Cronos Group Inc. 10-Q

Item 1. Financial Statements Table of Contents Condensed Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 202 4 4 Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31 , 202 5 and 202 4 (Unaudited) 5 Condensed Consolidated Statements of Changes in Equity for the three months ended March 31 , 202 5 and 202 4 (Unaudited) 6 Condensed Consolidated Statements of Cash Flows for the three months ended March 31 , 202 5 and 202 4 (Unaudited) 7 Notes to Condensed Consolidated Financial Statements (Unaudited) 8 3 Cronos Group Inc. Condensed Consolidated Balance Sheets (In thousands of U.S. dollars, except share amounts, unaudited) Table of Contents As of March 31, 2025 As of December 31, 2024 Assets Current assets Cash and cash equivalents $ 797,819 $ 858,805 Short-term investments 40,000 — Accounts receivable, net 18,714 15,462 Interest receivable 4,952 8,690 Other receivables 7,354 5,000 Current portion of loans receivable, net 737 618 Inventory, net 34,603 33,149 Prepaids and other current assets 6,313 6,277 Held-for-sale assets 8,089 8,112 Total current assets 918,581 936,113 Other investments 2,755 2,813 Non-current portion of loans receivable, net 15,587 15,526 Property, plant and equipment, net 139,185 133,189 Right-of-use assets 1,320 1,390 Goodwill 63,268 63,453 Intangible assets, net 10,625 11,257 Deferred tax assets 2,506 2,571 Total assets $ 1,153,827 $ 1,166,312 Liabilities Current liabilities Accounts payable $ 9,499 $ 16,973 Income taxes payable 12 9 Accrued liabilities 22,547 31,653 Current portion of lease obligation 977 1,025 Derivative liabilities 13 40 Total current liabilities 33,048 49,700 Non-current portion due to non-controlling interests 611 1,073 Non-current portion of lease obligation 840 993 Deferred tax liabilities 4,563 3,564 Total liabilities 39,062 55,330 Shareholders’ equity Share capital and additional paid-in capital (no par value; authorized for issue as of March 31, 2025 and December 31, 2024: unlimited; shares outstanding as of March 31, 2025 and December 31, 2024: 385,406,395 and 382,530,780 , respectively) 669,036 669,879 Retained earnings 463,816 457,709 Accumulated other comprehensive loss ( 66,449 ) ( 63,525 ) Total equity attributable to shareholders of Cronos Group 1,066,403 1,064,063 Non-controlling interests 48,362 46,919 Total shareholders’ equity 1,114,765 1,110,982 Total liabilities and shareholders’ equity $ 1,153,827 $ 1,166,312 See notes to condensed consolidated interim financial statements. 4 Cronos Group Inc. Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) (In thousands of U.S. dollars, except share and per share amounts, unaudited) Table of Contents Three months ended March 31, 2025 2024 Net revenue, before excise taxes $ 41,898 $ 35,367 Excise taxes ( 9,636 ) ( 10,079 ) Net revenue 32,262 25,288 Cost of sales 18,528 20,805 Gross profit 13,734 4,483 Operating expenses Sales and marketing 4,565 5,332 Research and development 793 997 General and administrative 9,309 8,907 Restructuring costs 555 83 Share-based compensation 2,088 2,015 Depreciation and amortization 496 1,123 Impairment loss on long-lived assets — 1,974 Total operating expenses 17,806 20,431 Operating loss ( 4,072 ) ( 15,948 ) Other income Interest income, net 9,665 14,245 Share of income from equity method investments — 1,448 Gain (loss) on revaluation of financial instruments 49 ( 2,642 ) Impairment loss on other investments — ( 12,734 ) Foreign currency transaction gain 1,583 13,259 Other, net 43 ( 670 ) Total other income 11,340 12,906 Income (loss) before income taxes 7,268 ( 3,042 ) Income tax benefit ( 455 ) ( 558 ) Net income (loss) 7,723 ( 2,484 ) Net income (loss) attributable to non-controlling interest 1,601 ( 243 ) Net income (loss) attributable to Cronos Group $ 6,122 $ ( 2,241 ) Comprehensive income (loss) Net income (loss) $ 7,723 $ ( 2,484 ) Other comprehensive income (loss) Foreign exchange loss on translation ( 3,082 ) ( 22,361 ) Comprehensive income (loss) 4,641 ( 24,845 ) Comprehensive income (loss) attributable to non-controlling interests 1,443 ( 133 ) Comprehensive income (loss) attributable to Cronos Group $ 3,198 $ ( 24,712 ) Net income (loss) per share Basic net income (loss) per share attributable to Cronos Group $ 0.02 $ ( 0.01 ) Diluted net income (loss) per share attributable to Cronos Group $ 0.02 $ ( 0.01 ) See notes to condensed consolidated interim financial statements. 5 Cronos Group Inc. Condensed Consolidated Statements of Changes in Equity For the three months ended March 31, 2025 and 2024 (In thousands of U.S. dollars, except share amounts, unaudited) Number of shares Share capital and additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity Balance as of December 31, 2024 382,530,780 $ 669,879 $ 457,709 $ ( 63,525 ) $ 46,919 $ 1,110,982 Activities relating to share-based compensation 2,875,615 ( 843 ) ( 15 ) — — ( 858 ) Net income (loss) — — 6,122 — 1,601 7,723 Foreign exchange loss on translation — — — ( 2,924 ) ( 158 ) ( 3,082 ) Balance as of March 31, 2025 385,406,395 $ 669,036 $ 463,816 $ ( 66,449 ) $ 48,362 $ 1,114,765 Number of shares Share capital and additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity Balance as of December 31, 2023 381,298,853 $ 662,174 $ 416,719 $ 20,678 $ ( 3,447 ) $ 1,096,124 Activities relating to share-based compensation 712,325 1,499 — — — 1,499 Net income (loss) — — ( 2,241 ) — ( 243 ) ( 2,484 ) Foreign exchange gain (loss) on translation — — — ( 22,471 ) 110 ( 22,361 ) Balance as of March 31, 2024 382,011,178 $ 663,673 $ 414,478 $ ( 1,793 ) $ ( 3,580 ) $ 1,072,778 See notes to condensed consolidated interim financial statements. 6 Cronos Group Inc. Condensed Consolidated Statements of Cash Flows (In thousands of U.S. dollars, except share amounts, unaudited) Table of Contents Three months ended March 31, 2025 2024 Operating activities Net income (loss) $ 7,723 $ ( 2,484 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Share-based compensation 2,088 2,015 Depreciation and amortization 2,840 1,731 Impairment loss on long-lived assets — 1,974 Impairment loss on other investments — 12,734 Loss from investments 68 894 Changes in expected credit losses on long-term financial assets 9 ( 191 ) Inventory step-up recorded to cost of sales 517 — Foreign currency transaction gain ( 1,583 ) ( 13,259 ) Other non-cash operating activities, net 779 1,084 Changes in operating assets and liabilities: Accounts receivable, net ( 3,409 ) ( 1,654 ) Interest receivable 3,453 4,251 Other receivables ( 2,379 ) 289 Prepaids and other current assets ( 60 ) ( 985 ) Inventory, net ( 1,631 ) ( 777 ) Accounts payable ( 1,637 ) ( 2,775 ) Income taxes payable 4 11 Accrued liabilities ( 8,878 ) ( 5,062 ) Net cash used in operating activities ( 2,096 ) ( 2,204 ) Investing activities Proceeds from short-term investments — 188,872 Purchase of short-term investments ( 40,000 ) — Proceeds from repayment on loans receivable — 2,678 Purchase of property, plant and equipment, net of disposals ( 15,258 ) ( 1,724 ) Purchase of intangible assets, net of disposals ( 98 ) ( 270 ) Net cash provided by (used in) investing activities ( 55,356 ) 189,556 Financing activities Withholding taxes paid on share-based awards ( 2,930 ) ( 645 ) Net cash used in financing activities ( 2,930 ) ( 645 ) Effect of foreign currency translation on cash and cash equivalents ( 604 ) ( 884 ) Net change in cash and cash equivalents ( 60,986 ) 185,823 Cash and cash equivalents, beginning of period 858,805 669,291 Cash and cash equivalents, end of period $ 797,819 $ 855,114 Supplemental cash flow information Interest paid $ — $ — Interest received $ 13,052 $ 14,641 Income taxes paid $ 50 $ 579 See notes to condensed consolidated interim financial statements. 7 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 1. Background, Basis of Presentation, and Summary of Significant Accounting Policies (a) Background Cronos Group Inc. (“Cronos” or the “Company”) is incorporated in the province of British Columbia under the Business Corporations Act (British Columbia) with principal executive offices at 4491 Concession Rd 12, Stayner, Ontario, L0M 1S0. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) and Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CRON.” Cronos is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio. Cronos’ diverse international brand portfolio includes Spinach ® , PEACE NATURALS ® and Lord Jones ® . (b) Basis of presentation These condensed consolidated interim financial statements of Cronos are unaudited. They have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) for interim financial information and with applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) relating to interim financial statements. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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 months ended March 31, 2025 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, 2024 (the “Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation of our condensed consolidated interim financial statements. These reclassifications had no effect on the reported results of operations and ending shareholders’ equity. (c) Segment information Segment reporting is prepared on the same basis that the Company’s chief operating decision maker (the “CODM”) manages the business, makes operating decisions and assesses the Company’s performance. The Company has determined that it has one operating segment and therefore one reportable segment, which is comprised of operations in Canada and Israel and is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets . (d) Revenue recognition The following tables present the Company’s revenue by major product category: Three months ended March 31, 2025 2024 Cannabis flower $ 23,344 $ 17,525 Cannabis extracts 8,608 7,727 Other 310 36 Net revenue $ 32,262 $ 25,288 Net revenue attributed to a geographic region based on the location of the customer were as follows: Three months ended March 31, 2025 2024 Canada $ 20,130 $ 18,871 Israel 9,229 6,417 Other countries 2,903 — Net revenue $ 32,262 $ 25,288 8 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents (e) Short-term Investments Short-term investments are classified as held-to-maturity and recorded at cost. Interest earned on short-term investments is recorded in other receivables on the consolidated balance sheets and interest income, net on the condensed consolidated statements of net income (loss) and comprehensive income (loss). Cash inflows and outflows related to the purchase and maturity of short-term investments are classified as investing activities in the Company’s consolidated statements of cash flows. (f) Concentration of risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. 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 $ 885,163 and $ 904,101 as of March 31, 2025 and December 31, 2024, respectively. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on the days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Accounts receivable are written off when there is no reasonable expectation of recovery. 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 March 31, 2025 and December 31, 2024, the Company had $ 33 and $ 7 , respectively, in expected credit losses that have been recognized on receivables from contracts with customers. As of March 31, 2025, the Company assessed that there is a concentration of credit risk, as 20 % of the Company’s accounts receivable were due from one customer with an established credit history with the Company. As of December 31, 2024, 27 % of the Company’s accounts receivable were due from one customer 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 net revenue before excise taxes. During the three months ended March 31, 2025, the Company earned a total net revenue before excise taxes of $ 17,751 from two major customers, together accounting for 42 % of the Company’s total net revenue before excise taxes. During the three months ended March 31, 2024, the Company earned a total net revenue before excise taxes of $ 21,866 from three major customers, together accounting for 62 % of the Company’s total net revenue before excise taxes. (g) New accounting pronouncements not yet adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the existing income tax disclosures to provide additional information to better assess how an entity’s operations, related tax risks and tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, and we expect to adopt ASU 2023-09 prospectively. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements. In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2024-03”). ASU 2024-03 adds an obligation under ASC 220-40 to require a footnote disclosure about specific expenses by requiring public business entities to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities or other types of depletion expenses. The tabular disclosure would also include certain other expenses, when applicable. ASU 2024-03 does not change or remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, and applicable entities are required to adopt ASU 2024-03 prospectively; however, companies are permitted to apply the amendments in ASU 2024-03 retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. In January 2025, the effective date was further clarified with the issuance of ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). No guidance was changed with ASU 2025-01, but the issuance simply ensures that all public business entities have a clear and consistent timeline for implementing the enhanced expense disaggregation disclosures. 9 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 2. Business Combination Cronos Growing Company Inc. (“Cronos GrowCo”) was formed under the Canada Business Corporations Act on June 14, 2018, with the objective of cultivating and commercializing cannabis and cannabis products. Cronos GrowCo is licensed to sell certain cannabis products to other license holders in the wholesale channel, as well as to provincial cannabis control authorities. Cronos GrowCo holds Global GAP and ICANN GAP certifications (equivalent to IMC-GAP) for the export of dried flower to Israel. In the third quarter of 2024, the Company obtained majority control of the board of directors of Cronos GrowCo, which qualified as a business combination under ASC 805 Accounting for Business Combinations (the “Cronos GrowCo Transaction”). Prior to the Cronos GrowCo Transaction, the Company’s investment in Cronos GrowCo consisted of an investment accounted for under the equity method and loans receivable from Cronos GrowCo. In connection with the Cronos GrowCo Transaction, the Company provided an approximately $ 51,000 secured non-revolving credit facility to Cronos GrowCo to fund the expansion of Cronos GrowCo’s cultivation and processing facilities (such area, the “Phase 2 Expansion Area”) and entered into a new supply agreement with Cronos GrowCo (the “Cronos GrowCo Supply Agreement”). Pursuant to the Cronos GrowCo Supply Agreement, prior to the commencement of sales from the Phase 2 Expansion Area, the Company and its controlled affiliates (other than Cronos GrowCo) have the right, but not the obligation, to purchase an aggregate total quantity of 80 % of Cronos GrowCo’s production. Thereafter, the Company and its controlled affiliates (other than Cronos GrowCo) will have the right, but not the obligation, to purchase 70 % of Cronos GrowCo’s forecasted production capacity over a given period and 70 % of Cronos GrowCo’s actual production in a given month. Cronos GrowCo’s production is intended to support the majority of the Company’s current and future biomass supply requirements. As there was no cash consideration paid, the Cronos GrowCo Transaction was valued with reference to the fair value of our preexisting equity method investment of $ 53,542 , as well as the effective settlement of various preexisting relationships between the Company and Cronos GrowCo. These preexisting relationships are now classified as intercompany transactions and eliminated upon consolidation. As of the date of the Cronos GrowCo Transaction, the fair value of the non-controlling interest in Cronos GrowCo was $ 53,542 . The Company used the income approach to estimate both the fair value of the Company’s equity method investment in Cronos GrowCo and the fair value of the non-controlling interest in Cronos GrowCo. Under the income approach, significant assumptions used in the discounted cash flow method that required the use of judgment were the discount rate, growth rates and cash flow projections. During the fourth quarter of 2024, the Company completed the allocation of the purchase price to the assets acquired and liabilities assumed. The final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed was: Cash $ 5,993 Accounts receivable 2,437 Inventory 15,754 Prepaids and other current assets 795 Intangible assets 8,008 Goodwill 65,269 Property, plant and equipment 87,630 Accounts payable ( 2,913 ) Accrued liabilities ( 2,757 ) Deferred income tax liability ( 1,337 ) Total purchase price $ 178,879 The inventory acquired in the Cronos GrowCo Transaction of $ 15,754 included a step-up to fair value of $ 5,605 . For the three months ended March 31, 2025, the Company recognized $ 517 of this inventory step-up into cost of sales on the condensed consolidated statements of income (loss) and comprehensive income (loss). As of March 31, 2025, none of the inventory step-up was remaining in the Company’s inventory on the condensed consolidated balance sheet. 