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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .
Commission File No. 001-38403
__________________________
CRONOS GROUP INC.
(Exact name of registrant as specified in its charter)
__________________________
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)
416-504-0004
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Shares, no par value CRON The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer
Non-accelerated filer o Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes No x

As of August 5, 2021, there were 371,805,547 common shares of the registrant issued and outstanding.

1



Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to the “Company”, “Cronos Group”, “we”, “us” and “our” refer to Cronos Group Inc., its direct and indirect wholly owned subsidiaries and, if applicable, its joint ventures and investments accounted for by the equity method; the term “cannabis” means the plant of any species or subspecies of genus Cannabis and any part of that plant, including all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers; the term “U.S. hemp” has the meaning given to term “hemp” in the U.S. Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), including hemp-derived cannabidiol (“CBD”); and the term “U.S. Schedule I cannabis” means cannabis excluding U.S. hemp.
This Quarterly Report contains references to our trademarks and trade names and to trademarks and trade names belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us or our business by, any other companies. In addition, this Quarterly Report includes website addresses. These website addresses are intended to provide inactive, textual references only. The information on or referred to on these websites is not part of or incorporated into this Quarterly Report.
All currency amounts in this Quarterly Report are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars; all references to “C$” are to Canadian dollars; all references to “A$” are to Australian dollars; and all references to “ILS” are to New Israeli Shekels.
(Exchange rates are shown as C$ per $) As of
June 30, 2021 June 30, 2020 December 31, 2020
Average rate 1.2293 1.3856 1.3036
Spot rate 1.2395 1.3576 1.2751
Year-to-date average rate 1.2481 1.3646 1.3411
All summaries of agreements described herein are qualified by the full text of such agreements (certain of which have been filed as exhibits with the U.S. Securities and Exchange Commission).


2


PART I
FINANCIAL INFORMATION

3

Cronos Group Inc.
Condensed Consolidated Balance Sheets
(In thousands of U.S. dollars, except share amounts)

As of June 30, 2021 As of December 31, 2020
Assets (Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 895,181  $ 1,078,023 
Short-term investments 201,699  211,766 
Accounts receivable, net 11,299  8,928 
Other receivables 2,468  10,033 
Current portion of loans receivable, net 5,028  7,083 
Prepaids and other current assets 10,153  11,161 
Inventory, net 35,605  44,002 
Held-for-sale assets 645  1,176 
Total current assets 1,162,078  1,372,172 
Advances to joint ventures 499  467 
Investments in equity accounted investees, net 20,970  19,235 
Other investments 110,392  — 
Loan receivable, net 94,113  87,191 
Property, plant and equipment, net 193,920  187,599 
Right-of-use assets 6,687  9,776 
Intangible assets, net 70,409  69,720 
Goodwill 179,543  179,522 
Total assets $ 1,838,611  $ 1,925,682 
Liabilities
Current liabilities
Accounts payable and other liabilities $ 29,829  $ 42,102 
Current portion of lease obligation 1,206  1,322 
Derivative liabilities 169,563  163,410 
Total current liabilities 200,598  206,834 
Due to non-controlling interests 1,768  2,188 
Lease obligation 6,333  8,492 
Total liabilities 208,699  217,514 
Commitments and contingencies (see Note 9)
Shareholders’ equity
Share capital (i, ii)
572,858  569,260 
Additional paid-in capital 32,368  34,596 
Retained earnings 955,721  1,064,509 
Accumulated other comprehensive income 71,729  42,999 
Total equity attributable to shareholders of Cronos Group 1,632,676  1,711,364 
Non-controlling interests (2,764) (3,196)
Total shareholders’ equity 1,629,912  1,708,168 
Total liabilities and shareholders’ equity $ 1,838,611  $ 1,925,682 
(i)Authorized for issuance as of June 30, 2021: unlimited and December 31, 2020: unlimited.
(ii)Shares issued as of June 30, 2021: 371,805,547 and December 31, 2020: 360,253,332.

See notes to condensed consolidated 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)

Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Net revenue, before excise taxes $ 18,848  $ 11,432  $ 33,502  $ 20,776 
Excise taxes (3,226) (1,549) (5,269) (2,461)
Net revenue 15,622  9,883  28,233  18,315 
Cost of sales 19,445  9,743  35,019  16,689 
Inventory write-down 11,961  3,062  11,961  11,024 
Gross loss (15,784) (2,922) (18,747) (9,398)
Operating expenses
Sales and marketing 13,209  6,501  23,463  13,613 
Research and development (“R&D”) 5,199  3,631  10,301  8,221 
General and administrative 22,417  18,429  44,323  42,188 
Share-based payments 2,565  2,546  5,064  4,982 
Depreciation and amortization 1,043  679  1,778  1,366 
Total operating expenses 44,433  31,786  84,929  70,370 
Operating loss (60,217) (34,708) (103,676) (79,768)
Other income (loss)
Interest income, net 2,293  3,734  4,622  11,485 
Gain (loss) on revaluation of derivative liabilities 115,248  (35,880) (1,626) 77,488 
Impairment loss on long-lived assets —  (40,000) (1,741) (40,000)
Share of loss from equity accounted investments (1,115) (794) (2,758) (1,966)
Other, net 1,127  (9) 911  785 
Total other income (loss) 117,553  (72,949) (592) 47,792 
Income (loss) from continuing operations 57,336  (107,657) (104,268) (31,976)
Loss from discontinued operations (561) (46) (582) (46)
Net income (loss) 56,775  (107,703) (104,850) (32,022)
Net loss attributable to non-controlling interest (279) (726) (592) (1,085)
Net income (loss) attributable to Cronos Group $ 57,054  $ (106,977) $ (104,258) $ (30,937)
Other comprehensive income (loss)
Net income (loss) $ 56,775  $ (107,703) $ (104,850) $ (32,022)
Other comprehensive income (loss):
Foreign exchange gain (loss) on translation 13,470  51,871  29,754  (61,821)
Total other comprehensive income (loss) 13,470  51,871  29,754  (61,821)
Comprehensive income (loss) 70,245  (55,832) (75,096) (93,843)
Less: comprehensive income (loss) attributable to non-controlling interests (394) (762) 432  (1,098)
Comprehensive income (loss) attributable to Cronos Group $ 70,639  $ (55,070) $ (75,528) $ (92,745)
Net income (loss) per share
Basic and diluted - continuing operations $ 0.15  $ (0.31) $ (0.28) $ (0.09)
Weighted average number of outstanding shares
Basic 371,721,382  349,075,408  367,391,118  348,946,439 
Diluted 375,349,856  349,075,408  367,391,118  348,946,439 

