Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“
Cronos
Group” or the “
Company”), today announced
financial results and business highlights for the first quarter
ended March 31, 2019.
“In the first quarter of 2019, the business
performed in line with our expectations. We continue to stay
laser-focused on our strategy of building our supply chain,
distribution, intellectual property and brand portfolios,” said
Mike Gorenstein, CEO of Cronos Group. “We’re delighted to have
officially closed our transaction with Altria and to kick off a
relationship we expect to lead to significant growth and value
creation. Altria’s investment and the services that Altria will
provide to Cronos Group will enhance our financial
resources and allow us to expand our product development and
commercialization capabilities. Altria’s skills in these areas as
well as its regulatory expertise position Cronos Group to
compete, scale and lead the rapidly growing global cannabis
industry as markets open and welcome legalization.”
“Additionally, the launch of Cronos Device Labs
announced earlier this week is an exciting next step on our journey
to become a leader in cannabinoid innovation. Vaporizers have
become one of the most popular forms of cannabis consumption, and
we see a clear opportunity for Cronos Group to bring the
next-generation of vaporizer products designed specifically for
cannabinoids.”
Financial Results First Quarter
2019
- Net revenue was $6.5 million in first quarter 2019,
representing a 120% increase from $2.9 million in first quarter
2018, primarily driven by the launch of the adult-use market in
Canada. Net revenue increased 15% quarter-over-quarter from $5.6
million in fourth quarter 2018, primarily driven by increased sales
in CBD oil, which carries no excise tax reduction and increased
sales of dry flower.
- 1,111 kilograms were sold in first quarter 2019, representing a
122% increase from 501 kilograms sold in first quarter 2018,
primarily driven by increased cannabis production and the launch of
the adult-use market in Canada. Kilograms sold increased 7%
quarter-over-quarter from 1,040 kilograms sold in fourth quarter
2018, primarily driven by increased cannabis production.
- Cost of sales before fair value adjustments per gram sold was
$2.69 in first quarter 2019, representing a 14% decrease from $3.13
in first quarter 2018, and an 11% decrease from $3.02 in fourth
quarter 2018. The decrease year-over-year and quarter-over-quarter
was driven by increased productivity in our cultivation
operations.
- The Company experienced continued growth in cannabis oil sales,
which represented 23% of net product revenue in first quarter 2019
compared to 9% in first quarter 2018.
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($ in 000s, except where noted
otherwise) |
First |
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|
First |
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First |
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Fourth |
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Quarter |
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|
Quarter |
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|
Change |
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|
Quarter |
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|
Quarter |
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|
Change |
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|
2019 |
|
|
2018 |
|
|
$ |
|
|
% |
|
|
2019 |
|
|
2018 |
|
|
$ |
|
|
% |
|
Financial Results |
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Net Revenue |
$ |
6,470 |
|
|
$ |
2,945 |
|
|
$ |
3,525 |
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|
|
120 |
% |
|
$ |
6,470 |
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|
$ |
5,604 |
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|
$ |
866 |
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|
|
15 |
% |
Gross Margin before Fair Value Adjustments(1) |
|
54 |
% |
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|
47 |
% |
|
-- |
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|
-- |
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|
|
54 |
% |
|
|
44 |
% |
|
-- |
|
|
-- |
|
Adjusted EBITDA(2) |
$ |
(8,947 |
) |
|
$ |
(1,500 |
) |
|
$ |
(7,447 |
) |
|
|
496 |
% |
|
$ |
(8,947 |
) |
|
$ |
(7,943 |
) |
|
$ |
(1,004 |
) |
|
|
13 |
% |
Extract Sales (% of Net Product Revenue) |
|
23 |
% |
|
|
9 |
% |
|
-- |
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|
-- |
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|
23 |
% |
|
|
24 |
% |
|
-- |
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-- |
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Operating
Results |
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Kilograms Sold |
|
1,111 |
|
|
|
501 |
|
|
|
610 |
|
|
|
122 |
% |
|
|
1,111 |
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|
1,040 |
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|
71 |
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|
|
7 |
% |
Net Product Revenue / Gram Sold |
$ |
5.73 |
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|
$ |
5.67 |
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|
$ |
0.06 |
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1 |
% |
|
$ |
5.73 |
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$ |
5.35 |
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|
$ |
0.38 |
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|
7 |
% |
Cost of Sales before Fair Value Adj. / Gram Sold |
|
2.69 |
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|
3.13 |
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(0.44 |
) |
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|
(14 |
%) |
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|
2.69 |
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|
3.02 |
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(0.33 |
) |
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(11 |
%) |
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Balance
Sheet |
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Cash and Cash Equivalents |
$ |
2,418,277 |
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|
$ |
32,368 |
|
|
$ |
2,385,909 |
|
|
|
7,371 |
% |
|
$ |
2,418,277 |
|
|
$ |
32,634 |
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|
$ |
2,385,643 |
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|
|
7,310 |
% |
Derivative Liabilities |
|
1,664,275 |
|
|
|
— |
|
|
|
1,664,275 |
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|
NA |
|
|
|
1,664,275 |
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|
|
— |
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|
1,664,275 |
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|
NA |
|
(1) See
“Non-IFRS Measures” for information related to Adjusted
EBITDA. |
Transactions
Altria Strategic Investment
In March 2019, Altria Group, Inc.
(“Altria”) completed its investment of $2.4
billion in Cronos Group (the “Altria Investment”).
The Altria Investment represents a 45% economic and voting interest
in Cronos Group and a warrant, which is exercisable over the next
four years, to acquire an additional 10% equity stake if exercised
in full (the “Altria Warrant”).
The Company’s strategic partnership with Altria provides Cronos
Group with additional financial resources, product development and
commercialization capabilities, and deep regulatory expertise to
better position the Company to compete in the global cannabis
industry.
Altria also received certain pre-emptive rights
and top-up rights (collectively “Anti-Dilution
Rights”) to purchase Cronos Group shares in order to
maintain its ownership percentage upon the occurrence of specified
events as described in the Company’s Financial Statements which
have been filed on SEDAR and with the SEC on EDGAR. Cronos Group
will record the Altria Warrant and the Anti-Dilution Rights as
derivative liabilities, which will be recorded at fair value at the
end of each quarter. As such, in the future Cronos Group may
experience significant reported earnings volatility, primarily
driven by quarterly adjustments related to movement in Cronos
Group’s stock price. Such fair-value adjustments to derivative
liabilities are non-cash items and have been excluded from Adjusted
EBITDA.
In the first quarter 2019, Cronos Group recorded
a non-cash unrealized gain on revaluation of derivative liabilities
of $436.4 million.
Whistler Transaction
In March 2019, the Company sold all of its
approximate 19% equity interest in Whistler Medical Marijuana
Corporation (“Whistler”) to Aurora Cannabis Inc.
(“Aurora”) in an all-share transaction (the
“Whistler Transaction”). In connection with the
closing of the Whistler Transaction, the Company received
approximately $24.7 million in value of Aurora common shares, which
the Company subsequently sold for approximately $25.6 million in
cash. Subject to the satisfaction of certain specified milestones,
the Company expects to receive an additional $7.6 million in value
of Aurora common shares. Based on market conditions at the time of
the transaction and assuming all milestones are met, the Company
expects to generate, in aggregate, an 8.7x return on its investment
in Whistler.
Business Highlights
Global Production
In March 2019, the Company’s joint venture
NatuEra S.à r.l. (“NatuEra”) with affiliate
Agroidea SAS, a leading Colombian agricultural services provider,
received a license from the Colombian Ministry of Justice and Law
to cultivate psychoactive cannabis for the production of seeds for
cultivation, the production of grain, and the manufacture of
derivative products.
NatuEra intends to develop, cultivate,
manufacture and export cannabis-based medical and consumer products
for the Latin American and global markets. NatuEra is the cannabis
industry’s first Contract Manufacturing Organization (CMO) in Latin
America; it plans to allow the growing number of cannabis brands to
outsource cultivation and manufacturing. NatuEra plans to develop
its initial cultivation and manufacturing operations with a
purpose-built, GMP-standard facility located in Cundinamarca,
Colombia.
Global Sales and Distribution
In January 2019, the Company secured listings
with various private retailers in Saskatchewan. Together with its
established listings in Ontario, British Columbia, Nova Scotia and
Prince Edward Island, the Company has secured listings to
distribute its products in five provinces, which represent
approximately 58% of the Canadian population. As the Company’s
production capacity grows, the Company intends to increase
penetration within existing markets and expand its distribution
into additional provinces and territories in Canada.
In January 2019, the Israeli government approved
the export of medical cannabis from Israel, which would allow
medical cannabis license holders that meet certain quality
standards to export medical cannabis, under the supervision of the
Israeli authorities, to United Nations’ Single Convention on
Narcotic Drugs-signatory countries that have explicitly approved
the import of cannabis. Subject to obtaining all necessary licenses
and permits, the Company intends to export medical cannabis
products from Cronos Israel once operations have commenced.
Intellectual Property
Initiatives
Cronos Group established Cronos Device Labs, a global research
and development (“R&D”) center for vaporizer
innovation. Cronos Device Labs’ state-of-the-art facility is based
in Israel, a leader in cannabis R&D, and supports Cronos
Group’s efforts to develop next-generation vaporizer products that
are designed specifically for cannabinoid applications.
Cronos Device Labs, which is equipped with an experienced team
of product development talent, advanced vaporizer technology and
analytical testing infrastructure, serves as the global center of
R&D for the Company’s vaporizer devices. The 23-member team at
Cronos Device Labs, which brings to Cronos Group over 80 years of
combined expertise in vaporizer development, is comprised of
product designers, mechanical, electrical and software engineers,
and analytical and formulation scientists. Cronos Device Labs
significantly enhances Cronos Group’s technology and development
capabilities and is expected to enable the Company to deliver
expanded product offerings to customers that are specially tailored
to cannabinoid use.
Brand Portfolio
Cronos Group’s adult-use cannabis-brand Spinach™
partnered with foodora, Canada’s on-demand food delivery service,
and arrive alive DRIVE SOBER® to encourage responsible, sober
driving. Every dollar raised for arrive alive DRIVE SOBER® goes
directly to the campaign’s road safety initiatives. The campaign
works with police services, public health units, schools, community
groups and businesses to help spread the message of safe and sober
driving through resource sharing, public campaign and awareness
events.
Conference Call
The Company will host a conference call and live
audio webcast on Thursday, May 9, 2019 at 8:30 a.m. EST to discuss
first quarter 2019 results. The call will last approximately one
hour. Instructions for the conference call are provided below:
- Live audio webcast:
https://ir.thecronosgroup.com/events/event-details/first-quarter-2019-earnings-conference-call
- Toll Free from the U.S. and Canada dial-in: (866) 795-2258
- International dial-in: (409) 937-8902
- Conference ID: 8599026
An audio replay of the call will be archived on the Company’s
website for replay.
About Cronos GroupCronos Group
is an innovative global cannabinoid company with international
production and distribution across five continents. Cronos
Group is committed to building disruptive
intellectual property by advancing cannabis
research, technology and product development. With a
passion to responsibly elevate the consumer experience, Cronos
Group is building an iconic brand portfolio. Cronos Group’s
portfolio includes PEACE NATURALS™, a global health and
wellness platform, and two adult-use brands COVE™ and
Spinach™. To learn more about Cronos Group and its brands,
please visit: www.thecronosgroup.com; www.peacenaturals.com;
www.covecannabis.ca; www.spinachcannabis.com.
Forward-looking statementsThis
news release contains "forward-looking information" and
"forward-looking statements" within the meaning of applicable
securities laws (collectively, "forward-looking statements"), which
are based on the Company’s current internal expectations,
estimates, projections, assumptions and beliefs. All information
contained herein that is not clearly historical in nature may
constitute forward-looking statements. In some cases,
forward-looking statements can be identified by the use of
forward-looking terminology such as “may”, “will”, “expect”,
“likely”, “should”, “would”, “plan”, “anticipate”, “intend”,
“potential”, “proposed”, “estimate”, “believe”, or other similar
words, expressions, phrases, including negative and grammatical
variations thereof, or statements that certain events or conditions
“may” or “will” happen, or by discussions of strategy.
Forward-looking statements include estimates, plans, expectations,
opinions, forecasts, projections, targets, guidance or other
statements that are not statements of historical fact.
Forward-looking statements are provided for the purposes of
assisting the reader in understanding our financial performance,
financial position and cash flows as at and for periods ended on
certain dates and to present information about management's current
expectations and plans relating to the future and the reader is
cautioned that such information may not be appropriate for any
other purpose. Some of the forward-looking statements contained in
this press release, include, but are not limited to, statements
with respect to: the anticipated benefits of the Altria Investment,
including our ability to scale our product development and
commercialization capabilities as a result thereof; the anticipated
benefits of our joint ventures, strategic alliances, research and
development initiatives and other commercial arrangements,
including the ability to produce and distribute the target
cannabinoids under our strategic partnership with Ginkgo Bioworks,
Inc. and the ability to build innovative vaporizer products and
expand product offerings through Cronos Device Labs; the
anticipated benefits of the Whistler Transaction, including the
satisfaction of certain specified milestones; our ability to
execute on our growth strategy, including the construction of
production facilities and the commencement of operations by our
joint ventures and the timing thereof; the ability of Cronos Group,
our joint ventures, strategic partners and commercial
counterparties to obtain all necessary licenses, permits and
approvals; our ability to expand our distribution network and
global footprint; our business and operations; our strategy for
future growth; our intention to build an international iconic brand
portfolio and develop disruptive intellectual property; and the
growth potential of the cannabis industry and our ability to
realize such opportunity. No forward-looking statement can be
guaranteed and Cronos Group cannot guarantee the forward-looking
statements contained herein. Forward-looking statements are based
upon certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including
management's perceptions of historical trends, current conditions
and expected future developments, as well as other considerations
that are believed to be appropriate in the circumstances. While we
consider these assumptions to be reasonable based on information
currently available to management, there is no assurance that such
expectations will prove to be correct. By their nature,
forward-looking statements are subject to inherent risks and
uncertainties that may be general or specific and which give rise
to the possibility that expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate, that
assumptions may not be correct and that objectives, strategic goals
and priorities will not be achieved. A variety of factors,
including known and unknown risks, many of which are beyond our
control, could cause actual results to differ materially from the
forward-looking statements in this press release. Such factors
include, without limitation, those discussed in the Company's most
recent management’s discussion and analysis and the Company’s
annual information form for the year ended December 31, 2018, both
of which have been filed on the Company’s profile on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov. Readers are cautioned to
consider these and other factors, uncertainties and potential
events carefully and not to put undue reliance on forward-looking
statements. Forward-looking statements contained herein are made as
of the date of this press release and are based on the beliefs,
estimates, expectations and opinions of management on the date such
forward-looking statements are made. The Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, estimates or opinions,
future events or results or otherwise or to explain any material
difference between subsequent actual events and such
forward-looking statements, except as required by applicable
law.
All references in this news release to
“dollars”, “C$” or “$” are to Canadian dollars and all references
to “US$” are to United States dollars.
|
Cronos
Group Inc. Unaudited Condensed Interim Consolidated
Statements of Financial Position As at
March 31, 2019 and December 31, 2018
(in thousands of CDN $) |
|
Notes |
|
As
atMarch 31,2019 |
|
|
As
atDecember 31,2018 |
|
Assets |
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
22(a) |
|
$ |
2,418,277 |
|
|
$ |
32,634 |
|
Interest receivable |
22(a) |
|
|
3,130 |
|
|
|
- |
|
Accounts receivable |
22(a) |
|
|
5,559 |
|
|
|
4,163 |
|
Sales taxes receivable |
|
|
|
5,594 |
|
|
|
3,419 |
|
Prepaid expenses and other assets |
|
|
|
5,092 |
|
|
|
4,190 |
|
Biological assets |
5 |
|
|
11,506 |
|
|
|
9,074 |
|
Inventory |
5 |
|
|
25,150 |
|
|
|
11,584 |
|
Total current assets |
|
|
|
2,474,308 |
|
|
|
65,064 |
|
Advances to joint
ventures |
6(a) |
|
|
21,920 |
|
|
|
6,395 |
|
Net investments in equity accounted
investees |
6(b) |
|
|
2,185 |
|
|
|
4,038 |
|
Other
investments |
7,22(c) |
|
|
300 |
|
|
|
705 |
|
Property, plant
and equipment |
8 |
|
|
184,570 |
|
|
|
171,720 |
|
Right-of-use
assets |
3(a),11(a) |
|
|
1,875 |
|
|
|
171 |
|
Intangible
assets |
9(a) |
|
|
11,087 |
|
|
|
11,234 |
|
Goodwill |
9(b) |
|
|
1,792 |
|
|
|
1,792 |
|
Total assets |
|
|
$ |
2,698,037 |
|
|
$ |
261,119 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
|
Bank indebtedness |
22(b) |
|
$ |
422 |
|
|
$ |
- |
|
Accounts payable and other liabilities |
22(b) |
|
|
45,016 |
|
|
|
15,372 |
|
Holdbacks payable |
22(b) |
|
|
8,482 |
|
|
|
7,887 |
|
Government remittances payable |
22(b) |
|
|
1,313 |
|
|
|
1,123 |
|
Current portion of lease obligations |
11,22(b) |
|
|
134 |
|
|
|
41 |
|
Derivative liabilities |
13,22(b) |
|
|
1,664,275 |
|
|
|
- |
|
Construction loan payable |
12,22(b) |
|
|
- |
|
|
|
20,951 |
|
Total current liabilities |
|
|
|
1,719,642 |
|
|
|
45,374 |
|
Lease
obligations |
11,22(b) |
|
|
1,827 |
|
|
|
119 |
|
Due to
non-controlling interests |
10,22(b) |
|
|
2,247 |
|
|
|
2,136 |
|
Deferred income
tax liability |
20 |
|
|
4,371 |
|
|
|
1,850 |
|
Total liabilities |
|
|
|
1,728,087 |
|
|
|
49,479 |
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
Share capital |
14(a) |
|
|
556,930 |
|
|
|
225,500 |
|
Warrants |
15(a) |
|
|
845 |
|
|
|
1,548 |
|
Stock options |
15(b) |
|
|
6,631 |
|
|
|
6,241 |
|
Retained earnings (accumulated deficit) |
|
|
|
404,499 |
|
|
|
(22,715 |
) |
Accumulated other comprehensive income |
|
|
|
1,049 |
|
|
|
930 |
|
Total equity attributable to shareholders of Cronos Group |
|
|
|
969,954 |
|
|
|
211,504 |
|
Non-controlling interests |
10 |
|
|
(4 |
) |
|
|
136 |
|
Total shareholders' equity |
|
|
|
969,950 |
|
|
|
211,640 |
|
Total liabilities and shareholders' equity |
|
|
$ |
2,698,037 |
|
|
$ |
261,119 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
19 |
|
|
|
|
|
|
|
|
Subsequent
events |
25 |
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
|
|
|
|
Cronos
Group Inc. Unaudited Condensed Interim
Consolidated Statements of Operations and Comprehensive Income
(Loss) For the three months ended March 31,
2019 and March 31, 2018 (in thousands of CDN $,
except share and per share amounts) |
|
|
|
Three Months Ended March 31, |
|
|
Notes |
|
2019 |
|
|
2018 |
|
Gross revenue |
16 |
|
$ |
6,985 |
|
|
$ |
2,945 |
|
Excise taxes |
|
|
|
(515 |
) |
|
|
- |
|
Net
revenue |
|
|
|
6,470 |
|
|
|
2,945 |
|
Cost of
sales |
|
|
|
|
|
|
|
|
|
Cost of sales before fair
value adjustments |
4(b) |
|
|
2,984 |
|
|
|
1,567 |
|
Gross profit before
fair value adjustments |
|
|
|
3,486 |
|
|
|
1,378 |
|
Fair value
adjustments |
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
4(b) |
|
|
(13,553 |
) |
|
|
(2,744 |
) |
Realized fair value adjustments on inventory sold in the
period |
4(b) |
|
|
3,722 |
|
|
|
2,194 |
|
Total fair value adjustments |
|
|
|
(9,831 |
) |
|
|
(550 |
) |
Gross
profit |
|
|
|
13,317 |
|
|
|
1,928 |
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
1,500 |
|
|
|
586 |
|
Research and development |
|
|
|
1,557 |
|
|
|
- |
|
General and administrative |
|
|
|
9,611 |
|
|
|
2,461 |
|
Share-based payments |
15(b),18 |
|
|
737 |
|
|
|
774 |
|
Depreciation and amortization |
8,9(a),11(a) |
|
|
470 |
|
|
|
285 |
|
Total operating expenses |
|
|
|
13,875 |
|
|
|
4,106 |
|
Operating
loss |
|
|
|
(558 |
) |
|
|
(2,178 |
) |
Other income
(expense) |
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
2,720 |
|
|
|
(22 |
) |
Financing costs |
12,13 |
|
|
(29,561 |
) |
|
|
- |
|
Gain on revaluation of derivative liabilities |
13 |
|
|
436,383 |
|
|
|
- |
|
Share of income (loss) from investments in equity accounted
investees |
6 |
|
|
(264 |
) |
|
|
41 |
|
Gain on disposal of Whistler |
6 |
|
|
20,606 |
|
|
|
- |
|
Gain on other investments |
7 |
|
|
924 |
|
|
|
221 |
|
Total other income |
|
|
|
430,808 |
|
|
|
240 |
|
Income (loss) before income
taxes |
|
|
|
430,250 |
|
|
|
(1,938 |
) |
Deferred income tax expense
(recovery) |
20 |
|
|
2,557 |
|
|
|
(888 |
) |
Net income (loss) |
|
|
$ |
427,693 |
|
|
$ |
(1,050 |
) |
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
$ |
427,829 |
|
|
$ |
(1,050 |
) |
Non-controlling interests |
10 |
|
|
(136 |
) |
|
|
- |
|
|
|
|
$ |
427,693 |
|
|
$ |
(1,050 |
) |
Other comprehensive
income (loss) |
|
|
|
|
|
|
|
|
|
Gain (loss) on revaluation and disposal of other investments, net
of tax |
7,20 |
|
$ |
103 |
|
|
$ |
(35 |
) |
Foreign exchange gain on translation of foreign operations |
2(d),10 |
|
|
16 |
|
|
|
- |
|
Total other comprehensive income (loss) |
|
|
|
119 |
|
|
|
(35 |
) |
Comprehensive income
(loss) |
|
|
$ |
427,812 |
|
|
$ |
(1,085 |
) |
Comprehensive income
(loss) attributable to: |
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
$ |
427,948 |
|
|
$ |
(1,085 |
) |
Non-controlling interests |
10 |
|
|
(136 |
) |
|
|
- |
|
|
|
|
$ |
427,812 |
|
|
$ |
(1,085 |
) |
Earnings (loss) per
share |
|
|
|
|
|
|
|
|
|
Basic |
17 |
|
$ |
1.95 |
|
|
$ |
(0.01 |
) |
Diluted |
17 |
|
$ |
0.48 |
|
|
$ |
(0.01 |
) |
Weighted average
number of outstanding shares |
|
|
|
|
|
|
|
|
|
Basic |
17 |
|
|
218,949,590 |
|
|
|
157,054,891 |
|
Diluted |
17 |
|
|
271,086,575 |
|
|
|
157,054,891 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
|
|
|
|
Cronos
Group Inc.Unaudited Condensed Interim Consolidated Statements of
Cash FlowsFor the three months ended March 31, 2019 and
March 31, 2018(in thousands of CDN $) |
|
|
|
Three Months Ended March 31, |
|
|
Notes |
|
2019 |
|
|
2018 |
|
Operating activities |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
$ |
427,693 |
|
|
$ |
(1,050 |
) |
Items not affecting cash and
cash equivalents: |
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
4(b) |
|
|
(13,553 |
) |
|
|
(2,744 |
) |
Realized fair value adjustments on inventory sold in the
period |
4(b) |
|
|
3,722 |
|
|
|
2,194 |
|
Share-based payments |
15(b),18 |
|
|
737 |
|
|
|
774 |
|
Depreciation and amortization |
8,9(a),11(a) |
|
|
470 |
|
|
|
285 |
|
Depreciation relieved on inventory sold |
|
|
|
235 |
|
|
|
169 |
|
Share of loss (income) from investments in equity accounted
investees |
6 |
|
|
264 |
|
|
|
(41 |
) |
Gain on disposal of Whistler |
6 |
|
|
(20,606 |
) |
|
|
- |
|
Gain on other investments |
7 |
|
|
(924 |
) |
|
|
(221 |
) |
Gain on revaluation of derivative liabilities |
13 |
|
|
(436,383 |
) |
|
|
- |
|
Deferred income tax expense (recovery) |
20 |
|
|
2,557 |
|
|
|
(888 |
) |
Foreign exchange loss (gain) |
|
|
|
67 |
|
|
|
(16 |
) |
Net changes in non-cash
working capital |
21 |
|
|
17,320 |
|
|
|
(12,212 |
) |
Cash and cash equivalents used
in operating activities |
|
|
|
(18,401 |
) |
|
|
(13,750 |
) |
Investing
activities |
|
|
|
|
|
|
|
|
|
Investments in equity accounted investees |
6 |
|
|
(2,200 |
) |
|
|
- |
|
Advances to joint ventures |
6 |
|
|
(15,812 |
) |
|
|
- |
|
Proceeds from sale of other investments |
7 |
|
|
26,078 |
|
|
|
687 |
|
Payment to exercise ABcann warrants |
7 |
|
|
- |
|
|
|
(113 |
) |
Purchase of property, plant and equipment |
8 |
|
|
(13,454 |
) |
|
|
(7,642 |
) |
Purchase of intangible assets |
9(a) |
|
|
(51 |
) |
|
|
(131 |
) |
Advance to Cronos Israel |
2(a),10 |
|
|
- |
|
|
|
(926 |
) |
Cash and cash equivalents used
in investing activities |
|
|
|
(5,439 |
) |
|
|
(8,125 |
) |
Financing
activities |
|
|
|
|
|
|
|
|
|
Increase in bank indebtedness |
|
|
|
422 |
|
|
|
- |
|
Advance from non-controlling interests |
10 |
|
|
111 |
|
|
|
- |
|
Repayment of lease obligations |
11 |
|
|
(32 |
) |
|
|
(13 |
) |
Repayment of construction loan payable |
12 |
|
|
(21,311 |
) |
|
|
- |
|
Payment of accrued interest on construction loan payable |
12 |
|
|
(121 |
) |
|
|
(185 |
) |
Advance under Credit Facility |
12 |
|
|
65,000 |
|
|
|
- |
|
Repayment of Credit Facility |
12 |
|
|
(65,000 |
) |
|
|
- |
|
Proceeds from Altria Investment |
13,14(a) |
|
|
2,434,757 |
|
|
|
- |
|
Proceeds from share issuance |
14(a) |
|
|
- |
|
|
|
46,000 |
|
Share issuance costs |
|
|
|
(4,901 |
) |
|
|
(3,081 |
) |
Proceeds from shares to be issued |
14(b) |
|
|
- |
|
|
|
961 |
|
Proceeds from exercise of warrants and options |
15(a),(b) |
|
|
1,182 |
|
|
|
1,353 |
|
Withholding taxes paid on share appreciation rights |
15(b) |
|
|
(547 |
) |
|
|
- |
|
Cash and cash equivalents
provided by financing activities |
|
|
|
2,409,560 |
|
|
|
45,035 |
|
Net change in cash and cash
equivalents |
|
|
|
2,385,720 |
|
|
|
23,160 |
|
Cash and cash equivalents -
beginning of period |
|
|
|
32,634 |
|
|
|
9,208 |
|
Effects of foreign exchange on
cash |
|
|
|
(77 |
) |
|
|
- |
|
Cash and cash
equivalents - end of period |
|
|
$ |
2,418,277 |
|
|
$ |
32,368 |
|
Supplemental cash flow
information |
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
$ |
675 |
|
|
$ |
307 |
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
|
|
|
Non-IFRS measures
The Company uses certain measures that are not
recognized under International Financial Reporting Standards
(“IFRS”), do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures presented by other companies. Rather, these measures are
provided as a supplement to those IFRS measures to provide
additional information regarding the Company’s results of
operations from management’s perspective. Accordingly, non-IFRS
measures should not be considered a substitute for, or superior to,
the financial information prepared and presented in accordance with
IFRS. Each non-IFRS measure is reconciled to its most directly
comparable IFRS measure.