10 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 details of the property, plant and equipment acquired by major category: Fair value at date of Cronos GrowCo Transaction Land $ 4,557 Building and leasehold improvements 49,356 Machinery and equipment 21,603 Furniture and fixtures 580 Construction in progress 11,534 Total $ 87,630 The following table presents details of the intangible assets acquired: Fair value at date of acquisition Amortization period (in years) Know-how $ 8,008 10 Total $ 8,008 For the three months ended March 31, 2025, net revenue attributable to Cronos GrowCo was $ 2,885 and income before income taxes attributable to Cronos GrowCo was $ 791 . Business combination-related costs of $ 40 were incurred in relation to the Cronos GrowCo Transaction in the three months ended March 31, 2025 and were reported in general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss). As a result of the Cronos GrowCo Transaction, the Company recorded goodwill of $ 65,269 , none of which is deductible for income tax purposes. The goodwill acquired was primarily attributable to the ability to realize synergies, enhance Cronos’ supply capabilities and support future growth opportunities from the expansion of Cronos GrowCo’s cultivation and processing facilities. 3. Inventory, net Inventory, net is comprised of the following items: As of March 31, 2025 As of December 31, 2024 Raw materials $ 5,216 $ 5,400 Work-in-progress 15,809 14,350 Finished goods 13,451 13,248 Supplies and consumables 127 151 Total $ 34,603 $ 33,149 As a result of the Cronos GrowCo Transaction, the Company recorded a step-up to Cronos GrowCo’s existing inventory of $ 5,605 to bring the inventory balance acquired by the Company to its fair value. For the three months ended March 31, 2025, the Company recognized $ 517 of this inventory step-up into cost of sales on the condensed consolidated statements of income (loss) and comprehensive income (loss). As of March 31, 2025, none of the inventory step-up was remaining in the Company’s inventory on the condensed consolidated balance sheets. See Note 2 “ Business Combination ” for further information. 11 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 4. Investments (a) Investments in equity method investments, net The following is a summary of the Company’s share of net income from equity investments accounted for under the equity method of accounting: Three months ended March 31, 2024 Cronos GrowCo (i) $ 1,448 $ 1,448 (i) The Company obtained control of Cronos GrowCo on July 1, 2024, and, as a result, the investment in Cronos GrowCo is now accounted for as an intercompany transaction and eliminated upon consolidation from the business combination date onwards. See Note 2 “Business Combination” for further information. (b) Other investments Other investments consist of investments in common shares and options of two companies in the cannabis industry. PharmaCann Option On June 14, 2021, the Company purchased an option (the “PharmaCann Option”) to acquire 473,787 shares of Class A Common Stock of PharmaCann, Inc. (“PharmaCann”), a vertically integrated cannabis company in the United States, at an exercise price of $ 0.0001 per share, representing approximately 10.5 % of PharmaCann’s issued and outstanding capital stock on a fully diluted basis as of the date of the PharmaCann Option, for an aggregate purchase price of approximately $ 110,392 . The PharmaCann Option is classified as an investment in an equity security without a readily determinable fair value. The Company measures the PharmaCann Option at cost less accumulated impairment charges, 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 March 31, 2025 and December 31, 2024, the Company’s ownership percentage in PharmaCann on a fully diluted basis was approximately 3.4 % and 5.8 %, respectively. The decrease in ownership percentage in the first quarter of 2025 was the result of the exercise of a convertible note by a PharmaCann shareholder unrelated to Cronos. The decrease in the Company’s ownership percentage since acquisition does not materially affect the Company’s rights under the PharmaCann Option. The net book value of the PharmaCann Option was zero as of March 31, 2025 and December 31, 2024. During the first quarter of 2024, the Company identified adverse forecast changes in the financial performance of PharmaCann as indicators of impairment related to the PharmaCann Option and conducted an analysis comparing the PharmaCann Option’s carrying amount to its estimated fair value. The fair value was estimated using the market approach. Under the market approach, the key assumptions are the selected multiples and the discount for lack of marketability. As a result of the analysis, the Company recorded a non-cash impairment charge of $ 12,734 in the first quarter of 2024, 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) for the three months ended March 31, 2024. The Company may sell, transfer or dispose of the PharmaCann Option without PharmaCann’s prior written consent, subject to the following conditions : (i) any transferee of any part of the PharmaCann Option must comply with and commit to comply with all regulations issued by a governmental entity applicable to such transferee in all material respects; (ii) any transferee of any part of the PharmaCann Option must agree to be bound by the terms of the Option Purchase Agreement, dated as of June 14, 2021 (the “Option Purchase Agreement”), as a “Purchaser” thereunder; (iii) the Company may not split and/or transfer the PharmaCann Option, in the aggregate, to more than four persons (with certain exceptions); (iv) no transferee may be a Prohibited Assignee (as defined in the Option Purchase Agreement); and (v) subject to certain exceptions, in the event that the Company (or a Permitted Transferee of the whole PharmaCann Option) transfers less than all of the PharmaCann Option to any third party that is not a Permitted Transferee, certain governance and information rights terminate immediately, unless waived by the PharmaCann board of directors in its sole and absolute discretion. Additionally, in the event of an initial underwritten public offering of PharmaCann’s common stock pursuant to an effective registration statement, to the extent that holders of PharmaCann common stock are subject to any lock-up period imposed by the underwriter in connection therewith, the Company will, if applicable, execute a customary lock-up agreement on the same material terms and conditions as the other holders of common stock are subject to or as otherwise agreed between PharmaCann and the Company, subject to certain conditions with respect to the duration of the lock-up period. 12 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents Vitura On February 12, 2025, Vitura Health Limited (“Vitura”) issued an additional 74,814,757 common shares diluting the Company’s ownership in Vitura from approximately 10 % to approximately 8.3 %. As of March 31, 2025, the Company’s ownership percentage in Vitura remained at approximately 8.3 % of its outstanding common shares. 