See notes to condensed consolidated financial statements.
5

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the three months ended June 30, 2021 and 2020
(In thousands of U.S. dollars, except share amounts, unaudited)

Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income Non-controlling interests Total shareholders’ equity
Balance at April 1, 2021 371,656,590  $ 584,912  $ 32,090  $ 895,503  $ 58,144  $ (2,370) $ 1,568,279 
Warrants exercised 10,000  (2) —  —  — 
Vesting of options —  —  1,864  —  —  —  1,864 
Options exercised 80,603  102  (102) —  —  —  — 
Restricted share units settled 58,354  345  (345) —  —  —  — 
Withholding taxes paid on share-based awards —  —  (183) (63) —  —  (246)
Vesting of restricted share units —  —  701  —  —  —  701 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development —  2,000  (1,655) —  —  —  345 
Top-up rights out-of-period adjustment —  (14,505) —  3,227  —  —  (11,278)
Net income (loss) —  —  —  57,054  —  (279) 56,775 
Foreign exchange gain (loss) on translation —  —  —  —  13,585  (115) 13,470 
Balance at June 30, 2021 371,805,547  $ 572,858  $ 32,368  $ 955,721  $ 71,729  $ (2,764) $ 1,629,912 
Number of shares Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests Total shareholders’ equity
Balance at April 1, 2020 348,817,472  $ 563,165  $ 25,483  $ 1,213,686  $ (85,877) $ (1,189) $ 1,715,268 
Vesting of options —  —  1,770  —  —  —  1,770 
Options exercised 1,068,930  1,329  (1,328) —  —  — 
Vesting of restricted share units —  —  776  —  —  —  776 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development —  —  345  —  —  —  345 
Top-up rights exercised —  717  —  —  —  —  717 
Net loss —  —  —  (106,977) —  (726) (107,703)
Foreign exchange gain (loss) on translation —  —  —  —  51,907  (36) 51,871 
Balance at June 30, 2020 349,886,402  $ 565,211  $ 27,046  $ 1,106,709  $ (33,970) $ (1,951) $ 1,663,045 

See notes to condensed consolidated financial statements.
6

Cronos Group Inc.
Condensed Consolidated Statements of Changes in Equity
For the six months ended June 30, 2021 and 2020
(In thousands of U.S. dollars, except share amounts, unaudited)


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, 2021 360,253,332  $ 569,260  $ 34,596  $ 1,064,509  $ 42,999  $ (3,196) $ 1,708,168 
Warrants exercised 7,842,859  1,165  (1,163) —  —  — 
Vesting of options —  —  3,928  —  —  —  3,928 
Options exercised 3,651,002  3,315  (3,305) —  —  —  10 
Restricted share units settled 58,354  345  (345) —  —  —  — 
Withholding taxes paid on share-based awards —  —  (1,162) (7,757) —  —  (8,919)
Vesting of restricted share units —  —  1,136  —  —  —  1,136 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development —  2,000  (1,317) —  —  —  683 
Top-up rights out-of-period adjustment —  (3,227) —  3,227  —  —  — 
Net loss —  —  —  (104,258) —  (592) (104,850)
Foreign exchange gain on translation —  —  —  —  28,730  1,024  29,754 
Balance at June 30, 2021 371,805,547  $ 572,858  $ 32,368  $ 955,721  $ 71,729  $ (2,764) $ 1,629,912 
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, 2020 348,817,472  $ 561,165  $ 23,234  $ 1,137,646  $ 27,838  $ (853) $ 1,749,030 
Vesting of options —  —  3,500  —  —  —  3,500 
Options exercised 1,068,930  1,329  (1,328) —  —  — 
Vesting of restricted share units —  —  1,482  —  —  —  1,482 
Vesting of common shares issued in connection with the use of certain publicity rights in brand development —  2,000  158  —  —  —  2,158 
Top-up rights exercised —  717  —  —  —  —  717 
Net loss —  —  —  (30,937) —  (1,085) (32,022)
Foreign exchange loss on translation —  —  —  (61,808) (13) (61,821)
Balance at June 30, 2020 349,886,402  $ 565,211  $ 27,046  $ 1,106,709  $ (33,970) $ (1,951) $ 1,663,045 

See notes to condensed consolidated financial statements.
7

Cronos Group Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands of U.S. dollars, except share amounts, unaudited)

