Cronos Group Inc 10-Q for FY2022 Q1

Cronos Group Inc. (CRON)

10-Q 2022-05-10 For: 2022-03-31

Added on April 08, 2026

About this 10-Q

Cronos Group Inc filed this 10-Q on May 10, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $25.03M; up 98.5% from $12.61M a year earlier
Net loss: $32.64M; compared with a net loss of $161.31M a year earlier

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British Columbia, Canada						N/A
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

111 Peter St. Suite 300
Toronto, Ontario						M5V 2H1
(Address of principal executive offices)						(Zip Code)


Table of Contents

Condensed Consolidated Balance Sheets as of March 31 , 202 2 (Unaudited) and December 31, 2021			4
Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31 , 202 2 and 202 1 (Unaudited)			5
Condensed Consolidated Statements of Changes in Equity for the three months ended March 3 1 , 202 2 and 202 1 (Unaudited)			6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31 , 202 2 and 202 1 (Unaudited)			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8


Cronos Group Inc.
Condensed Consolidated Balance Sheets

(In thousands of U.S. dollars, except share amounts)			Table of Contents


	As of March 31, 2022		As of December 31, 2021
Assets	(Unaudited)		(Audited)
Current assets
Cash and cash equivalents	$	861,535	$	886,973
Short-term investments	119,933		117,684
Accounts receivable, net	25,814		22,067
Other receivables	3,297		5,765
Current portion of loans receivable, net	6,235		5,460
Inventory, net	37,054		32,802
Prepaids and other current assets	9,537		8,967

Total current assets	1,063,405		1,079,718
Investments in equity accounted investees, net	17,084		16,764
Other investments	111,761		118,392
Non-current portion of loans receivable, net	81,529		80,635
Property, plant and equipment, net	71,828		74,070
Right-of-use assets	6,325		8,882
Goodwill	1,119		1,098
Intangible assets, net	17,880		18,079
Other assets	70		100
Total assets	$	1,371,001	$	1,397,738

Liabilities
Current liabilities
Accounts payable	$	10,904	$	11,218
Accrued liabilities	23,076		26,069
Current portion of lease obligation	2,173		2,711
Derivative liabilities	4,099		14,375
Total current liabilities	40,252		54,373
Due to non-controlling interests	1,888		1,913
Non-current portion of lease obligation	7,094		7,095
Deferred income tax liability	396		81
Total liabilities	49,630		63,462


Shareholders’ equity
Share capital (authorized for issue as of March 31, 2022 and December 31, 2021: unlimited; shares outstanding as of March 31, 2022 and December 31, 2021: 375,299,980 and 374,952,693, respectively)	596,368		595,497
Additional paid-in capital	35,365		32,465
Retained earnings	626,778		659,416
Accumulated other comprehensive income	66,088		49,865
Total equity attributable to shareholders of Cronos Group	1,324,599		1,337,243
Non-controlling interests	(3,228)		(2,967)
Total shareholders’ equity	1,321,371		1,334,276
Total liabilities and shareholders’ equity	$	1,371,001	$	1,397,738


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,
	2022		2021
Net revenue, before excise taxes	$	29,406	$	14,654
Excise taxes	(4,373)		(2,043)
Net revenue	25,033		12,611
Cost of sales	18,107		15,574

Gross profit	6,926		(2,963)
Operating expenses
Sales and marketing	5,012		10,254
Research and development	4,039		5,102
General and administrative	22,368		21,906
Restructuring costs	3,084		—
Share-based compensation	3,686		2,499
Depreciation and amortization	1,293		735

Impairment loss on long-lived assets	3,493		1,741
Total operating expenses	42,975		42,237
Operating loss	(36,049)		(45,200)
Other income (expense)
Interest income, net	2,046		2,329
Gain (loss) on revaluation of derivative liabilities	10,419		(116,874)
Share of loss from equity accounted investments	—		(1,643)
Gain (loss) on revaluation of financial instruments	4,268		(200)
Impairment loss on other investments	(11,238)		—
Foreign currency transaction loss	(1,872)		—
Other, net	135		(16)
Total other income (expense)	3,758		(116,404)
Loss before income taxes	(32,291)		(161,604)
Income tax expense	362		—
Loss from continuing operations	(32,653)		(161,604)
Loss from discontinued operations	—		(21)
Net loss	(32,653)		(161,625)
Net loss attributable to non-controlling interest	(15)		(313)
Net loss attributable to Cronos Group	$	(32,638)	$	(161,312)