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 income (loss) and comprehensive income (loss). The following table summarizes the Company’s other investments activity: As of December 31, 2024 Unrealized loss Impairment charges Foreign exchange effect As of March 31, 2025 Vitura 2,813 ( 68 ) — 10 2,755 $ 2,813 $ ( 68 ) $ — $ 10 $ 2,755 As of December 31, 2023 Unrealized loss Impairment charges Foreign exchange effect As of March 31, 2024 PharmaCann $ 25,650 $ — $ ( 12,734 ) $ — $ 12,916 Vitura 9,601 ( 2,342 ) — ( 417 ) 6,842 $ 35,251 $ ( 2,342 ) $ ( 12,734 ) $ ( 417 ) $ 19,758 5. Loans Receivable, net Loans receivable, net consists of the following: As of March 31, 2025 As of December 31, 2024 Current portion of Mucci Promissory Note accrued interest $ 737 $ 618 Total current portion of loans receivable, net 737 618 Mucci Promissory Note 13,547 13,464 Cannasoul Collaboration Loan 1,702 1,736 Add: Long-term portion of accrued interest 338 326 Total long-term portion of loans receivable, net 15,587 15,526 Total loans receivable, net $ 16,324 $ 16,144 Cronos GrowCo Credit Facility 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 . During the three months ended March 31, 2024, Cronos GrowCo repaid C$ 1,667 ($ 1,231 ) in principal and paid C$ 1,943 ($ 1,435 ) in interest related to the GrowCo Credit Facility. In June 2024, the GrowCo Credit Facility was amended to increase the aggregate principal amount available by C$ 70,000 by providing a second secured non-revolving credit facility (“Term Loan B”). The funds from Term Loan B will be used to expand Cronos GrowCo’s purpose-built cannabis facility and Term Loan B will mature 10 years after the commencement of sales from the Phase 2 Expansion Area. Principal will be repaid under Term Loan B on a quarterly basis after the commencement of sales from the Phase 2 Expansion Area. Interest on Term Loan B is payable on a quarterly basis until maturity beginning after the first borrowing under Term Loan B. Prior to July 1, 2024, only C$ 12,000 of the C$ 70,000 increased principal availability could be drawn, which Cronos GrowCo drew in full on June 20, 2024. As a result of the Cronos GrowCo Transaction on July 1, 2024, the existing loans receivable under the GrowCo Credit Facility were remeasured at their fair value and effectively settled. See Note 2 “ Business Combination ” for further information regarding the Cronos GrowCo Transaction. 13 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents Mucci Promissory Note On June 28, 2019, the Company entered into a promissory note receivable agreement (the “Mucci Promissory Note”) for C$ 16,350 (approximately $ 11,360 ) with the Cronos GrowCo joint venture partner (“Mucci”). The Mucci Promissory Note is secured by a general security agreement covering all the assets of Mucci. Prior to July 1, 2022, interest accrued on the Mucci Promissory Note was capitalized as part of the principal balance. On September 30, 2022, the Mucci Promissory Note was amended and restated to increase the interest rate from 3.95 % to the Canadian Prime Rate plus 1.25 %, change the interest payments from quarterly to annual, and defer Mucci’s initial cash interest payment from September 30, 2022 to July 1, 2023. On June 20, 2024, the Mucci Promissory Note was amended and restated. As a result, interest accrued on the Mucci Promissory Note between July 1, 2023 and July 1, 2024 was capitalized as part of the principal balance. As of July 1, 2024, interest is accrued and to be paid in cash beginning on July 1, 2025. For both the three months ended March 31, 2025 and March 31, 2024, there were no repayments of principal or interest on the Mucci Promissory Note. Cannasoul Collaboration Loan The Company holds a variable interest in Cannasoul Lab Services Ltd. (“CLS”). CLS is a wholly owned subsidiary of Cannasoul Analytics Ltd., which is in the process of establishing a commercial cannabis analytical testing laboratory (the “Cannasoul Laboratory”) located on the premises of Cronos Israel (the “Cannasoul Collaboration”). Cronos Israel agreed to advance up to ILS 8,297 ($ 2,231 ) by a non-recourse loan (the “Cannasoul Collaboration Loan”) to CLS over a period of two years from April 1, 2020 for the capital and operating expenditures of the Cannasoul Laboratory. The Cannasoul Collaboration Loan bears interest at 3.5 % annually. Cronos Israel will receive 70 % of the profits of the Cannasoul Laboratory until such time as it has recovered 150 % of the amounts advanced to CLS, after which time it will receive 50 % of the Cannasoul Laboratory profits. As a result, the Company is exposed to economic variability from CLS’s performance. The Company does not consolidate CLS as it does not have the power to direct the activities that most significantly impact the entity’s economic performance; thus, the Company is not considered the primary beneficiary of the entity. The carrying amount of the Cannasoul Collaboration Loan is recorded under loans receivable and the full loan amount, ILS 8,297 , represents the Company’s maximum potential exposure to losses through the Cannasoul Collaboration. As of both March 31, 2025 and December 31, 2024, CLS has received ILS 8,297 (approximately $ 2,231 and $ 2,272 , respectively), from the Cannasoul Collaboration Loan. Expected credit loss allowances on the Company’s long-term financial assets for the three months ended March 31, 2025 and 2024 were comprised of the following items: As of December 31, 2024 Increase (decrease) (ii) Foreign exchange effect As of March 31, 2025 Mucci Promissory Note $ 88 $ 5 $ — $ 93 Cannasoul Collaboration Loan 535 4 ( 10 ) 529 $ 623 $ 9 $ ( 10 ) $ 622 As of December 31, 2023 Increase (decrease) (iii) Foreign exchange effect As of March 31, 2024 GrowCo Credit Facility (i) $ 11,176 $ ( 197 ) $ ( 239 ) $ 10,740 Mucci Promissory Note 89 2 ( 2 ) 89 Cannasoul Collaboration Loan 524 4 ( 10 ) 518 $ 11,789 $ ( 191 ) $ ( 251 ) $ 11,347 (i) The Company obtained control of Cronos GrowCo on July 1, 2024, and, as a result, the loans receivable from Cronos GrowCo are now accounted for as intercompany transactions and eliminated upon consolidation from the business combination date onwards. See Note 2 “ Business Combination ” for further information. (ii) During the three months ended March 31, 2025, $ 9 was recorded as an increase to general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as a result of adjustments to our expected credit losses. (iii) During the three months ended March 31, 2024, $ 191 was recorded as a decrease to general and administrative expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss) as a result of adjustments to our expected credit losses. 14 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 6. Property, Plant and Equipment, net Property, plant and equipment, net consisted of the following: As of March 31, 2025 As of December 31, 2024 Cost Land $ 6,347 $ 6,389 Building and leasehold improvements 191,210 192,059 Machinery and Equipment 35,343 36,741 Furniture and fixtures 2,477 2,687 Construction in progress 37,270 28,710 Less: accumulated depreciation ( 30,167 ) ( 29,798 ) Less: accumulated impairment charges ( 103,295 ) ( 103,599 ) Property, Plant, and Equipment, net $ 139,185 $ 133,189 During the first quarter of 2024, the Company ceased operations at its Winnipeg, Manitoba facility (“Cronos Fermentation”) and performed an assessment under ASC 360 of the recoverability of the carrying value of the Cronos Fermentation assets, and determined the carrying value of the assets was not fully recoverable. The fair value was estimated using a combination of the market and income approaches. As a result of this analysis, an impairment loss on long-lived assets of $ 1,631 was recorded to the condensed consolidated statements of net income (loss) and comprehensive income (loss) in the three months ended March 31, 2024. As of both March 31, 2025 and December 31, 2024, the Cronos Fermentation assets were classified as held-for-sale on the condensed consolidated balance sheets. See Note 8 “ Restructuring ” for further information. For the three months ended March 31, 2025, depreciation expense on property, plant and equipment was $ 2,144 . For the three months ended March 31, 2024, depreciation expense on property, plant and equipment was $ 757 . This depreciation expense was included in cost of sales as well as depreciation and amortization in operating expenses on the condensed consolidated statements of net income (loss) and comprehensive income (loss). As of March 31, 2025 and December 31, 2024, the Company had $ 2,774 and $ 8,828 , respectively, of unpaid purchases of property, plant and equipment accrued in accounts payable on the condensed consolidated balance sheets. 