Six months ended June 30,
2021 2020
Operating activities
Net loss $ (104,850) $ (32,022)
 Adjustments to reconcile net loss to cash provided by operating activities:
Share-based payments 5,064  4,982 
Depreciation and amortization 5,083  2,879 
Share of loss from investments in equity accounted investees 2,758  1,966 
Gain (loss) on revaluation of derivative liabilities 1,626  (77,488)
Impairment loss on long-lived assets 1,741  40,000 
Expected credit losses on long-term financial assets —  1,357 
Other non-cash operating activities, net (1,192) 599 
Changes in operating assets and liabilities:
Accounts receivable, net (2,194) 2,895 
Other receivables 6,960  (3,047)
Prepaids and other current assets 1,268  1,187 
Inventory, net (1,010) (24,292)
Inventory write-down 11,961  11,024 
Accounts payable and other liabilities (13,412) (8,417)
Cash flows used in operating activities (86,197) (78,377)
Investing activities
Purchase of short-term investments (120,180) (200,173)
Proceeds from short-term investments 136,204  279,275 
Purchase of other investments (110,392) — 
Purchase of property, plant and equipment (8,347) (13,344)
Purchase of intangible assets (843) (2,754)
Proceeds from sale of held-for-sale assets 2,059  — 
Advances on loans receivable (5,064) (23,974)
Proceeds from sale of other investments —  769 
Cash flows provided by (used in) investing activities (106,563) 39,799 
Financing activities
Withholding taxes paid on share-based awards (8,919) — 
Proceeds from exercise of warrants and options 12 
Cash flows provided by (used in) financing activities (8,907)
Effect of foreign currency translation on cash and cash equivalents 18,825  (51,416)
Net change in cash and cash equivalents (182,842) (89,993)
Cash and cash equivalents, beginning of period 1,078,023  1,199,693 
Cash and cash equivalents, end of period $ 895,181  $ 1,109,700 
Supplemental cash flow information
Interest paid $ —  $ 90 
Interest received 2,961  11,575 
Income taxes paid 858  — 
See notes to condensed consolidated financial statements.



8

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
1. Background, Basis of Presentation and Accounting Policies
(a)Background
Cronos Group Inc. (“Cronos Group” or the “Company”) is incorporated in the Province of British Columbia and under the Business Corporations Act (British Columbia) with principal executive offices at 111 Peter Street, Suite 300, Toronto, Ontario, M5V 2H1. The Company’s common shares are currently listed on the Toronto Stock Exchange (“TSX”) and Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CRON.”
Cronos Group is an innovative global cannabinoid company, with international production and distribution across five continents. The Company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development and is seeking to build an iconic brand portfolio. Cronos Group’s brand portfolio includes PEACE NATURALS, a global wellness platform; two adult-use brands, COVE and Spinach; and three U.S. hemp-derived consumer products brands, Lord Jones, Happy Dance and PEACE+.
Cronos Group has established strategic joint ventures in Canada, Israel, and Colombia. “Cronos Israel” consists of a cultivation company (Cronos Israel G.S. Cultivation Ltd.), a manufacturing company (Cronos Israel G.S. Manufacturing Ltd.), a distribution company (Cronos Israel G.S. Store Ltd.) and a pharmacy company (Cronos Israel G.S. Pharmacy Ltd.) and is consolidated for financial reporting purposes. The Company also holds approximately 31% of the issued capital of Cronos Australia Limited (“Cronos Australia”) and accounts for its investment in Cronos Australia under the equity method of accounting. For additional discussion regarding the joint ventures and strategic investment, see Note 3. Investments.
(b)Out-of-period adjustments
During the three months ended March 31, 2021, the Company identified an error in the accounting related to the withholding taxes on the net exercise of stock options, which resulted in an understatement of accounts payable and other liabilities of $966 and overstatements of other receivables, retained earnings and share capital of $3,202, $3,838 and $330, respectively, as of December 31, 2020. The error was deemed immaterial, and thus the Company has recorded an out-of-period adjustment to the condensed consolidated balance sheet and the condensed consolidated statement of changes in equity during the first quarter of 2021 to correct the error. This error had no impact to the condensed consolidated statement of net income (loss) and comprehensive income (loss). The impact of the out-of-period adjustments are included within the changes in operating assets and liabilities and withholding taxes paid on share-based awards lines in the Company’s condensed consolidated statements of cash flows.
During the three months ended June 30, 2021, the Company identified an error in the accounting related to the exercise of Top-up Rights (as defined herein), which resulted in an overstatement of share capital and an understatement of gain on revaluation of derivative liabilities of $3,227 as of December 31, 2020, and overstatements of share capital and loss on revaluation of derivative liabilities and an understatement of retained earnings of $14,505, $11,278 and $3,227, respectively, as of March 31, 2021. The error was deemed immaterial, and thus the Company has recorded an out-of-period adjustment to the condensed consolidated balance sheet, the condensed consolidated statement of net income (loss) and comprehensive income (loss) and the condensed consolidated statement of changes in equity during the second quarter of 2021 to correct the error. The impact of the out-of-period adjustments are included within the adjustments to net loss in the Company’s condensed consolidated statements of cash flows.
(c)Basis of presentation
The interim condensed consolidated financial statements of Cronos Group 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 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 accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other reporting period.
These condensed consolidated 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, 2020 (the “Annual Financial Statements”).
Certain prior year amounts have been reclassified to conform to the current year presentation of our condensed consolidated financial statements. These reclassifications had no effect on the reported results of operations and ending shareholders’ equity.
9

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
(d)Adoption of new accounting pronouncements
On January 1, 2021, the Company adopted ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU No. 2020-01”). ASU No. 2020-01 clarifies the interaction of accounting for the transition into and out of the equity method as well as measuring certain purchased options and forward contracts to acquire investments. The adoption of ASU No. 2020-01 did not have an impact on the Company’s interim condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU No. 2019-12 eliminates certain exceptions and simplifies the application of U.S. GAAP-related changes in enacted tax laws or rates and employee stock option plans. The adoption of ASU No. 2019-12 did not have an impact on the Company’s interim condensed consolidated financial statements.
(e)New accounting pronouncements not yet adopted
In August 2020, the FASB issued ASU 2020-06, Debt –Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815–40) (“ASU No. 2020-06”). ASU No. 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU No. 2020-06 is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU No. 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU No. 2020-06 will have on its condensed consolidated financial statements.

2. Inventory, net
Inventory, net is comprised of the following items:
As of June 30, 2021 As of December 31, 2020
Raw materials $ 7,471  $ 11,489 
Work-in-progress 17,291  26,278 
Finished goods 10,247  5,905 
Supplies and consumables 596  330 
Total $ 35,605  $ 44,002 
Inventory is written down for any obsolescence such as slow-moving or non-marketable products, or when the net realizable value of inventory is less than the carrying value. During the three months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $11,961 and $3,062, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded write-downs related to inventory of $11,961 and $11,024, respectively.