Comprehensive loss
Net loss	$	(32,653)	$	(161,625)
Other comprehensive income
Foreign exchange gain on translation	15,977		16,284
Comprehensive loss	(16,676)		(145,341)
Comprehensive income (loss) attributable to non-controlling interests	(261)		826
Comprehensive loss attributable to Cronos Group	$	(16,415)	$	(146,167)

Net loss from continuing operations per share
Basic - continuing operations	$	(0.09)	$	(0.44)
Diluted - continuing operations	(0.09)		(0.44)


Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the three months ended March 31, 2022 and 2021
(In thousands of U.S. dollars, except share amounts, unaudited)			Table of Contents


	Number of shares	Share capital		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Non-controlling interests		Total shareholders’ equity
Balance as of January 1, 2022	374,952,693	$	595,497	$	32,465	$	659,416	$	49,865	$	(2,967)	$	1,334,276


Activities relating to share-based compensation	347,287	871		2,900		—		—		—		3,771
Net loss	—	—		—		(32,638)		—		(15)		(32,653)
Foreign exchange gain (loss) on translation	—	—		—		—		16,223		(246)		15,977
Balance as of March 31, 2022	375,299,980	$	596,368	$	35,365	$	626,778	$	66,088	$	(3,228)	$	1,321,371


	As of March 31, 2022		As of December 31, 2021
Raw materials	$	8,523	$	9,211
Work-in-progress	12,353		12,405
Finished goods	15,587		10,778
Supplies and consumables	591		408
Total	$	37,054	$	32,802


	Ownership interest	As of March 31, 2022		As of December 31, 2021

Cronos Growing Company Inc. (“Cronos GrowCo”)	50%	$	17,084	$	16,764
NatuEra S.à.r.l. (“Natuera”)	50%	—		—

		$	17,084	$	16,764


	For the three months ended March 31,
		2022		2021



Cronos GrowCo		$	—	$	(299)

Natuera		—		(1,344)

		$	—	$	(1,643)


	As of December 31, 2021		Unrealized gain		Impairment charges		Foreign exchange effect		As of March 31, 2022
PharmaCann	$	110,392	$	—	$	(11,238)	$	—	$	99,154
Cronos Australia	8,000		4,196		—		411		12,607
	$	118,392	$	4,196	$	(11,238)	$	411	$	111,761


	As of March 31, 2022		As of December 31, 2021

GrowCo Facility(i)	$	3,198	$	3,138
Add: Current portion of accrued interest	3,037		2,322
Total current portion of loans receivable	6,235		5,460
GrowCo Facility(i)	64,801		64,367
Mucci Promissory Note	14,414		14,019
Cannasoul Collaboration Loan(ii)	2,192		2,249
Add: Long-term portion of accrued interest	122		—
Total long-term portion of loans receivable	81,529		80,635
Total loans receivable, net	$	87,764	$	86,095


	As of January 1, 2022		Increase (decrease)(i)		Foreign exchange effect		As of March 31, 2022
GrowCo Facility	$	14,089	$	(4)	$	269	$	14,354

Mucci Promissory Note	90		1		2		93
Cannasoul Collaboration Loan	415		3		(9)		409
	$	14,594	$	—	$	262	$	14,856


	As of January 1, 2021		Increase (decrease)(i)		Foreign exchange effect		As of March 31, 2021
GrowCo Facility	$	1,546	$	—	$	23	$	1,569
Natuera Series A Loan(ii)	721		416		14		1,151
Mucci Promissory Note	270		—		4		274
Cannasoul Collaboration Loan	26		—		—		26
	$	2,563	$	416	$	41	$	3,020


	As of January 1, 2022		Revaluation gain		Exercise of rights		Foreign exchange effect		As of March 31, 2022
(a) Altria Warrant	$	13,720	$	(10,011)	$	—	$	136	$	3,845
(b) Pre-emptive Rights	180		(115)		—		2		67
(c) Top-up Rights	475		(293)		—		5		187
	$	14,375	$	(10,419)	$	—	$	143	$	4,099


	As of January 1, 2021		Revaluation loss		Exercise of rights		Foreign exchange effect		As of March 31, 2021
(a) Altria Warrant	$	138,858	$	92,964	$	—	$	2,834	$	234,656
(b) Pre-emptive Rights	12,095		7,833		—		245		20,173
(c) Top-up Rights	12,457		16,077		(11,278)		215		17,471
	$	163,410	$	116,874	$	(11,278)	$	3,294	$	272,300