7. Goodwill and Intangible Assets, net (a) Goodwill Goodwill is comprised of the following items as of March 31, 2025 and December 31, 2024: As of March 31, 2025 Cost Accumulated impairment charges Net Peace Naturals $ 973 $ — $ 973 Cronos GrowCo 62,295 — 62,295 $ 63,268 $ — $ 63,268 As of December 31, 2024 Cost Accumulated impairment charges Net Peace Naturals $ 976 $ — $ 976 Cronos GrowCo 62,477 — 62,477 $ 63,453 $ — $ 63,453 15 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents (b) Intangible assets, net Intangible assets, net are comprised of the following items as of March 31, 2025 and December 31, 2024: As of March 31, 2025 Cost Accumulated amortization Accumulated impairment charges Net Software $ 6,931 $ ( 5,003 ) $ ( 72 ) $ 1,856 Health Canada licenses 7,787 ( 1,668 ) ( 6,119 ) — Ginkgo exclusive licenses 26,063 ( 5,313 ) ( 20,750 ) — Israeli codes (i) 276 ( 77 ) — 199 Know-how (ii) 7,643 ( 573 ) — 7,070 Total definite-lived intangible assets 48,700 ( 12,634 ) ( 26,941 ) 9,125 Lord Jones ® brand 64,000 — ( 62,500 ) 1,500 Trademarks 142 — ( 142 ) — Total intangible assets $ 112,842 $ ( 12,634 ) $ ( 89,583 ) $ 10,625 As of December 31, 2024 Cost Accumulated amortization Accumulated impairment charges Net Software $ 6,988 $ ( 4,646 ) $ ( 72 ) $ 2,270 Health Canada licenses 7,810 ( 1,673 ) ( 6,137 ) — Ginkgo exclusive licenses 26,139 ( 5,329 ) ( 20,810 ) — Israeli codes (i) 281 ( 76 ) — 205 Know-how (ii) 7,665 ( 383 ) — 7,282 Total definite-lived intangible assets 48,883 ( 12,107 ) ( 27,019 ) 9,757 Lord Jones ® brand 64,000 — ( 62,500 ) 1,500 Trademarks 142 — ( 142 ) — Total intangible assets $ 113,025 $ ( 12,107 ) $ ( 89,661 ) $ 11,257 (i) The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities. (ii) Know-how was acquired as part of the Cronos GrowCo Transaction. See Note 2 “ Business Combination ” for further information. Amortization costs associated with the know-how intangible asset are recorded to cost of sales on the consolidated statements of net income (loss) and comprehensive income (loss). As of March 31, 2025, the estimated future amortization of definite-lived intangible assets is as follows: As of March 31, 2025 Remainder of 2025 (9 months) $ 1,457 2026 1,506 2027 1,000 2028 794 2029 792 Thereafter 3,576 $ 9,125 16 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 8. Restructuring In the first quarter of 2022, the Company initiated a strategic plan to realign the business around its brands, centralize functions and evaluate the Company’s supply chain (the “Realignment”). As part of the Realignment, on February 28, 2022, the Company’s Board of Directors (the “Board”) approved plans to leverage the Company’s strategic partnerships to improve supply chain efficiencies and reduce manufacturing overhead by exiting its production facility in Stayner, Ontario, Canada (the “Peace Naturals Campus”). On February 27, 2023, the Board approved revisions to the Realignment, under which the Company is 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. In the third quarter of 2023, the Board approved revisions to the Realignment to wind-down operations at Cronos Fermentation, list the Cronos Fermentation Facility for sale, and implement additional organization-wide cost reductions as the Company continues its Realignment initiatives. In the first quarter of 2025, the Company continued its Realignment initiatives to transform its IT infrastructure and finance departments to drive long-term cost efficiencies, improve cross-functional collaboration, and support global scalability. These actions include leadership transitions, consolidation of certain roles, and assessment of, and investment in, critical IT infrastructure. The Realignment initiatives are intended to position the Company to drive profitable and sustainable growth over time. On November 26, 2023, the Company entered into an agreement with Future Farmco Canada Inc. for the sale and leaseback of the Peace Naturals Campus. This agreement was subsequently terminated pursuant to its terms during the second quarter of 2024. The Company plans to continue and expand operations at the Peace Naturals Campus. During the first quarter of 2024, the Company ceased operations at Cronos Fermentation and performed an assessment under ASC 360 Property, Plant and Equipment of the recoverability of the carrying value of the Cronos Fermentation assets, and determined the carrying value of the assets was not fully recoverable. The fair value was estimated using a combination of the market and income approaches. As a result of this analysis, an impairment loss on long-lived assets of $ 1,631 was recorded to the condensed consolidated statements of net loss and comprehensive loss in the three months ended March 31, 2024. In addition, the Cronos Fermentation assets were classified as held-for-sale in the first quarter of 2024 and continue to be classified as held-for-sale as of March 31, 2025. During the three months ended March 31, 2025, the Company incurred $ 555 restructuring costs in connection with the Realignment. During the three months ended March 31, 2024, the Company incurred $ 83 of restructuring costs in connection with the Realignment. Charges related thereto include employee-related costs such as severance and other termination benefits, as well as other related costs. The following table summarizes the Company’s restructuring activity for the three months ended March 31, 2025: Accrual as of December 31, 2024 Expenses Payments/Write-offs Accrual as of March 31, 2025 Employee Termination Benefits $ — $ 257 $ — $ 257 Other Restructuring Costs — 298 ( 115 ) 183 Total $ — $ 555 $ ( 115 ) $ 440 The following table summarizes the Company’s restructuring activity for the three months ended March 31, 2024: Accrual as of December 31, 2023 Expenses Payments/Write-offs Accrual as of March 31, 2024 Employee Termination Benefits $ 150 $ 62 $ ( 174 ) $ 38 Other Restructuring Costs — 21 ( 21 ) — Total $ 150 $ 83 $ ( 195 ) $ 38 17 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 9. Share-based Compensation (a) Share-based award plans The Company has granted stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees and non-employee directors under the 2018 Stock Option Plan dated June 28, 2018 (the “2018 Stock Option Plan”), the 2020 Omnibus Equity Incentive Plan dated March 29, 2020 (the “2020 Omnibus Plan”) and the DSU Plan dated August 10, 2019 (the “DSU Plan”). The Company can no longer make grants under the 2018 Stock Option Plan. The following table summarizes the total share-based compensation expense associated with the Company’s stock options and RSUs for the three months ended March 31, 2025 and 2024: For the three months ended March 31, 2025 2024 Stock options $ 74 $ 34 RSUs 2,014 1,981 Total share-based compensation $ 2,088 $ 2,015 (b) Stock options Vesting conditions for grants of options are determined by the Compensation Committee of the Board. 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 . The typical vesting for stock option grants made under the 2018 Stock Option Plan is quarterly vesting over three to five years with a maximum term of seven years . The 2018 Stock Option Plan did not, and the 2020 Omnibus Plan does not, authorize grants of options with an exercise price below fair market value. The following is a summary of the changes in stock options for the three months ended March 31, 2025 and 2024: Weighted-average exercise price (C$) (i) Number of options Weighted-average remaining contractual term (years) Balance as of December 31, 2024 $ 5.63 717,264 3.65 Balance as of March 31, 2025 $ 5.63 717,264 3.40 Exercisable as of March 31, 2025 $ 6.20 573,253 3.04 Weighted-average exercise price (C$) (i) Number of options Weighted-average remaining contractual term (years) Balance as of December 31, 2023 $ 14.50 2,103,201 1.84 Cancellation, forfeiture and expiry of options 23.93 ( 9,501 ) Balance as of March 31, 2024 $ 14.46 2,093,700 1.59 Exercisable as of March 31, 2024 $ 15.72 1,874,123 1.10 (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. The following table summarizes stock options outstanding: As of March 31, 2025 As of December 31, 2024 2020 Omnibus Plan 702,264 702,264 2018 Stock Option Plan 15,000 15,000 Total stock options outstanding 717,264 717,264 18 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents (c) Restricted share units The following is a summary of the changes in RSUs for the three months ended March 31, 2025 and 2024: Weighted-average grant date fair value (C$) (ii) Number of RSUs Balance as of December 31, 2024 $ 3.50 8,382,213 Granted (i) 2.73 1,775,668 Vested and issued 4.00 ( 4,459,280 ) Cancellation and forfeitures 3.47 ( 134,999 ) Balance as of March 31, 2025 $ 2.86 5,563,602 Weighted-average grant date fair value (C$) (ii) Number of RSUs Balance as of December 31, 2023 $ 3.77 7,381,541 Granted (i) 2.66 1,910,756 Vested and issued 3.52 ( 967,016 ) Cancellation and forfeitures 2.95 ( 65,662 ) Balance as of March 31, 2024 $ 3.55 8,259,619 (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. The vesting of such RSUs is not subject to the achievement of any performance criteria. (ii) The weighted-average grant date fair value reflects the conversion of foreign currency-denominated RSUs translated into C$ using the foreign exchange rate as of the date of issuance. (d) Deferred share units The following is a summary of the changes in DSUs for the three months ended March 31, 2025 and 2024: Financial liability Number of DSUs Balance as of December 31, 2024 $ 1,129 560,261 Gain on revaluation ( 120 ) — Balance as of March 31, 2025 $ 1,009 560,261 Financial liability Number of DSUs Balance as of December 31, 2023 $ 1,092 521,679 Loss on revaluation 277 — Balance as of March 31, 2024 $ 1,369 521,679 10. Commitments and Contingencies (a) Commitments There have been no material changes in the information regarding commitments as disclosed in the Company’s Annual Report. (b) Contingencies The Company is subject to various legal proceedings in the ordinary course of its business and in connection with its marketing, distribution and sale of its products. Many of these legal proceedings are in the early stages of litigation and seek damages that are unspecified or not quantified. Although the outcome of these matters cannot be predicted with certainty, the Company does not believe these legal proceedings, individually or in the aggregate, will have a material adverse effect on its financial condition but could be material to its results of operations for a quarterly period depending, in part, on its results for that quarter. 19 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents (i) Class action complaints relating to restatement of 2019 interim financial statements On March 11 and 12, 2020, two alleged shareholders of the Company separately filed two putative class action complaints in the U.S. District Court for the Eastern District of New York against the Company and its Chief Executive Officer and former Chief Financial Officer. The court consolidated the cases, and the consolidated amended complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, promulgated thereunder, against all defendants, and Section 20(a) of the Exchange Act against the individual defendants. The consolidated amended complaint generally alleges that certain of the Company’s prior public statements about revenue and internal controls were incorrect based on the Company’s disclosures relating to the Audit Committee of the Board’s review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel. The consolidated amended complaint does not quantify a damage request. The defendants moved to dismiss on February 8, 2021. On November 17, 2023, the court entered an order granting the motion and dismissed the case with prejudice. On December 1, 2023, the shareholder plaintiffs sought reconsideration of the dismissal, requesting that the court instead dismiss the action without prejudice and permit the plaintiffs to seek leave to further amend the complaint. On December 3, 2024, the Court issued an opinion and order granting the plaintiffs’ motion for reconsideration, and on January 10, 2025, the plaintiffs filed a second amended class action complaint. The defendants are moving to dismiss the second amended class action complaint. On June 3, 2020, an alleged shareholder filed a Statement of Claim, as amended on August 12, 2020, in the Ontario Superior Court of Justice in Toronto, Ontario, Canada, seeking, among other things, an order certifying the action as a class action on behalf of a putative class of shareholders and damages of an unspecified amount. The Amended Statement of Claim named (i) the Company, (ii) its Chief Executive Officer, (iii) former Chief Financial Officer, (iv) former Chief Financial Officer and Chief Commercial Officer, and (v) current and former members of the Board as defendants and alleged breaches of the Ontario Securities Act, oppression under the Ontario Business Corporations Act and common law misrepresentation. The Amended Statement of Claim generally alleged that certain of the Company’s prior public statements about revenue and internal controls were misrepresentations based on the Company’s March 2, 2020 disclosure that the Audit Committee of the Board was conducting a review of the appropriateness of revenue recognized in connection with certain bulk resin purchases and sales of products through the wholesale channel, and the Company’s subsequent restatement. The Amended Statement of Claim did not quantify a damage request. On June 28, 2021, the Court dismissed motions brought by the plaintiff for leave to commence a claim for misrepresentation under the Ontario Securities Act and for certification of the action as a class action. The plaintiff appealed the Court’s dismissal of the motions only with respect to the Company, the Chief Executive Officer, and the now former Chief Financial Officer; the remaining defendants were dismissed from the matter with prejudice and the Company and all individual defendants agreed not to seek costs from plaintiff in connection with the dismissal of the motions. 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 April 11, 2023, the plaintiff filed a Fresh as Amended Statement of Claim, which reflected the dismissal of the defendants for which an appeal was not sought, the removal of the claims for oppression under the Ontario Business Corporations Act and common law misrepresentation, as well as shortening the proposed class period. On October 10, 2023, the Superior Court certified the action on behalf of a class of persons or entities who acquired shares in the secondary market, including on the TSX and Nasdaq, during the period from May 9, 2019 to March 30, 2020, other than certain excluded persons. (ii) Regulatory reviews relating to restatements On October 24, 2022, the Company announced regulatory settlements as follows: SEC Settlement On October 24, 2022, the SEC issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8(a) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21(c) of the Exchange Act, Making Findings, and Imposing a Cease-and-Desist Order (the “Settlement Order”) resolving the restatements of our 2019 and 2021 interim financial statements (the “Restatements”). The Company agreed to settle with the SEC, without admitting or denying the allegations described in the Settlement Order. The Settlement Order fully and finally disposed of the investigation of the Company by the SEC into the Restatements without the payment of any civil penalty or other amount. The Settlement Order required the Company to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 13a-13, 13a-15(a), 13a-16 and 12b-20 thereunder. As a result of the Settlement Order, the Company (i) lost its status as a well-known seasoned issuer for a period of three years, (ii) is unable to rely on the private offering exemptions provided by Regulations A and D under the Securities Act for a period of five years and (iii) is unable to rely on the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 for a period of three years. 