Cronos Group Inc 10-Q for FY2021 Q1

Cronos Group Inc. (CRON)

10-Q 2021-05-07 For: 2021-03-31

Added on April 08, 2026

About this 10-Q

Cronos Group Inc filed this 10-Q on May 7, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $12.61M; up 49.6% from $8.43M a year earlier
Net loss: $161.31M; compared with net income of $76.04M a year earlier
Diluted EPS: -$0.44; compared with $0.20 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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)


(Exchange rates are shown as C$ per $)	As of
	March 31, 2021	March 31, 2020	December 31, 2020
Average rate	1.2665	1.3437	1.3036
Spot rate	1.2563	1.4062	1.2751

Year-to-date average rate	1.2665	1.3437	1.3411


Table of Contents

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020			4
Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three months ended March 3 1 , 2021 and 2020 (Unaudited)			5
Condensed Consolidated Statements of Changes in Equity for the three months ended March 3 1 , 202 1 and 2020 (Unaudited)			6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (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, 2021		As of December 31, 2020
Assets	(Unaudited)		(Audited)
Current assets
Cash and cash equivalents	$	1,024,450	$	1,078,023
Short-term investments	214,925		211,766
Accounts receivable, net(i)	6,997		8,928
Other receivables	3,796		10,033
Current portion of loans receivable, net (ii)	6,717		7,083
Prepaids and other current assets	15,053		11,161
Inventory, net	46,437		44,002
Held-for-sale assets	1,969		1,176
Total current assets	1,320,344		1,372,172
Advances to joint ventures	487		467
Investments in equity accounted investees, net	19,221		19,235
Loan receivable, net (ii)	90,953		87,191
Property, plant and equipment, net	192,123		187,599
Right-of-use assets	8,538		9,776
Intangible assets, net	70,085		69,720
Goodwill	179,531		179,522
Total assets	$	1,881,282	$	1,925,682

Liabilities
Current liabilities
Accounts payable and other liabilities	$	29,213	$	42,102
Current portion of lease obligation	1,130		1,322
Derivative liabilities	272,300		163,410
Total current liabilities	302,643		206,834
Due to non-controlling interests	2,129		2,188
Lease obligation	8,231		8,492

Total liabilities	313,003		217,514
Commitments and contingencies(iii)

Shareholders’ equity
Share capital(iv, v)	584,912		569,260
Additional paid-in capital	32,090		34,596
Retained earnings	895,503		1,064,509
Accumulated other comprehensive income	58,144		42,999
Total equity attributable to shareholders of Cronos Group	1,570,649		1,711,364
Non-controlling interests	(2,370)		(3,196)
Total shareholders’ equity	1,568,279		1,708,168
Total liabilities and shareholders’ equity	$	1,881,282	$	1,925,682


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,
		2021		2020
Net revenue, before excise taxes		$	14,654	$	9,344
Excise taxes		(2,043)		(912)
Net revenue		12,611		8,432
Cost of sales		15,574		6,946
Inventory write-down		—		7,962
Gross profit (loss)		(2,963)		(6,476)
Operating expenses
Sales and marketing		10,254		7,112
Research and development (“R&D”)		5,102		4,590
General and administrative		21,906		23,759
Share-based payments		2,499		2,436
Depreciation and amortization		735		687
Total operating expenses		40,496		38,584
Operating loss		(43,459)		(45,060)
Other income (loss)
Interest income, net		2,329		7,751
Gain (loss) on revaluation of derivative liabilities		(116,874)		113,368
Impairment loss on property, plant and equipment and right-of-use assets		(1,741)		—
Other loss		(1,859)		(378)
Total other income (loss)		(118,145)		120,741


Income (loss) from continuing operations		(161,604)		75,681
Loss from discontinued operations		(21)		—
Net income (loss)		$	(161,625)	$	75,681
Net income (loss) attributable to:
Cronos Group		$	(161,312)	$	76,040
Non-controlling interests		(313)		(359)
		$	(161,625)	$	75,681
Other comprehensive income (loss)
Foreign exchange gain (loss) on translation		$	16,284	$	(113,692)

Total other comprehensive income (loss)		16,284		(113,692)
Comprehensive loss		$	(145,341)	$	(38,011)
Comprehensive income (loss) attributable to:
Cronos Group		$	(146,167)	$	(37,675)
Non-controlling interests		826		(336)
		$	(145,341)	$	(38,011)
Net income (loss) per share(i)
Basic - continuing operations		$	(0.44)	$	0.22
Diluted - continuing operations(ii)		(0.44)		0.20
Weighted average number of outstanding shares
Basic		363,012,740		348,817,472
Diluted(ii)		363,012,740		374,330,168


	Number of shares	Share capital		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests		Total shareholders’ equity
Balance as of January 1, 2021	360,253,332	$	569,260	$	34,596	$	1,064,509	$	42,999	$	(3,196)	$	1,708,168