Adjusted EBITAdjusted earnings before interest
and tax (“Adjusted EBIT”) is used by management as
a supplemental measure to review and assess operating performance
and trends on a comparable basis. Adjusted EBIT is defined as net
income or loss, excluding interest expense, interest income,
deferred income tax expense or recovery, share-based payments,
unrealized change in the fair value of biological assets, realized
fair value adjustments on inventory sold, financing costs, gain on
revaluation of derivative liabilities, share of income or loss from
investments in equity accounted investees and gain or loss on
investments. The Company believes that Adjusted EBIT is useful to
compare its operating profitability across periods. A
reconciliation of Adjusted EBIT to net income, the most directly
comparable IFRS measure, is provided below.
Adjusted EBITDAAdjusted earnings before
interest, tax, depreciation and amortization (“Adjusted
EBITDA”) is used by management as a supplemental measure
to review and assess operating performance and trends on a
comparable basis. Adjusted EBITDA is defined as Adjusted EBIT
excluding depreciation and amortization. The Company believes that
EBITDA is useful to compare its ability to generate cash from
operations across periods. A reconciliation of Adjusted EBITDA to
net income, the most directly comparable IFRS measure, is provided
below.
Reconciliation of non-IFRS measuresA
reconciliation of Adjusted EBIT and Adjusted EBITDA to net income,
the most directly comparable IFRS measure, is presented in the
following table.
|
|
|
|
|
|
|
|
|
($ in 000s) |
First |
|
|
Fourth |
|
|
First |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Net Income (Loss) |
$ |
427,693 |
|
|
$ |
(11,607 |
) |
|
$ |
(1,050 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
Interest (Income) Expense |
|
(2,720 |
) |
|
|
(228 |
) |
|
|
22 |
|
Deferred Income Tax Expense (Recovery) |
|
2,557 |
|
|
|
(708 |
) |
|
|
(888 |
) |
Share-Based Payments |
|
737 |
|
|
|
1,291 |
|
|
|
774 |
|
Unrealized Change in Fair Value of Biological Assets |
|
(13,553 |
) |
|
|
(460 |
) |
|
|
(2,744 |
) |
Realized Fair Value Adjustments on Inventory Sold |
|
3,722 |
|
|
|
2,019 |
|
|
|
2,194 |
|
Financing Costs |
|
29,561 |
|
|
|
— |
|
|
|
— |
|
Gain on Revaluation of Derivative Liabilities |
|
(436,383 |
) |
|
|
— |
|
|
|
— |
|
Share of Loss (Income) from Investments in Equity Accounted
Investees |
|
264 |
|
|
|
1,000 |
|
|
|
(41 |
) |
Gain on Disposal of Whistler |
|
(20,606 |
) |
|
|
— |
|
|
|
— |
|
Gain on Other Investments |
|
(924 |
) |
|
|
— |
|
|
|
(221 |
) |
Adjusted EBIT |
|
(9,652 |
) |
|
|
(8,693 |
) |
|
|
(1,954 |
) |
Depreciation and Amortization |
|
705 |
|
|
|
750 |
|
|
|
454 |
|
Adjusted EBITDA |
|
(8,947 |
) |
|
|
(7,943 |
) |
|
|
(1,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information, please
contact:Anna Shlimak Investor Relations Tel: (416)
504-0004 investor.relations@thecronosgroup.com
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