20 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents OSC Settlement On October 24, 2022, the Ontario Capital Markets Tribunal approved a settlement agreement (the “Settlement Agreement”) between the Company and the staff of the Ontario Securities Commission (the “OSC”), resolving the Restatements. Pursuant to the terms of the Settlement Agreement, which fully and finally disposed the investigation of the Company by the OSC, Cronos agreed to pay a total of C$ 1.34 million to fully settle the matter, and acknowledged that it had failed to comply with the requirement under Section 77 of the Ontario Securities Act to file interim financial reports in the manner set out therein and had acted in a manner contrary to the public interest. (iii) Litigation and regulatory inquiries relating to marketing, distribution, import and sale of products On April 17, 2023, a group of plaintiffs led by the Green Leaf (Ale Yarok) political party filed a Statement of Claim and Request for Approval of a Class Action on behalf of a purported class of Israeli cannabis consumers in the District Court of Tel Aviv, Israel, against 26 cannabis-related parties, including three Cronos Israel entities. The Statement of Claim alleges that the defendants violated certain laws relating to the marketing of medical cannabis products, including marketing to unlicensed cannabis consumers. The lawsuit seeks a total of ILS 420 million. The Cronos Israel defendants moved to dismiss the action on August 13, 2023. The court granted the motion (and similar motions filed by other defendants) on May 16, 2024, dismissing the plaintiffs’ petition for class certification without prejudice and their individual claims with prejudice, and ordering the plaintiffs to pay ILS 10 thousand to each of the defendants for costs. On July 14, 2024, the plaintiffs appealed to the Supreme Court of Israel seeking to overturn both the dismissal of plaintiffs’ individual claims and the award of costs. The appeal is pending. On January 18, 2024, the Company was notified that the Trade Levies Commissioner of the Israel Ministry of Economy and Industry initiated a public investigation of alleged dumping of medical cannabis imports from Canada into Israel. On July 9, 2024, the Commissioner announced a preliminary determination proposing to impose an anti-dumping duty on Canadian licensed producers. Under the proposal, the Company would have been subject to a proposed duty of 369%. The Commissioner determined not to impose a provisional duty at that time pending the conclusion of the Ministry’s investigation. The Company responded to requests for information from the Ministry. On November 10, 2024, the Trade Levies Commissioner published final findings under which the Company would be subject to a proposed duty of 175%. The Commissioner’s findings were then evaluated by an ad hoc advisory committee. On December 12, 2024, the Minister of Economy announced a conflict of interest and recused himself from the evaluation of whether to impose a duty. On April 10, 2025, notwithstanding the previous recusal, the Minister of Economy approved a duty of up to 165% on imports of cannabis from Canada, including the Company’s imports. On April 25, 2025, the Minister of Finance released a memorandum opposing the imposition of the duty, which acted as a veto of the Minister of Economy’s approval. On April 29, 2025, the Minister of Economy released a memorandum stating that notwithstanding the veto, he intends to proceed with the process of imposing the duty. A provisional duty is not being imposed at this time. The Company cannot predict further proceedings or determinations of the Ministers of Economy or Finance, or the Finance Committee of the Knesset and cannot predict whether a duty will ultimately be imposed on its products. On July 25, 2024, a group of cannabis cultivators filed an administrative petition in the District Court of Jerusalem, Israel, against the Trade Levies Commissioner and certain Israeli and Canadian businesses. The administrative petition sought a court order requiring the Trade Levies Commissioner to impose a temporary duty on cannabis imported from Canada during the pendency of the investigation until the date on which a final determination is made by the Ministry of Economy whether to impose a duty. On September 9, 2024, the Company filed a motion to join the litigation; the court granted the Company’s motion on September 23, 2024. On February 6, 2025, the court dismissed the administrative petition. We expect litigation and regulatory proceedings relating to the marketing, distribution, import and sale of our products to increase. 21 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 11. Segment Information Segment reporting is prepared on the same basis that the CODM manages the business, makes operating decisions and assesses the Company’s performance. The CODM is the Company’s Chief Executive Officer. The Company operates as a single segment with the purpose of providing high-quality cannabis products to adult-use, wholesale, and medical market customers globally. The consolidated results are regularly reviewed by the CODM to assess the performance of the Company’s single segment operations and make decisions regarding the allocation of resources. The CODM reviews adjusted earnings (loss) before interest, tax, depreciation and amortization (“Adjusted EBITDA”) as the measure of segment profit or loss to evaluate performance of and allocate resources for its reportable segment. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, and non-cash items and items that do not reflect management’s assessment of ongoing business performance. The CODM believes Adjusted EBITDA provides the most useful insight into underlying business trends and results and provides a more meaningful comparison of period-over-period results. In addition, certain significant expenses are regularly reviewed by the CODM and considered for business decisions and allocation of resources; these significant expenses include: sales and marketing, research and development, general and administrative, depreciation and amortization, and share-based compensation expense, which are presented within operating expenses on the Company’s condensed consolidated statements of net income (loss) and comprehensive income (loss). Furthermore, the CODM regularly reviews total cash and short-term investments to aid in capital allocation decisions. The table below sets forth consolidated Adjusted EBITDA and significant expenses for our single segment: Three months ended March 31, 2025 2024 Adjusted EBITDA $ 2,289 $ ( 10,669 ) Significant expenses: Sales and marketing 4,565 5,332 Research and development 793 997 General and administrative 9,309 8,907 Share-based compensation 2,088 2,015 Depreciation and amortization 496 1,123 Total significant expenses 17,251 18,374 Restructuring costs 555 83 Impairment loss on long-lived assets — 1,974 Total operating expense $ 17,806 $ 20,431 22 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 set forth a reconciliation of net income (loss) as determined in accordance with U.S. GAAP to Adjusted EBITDA for the periods indicated: Three months ended March 31, 2025 Net income $ 7,723 Interest income, net ( 9,665 ) Income tax benefit ( 455 ) Depreciation and amortization 2,840 EBITDA 443 Gain on revaluation of financial instruments (ii) ( 49 ) Foreign currency transaction gain ( 1,583 ) Transaction costs (iv) 40 Other, net (v) ( 43 ) Restructuring costs (vi) 555 Share-based compensation (vii) 2,088 Financial statement review costs (viii) 47 Inventory step-up recorded to cost of sales (ix) 517 Israel Ministry of Economy and Industry dumping inquiry expense (x) 274 Adjusted EBITDA $ 2,289 Three months ended March 31, 2024 Net loss $ ( 2,484 ) Interest income, net ( 14,245 ) Income tax benefit ( 558 ) Depreciation and amortization 1,731 EBITDA ( 15,556 ) Share of income from equity method investments ( 1,448 ) Impairment loss on long-lived assets (i) 1,974 Loss on revaluation of financial instruments (ii) 2,642 Impairment loss on other investments (iii) 12,734 Foreign currency transaction gain ( 13,259 ) Other, net (v) 670 Restructuring costs (vi) 83 Share-based compensation (vii) 2,015 Financial statement review costs (viii) ( 524 ) Adjusted EBITDA $ ( 10,669 ) (i) For the three months ended March 31, 2024, impairment loss on long-lived assets was primarily the result of the cessation of operations at Cronos Fermentation during the quarter. (ii) For the three months ended March 31, 2025 and 2024, the (gain) 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, impairment loss on other investments represents the fair value change on the PharmaCann Option. 