Warrants exercised	7,832,859	1,161		(1,161)		—		—		—		—
Vesting of options	—	—		2,064		—		—		—		2,064
Options exercised	3,570,399	3,213		(3,203)		—		—		—		10
Vesting of restricted share units	—	—		435		—		—		—		435
Withholding taxes paid on share-based awards	—	—		(979)		(7,694)		—		—		(8,673)
Vesting of common shares issued in connection with the use of certain publicity rights in brand development	—	—		338		—		—		—		338
Top-up rights exercised	—	11,278		—		—		—		—		11,278
Net income (loss)	—	—		—		(161,312)		—		(313)		(161,625)
Foreign exchange gain (loss) on translation	—	—		—		—		15,145		1,139		16,284
Balance as of March 31, 2021	371,656,590	$	584,912	$	32,090	$	895,503	$	58,144	$	(2,370)	$	1,568,279


Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands of $, except gram and share amounts)			Table of Contents


	As of March 31, 2021		As of December 31, 2020
Raw materials, net	$	11,182	$	11,489
Work-in-progress – dry cannabis, net	21,590		20,520
Work-in-progress – cannabis extracts, net	5,036		5,758
Finished goods – dry cannabis, net	5,677		4,894
Finished goods – cannabis extracts, net	2,141		1,011
Supplies and consumables	811		330
Total	$	46,437	$	44,002


	Ownership interest	As of March 31, 2021		As of December 31, 2020
Cronos Australia	31%	$	—	$	—
Cronos GrowCo	50%	$	19,221	$	19,235
Natuera	50%	—		—
		$	19,221	$	19,235


	For the three months ended March 31,
		2021		2020



Cronos GrowCo		$	(299)	$	(311)

Natuera(i)		(1,344)		(861)

		$	(1,643)	$	(1,172)


	As of March 31, 2021		As of December 31, 2020
Natuera Series A loan(i)	$	2,013	$	3,518
GrowCo Facility(ii)	796		3,137
Add: Accrued interest	3,908		428
Total current portion of loans receivable	6,717		7,083
GrowCo Facility(ii)	76,043		69,939
Mucci promissory note(iii)	13,654		13,324
Cannasoul collaboration loan(iv)	1,215		1,261
Add: Accrued interest	41		2,667
Total long-term portion of loans receivable	90,953		87,191
Total loans receivable, net	$	97,670	$	94,274


	As of January 1, 2021		Revaluation (gain)/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 January 1, 2020		Revaluation (gain)/loss		Exercise of rights		Foreign exchange effect		As of March 31, 2020
(a) Altria Warrant	$	234,428	$	(88,104)	$	—	$	(13,958)	$	132,366
(b) Pre-emptive Rights	12,787		1,315		—		(1,032)		13,070
(c) Top-up Rights	49,945		(26,579)		—		(2,626)		20,740
	$	297,160	$	(113,368)	$	—	$	(17,616)	$	166,176


	As of March 31, 2021			As of December 31, 2020
	Altria Warrant	Pre-emptive Rights	Top-up Rights	Altria Warrant	Pre-emptive Rights	Top-up Rights
Share price at valuation date (i)	$11.88	$11.88	$11.88	$8.84	$8.84	$8.84
Subscription price (i)	$19.00	$16.25	$16.25	$19.00	$16.25	$16.25
Weighted average risk-free interest rate (ii)	0.22%	0.17%	0.14%	0.21%	0.17%	0.13%
Weighted average expected life (iii)	1.93	1.25	0.72	2.18	1.50	0.98
Expected annualized volatility (iv)	82%	82%	82%	81%	81%	81%
Expected dividend yield	—%	—%	—%	—%	—%	—%


	Increase as of March 31, 2021
	Altria Warrant		Pre-emptive Rights		Top-up Rights
Share price	$	42,479	$	4,133	$	4,376
Weighted average expected life	18,051		3,039		683
Expected annualized volatility	35,099		2,865		2,785


	Weighted average exercise price (C$) (i)		Number of options	Weighted average remaining contractual term (years)
Balance as of January 1, 2021	$	5.40	13,755,148	2.30

Exercise of options	2.13		(5,230,550)
Cancellation, forfeiture and expiry of options	14.71		(25,771)
Balance as of March 31, 2021	$	7.38	8,498,827	2.82
Exercisable as of March 31, 2021	$	5.75	4,896,820	1.46


	Weighted average exercise price (C$)		Number of options	Weighted average remaining contractual term (years)
Balance as of January 1, 2020	$	4.84	14,149,502	2.56


Cancellation, forfeiture and expiry of options	17.17		(42,889)
Balance as of March 31, 2020	$	4.80	14,106,613	2.06
Exercisable as of March 31, 2020	$	3.11	9,783,544	1.66


	Stock options outstanding as of
	March 31, 2021	December 31, 2020
2020 Omnibus Plan	2,000,000	2,000,000
2018 Stock Option Plan	1,591,944	1,627,715
2015 Stock Option Plan	4,906,883	10,127,433
Total stock options outstanding	8,498,827	13,755,148