	As of March 31, 2022
	Altria Warrant	Pre-emptive Rights	Top-up Rights
Share price at valuation date (per share in C$)	$4.85	$4.85	$4.85
Subscription price (per share in C$)	$19	$16.25	$16.25
Weighted-average risk-free interest rate(i)	1.84%	1.31%	1.38%
Weighted-average expected life (in years)(ii)	0.94	0.50	0.75
Expected annualized volatility(iii)	71%	71%	71%
Expected dividend yield	—%	—%	—%


	As of December 31, 2021
	Altria Warrant	Pre-emptive Rights	Top-up Rights
Share price at valuation date (per share in C$)	$4.98	$4.98	$4.98
Subscription price (per share in C$)	$19.00	$16.25	$16.25
Weighted-average risk-free interest rate(i)	0.79%	0.39%	0.50%
Weighted-average expected life (in years)(ii)	1.18	0.50	0.80
Expected annualized volatility(iii)	80%	80%	80%
Expected dividend yield	—%	—%	—%


	10% decrease as of March 31, 2022
	Altria Warrant		Pre-emptive Rights		Top-up Rights
Share price	$	1,445	$	34	$	53
Weighted-average expected life	1,114		65		60
Expected annualized volatility	1,930		41		67


	10% decrease as of December 31, 2021
	Altria Warrant		Pre-emptive Rights		Top-up Rights
Share price	$	3,970	$	80	$	123
Weighted-average expected life	2,971		171		133
Expected annualized volatility	5,402		96		155


	Accrual as of December 31, 2021		Year-to-date expense		Payments		Accrual as of March 31, 2022
Employee termination benefits	$	—	$	2,503	$	(1,249)	$	1,254

Other restructuring costs	—		581		(437)		144
Total	$	—	$	3,084	$	(1,686)	$	1,398


	Weighted-average exercise price (C$) (i)		Number of options	Weighted-average remaining contractual term (years)
Balance as of January 1, 2022	$	7.75	8,939,330	2.70

Exercise of options	3.14		(1,356,875)
Cancellation, forfeiture and expiry of options	12.46		(55,791)
Balance as of March 31, 2022	$	8.55	7,526,664	1.72
Exercisable as of March 31, 2022	$	7.96	4,654,574	1.14


	As of March 31, 2022	As of December 31, 2021
2020 Omnibus Plan	2,900,000	2,900,000
2018 Stock Option Plan	1,523,449	1,550,074
2015 Stock Option Plan	3,103,215	4,489,256
Total stock options outstanding	7,526,664	8,939,330


	Weighted-average grant date fair value (C$)(i)		Number of RSUs
Balance as of January 1, 2022	$	9.22	1,225,870
Granted(i)	3.52		3,950,334
Vested and issued	10.81		(78,631)
Cancellation and forfeitures	7.92		(55,479)
Balance as of March 31, 2022	$	4.74	5,042,094


	Weighted-average grant date fair value (C$)(ii)		Number of RSUs
Balance as of January 1, 2021	$	7.66	948,357
Granted(i)	13.27		265,904


Balance as of March 31, 2021	$	8.89	1,214,261


	Financial liability		Number of DSUs
Balance as of January 1, 2022	$	408	104,442


Gain on revaluation	(66)		—
Balance as of March 31, 2022	$	342	104,442


	Weighted-average exercise price (C$)		Number of warrants
Balance as of January 1, 2021	$	0.25	7,987,349
Exercise of warrants	0.25		(7,977,349)

Balance as of March 31, 2021	$	0.25	10,000


	Three months ended March 31, 2022
	United States		Rest of World		Corporate		Total
Cannabis flower	$	—	$	18,625	$	—	$	18,625
Cannabis extracts	2,328		3,988		—		6,316
Other	—		92		—		92
Net revenue	$	2,328	$	22,705	$	—	$	25,033







Total assets	$	441,064	$	283,182	$	646,755	$	1,371,001
Depreciation and amortization	96		1,197		—		1,293



Adjusted EBITDA	(7,086)		(3,425)		(8,389)		(18,900)
Purchase of property, plant and equipment, net	—		711		—		711


	Three months ended March 31, 2021
	United States		Rest of World		Corporate		Total
Cannabis flower	$	—	$	9,434	$	—	$	9,434
Cannabis extracts	2,441		703		—		3,144
Other	—		33		—		33
Net revenue	$	2,441	$	10,170	$	—	$	12,611