3. Investments
(a)Variable interest entities and investments in equity accounted investees, net
The Company holds variable interests in Cronos Growing Company Inc. (“Cronos GrowCo”), Natuera S.à.r.l (“Natuera”), MedMen Canada Inc. (“MedMen Canada”) and Cannasoul Lab Services Ltd. (“CLS”). The Company’s investments in Cronos GrowCo, Natuera and MedMen Canada are exposed to economic variability from each entity’s performance; however, the Company does not consolidate the entities as it does not have the power to direct the activities that most significantly impact each entity’s economic performance. Thus, Cronos Group is not considered the primary beneficiary of each entity. These investments are accounted for as equity method investments classified as “Investments in equity accounted investees, net” in the consolidated balance sheets.
Cronos GrowCo is a joint venture incorporated under the Canada Business Corporations Act (“CBCA”) on June 14, 2018 with the objective of cultivating and commercializing cannabis and cannabis products. Cronos Group holds variable interests in Cronos GrowCo through its ownership of 50% of Cronos GrowCo’s common shares and senior secured debt. Cronos GrowCo’s economic performance is driven by the quantity and strains of cannabis grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.
10

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
MedMen Canada is a joint venture incorporated under the CBCA on March 13, 2018, with the objective of the retail sale and marketing of cannabis products in Canada. MedMen Canada holds the exclusive license to the MedMen brand in Canada for a minimum term of 20 years. The Company holds variable interests in MedMen Canada through its ownership of 50% of MedMen Canada’s common shares and other subordinated debt. MedMen Canada’s economic performance is driven by the quantity and strains of cannabis sold. Subject to applicable law, the joint venture partners mutually determine the quantity and strains of cannabis to be sold in MedMen Canada’s retail stores, if and when stores are opened.
Natuera is a joint venture registered in Luxembourg with the objective of cultivating and commercializing hemp and cannabis products. The Company holds variable interests in Natuera through its ownership of 50% of Natuera’s common shares. Natuera’s economic performance is driven by the quantity and strains of cannabis grown, which is mutually determined by the joint venture partners.
CLS is a wholly owned subsidiary of Cannasoul Analytics Ltd., incorporated with the purpose of establishing a commercial cannabis analytical testing laboratory located on the premises of Cronos Israel (the “Cannasoul Collaboration”). Cronos Israel agreed to advance up to ILS 8,297 ($2,511) 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 laboratory. The loan bears interest at 3.5% annually. Cronos Israel will receive 70% of the profits of the laboratory until such time as it has recovered 150% of the amounts advanced to CLS, after which time it will receive 50% of the 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 non-recourse 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. See Note 4. Loans Receivable, net for further information regarding loans receivable.
A reconciliation of the carrying amount of the investments in associates and joint ventures is as follows:
Ownership interest As of June 30, 2021 As of December 31, 2020
Cronos Australia 31% $ —  $ — 
Cronos GrowCo 50% 19,022  19,235 
Natuera(i)
50% 1,948  — 
$ 20,970  $ 19,235 
(i)On April 1, 2021, the Company and an affiliate of Agroidea (“AGI”), the other joint venture partner of Natuera, converted all advances made to Natuera under the master loan agreement entered into with Natuera on September 27, 2019 (the “Natuera Series A Loan”), plus accrued interest, into equity of Natuera. Total aggregate gross advances to Natuera under the Natuera Series A Loan were $15,500, of which the Company advanced 50% and AGI advanced the remaining 50%, or $7,750 each. As a result, the Company transferred the carrying value of the Natuera Series A Loan of approximately $2,013 plus accrued interest of $540, for a total investment value of $2,553, which approximates fair value, to investments in equity accounted investees in respect of Natuera. See Note 4. Loans Receivable, net.
The Company’s share of net losses from equity investments accounted for under the equity method of accounting:
For the three months ended June 30, For the six months ended June 30,
2021 2020 2021 2020
Cronos Australia $ —  $ (235) $ —  $ (235)
Cronos GrowCo (459) (190) (758) (501)
Natuera (656) (369) (2,000) (1,230)
$ (1,115) $ (794) $ (2,758) $ (1,966)
11

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
The Company determined that the maximum exposure of loss on investments in non-consolidated investments is limited to the Company’s initial investment, advances and/or loans for each variable interest entity. The following is a summary of the maximum exposure to loss as of June 30, 2021 and December 31, 2020:
Ownership interest As of June 30, 2021 As of December 31, 2020
Cronos Australia 31% $ 1,573  $ 1,530 
Cronos GrowCo 50% 21,723  21,125 
MedMen Canada 50% 494  467 
Natuera 50% 8,047  8,154 
Total $ 31,837  $ 31,276 
(b)Other investments
Other investments consist of investments in options of companies in the cannabis industry.
On June 14, 2021, the Company purchased an 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, for an aggregate purchase price of approximately $110,392. The option exercise will be based upon various factors, including the status of U.S. federal cannabis legalization, as well as regulatory approvals, including in the states where PharmaCann operates that may be required upon exercise. This option is classified as an equity security without a readily determinable fair value. The Company has elected to measure the fair value of the option at cost less impairment, if any, and subsequently adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The option is reported as other investments on the condensed consolidated balance sheet for the period ended June 30, 2021. As of June 30, 2021 and December 31, 2020, the Company did not hold any additional other investments.

4. Loans Receivable, net
As of June 30, 2021 As of December 31, 2020
Natuera Series A Loan(i)
$ —  $ 3,518 
GrowCo Facility(ii)
1,614  3,137 
Add: Accrued interest 3,414  428 
Total current portion of loans receivable 5,028  7,083 
GrowCo Facility(ii)
77,474  69,939 
Mucci Promissory Note(iii)
13,969  13,324 
Cannasoul Collaboration Loan(iv)
1,870  1,261 
Add: Accrued interest 800  2,667 
Total long-term portion of loans receivable 94,113  87,191 
Total loans receivable, net $ 99,141  $ 94,274 
(i)On April 1, 2021, the Company and AGI converted all advances made to Natuera under the Series A Loan, plus accrued interest, into equity of Natuera. Total aggregate gross advances to Natuera under the Natuera Series A Loan were $15,500, of which the Company advanced 50% and AGI advanced the remaining 50%, or $7,750 each. As a result, the Company transferred the carrying value of the Natuera Series A Loan of approximately $2,013 plus accrued interest of $540, for a total investment value of $2,553, which approximates fair value, to investments in equity accounted investees in respect of Natuera. See Note 3. Investments.
(ii)As of June 30, 2021 and December 31, 2020, Cronos GrowCo had drawn C$100,000 ($80,678) and C$95,150 ($74,626), respectively, from a credit agreement it entered into with the Company in August 2019 (the “GrowCo Facility”). As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $1,590 and $1,470, respectively, recorded against the GrowCo Facility.
(iii)As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $278 and $259, respectively, recorded against the promissory note receivable agreement entered into with Mucci on June 28, 2019 (the “Mucci Promissory Note”).
(iv)As of June 30, 2021 and December 31, 2020 CLS has received ILS 6,223 and ILS 4,149 (approximately $1,909 and $1,287 respectively) from the Cannasoul Collaboration Loan. As of June 30, 2021 and December 31, 2020, the Company had an allowance for credit losses of $39 and $25, respectively, recorded against the Cannasoul Collaboration Loan.

12

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
5. Derivative Liabilities
On March 8, 2019, the Company closed the previously announced investment in the Company (the “Altria Investment”) by Altria Group, Inc. (“Altria”), pursuant to a subscription agreement dated December 7, 2018. As of the closing date of the Altria Investment, the Altria Investment consisted of 149,831,154 common shares of the Company and one warrant of the Company (the “Altria Warrant”), all of which were issued to a wholly owned subsidiary of Altria. As of the closing date of the Altria Investment, Altria beneficially held an approximately 45% ownership interest in the Company (calculated on a non-diluted basis). As summarized in this note, if exercised in full on such date, the exercise of the Altria Warrant would have resulted in Altria holding a total ownership interest in the Company of approximately 55% (calculated on a non-diluted basis). As of June 30, 2021, Altria beneficially held an approximately 42% ownership interest in the Company (calculated on a non-diluted basis). As summarized in this note, if exercised in full on such date, the exercise of the Altria Warrant would have resulted in Altria holding a total ownership interest in the Company of approximately 53% (calculated on a non-diluted basis). Pursuant to the investor rights agreement between the Company and Altria, entered into in connection with the closing of the Altria Investment (the “Investor Rights Agreement”), the Company granted Altria certain rights, among others, summarized in this note.
The summaries below are qualified entirely by the terms and conditions fully set out in the Investor Rights Agreement and the Altria Warrant, as applicable.
a.The Altria Warrant entitles the holder, subject to certain qualifications and limitations, to subscribe for and purchase up to an additional approximate 10% of the common shares of Cronos (approximately 83 million common shares at June 30, 2021) at a per share exercise price of C$19.00, which expires on March 8, 2023.
b.The Company granted to Altria, subject to certain qualifications and limitations, upon the occurrence of certain issuances of common shares of the Company executed by the Company (including issuances pursuant to the R&D partnership with Ginkgo Bioworks Inc. (“Ginkgo”) (the “Ginkgo Strategic Partnership”)), the right to purchase up to such number of common shares of the Company in order to maintain their ownership percentage of issued and outstanding common shares of the Company immediately preceding any issuance of shares by the Company (“Pre-emptive Rights”), at the same price per common share of the Company at which the common shares are sold in the relevant issuance. The price per common share of the Company to be paid by Altria pursuant to its exercise of its Pre-emptive Rights related to the Ginkgo Strategic Partnership will be C$16.25 per common share. These rights may not be exercised if Altria’s ownership percentage of the issued and outstanding shares of the Company falls below 20%.
c.In addition to (and without duplication of) the Pre-emptive Rights, the Company granted to Altria, subject to certain qualifications and limitations, the right to subscribe for common shares of the Company issuable in connection with the exercise, conversion or exchange of convertible securities of the Company issued prior to March 8, 2019 or thereafter (excluding any convertible securities of the Company owned by Altria or any of its subsidiaries), a share incentive plan of the Company, the exercise of any right granted by the Company pro rata to all shareholders of the Company to purchase additional common shares and/or securities of the Company, bona fide bank debt, equipment financing or non-equity interim financing transactions that contemplate an equity component or bona fide acquisitions (including acquisitions of assets or rights under a license or otherwise), mergers or similar business combination transactions or joint ventures involving the Company in order to maintain their ownership percentage of issued and outstanding common shares of the Company immediately preceding any such transactions (“Top-up Rights”).
The price per common share to be paid by Altria pursuant to the exercise of its Top-up Rights will be, subject to certain limited exceptions, the 10-day volume-weighted average price of the common shares of the Company on the TSX for the ten full days preceding such exercise by Altria, provided that the price per common share of the Company to be paid by Altria pursuant to the exercise of its Top-up Rights in connection with the issuance of common shares of the Company pursuant to the exercise of options or warrants that were outstanding as of March 8, 2019 will be C$16.25 per common share without any set off, counterclaim, deduction, or withholding. These rights may not be exercised if Altria’s ownership percentage of the issued and outstanding shares of the Company falls below 20%. The Altria Warrant, Pre-emptive Rights, and fixed price Top-up Rights have been classified as derivative liabilities.
13

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
A reconciliation of the carrying amounts of the derivative liability for the three months ended June 30, 2021 and 2020:
As of April 1, 2021 Revaluation gain Out-of-period adjustment Foreign exchange effect As of June 30, 2021
(a) Altria Warrant $ 234,656  $ (85,778) $ —  $ 1,205  $ 150,083 
(b) Pre-emptive Rights 20,173  (6,360) —  113  13,926 
(c) Top-up Rights 17,471  (23,110) 11,278  (85) 5,554 
$ 272,300  $ (115,248) $ 11,278  $ 1,233  $ 169,563 
As of April 1, 2020 Revaluation loss Exercise of rights Foreign exchange effect As of June 30, 2020
(a) Altria Warrant $ 132,366  $ 30,052  $ —  $ 3,540  $ 165,958 
(b) Pre-emptive Rights 13,070  2,610  —  500  16,180 
(c) Top-up Rights 20,013  3,218  (727) 1,072  23,576 
$ 165,449  $ 35,880  $ (727) $ 5,112  $ 205,714 
A reconciliation of the carrying amounts of the derivative liability for the six months ended June 30, 2021 and 2020:
As of January 1, 2021 Revaluation loss/(gain) Exercise of rights Foreign exchange effect As of June 30, 2021
(a) Altria Warrant $ 138,858  $ 7,186  $ —  $ 4,039  $ 150,083 
(b) Pre-emptive Rights 12,095  1,473  —  358  13,926 
(c) Top-up Rights 12,457  (7,033) —  130  5,554 
$ 163,410  $ 1,626  $ —  $ 4,527  $ 169,563 
As of January 1, 2020 Revaluation loss/(gain) Exercise of rights Foreign exchange effect As of June 30, 2020
(a) Altria Warrant $ 234,428  $ (58,052) $ —  $ (10,418) $ 165,958 
(b) Pre-emptive Rights 12,787  3,925  —  (532) 16,180 
(c) Top-up Rights 49,945  (23,361) (727) (2,281) 23,576 
$ 297,160  $ (77,488) $ (727) $ (13,231) $ 205,714 
Fluctuations in the Company’s share price are a primary driver for the changes in the derivative valuations during each reporting period. As the share price decreases for each of the related derivative instruments, the liability of the instrument generally decreases. Share price is one of the significant observable inputs used in the fair value measurement of each of the Company’s derivative instruments. During the three months ended June 30, 2021, the Company’s share price decreased from April 1, 2021 and we recorded an out-of-period adjustment of $11,278. See Note 1. Background, Basis of Presentation and Accounting Policies for more information on the out-of-period adjustment.
14

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
The fair values of the derivative liabilities were determined using the Black-Scholes pricing model as of June 30, 2021 and December 31, 2020 applying the following inputs:
As of June 30, 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)
$10.68 $10.68 $10.68 $8.84 $8.84 $8.84
Subscription price (i)
$19.00 $16.25 $16.25 $19.00 $16.25 $16.25
Weighted average risk-free interest rate (ii)
0.38% 0.28% 0.31% 0.21% 0.17% 0.13%
Weighted average expected life (iii)
1.68 1.25 1.31 2.18 1.50 0.98
Expected annualized volatility (iv)
75% 75% 75% 81% 81% 81%
Expected dividend yield —% —% —% —% —% —%
(i)Per share in C$.
(ii)The risk-free interest rate was based on Bank of Canada government treasury bills and bonds with a remaining term equal to the expected life of the derivative liabilities. As of June 30, 2021 and December 31, 2020, the risk-free interest rate uses a range of approximately 0.15% to 0.85% and 0.10% to 0.39%, respectively, for the Pre-emptive Rights and Top-up Rights.
(iii)The expected life represents the period of time, in years, that the derivative liabilities are expected to be outstanding. The expected life of the Pre-emptive Rights and Top-up Rights is determined based on the expected term of the underlying options, warrants, and shares, to which the Pre-emptive Rights and Top-up Rights are linked. As of June 30, 2021 and December 31, 2020, the expected life uses a range of approximately 0.25 year to 4.25 years and 0.50 year to 5.00 years, respectively.
(iv)Volatility was based on an equally weighted blended historical and implied volatility level of the underlying equity securities of the Company as of June 30, 2021. As of December 31, 2020, volatility was based on the blended historical volatility levels of the Company and peer companies.
The following table quantifies each of the significant inputs described above and provides a sensitivity analysis of the impact on the reported values of the derivative liabilities. The sensitivity analysis for each significant input is performed by assuming a 10% decrease in the input while other significant inputs remain constant at management’s best estimate as of the respective dates. While a decrease in the inputs noted below would cause a decrease in the carrying value of the derivative liability, there would also be an equal but opposite impact on net income (loss).
Decrease as of June 30, 2021 Decrease as of December 31, 2020
Altria Warrant Pre-emptive Rights Top-up Rights Altria Warrant Pre-emptive Rights Top-up Rights
Share price $ 31,375  $ 3,146  $ 1,302  $ 25,819  $ 2,527  $ 2,989 
Weighted average expected life 14,220  5,266  502  13,541  1,988  2,121 
Expected annualized volatility 27,375  2,348  968  26,183  2,269  2,602 
These inputs are classified in Level 3 on the fair value hierarchy and are subject to volatility and several factors outside of the Company’s control, which could significantly affect the fair value of these derivative liabilities in future periods.

15

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
6. Share-based Payments
(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 Stock Option Plan dated May 26, 2015 (the “2015 Stock Option Plan”), the 2018 Stock Option Plan dated June 28, 2018 (the “2018 Stock Option Plan” and, together with the 2015 Stock Option Plan, the “Prior Option Plans”), 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 Prior Option Plans.
The following table summarizes the total share-based payments associated with the Company’s stock options and RSUs for the three and six months ended June 30, 2021 and 2020:
For the three months ended June 30, For the six months ended June 30,
2021 2020 2021 2020
Stock options $ 1,864  $ 1,770  $ 3,928  $ 3,500 
RSUs 701  776  1,136  1,482 
Total share-based payments $ 2,565  $ 2,546  $ 5,064  $ 4,982 
(b)Stock options
Vesting conditions for grants of options are determined by the Compensation Committee of the Company’s Board of Directors. 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 Prior Option Plans is quarterly vesting over three to five years with a maximum term of seven years. The Prior Option Plans 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 during the six months ended June 30, 2021 and 2020:
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 2.14  (5,349,818)
Cancellation, forfeiture and expiry of options 14.86  (33,699)
Balance as of June 30, 2021 $ 7.45  8,371,631  2.66
Exercisable as of June 30, 2021 $ 6.49  4,679,240  1.43
(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.
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
Exercise of options 2.05  (1,807,909)
Cancellation, forfeiture and expiry of options 15.78  (127,045)
Balance as of June 30, 2020 $ 5.13  12,214,548  2.05
Exercisable as of June 30, 2020 $ 3.42  8,688,645  1.78
No stock options were granted during the six months ended June 30, 2021 and 2020.
16

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
The following table summarizes stock options outstanding for the 2020 Omnibus Plan, the 2018 Stock Option Plan, and the 2015 Stock Option Plan:
Stock options outstanding as of
June 30, 2021 December 31, 2020
2020 Omnibus Plan 2,000,000  2,000,000 
2018 Stock Option Plan 1,586,725 1,627,715 
2015 Stock Option Plan 4,784,906  10,127,433 
Total stock options outstanding 8,371,631 13,755,148 
(c)Restricted share units
The following is a summary of the changes in RSUs for the six months ended June 30, 2021 and 2020:
Number of RSUs (i)
Weighted average grant date fair value (C$)(ii)
Balance as of January 1, 2021 948,357  $ 7.66 
Granted(i)
515,433  11.29 
Vested and issued (89,912) 7.52 
Balance as of June 30, 2021 1,373,878  $ 9.03 
Number of RSUs (i)
Weighted average grant date fair value (C$)(ii)
Balance as of January 1, 2020 732,972  $ 15.34 
Granted(i)
279,277  7.52 
Balance as of June 30, 2020 1,012,249  $ 13.18 
(i)RSUs granted in the period vest annually in equal installments over a three-year period following the grant date, 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 during the six months ended June 30, 2021 and 2020:
Number of DSUs Financial liability
Balance as of January 1, 2021 83,293  $ 577 
Loss on revaluation —  141 
Balance as of June 30, 2021 83,293  $ 718 
Number of DSUs Financial liability
Balance as of January 1, 2020 33,397  $ 255 
DSU liabilities settled (8,484) (46)
Gain on revaluation —  (56)
Balance as of June 30, 2020 24,913  $ 153 

17

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
(e)Warrants
The following is a summary of the changes in warrants during the six months ended June 30, 2021 and 2020:
Weighted average exercise price (C$) Number of warrants
Balance as of January 1, 2021 $ 0.25  7,987,349 
Exercise of warrants 0.25  (7,987,349)
Balance as of June 30, 2021 $ —  — 
Weighted average exercise price (C$) Number of warrants
Balance as of January 1, 2020 and June 30, 2020 $ 0.26  18,066,662 

As of June 30, 2021, there are no warrants outstanding other than the Altria Warrant. See Note 5. Derivative Liabilities for further description on the Altria Warrant.

18

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
7. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share from continuing operations are calculated using the following numerators and denominators:
For the three months ended June 30, For the six months ended June 30,
2021 2020 2021 2020
Basic earnings (loss) per share computation
Net income (loss) from continuing operations attributable to the shareholders of Cronos Group $ 57,615  $ (106,931) $ (103,676) $ (30,891)
Weighted average number of common shares outstanding 371,721,382  349,075,408  367,391,118  348,946,439 
 Basic earnings (loss) from continuing operations per share(i)
$ 0.15  $ (0.31) $ (0.28) $ (0.09)
Loss from discontinued operations attributable to the shareholders of Cronos Group $ (561) $ (46) $ (582) $ (46)
Weighted average number of common shares outstanding 371,721,382  349,075,408  367,391,118  348,946,439 
Basic earnings from discontinued operations per share $ 0.00  $ 0.00  $ 0.00  $ 0.00 
Diluted earnings (loss) per share computation
Net income (loss) used in the computation of basic earnings (loss) from continuing operations per share $ 57,615  $ (106,931) $ (103,676) $ (30,891)
Adjustment for gain (loss) on revaluation of derivative liabilities —  (729) —  (729)
Net income (loss) used in the computation of diluted earnings (loss) from continuing operations per share $ 57,615  $ (107,660) $ (103,676) $ (31,620)
Weighted average number of common shares outstanding used in the computation of basic earnings (loss) per share 371,721,382  349,075,408  367,391,118 348,946,439
Dilutive effect of warrants 5,577  —  —  — 
Dilutive effect of stock options 3,027,518  —  —  — 
Dilutive effect of RSUs 595,379  —  —  — 
Weighted average number of common shares for computation of diluted earnings (loss) from continuing operations per share(i)
375,349,856  349,075,408  367,391,118 348,946,439
Diluted earnings (loss) from continuing operations per share $ 0.15  $ (0.31) $ (0.28) $ (0.09)
Loss from discontinued operations attributable to the shareholders of Cronos Group $ (561) $ (46) $ (582) $ (46)
Weighted average number of common shares for computation of diluted loss from discontinued operations per share 375,349,856  349,075,408  367,391,118  348,946,439 
Diluted earnings from discontinued operations per share $ 0.00  $ 0.00  $ 0.00  $ 0.00 
(i)In computing diluted earnings 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.
19

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive or because conditions for contingently issuable shares were not satisfied at the end of the reporting periods.
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Ginkgo equity milestones 14,674,904  14,674,904  14,674,904  14,674,904 
Pre-emptive Rights 10,683,330  12,006,740  10,984,166  12,006,740 
Top-up Rights – fixed price 3,698,611  26,686,413  7,406,031  26,686,413 
Top-up Rights – market price 3,504,561  1,941,349  3,063,822  1,941,349 
Altria Warrant 82,623,455  77,752,533  82,606,904  77,752,533 
Stock options 1,411,944  10,495,235  6,136,113  10,547,256 
Warrants —  17,521,903  2,784,377  17,536,558 
Restricted share units 265,904  1,012,249  717,127  1,012,249 
Total anti-dilutive securities 116,862,709  162,091,326  128,373,444  162,158,002 

8. Segment Information
Segment reporting is prepared on the same basis that the Company’s chief operating decision makers (the “CODMs”) manage the business, make operating decisions and assess the Company’s performance. The Company determined that it has the following two reportable segments: United States and Rest of World. The United States operating segment consists of the manufacture and distribution of hemp-derived CBD infused products. The Rest of World operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. These two segments represent the geographic regions in which the Company operates and the different product offerings within each geographic region. The results of each segment are regularly reviewed by the CODMs to assess the performance of the segment and make decisions regarding the allocation of resources. The CODMs review 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 segments. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, non-cash items and items that do not reflect management’s assessment of on-going business performance.
The tables below set forth our condensed consolidated results of operations, expressed in thousands of U.S. dollars for the periods presented. Our condensed consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods.
20

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
Segment data was as follows for the three and six months ended June 30, 2021 and 2020:
Three months ended June 30, 2021
United States Rest of World Corporate Expenses Total
Cannabis flower $ —  $ 11,597  $ —  $ 11,597 
Cannabis extracts 2,227  1,531  —  3,758 
Other —  267  —  267 
Net revenue $ 2,227  $ 13,395  $ —  $ 15,622 
Share of loss from equity accounted investments $ —  $ 1,115  $ —  $ 1,115 
Interest income $ 20  $ 2,280  $ —  $ 2,300 
Interest expense —  (7) —  (7)
Interest income, net $ 20  $ 2,273  $ —  $ 2,293 
Total assets $ 709,956  $ 386,805  $ 741,850  $ 1,838,611 
Depreciation and amortization 68  975  —  1,043 
Adjusted EBITDA (10,711) (32,605) (6,443) (49,759)
Purchase of property, plant and equipment, net 239  1,428  —  1,667 
Three months ended June 30, 2020
United States Rest of World Corporate Expenses Total
Cannabis flower $ —  $ 5,674  $ —  $ 5,674 
Cannabis extracts 2,174  1,917  —  4,091 
Other —  118  —  118 
Net revenue $ 2,174  $ 7,709  $ —  $ 9,883 
Share of loss from equity accounted investments $ —  $ 794  $ —  $ 794 
Interest income 3,808  —  3,817 
Interest expense —  (83) —  (83)
Interest income, net $ $ 3,725  $ —  $ 3,734 
Total assets $ 250,470  $ 348,569  $ 1,311,248  $ 1,910,287 
Depreciation and amortization 36  643  —  679 
Impairment loss on long-lived assets 40,000  —  —  40,000 
Adjusted EBITDA (4,785) (18,618) (3,583) (26,986)
Purchase of property, plant and equipment, net 39  6,894  —  6,933 

21

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
Six months ended June 30, 2021
United States Rest of World Corporate Expenses Total
Cannabis flower $ —  $ 21,031  $ —  $ 21,031 
Cannabis extracts 4,668  2,234  —  6,902 
Other —  300  —  300 
Net revenue $ 4,668  $ 23,565  $ —  $ 28,233 
Share of loss from equity accounted investments $ —  $ 2,758  $ —  $ 2,758 
Interest income $ 23  $ 4,612  $ —  $ 4,635 
Interest expense —  (13) —  (13)
Interest income, net $ 23  $ 4,599  $ —  $ 4,622 
Total assets $ 709,956  $ 386,805  $ 741,850  $ 1,838,611 
Depreciation and amortization $ 139  $ 1,639  $ —  $ 1,778 
Impairment loss on long-lived assets 1,741  —  —  1,741 
Adjusted EBITDA (20,221) (54,789) (11,323) (86,333)
Purchase of property, plant and equipment, net 319  8,028  —  8,347 
Six months ended June 30, 2020
United States Rest of World Corporate Expenses Total
Cannabis flower $ —  $ 8,415  $ —  $ 8,415 
Cannabis extracts 4,350  5,317  —  9,667 
Other —  233  —  233 
Net revenue $ 4,350  $ 13,965  $ —  $ 18,315 
Share of loss from equity accounted investments $ —  $ 1,966  $ —  $ 1,966 
Interest income 16  11,559  —  11,575 
Interest expense —  (90) —  (90)
Interest income, net $ 16  $ 11,469  $ —  $ 11,485 
Total assets $ 250,470  $ 348,569  $ 1,311,248  $ 1,910,287 
Depreciation and amortization 69  1,297  —  1,366 
Impairment loss on long-lived assets 40,000  —  —  40,000 
Adjusted EBITDA (10,567) (47,628) (5,846) (64,041)
Purchase of property, plant and equipment, net 219  13,125  —  13,344 

22

Cronos Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands of $, except share amounts)
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 June 30, 2021
United States Rest of World Corporate Expenses Total
Net income (loss) $ (11,719) $ 79,627  $ (11,133) $ 56,775
Interest income, net (20) (2,273) —  (2,293)
Share of loss from equity accounted investments —  1,115  —  1,115
Gain on revaluation of derivative liabilities(ii)
—  (115,248) —  (115,248)
Transaction costs(iii)
—  —  2,758  2,758
Other, net(iv)
—  (1,127) —  (1,127)
Loss from discontinued operations(v)
—  561  —  561
Share-based payments(vi)
822  1,743  —  2,565
Review costs related to restatement of 2019 interim financial statements(vii)
—  —  1,932  1,932
Depreciation and amortization 206  2,997  —  3,203
Adjusted EBITDA $ (10,711) $ (32,605) $ (6,443) $ (49,759)
Three months ended June 30, 2020
United States Rest of World Corporate
Expenses
Total
Net loss $ (45,566) $ (55,095) $ (7,042) $ (107,703)
Interest income, net (9) (3,725) —  (3,734)
Share of loss from equity accounted investments —  794  —  794
Impairment loss on long-lived assets(i)
40,000  —  —  40,000