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


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


	Number of RSUs	Weighted average grant date fair value (C$)
Balance as of January 1, 2020 and March 31, 2020	732,972	$	15.34


	Number of DSUs	Financial liability
Balance as of January 1, 2021	83,293	$	577


Loss (gain) on revaluation	—	211
Balance as of March 31, 2021	83,293	$	788


	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(i)	$	0.25	10,000


	Three months ended March 31, 2021
	United States		Rest of World		Corporate expenses		Total
Net revenue
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 investments in equity accounted investees	$	—	$	1,643	$	—	$	1,643

Interest income	3		2,332		—		2,335
Interest expense	—		(6)		—		(6)
Interest income, net	$	3	$	2,326	$	—	$	2,329

Depreciation and amortization	$	71	$	664	$	—	$	735
Impairment loss on property, plant and equipment and right-of-use assets	1,741		—		—		1,741
Loss from discontinued operations	—		21		—		21
Adjusted EBITDA	(9,510)		(22,184)		(5,381)		(37,075)

Total assets	252,449		394,442		1,234,391		1,881,282
Investments in equity accounted investees	—		19,221		—		19,221
Goodwill	178,416		1,115		—		179,531
Purchase of property, plant and equipment, net	80		6,600		—		6,680


	Three months ended March 31, 2020
	United States		Rest of World		Corporate expenses		Total
Net revenue
Cannabis flower	$	—	$	2,741	$	—	$	2,741
Cannabis extracts	2,176		3,400		—		5,576
Other	—		115		—		115
Net revenue	$	2,176	$	6,256	$	—	$	8,432

Share of loss from investments in equity accounted investees	$	—	$	1,172	$	—	$	1,172

Interest income	7		7,751		—		7,758
Interest expense	—		(7)		—		(7)
Interest income, net	$	7	$	7,744	$	—	$	7,751

Depreciation and amortization	33		654		—		687

Adjusted EBITDA	$	(5,782)	$	(29,010)	$	(2,263)	$	(37,055)


(In thousands of U.S. dollars)	Three months ended March 31, 2021
	US		ROW		Corporate Expenses		Total
Net income (loss)	$	(12,092)	$	(142,147)	$	(7,386)	$	(161,625)
Adjustments
Interest income, net	(3)		(2,326)		—		(2,329)


Impairment loss on property, plant and equipment and right-of-use assets	1,741		—		—		1,741
Loss on revaluation of derivative liabilities	—		116,874		—		116,874

Other loss	—		1,859		—		1,859
Loss from discontinued operations	—		21		—		21
Share-based payments	745		1,754		—		2,499
Review costs related to restatement of 2019 interim financial statements	—		—		2,005		2,005
Adjusted EBIT	(9,609)		(23,965)		(5,381)		(38,955)
Adjustments
Depreciation and amortization	99		1,781		—		1,880
Adjusted EBITDA	$	(9,510)	$	(22,184)	$	(5,381)	$	(37,075)


	As of March 31, 2021		As of December 31, 2020
Canada	$	167,363	$	162,163
Israel	23,480		23,143
United States	1,280		2,293

Total	$	192,123	$	187,599


	March 31, 2021
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1,024,450	$	—	$	—	$	1,024,450
Short-term investments	214,925		—		—		214,925
Derivative liabilities	—		—		272,300		272,300


	March 31, 2021		December 31, 2020
OGBC assets classified as held-for-sale	$	1,195	$	1,176
Other property, plant and equipment classified as held-for-sale	774		—
Held-for-sale assets	$	1,969	$	1,176


(In thousands of U.S. dollars)	For the three months ended March 31,	Change
		2021			2020			$		%
Net revenue		$	12,611		$	8,432		$	4,179	50	%

Gross profit (loss)		(2,963)			(6,476)			3,513		(54)	%
Gross margin		(23)		%	(77)		%	N/A		54	pp

Adjusted EBITDA (i)		$	(37,075)		$	(37,055)		$	(20)	—	%


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†*						Executive Employment Agreement, dated as of November 1, 2019, by and among Hortican Inc., Cronos Group Inc. and Todd Abraham.
10.2†*						Executive Employment Agreement, dated as of February 20, 2020, by and among Cronos USA Client Services LLC, Cronos Group Inc. and Anna Shlimak.
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/ Kurt Schmidt
		Kurt Schmidt President and Chief Executive Officer
Date: May 7, 2021


SIGNED AND DELIVERED in the presence of
/s/ Claire Silvester
Witness Signature
Claire Silvester
Witness Print Name


SIGNED AND DELIVERED in the presence of
/s/ Matthew Goodman
Witness Signature
Matthew Goodman
Witness Print Name



/s/ Kurt Schmidt
Kurt Schmidt
President and Chief Executive Officer
(Principal Executive Officer)



/s/ Jerry Barbato
Jerry Barbato
Chief Financial Officer
(Principal Financial Officer)