23 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents (iv) For the three months ended March 31, 2025, transaction costs represented legal, financial and other advisory fees and expenses incurred in connection with the Cronos GrowCo Transaction. These costs are included in general and administrative expenses on the condensed consolidated statement of net income (loss) and comprehensive income (loss). (v) For the three months ended March 31, 2025 and 2024, other, net related to (gain) loss on disposal of assets and (gain) loss on revaluation of derivative liabilities. (vi) For the three months ended March 31, 2025, restructuring costs related to employee-related severance costs and IT infrastructure and finance transformation costs associated with the Realignment. For the three months ended March 31, 2024, restructuring costs related to employee-related severance costs and other restructuring costs associated with the Realignment, as described in Note 8 “ Restructuring .” (vii) For the three months ended March 31, 2025 and 2024, 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 9 “ Share-based Compensation. ” (viii) For the three months ended March 31, 2025 and 2024, 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. (ix) For the three months ended March 31, 2025, inventory step-up recorded to cost of sales represents the portion of the inventory step-up from the Cronos GrowCo Transaction that was recorded through the condensed consolidated statements of income (loss) and comprehensive income (loss). (x) For the three months ended March 31, 2025, Israel Ministry of Economy and Industry dumping inquiry expense included expenditures relating to the regulatory inquiry about alleged dumping of medical cannabis products in Israel and related litigation and external relations expenses. The following table presents the Company’s revenue by major product category for our single segment: Three months ended March 31, 2025 2024 Cannabis flower $ 23,344 $ 17,525 Cannabis extracts 8,608 7,727 Other 310 36 Net revenue $ 32,262 $ 25,288 Net revenue attributed to a geographic region based on the location of the customer was as follows: Three months ended March 31, 2025 2024 Canada $ 20,130 $ 18,871 Israel 9,229 6,417 Other countries 2,903 — Net revenue $ 32,262 $ 25,288 The table below sets forth total cash and cash equivalents and short-term investments for our single segment: As of March 31, 2025 As of December 31, 2024 Total cash and cash equivalents and short-term investments $ 837,819 $ 858,805 24 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents Property, plant and equipment, net were physically located in the following geographic regions: As of March 31, 2025 As of December 31, 2024 Canada $ 124,007 $ 117,329 Israel 15,178 15,860 Total $ 139,185 $ 133,189 Intangibles, net were physically located in the following geographic regions: As of March 31, 2025 As of December 31, 2024 Canada $ 10,279 $ 10,887 Israel 346 370 Total $ 10,625 $ 11,257 For additions to our property, plant and equipment, net and intangibles, net for the three months ended March 31, 2025 and March 31, 2024, please see Note 6 “ Property, Plant and Equipment, net ” and the condensed consolidated statements of cash flows. 25 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 12. Income (Loss) per Share Basic and diluted income (loss) per share are calculated as follows (in thousands, except share and per share amounts): Three months ended March 31, 2025 2024 Basic income (loss) per share computation Net income (loss) attributable to the shareholders of Cronos Group $ 6,122 $ ( 2,241 ) Weighted-average number of common shares outstanding for computation for basic income (loss) per share 382,958,797 381,442,597 Basic income (loss) per share $ 0.02 $ ( 0.01 ) Diluted income (loss) per share computation Net income (loss) attributable to the shareholders of Cronos Group $ 6,122 $ ( 2,241 ) Weighted-average number of common shares outstanding used in the computation of basic income (loss) per share 382,958,797 381,442,597 Dilutive effect of RSUs 3,823,127 — Dilutive effect of Top-up Rights – market price 181,761 — Weighted-average number of common shares for computation of diluted income (loss) from continuing operations per share (i) 386,963,685 381,442,597 Diluted income (loss) per share $ 0.02 $ ( 0.01 ) (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 March 31, 2025 and 2024, total securities of 18,273,597 and 24,580,665 , respectively, were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive. 13. Fair Value Measurements The Company complies with ASC 820 Fair Value Measurements for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In general, fair values are determined by: • Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. • Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. 26 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 present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis: March 31, 2025 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 797,819 $ — $ — $ 797,819 Other investments (i) 2,755 — — 2,755 Derivative liabilities — — 13 13 December 31, 2024 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 858,805 $ — $ — $ 858,805 Other investments (i) 2,813 — — 2,813 Derivative liabilities — — 40 40 (i) As of March 31, 2025 and December 31, 2024, 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 further information. There were no transfers between fair value categories during the periods presented. 14. Related Party Transactions (a) Cronos GrowCo The Company holds both ownership of 50 % of Cronos GrowCo’s common shares and senior secured debt in Cronos GrowCo and these were historically accounted for as related party transactions. Effective July 1, 2024, the Company obtained majority control of the board of directors of Cronos GrowCo, which is now accounted for as an intercompany relationship and all intercompany activity is eliminated upon consolidation. See Note 2 “ Business Combination ” for further information regarding the Cronos GrowCo Transaction. Three months ended March 31, 2024 Cronos GrowCo – purchases $ 7,010 (b) Vendor Agreement In November 2022, the Company entered into an agreement with an external vendor whereby the vendor would provide certain manufacturing services to the Company. 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. In November 2023, the Company negotiated a direct contract with the related-party vendor. During the three months ended March 31, 2025 and 2024, the Company purchased $ 189 and $ 772 , respectively, of products and services under this agreement and had outstanding accounts payable related to the agreement of $ 117 and $ 149 as of March 31, 2025 and December 31, 2024, respectively. (c) Consulting Agreement In connection with the Cronos GrowCo Transaction, Cronos GrowCo entered into a consulting services agreement with a consulting firm managed by a member of the group of investors holding the remaining 50 % ownership of Cronos GrowCo, pursuant to which the consulting firm provides management services to Cronos GrowCo. During the three months ended March 31, 2025, the Company incurred $ 209 of expense under this agreement. As of March 31, 2025, the Company had no outstanding payables related to this agreement. 27 Cronos Group Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands of U.S. dollars, except share amounts) Table of Contents 15. Subsequent Events (a) Share Repurchase Authorization On May 7, 2025, the Board authorized a share repurchase program of up to $ 50 million. The share repurchase program is expected to commence on May 14, 2025 and terminate on May 13, 2026, unless earlier terminated. Repurchases under the program may be made from time to time, either through open market purchases at then-prevailing market prices through the facilities of the NASDAQ Global Market or other U.S. published markets, privately negotiated transactions or otherwise. Open market repurchases will not exceed 19,270,951 common shares, being 5 % of the outstanding common shares as of May 7, 2025. The timing and amount of repurchases are subject to market conditions, compliance with applicable laws and regulations and any other factors management of the Company may deem relevant. The program does not obligate Cronos to acquire any specific dollar amount or number of shares and may be modified, suspended, or discontinued at any time. All shares repurchased under this program will be retired and cancelled upon settlement. As a result, the repurchased shares will be removed from issued and outstanding share capital, reducing the number of shares outstanding. The value of the retired shares will be charged against share capital and additional paid in capital and, if necessary, to retained earnings, in accordance with ASC 505-30. The Company intends to fund repurchases using available cash resources. 28 Table of Contents