjusted EBITDA

For the three months ended March 31, 2024, Adjusted EBITDA on a constant currency basis was $(10.6) million, representing a 32% improvement from the three months ended March 31, 2023.

The improvement in Adjusted EBITDA for the three months ended March 31, 2024 on a constant currency basis was driven by higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel, decreases in general and administrative expenses and lower costs associated with the achievement of Ginkgo milestones, partially offset by an adverse price/mix in Canada in the cannabis flower category driving increased excise tax payments as a percentage of revenue.

For the three months ended June 30, 2024, Adjusted EBITDA on a constant currency basis was $(10.9) million, representing a 32% improvement from the three months ended June 30, 2023.

For the six months ended June 30, 2024, Adjusted EBITDA on a constant currency basis was $(21.5) million, representing a 32% improvement from the six months ended June 30, 2023.

The improvement in Adjusted EBITDA for the three and six months ended June 30, 2024 on a constant currency basis was driven by higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel, decreases in general and administrative expenses and lower costs associated with the achievement of Ginkgo milestones, partially offset by an adverse price/mix in Canada in the cannabis flower category driving increased excise tax payments as a percentage of revenue.

Cash and cash equivalents & short-term investments

Cash and cash equivalents and short-term investments on a constant currency basis decreased 1% to $856.2 million as of March 31, 2024 from $861.5 million as of December 31, 2023.

The decrease in cash and cash equivalents and short-term investments is primarily due to cash flows used in operating activities in the three months ended March 31, 2024.

Cash and cash equivalents and short-term investments on a constant currency basis decreased 1% to $852.8 million as of June 30, 2024 from $861.5 million as of December 31, 2023.

The decrease in cash and cash equivalents and short-term investments is primarily due to advances of loans receivable and purchases of property, plant and equipment in the six months ended June 30, 2024.

Liquidity and Capital Resources

As of March 31, 2024, we had $855.1 million in cash and cash equivalents and no short-term investments.

As of June 30, 2024, we had $848.2 million in cash and cash equivalents and no short-term investments.

We believe that the existing cash and cash equivalents and short-term investments will be sufficient to fund the business operations and capital expenditures over the next twelve months.

1 unchanged sentence

(In thousands of U.S.

dollars) Three months ended March 31, 2024

dollars) Six months ended June 30, 2024

Cash flows used in operating activities $ (460) $ (59,467)

4 unchanged sentences

Net change in cash $ 178,898 $ (355,216)

Comparison of cash flows between the three months ended March 31, 2024 and the three months ended March 31, 2023

Comparison of cash flows between the six months ended June 30, 2024 and the six months ended June 30, 2023

Operating activities

During the three months ended March 31, 2024, we used $2.2 million of cash in operating activities as compared to cash used of $47.7 million in the three months ended March 31, 2023, representing a decrease in cash used of $45.5 million.

This change is primarily driven by a $12.3 million increase in net income after adjusting for non-cash items during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, a $32.8 million decrease in income taxes payable in the prior period as a result of a tax payment connected to the previously disclosed relinquishment by Altria of its warrant to purchase additional shares of the Company, higher interest received and lower increases in inventory, partially offset by an increase in accounts receivable, net and a decrease in accounts payable.

During the six months ended June 30, 2024, we used $0.5 million of cash in operating activities as compared to cash used of $59.5 million in the six months ended June 30, 2023, representing a decrease in cash used of $59.0 million.

This change is primarily driven by a $32.8 million decrease in income taxes payable in the prior period as a result of a tax payment connected to the previously disclosed relinquishment by Altria of its warrant to purchase additional shares of the Company, a $21.5 million increase in net income after adjusting for non-cash items during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, higher interest received and lower increases in inventory, partially offset by an increase in accounts receivable, net and a decrease in accounts payable.

Investing activities

During the three months ended March 31, 2024, we generated $189.6 million of cash in investing activities, compared to $303.8 million of cash used in investing activities during the three months ended March 31, 2023, representing a change of $493.4 million.

This change is primarily driven by the maturity of certain short-term investments, which were reinvested as cash equivalents upon maturity in the three months ended March 31, 2024.

During the six months ended June 30, 2024, we generated $181.0 million of cash in investing activities, compared to $299.0 million of cash used in investing activities during the six months ended June 30, 2023, representing a change of $480.0 million.

This change is primarily driven by the maturity of certain short-term investments, which were reinvested as cash equivalents upon maturity in the six months ended June 30, 2024, partially offset by higher advances of loans receivable and lower loan repayments in the six months ended June 30, 2024.

Financing activities

During the three months ended March 31, 2024, cash used in financing activities was $0.6 million, compared to $0.7 million of cash used in financing activities during three months ended March 31, 2023, representing a decrease of $0.1 million in cash used in financing activities.

This change is primarily driven by a decrease of $0.1 million in withholding taxes paid on share-based awards during three months ended March 31, 2024 compared to three months ended March 31, 2023.

During the six months ended June 30, 2024, cash used in financing activities was $0.9 million, compared to $0.8 million of cash used in financing activities during the six months ended June 30, 2023, representing an increase of $0.1 million.

This change is primarily driven by an increase of $0.1 million in withholding taxes paid on share-based awards during the six months ended June 30, 2024 compared to six months ended June 30, 2023.

Cash Requirements

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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-Q

Item 2. Management’s Discussion and Analysis