Share of loss from equity accounted investees	$	—	$	1,643	$	—	$	1,643





Total assets	$	252,449	$	394,442	$	1,234,391	$	1,881,282
Depreciation and amortization	71		664		—		735


Loss from discontinued operations	—		21		—		21
Adjusted EBITDA	(9,510)		(22,184)		(4,880)		(36,574)
Purchase of property, plant and equipment, net	80		6,600		—		6,680


	As of March 31, 2022		As of December 31, 2021
Canada	$	47,717	$	49,117
Israel	23,823		24,473
United States	288		480

Total	$	71,828	$	74,070


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	861,535	$	—	$	—	$	861,535
Short-term investments	119,933		—		—		119,933
Other investments(i)	12,607		—		—		12,607
Derivative liabilities	—		—		4,099		4,099


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	886,973	$	—	$	—	$	886,973
Short-term investments	117,684		—		—		117,684
Other investments(i)	8,000		—		—		8,000
Derivative liabilities	—		—		14,375		14,375


	Three months ended March 31,						Change
	2022			2021			$		%
Net revenue	$	25,033		$	12,611		$	12,422	99	%
Cost of sales	18,107			15,574			2,533		16	%

Gross profit	6,926			(2,963)			9,889		334	%
Gross margin(i)	28		%	(23)		%	N/A		51	pp


	Three months ended March 31,				Change(i)
	2022		2021		$		%
Interest income, net	$	2,046	$	2,329	$	(283)	(12)	%
Gain (loss) on revaluation of derivative liabilities	10,419		(116,874)		127,293		109	%
Share of loss from equity accounted investments	—		(1,643)		1,643		100	%
Gain (loss) on revaluation of financial instruments	4,268		(200)		4,468		N/M
Impairment loss on other investments	(11,238)		—		(11,238)		N/A
Foreign currency transaction loss	(1,872)		—		(1,872)		N/A
Other, net	135		(16)		151		N/M
Total other income (loss)	3,758		(116,404)		120,162		103	%
Income tax expense	(362)		—		(362)		N/A
Loss from discontinued operations	—		(21)		21		100	%
Net loss	$	(32,653)	$	(161,625)	$	128,972	80	%


(In thousands of U.S. dollars)	Three months ended March 31, 2022
	United States		Rest of World		Corporate		Total
Net income (loss)	$	(22,216)	$	2,014	$	(12,451)	$	(32,653)
Interest income, net	(29)		(2,017)		—		(2,046)
Income tax expense	—		362		—		362


Impairment loss on long-lived assets(i)	—		3,493		—		3,493
Gain on revaluation of derivative liabilities(ii)	—		(10,419)		—		(10,419)

Gain on revaluation of financial instruments(iv)	—		(4,268)		—		(4,268)
Impairment loss on other investment(v)	11,238		—		—		11,238
Foreign currency transaction loss	—		1,872		—		1,872
Other, net(vi)	—		(135)		—		(135)
Restructuring costs(viii)	1,053		2,031		—		3,084
Share-based compensation(ix)	2,436		1,250		—		3,686
Financial statement review costs(x)	—		—		4,062		4,062
Depreciation and amortization	432		2,392		—		2,824
Adjusted EBITDA	$	(7,086)	$	(3,425)	$	(8,389)	$	(18,900)


Exhibit Number						Exhibit Index
3.1						Certificate of Continuance, Notice of Articles and Articles of Cronos Group Inc. (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of Cronos Group Inc., filed August 6, 2020).
10.1†						Amended and Restated Employment Agreement, dated as of March 21, 2022, between Cronos USA Client Services LLC, Cronos Group Inc. and Michael Gorenstein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Cronos Group Inc., filed on March 21, 2022).
10.2†						Letter Agreement, dated as of March 21, 2022, between Cronos USA Client Services LLC, Cronos Group Inc. and Kurt Schmidt (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Cronos Group Inc., filed on March 21, 2022).
10.3†*						Executive Employment Agreement, dated as of August 1 6, 202 0 , amo ng Cronos Israel G.S. Cultivation Ltd., Cronos Group Inc. and Ran Gorelik.
31.1*						Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document.
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document.


	CRONOS GROUP INC.

	By:	/s/ Robert Madore
		Robert Madore Chief Financial Officer
Date: May 10, 2022


SIGNED AND DELIVERED in the presence of
/s/ Adam Wagner						/s/ Ran Gorelik
Witness Signature						Ran Gorelik
						General Manager
Adam Wagner, VP Finance Israel						August 16, 2020
Witness Print Name						Date: