Cronos Group Inc

Previous wording

•expectations related to the German, Australian and United Kingdom (the “UK”) markets, including our strategic partnerships with Cansativa GmbH (“Cansativa”), Vitura Health Limited (“Vitura”) and GROW® Pharma, respectively, and our plans to distribute the PEACE NATURALS® brand in Germany and the UK;

Current wording

•expectations related to the German, Australian and United Kingdom (“UK”) markets, including our strategic partnerships with Cansativa GmbH (“Cansativa”), Vitura Health Limited (“Vitura”) and GROW® Pharma, respectively, and our ability to successfully distribute the PEACE NATURALS® brand in Germany and the UK;

Previous wording

•the timing of the change in the nature of operations at our facility in Stayner, Ontario (the “Peace Naturals Campus”);

Current wording

•our expectations as to the use of our facility in Stayner, Ontario (the “Peace Naturals Campus”);

Previous wording

•expectations regarding the potential success of, and the costs and benefits associated with, our joint ventures, strategic alliances and equity investments, including the strategic partnership (the “Ginkgo Strategic Partnership”) with Ginkgo Bioworks Holdings, Inc. (“Ginkgo”);

Current wording

•expectations regarding the potential success of, and the costs and benefits associated with, our joint ventures, strategic alliances and equity investments;

Previous wording

•our ability or plans to identify, develop, commercialize or expand our technology and research and development (“R&D”) initiatives in cannabinoids, or the success thereof;

Current wording

•our ability or plans to identify, develop, commercialize or expand our technology research and development (“R&D”) initiatives in cannabinoids, or the success thereof;

Previous wording

•the legalization of the use of cannabis for medical or adult-use in jurisdictions outside of Canada, including the United States and Germany, the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized;

Current wording

•the legalization of the use of cannabis for medical or adult-use in jurisdictions outside of Canada, including the U.S. and Germany, the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized;

Previous wording

•laws and regulations and any amendments thereto applicable to our business and the impact thereof, including uncertainty regarding the application of United States (“U.S.”) state and federal law to cannabis and U.S. hemp (including CBD and other U.S. hemp-derived cannabinoids) products and the scope of any regulations by the U.S. Food and Drug Administration (the “FDA”), the U.S. Drug Enforcement Administration (the “DEA”), the U.S. Federal Trade Commission (the “FTC”), the U.S. Patent and Trademark Office (the “PTO”) and any state equivalent regulatory agencies over cannabis and U.S. hemp (including CBD and other U.S. hemp-derived cannabinoids) products, including the possibility marijuana is moved from Schedule I to Schedule III under the U.S. Controlled Substances Act;

Current wording

•laws and regulations and any amendments thereto applicable to our business and the impact thereof, including uncertainty regarding the application of U.S. state and federal law to cannabis and U.S. hemp (including CBD and other U.S. hemp-derived cannabinoids) products and the scope of any regulations by the U.S. Food and Drug Administration, the U.S. Drug Enforcement Administration, the U.S. Federal Trade Commission, the U.S. Patent and Trademark Office and any state equivalent regulatory agencies over cannabis and U.S. hemp (including CBD and other U.S. hemp-derived cannabinoids) products, including the possibility marijuana is moved from Schedule I to Schedule III under the U.S. Controlled Substances Act;

Previous wording

•expectations regarding acquisitions and dispositions and the anticipated benefits therefrom;

Current wording

•expectations regarding business combinations and dispositions and the anticipated benefits therefrom;

Previous wording

•our compliance with the terms of the settlement with the SEC (the “Settlement Order”) and the settlement agreement with the Ontario Securities Commission (the “Settlement Agreement”); and

Current wording

•our compliance with the terms of the settlement (the “Settlement Order”) with the Securities and Exchange Commission (the “SEC”) and the settlement agreement (the “Settlement Agreement”) with the Ontario Securities Commission (the “OSC”); and

Previous wording

The Forward-Looking Statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) our ability to effectively navigate developments related to the Anti-Dumping Investigation and its impact on our operations in Israel; (ii) our ability to effectively navigate developments related to the Middle East Conflict and its impact on our employees and operations in Israel, the supply of product in the market and demand for product by medical patients in Israel; (iii) our ability to efficiently and effectively distribute our PEACE NATURALS® brand in Germany with our strategic partner Cansativa and in the UK with our strategic partner GROW® Pharma and our ability to efficiently and effectively distribute products in Australia with our strategic partner Vitura; (iv) our ability to realize the expected cost-savings and other benefits related to the wind-down of our operations at our Winnipeg, Manitoba facility, (v) our ability to realize the expected cost-savings, efficiencies and other benefits of our Realignment and other announced cost-cutting measures and employee turnover related thereto; (vi) our ability to efficiently and effectively wind down certain production activities at the Peace Naturals Campus, receive the benefits of the change in the nature of our operations at our Peace Naturals Campus and acquire raw materials on a timely and cost-effective basis from third parties, including Cronos GrowCo; (vii) the timely completion of the expansion of Cronos GrowCo’s purpose-built cannabis facility and the ability of Cronos GrowCo to repay the Term Loan B; (viii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our acquisitions and strategic investments; (ix) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (x) government regulation of our activities and products including, but not limited to, the areas of cannabis taxation and environmental protection; (xi) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (xii) consumer interest in our products; (xiii) our ability to differentiate our products, including through the utilization of rare cannabinoids; (xiv) competition; (xv) anticipated and unanticipated costs; (xvi) our ability to generate cash flow from operations; (xvii) our ability to conduct operations in a safe, efficient and effective manner; (xviii) our ability to hire and retain qualified staff, and acquire equipment and services in a timely and cost-efficient manner; (xix) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann; (xx) our ability to complete planned dispositions, and, if completed, obtain our anticipated sales price; (xxi) general economic, financial market, regulatory …

Excerpt shortened here; the source contains the full paragraph.

Current wording

The Forward-Looking Statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) our ability to effectively navigate developments related to the Anti-Dumping Investigation and its impact on our operations in Israel; (ii) our ability to effectively navigate developments related to the Middle East Conflict and its impact on our employees and operations in Israel, the supply of product in the market and demand for product by medical patients in Israel; (iii) our ability to efficiently and effectively distribute our PEACE NATURALS® brand in Germany with our strategic partner Cansativa and in the UK with our strategic partner GROW® Pharma and our ability to efficiently and effectively distribute products in Australia with our strategic partner Vitura; (iv) our ability to realize the expected cost-savings and other benefits related to the wind-down of our operations at our Winnipeg, Manitoba facility, (v) expectations related to the impact of our decision to exit our U.S. hemp-derived cannabinoid product operations; (vi) our ability to realize the expected cost-savings, efficiencies and other benefits of our Realignment and other announced cost-cutting measures and employee turnover related thereto; (vii) our ability to efficiently and effectively change the nature of our operations at our Peace Naturals Campus and receive the benefits thereof and acquire raw materials on a timely and cost-effective basis from third parties or Cronos GrowCo; (viii) the timely completion of the expansion of Cronos GrowCo’s purpose-built cannabis facility and the ability of Cronos GrowCo to repay the credit facility provided by Cronos; (ix) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our business combinations and strategic investments; (x) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (xi) government regulation of our activities and products including, but not limited to, the areas of cannabis taxation and environmental protection; (xii) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (xiii) consumer interest in our products; (xiv) our ability to differentiate our products, including through the utilization of rare cannabinoids; (xv) competition; (xvi) anticipated and unanticipated costs; (xvii) our ability to generate cash flow from operations; (xviii) our ability to conduct operations in a safe, efficient and effective manner; (xix) our ability to hire and retain qualified staff, and acquire equipment and services in a timely and cost-efficient manner; (xx) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann; (xxi) our ability to complete planned dispositions, and, if completed, obtain our ant…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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 Quarterly Report and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf. Such factors include, without limitation, negative impacts on our business and operations in Israel due to the Anti-Dumping Investigation, including that we may not be able to produce, import or sell our products in Israel as a result thereof; negative impacts on our employees, business and operations in Israel due to the Middle East Conflict, including that we may not be able to produce, import or sell our products or protect our people or facilities in Israel during the Middle East Conflict, the supply of product in the market and the demand for product by medical patients in Israel; that we may not be able to successfully continue to distribute our products in Germany, Australia and the UK or generate material revenue from sales in those markets; that we may not be able to achieve the anticipated benefits of the wind-down of our operations at our Winnipeg, Manitoba facility or be able to access raw materials on a timely and cost-effective basis from third-parties; that we may be unable to further streamline our operations and reduce expenses; that we may not be able to effectively and efficiently re-enter the U.S. market in the future; that we may not be able to access raw materials on a timely and cost-effective basis from third-parties, including Cronos GrowCo; that Cronos GrowCo may not be able to complete the expansion of its purpose-built cannabis facility within a reasonable time or repay its borrowings under Term Loan B; the military conflict between Russia and Ukraine may disrupt our operations and those of our suppliers and distribution channels and negatively impact the demand for and use of our products; the risk that cost savings and any other synergies from the Altria Investment may not be fully realized or may take longer to realize than expected; failure to execute key personnel changes; the risks that our Realignment, the change in the nature of our operations at the Peace Naturals Campus and our further leveraging of our strategic partnerships will not result in the expected cost-savings, efficiencies and other benefits or will result in greater than anticipated turnover in personnel; lower levels of revenues; the lack of consumer demand for our products; our inability to…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 Quarterly Report and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf. Such factors include, without limitation, negative impacts on our business and operations in Israel due to the Anti-Dumping Investigation, including that we may not be able to produce, import or sell our products in Israel as a result thereof; negative impacts on our employees, business and operations in Israel due to the Middle East Conflict, including that we may not be able to produce, import or sell our products or protect our people or facilities in Israel during the Middle East Conflict, the supply of product in the market and the demand for product by medical patients in Israel; that we may not be able to successfully continue to distribute our products in Germany, Australia and the UK or generate material revenue from sales in those markets; that we may not be able to achieve the anticipated benefits of the wind-down of our operations at our Winnipeg, Manitoba facility; that we may be unable to further streamline our operations and reduce expenses; that we may not be able to effectively and efficiently re-enter the U.S. market in the future; that we may not be able to access raw materials on a timely and cost-effective basis from third-parties or Cronos GrowCo; that Cronos GrowCo may not be able to complete the expansion of its purpose-built cannabis facility within a reasonable time or repay its borrowings under the Cronos GrowCo Credit Facility; the military conflict between Russia and Ukraine may disrupt our operations and those of our suppliers and distribution channels and negatively impact the demand for and use of our products; the risk that cost savings and any other synergies from the Altria Investment may not be fully realized or may take longer to realize than expected; failure to execute key personnel changes; the risks that our Realignment, the change in the nature of our operations at the Peace Naturals Campus and our further leveraging of our strategic partnerships will not result in the expected cost-savings, efficiencies and other benefits or will result in greater than anticipated turnover in personnel; lower levels of revenues; the lack of consumer demand for our products; our inability to manage disruptions in credit markets; unanticipated future levels of capital…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2024, June 30, 2023, and December 31, 2023. Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates. The condensed consolidated statements of net loss and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period as reported on Bloomberg.

Current wording

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. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of September 30, 2024, September 30, 2023, and December 31, 2023. Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates. The condensed consolidated statements of net income (loss) and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period as reported on Bloomberg.

Previous wording

In the second quarter of 2023, Cronos exited its U.S. hemp-derived cannabinoid product operations. The exit of the U.S. operations represented a strategic shift that has a major effect on Cronos’ operations and financial results, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive income (loss). Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations. For further detail on the discontinuation of the U.S. operations, see Note 2 “Discontinued Operations” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

In the second quarter of 2023, Cronos exited its U.S. hemp-derived cannabinoid product operations. The exit of the U.S. operations represented a strategic shift that has a major effect on Cronos’ operations and financial results, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net income (loss) and comprehensive income (loss). Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations. For further detail on the discontinuation of the U.S. operations, see Note 3 “Discontinued Operations” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

Key highlights of the investment:

Current wording

Key Highlights of the Cronos GrowCo Transaction:

Previous wording

•Enhanced Governance: As of July 1, 2024, the GrowCo board of directors expanded to five members, three of whom are appointed by Cronos.

Current wording

•Increased Board Representation: As of July 1, 2024, the Cronos GrowCo board of directors expanded to five members, three of whom are appointed by Cronos.

Previous wording

•Financial Consolidation: Cronos will consolidate Cronos GrowCo’s results in its financial statements beginning in the third quarter of 2024.

Current wording

•Financial Consolidation: Cronos now consolidates Cronos GrowCo’s results in its financial statements beginning in the third quarter of 2024.

Previous wording

•Investment in Expansion: Cronos has provided an approximately $51 million ($70 million CAD) secured non-revolving credit facility to Cronos GrowCo to fund facility expansion, enabling growth opportunities in the markets Cronos operates in today as well as potentially enabling Cronos GrowCo to take advantage of future growth into new markets that open.

Current wording

•Investment in Expansion: Cronos has provided an approximately $51 million ($70 million CAD) secured non-revolving credit facility to Cronos GrowCo to fund the expansion of Cronos GrowCo’s cultivation and processing facilities (the “Phase 2 Expansion”), enabling growth opportunities in the markets Cronos operates in today as well as enabling future growth into new markets that open.

Previous wording

For the three months ended June 30, 2024, we reported consolidated net revenue of $27.8 million, representing an increase of $8.7 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, we reported consolidated net revenue of $53.1 million, representing an increase of $14.5 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries, partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue.

Current wording

For the three months ended September 30, 2024, we reported consolidated net revenue of $34.3 million, representing an increase of $9.5 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, we reported consolidated net revenue of $87.3 million, representing an increase of $24.0 million from the nine months ended September 30, 2023. For both the three and nine month comparative periods, the increase was primarily due to higher cannabis flower and extract sales in the Canadian market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries, partially offset by an adverse price/mix in the Canadian adult-use cannabis flower category driving increased excise tax payments as a percentage of net revenue. The Cronos GrowCo Transaction contributed $4.3 million of cannabis flower sales in both the three and nine months ended September 30, 2024. No such sales were recognized for the three and nine months ended September 30, 2023.

Previous wording

For both the three and six months ended June 30, 2024, we reported inventory write-downs of $0.4 million, compared to no inventory write-downs in the the three and six months ended June 30, 2023. For both the three and six month comparative periods, the increase was primarily due to write-downs resulting from unusable inventory that was scrapped in the period.

Current wording

For the three and nine months ended September 30, 2024, we reported inventory write-downs of $0.3 million and $0.7 million, compared to $0.7 million in both the three and nine months ended September 30, 2023. For both the three and nine month comparative periods, the activity was primarily due to write-downs resulting from unusable inventory that was scrapped in the period.

Previous wording

For the three months ended June 30, 2024, we reported consolidated cost of sales of $21.1 million, representing an increase of $5.1 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, we reported consolidated cost of sales of $41.9 million, representing an increase of $9.4 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries.

Current wording

For the three months ended September 30, 2024, we reported consolidated cost of sales of $30.3 million, representing an increase of $10.2 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, we reported consolidated cost of sales of $72.2 million, representing an increase of $19.6 million from the nine months ended September 30, 2023. For both the three and nine month comparative periods, the increase was primarily due to the impact of the inventory step-up from the Cronos GrowCo Transaction, higher cannabis flower and extract sales in the Canadian market, higher wholesale cannabis flower sales in Canada, higher cannabis flower sales in Israel and higher cannabis flower sales in other countries. For both the three and nine months ended September 30, 2024, we recognized $7.1 million of inventory step-up from the Cronos GrowCo Transaction into cost of sales. No such costs were recognized for the three and nine months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, sales and marketing expenses were $4.3 million, representing a decrease of $1.0 million compared to the three months ended June 30, 2023. For the six months ended June 30, 2024, sales and marketing expenses were $9.7 million, representing a decrease of $1.4 million compared to the six months ended June 30, 2023. For both the three and six month comparative periods, the decrease was primarily due to lower advertising and marketing spend.

Current wording

For the three months ended September 30, 2024, sales and marketing expenses were $5.5 million, representing an increase of $0.2 million compared to the three months ended September 30, 2023. For the nine months ended September 30, 2024, sales and marketing expenses were $15.2 million, representing a decrease of $1.1 million compared to the nine months ended September 30, 2023. For the three month comparative periods, the increase was primarily due to higher salaries and benefits. For the nine month comparative periods, the decrease was primarily due to lower salaries and benefits and favorable advertising and marketing spend.

Previous wording

For the three months ended June 30, 2024, research and development expenses were $1.0 million, essentially unchanged from the three months ended June 30, 2023. For the six months ended June 30, 2024, research and development expenses were $2.0 million, representing a decrease of $1.2 million from the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024, was primarily due to lower costs associated with the collaboration and license agreement between Ginkgo Bioworks Holdings, Inc. and the Company.

Current wording

For the three months ended September 30, 2024, research and development expenses were $1.2 million, essentially unchanged from the three months ended September 30, 2023. For the nine months ended September 30, 2024, research and development expenses were $3.2 million, representing a decrease of $1.2 million from the nine months ended September 30, 2023. The decrease for the nine months ended September 30, 2024, was primarily due to lower costs associated with the collaboration and license agreement between Ginkgo Bioworks Holdings, Inc. (“Ginkgo”) and the Company.

Previous wording

For the three months ended June 30, 2024, general and administrative expenses were $12.8 million, representing a decrease of $0.7 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, general and administrative expenses were $21.7 million, representing a decrease of $3.6 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the decrease was primarily due to lower professional fees, largely related to financial statement review costs, and lower salaries and benefits and insurance costs, partially offset by an increase in the expected credit loss allowance on loans receivable.

Current wording

For the three months ended September 30, 2024, general and administrative expenses were $12.8 million, representing a decrease of $1.6 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, general and administrative expenses were $34.4 million, representing a decrease of $5.2 million from the nine months ended September 30, 2023. For the three month comparative periods, the decrease was primarily due to lower professional fees, largely related to financial statement review costs in the prior year period, and lower salaries and benefits, partially offset by the impact of the Cronos GrowCo Transaction, which increased general and administrative expenses by $1.6 million. For the nine month comparative periods, the decrease was primarily due to lower professional fees, largely related to financial statement review costs, and lower salaries and benefits and insurance costs, partially offset by the impact of the Cronos GrowCo Transaction, which increased general and administrative expenses by $1.6 million, and $1.2 million higher expected credit loss allowance on loans receivable related to the increased borrowings by Cronos GrowCo in the second quarter of 2024.

Previous wording

For the three and six months ended June 30, 2024, restructuring costs were $0.5 million and $0.6 million, respectively. For further information, see Note 6 “Restructuring” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

For the three months ended September 30, 2024, we did not incur any restructuring costs. For the nine months ended September 30, 2024, restructuring costs were $0.6 million. For the three and nine months ended September 30, 2023, restructuring costs were $1.4 million. For further information, see Note 9 “Restructuring” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

For the three months ended June 30, 2024, share-based compensation expense was $2.2 million, essentially unchanged from the three months ended June 30, 2023. For the six months ended June 30, 2024, share-based compensation expense was $4.3 million, representing a decrease of $0.6 million from the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024 was primarily due to headcount reductions that occurred in the prior year.

Current wording

For the three months ended September 30, 2024, share-based compensation expense was $2.3 million, representing an increase of $0.3 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, share-based compensation expense was $6.5 million, representing a decrease of $0.3 million from the nine months ended September 30, 2023. For the three month comparative periods, the increase was primarily due to new awards granted in the current year and higher forfeitures in the prior year period. For the nine month comparative periods, the decrease was primarily due to headcount reductions that occurred in the prior year period.

Previous wording

For the three months ended June 30, 2024, depreciation and amortization expenses were $1.0 million, representing a decrease of $0.5 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, depreciation and amortization expenses were $2.1 million, representing a decrease of $0.9 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the decrease was primarily due to lower amortization on Ginkgo-related intangible assets and lower depreciation on property, plant and equipment.

Current wording

For the three months ended September 30, 2024, depreciation and amortization expenses were $1.1 million, representing a decrease of $0.4 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, depreciation and amortization expenses were $3.2 million, representing a decrease of $1.3 million from the nine months ended September 30, 2023. For both the three and nine month comparative periods, the decrease was primarily due to lower depreciation on property, plant and equipment as a result of the reclassification of the Cronos Fermentation Facility to held-for-sale in the first quarter of 2024.

Previous wording

For the six months ended June 30, 2024, impairment loss on long-lived assets was $2.0 million and was primarily due to the cessation of operations at Cronos Fermentation during Q1 2024. There was no such impairment loss on long-lived assets for the three months ended June 30, 2024, or the three and six months ended June 30, 2023. For further information, see Note 6 “Restructuring” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

For the three months ended September 30, 2024, impairment loss on long-lived assets was $14.4 million and was primarily due to the impairment of the Ginkgo exclusive licenses. For the nine months ended September 30, 2024, impairment loss on long-lived assets was $16.4 million and was primarily due to the impairment of the Ginkgo exclusive licenses and the cessation of operations at Cronos Fermentation. There were no such impairment loss on long-lived assets for the three and nine months ended September 30, 2023. For further information, see Note 9 “Restructuring” and Note 8 “Goodwill and Intangible Assets, net” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

For the three months ended June 30, 2024, interest income, net was $13.5 million, representing an increase of $1.0 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, interest income, net was $27.7 million, representing an increase of $4.1 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the increase in net interest income was primarily due to higher interest rates in the current period compared to the prior periods.

Current wording

For the three months ended September 30, 2024, interest income, net was $12.5 million, representing a decrease of $0.9 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, interest income, net was $40.2 million, representing an increase of $3.1 million from the nine months ended September 30, 2023. For the three month comparative periods, the decrease in net interest income was primarily due to the absence of income recognized on the Cronos GrowCo loan receivable, which is eliminated in consolidation, effective July 1, 2024 and forward. For the nine month comparative periods, the increase in net interest income was primarily due to higher interest rates in the current period compared to the prior period.

Previous wording

For the three months ended June 30, 2024, our share of income from equity method investments was $0.9 million, representing an increase of $0.6 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, our share of income from equity method investments was $2.4 million, representing an increase of $2.6 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the increase was due to higher income pick-ups from our equity method investment in Cronos GrowCo. Periodic income and loss pickups from our equity method investment in Cronos GrowCo are impacted both by the profitability of Cronos GrowCo and any unsold inventory remaining at Cronos that originated from Cronos GrowCo.

Current wording

For the three months ended September 30, 2024, we had no income from equity method investments, compared to $1.1 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, our share of income from equity method investments was $2.4 million, representing an increase of $1.5 million from the nine months ended September 30, 2023. For the three months ended September 30, 2023 and the nine months ended September 30, 2024 and 2023, the income from equity method investments was due to income pick-ups from our equity method investment in Cronos GrowCo. As a result of the Cronos GrowCo Transaction on July 1, 2024, we now consolidate Cronos GrowCo and no longer account for our investment in Cronos GrowCo as an equity method investment. For further information, see Note 5 “Investments” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

Gain (loss) on revaluation of financial instruments

Current wording

Loss on revaluation of financial instruments

Previous wording

For the three months ended June 30, 2024, the loss on revaluation of financial instruments was $3.6 million, representing a deterioration of $8.8 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, the loss on revaluation of financial instruments was $6.3 million, representing a deterioration of $3.7 million from the six months ended June 30, 2023. The change was primarily related to the change in fair value of our investment in Vitura Health Limited (“Vitura”). For further information, see Note 4 “Investments” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

For the three months ended September 30, 2024, the loss on revaluation of financial instruments was $0.3 million, representing an improvement of $5.0 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, the loss on revaluation of financial instruments was $6.6 million, representing an improvement of $1.3 million from the nine months ended September 30, 2023. The change was primarily related to the change in fair value of our investment in Vitura Health Limited (“Vitura”). For further information, see Note 5 “Investments” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

For the three and six months ended June 30, 2024, we recognized $12.9 million and $25.7 million, respectively, of impairment loss on other investments, driven by impairment charges recorded on our PharmaCann Option for the difference between its estimated fair value and its carrying amount. There was no such impairment loss on other investments for the three and six months ended June 30, 2023. For further information, see Note 4 “Investments” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

For the nine months ended September 30, 2024, we recognized $25.7 million of impairment loss on other investments, driven by impairment charges recorded on our PharmaCann Option for the difference between its estimated fair value and its carrying amount. There was no such impairment loss on other investments for the three months ended September 30, 2024 or the three and nine months ended September 30, 2023. For further information, see Note 5 “Investments” to the condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

For the three months ended June 30, 2024, foreign currency translation gain was $6.5 million, representing an improvement of $9.7 million from the three months ended June 30, 2023. For the six months ended June 30, 2024, foreign currency translation gain was $19.8 million, representing an improvement of $24.6 million from the six months ended June 30, 2023. For both the three and six month comparative periods, the change was primarily due to certain foreign currency-denominated cash equivalents and certain foreign currency-denominated intercompany loans anticipated to be settled in the foreseeable future.

Current wording

For the three months ended September 30, 2024, foreign currency transaction loss was $7.4 million, representing a deterioration of $16.2 million from the three months ended September 30, 2023. For the nine months ended September 30, 2024, foreign currency transaction gain was $12.4 million, representing an improvement of $8.4 million from the nine months ended September 30, 2023. For both the three and nine month comparative periods, the change was primarily due to certain foreign currency-denominated cash equivalents and certain foreign currency-denominated intercompany loans anticipated to be settled in the foreseeable future.

Previous wording

For the three months ended June 30, 2024, income tax benefit was $2.2 million, compared to $0.2 million for the three months ended June 30, 2023. For the six months ended June 30, 2024, income tax benefit was $2.7 million, compared to $1.6 million for the six months ended June 30, 2023. For both the three and six month comparative periods, the increased benefit was driven by higher current income tax benefits recorded on the losses that will be carried back to recover taxes paid in prior years.

Current wording

For the three months ended September 30, 2024, income tax benefit was $2.7 million, compared to $1.3 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, income tax benefit was $5.4 million, compared to $2.9 million for the nine months ended September 30, 2023. For both the three and nine month comparative periods, the increased benefit was driven by higher current income tax benefits recorded on the losses that will be carried back to recover taxes paid in prior years.

Previous wording

There was no activity in discontinued operations for the three and six months ended June 30, 2024. For the three and six months ended June 30, 2023, loss from discontinued operations was due to the exit of U.S. operations. For more information, see Note 2 “Discontinued Operations” in our condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Current wording

There was no activity in discontinued operations for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, loss from discontinued operations was due to the exit of U.S. operations. For more information, see Note 3 “Discontinued Operations” in our condensed consolidated interim financial statements under Item 1 of this Quarterly Report.

Previous wording

Management reviews Adjusted EBITDA, a non-GAAP measure, which excludes non-cash items and items that do not reflect management’s assessment of ongoing business performance. Management defines Adjusted EBITDA as net income (loss) before interest, tax expense (benefit), depreciation and amortization adjusted for: share of (income) loss from equity method investments; impairment loss on goodwill and intangible assets; impairment loss on long-lived assets; -(gain) loss on revaluation of financial instruments; transaction costs related to strategic projects; impairment loss on other investments; foreign currency transaction loss; other, net; loss from discontinued operations; restructuring costs; inventory write-downs resulting from restructuring actions; share-based compensation; and financial statement review costs and reserves related to the restatements of our 2019 and 2021 interim financial statements (the “Restatements”), including the costs related to the settlement of the SEC’s and the Ontario Securities Commission’s (“OSC”) investigations of the Restatements and legal costs defending shareholder class action complaints brought against us as a result of the 2019 restatement (see Part II, Item 1 “Legal Proceedings” of this Quarterly Report for a discussion of the shareholder class action complaints relating to the restatement of the 2019 interim financial statements and the settlement of the SEC’s and the OSC’s investigations of the Restatements). Results are reported as total consolidated results, reflecting our reporting structure of one reportable segment.

Current wording

Management reviews Adjusted EBITDA, a non-GAAP measure, which excludes non-cash items and items that do not reflect management’s assessment of ongoing business performance. Management defines Adjusted EBITDA as net income (loss) before interest, tax expense (benefit), depreciation and amortization adjusted for: share of (income) loss from equity method investments; impairment loss on goodwill and intangible assets; impairment loss on long-lived assets; (gain) loss on revaluation of derivative liabilities; (gain) loss on revaluation of financial instruments; gain on revaluation of loan receivable; gain on revaluation of equity method investment; transaction costs related to strategic projects; loss on held-for-sale assets; impairment loss on other investments; foreign currency transaction loss; other, net; loss from discontinued operations; restructuring costs; inventory write-downs resulting from restructuring actions; share-based compensation; purchase accounting adjustment-related inventory step-up adjustments recorded through cost of sales; and financial statement review costs and reserves related to the restatements of our 2019 and 2021 interim financial statements (the “Restatements”), including the costs related to the settlement of the SEC and the OSC investigation of the Restatements and legal costs of defending shareholder class action complaints brought against us as a result of the 2019 restatement (see Part II, Item 1 “Legal Proceedings” of this Quarterly Report for a discussion of the shareholder class action complaints relating to the restatement of the 2019 interim financial statements and the settlement of the SEC’s and the OSC’s investigations of the Restatements). Results are reported as total consolidated results, reflecting our reporting structure of one reportable segment.

Previous wording

(i)For the three and six months ended June 30, 2024, impairment loss on long-lived assets related to the winding down of operations at Cronos Fermentation. For the three and six months ended June 30, 2023, impairment loss on long-lived assets related to certain leased properties associated with the Company’s U.S. operations.

Current wording

(i)For the three and nine months ended September 30, 2024, impairment loss on long-lived assets included $14,258 related to the write-down of our Ginkgo exclusive licenses. For the nine months ended September 30, 2024, impairment loss on long-lived assets included $1,631 related to the winding down of operations at the Company’s Winnipeg, Manitoba facility (“Cronos Fermentation Facility”). For the nine months ended September 30, 2023, impairment loss on long-lived assets related to certain leased properties associated with the Company’s U.S. operations.

Previous wording

(ii)For the three and six months ended June 30, 2024 and 2023, (gain) loss on revaluation of financial instruments related primarily to the Company’s equity securities in Vitura.

Current wording

(iv)For the three and nine months ended September 30, 2024 and 2023, loss on revaluation of financial instruments related primarily to the Company’s equity securities in Vitura.

Previous wording

(iii)For the three and six months ended June 30, 2024, impairment loss on other investments represents the fair value change on the PharmaCann Option.

Current wording

(v)For the nine months ended September 30, 2024, impairment loss on other investments represents the fair value change on the PharmaCann Option.

Previous wording

(iv)For the three and six months ended June 30, 2024, transactions costs represent advisory fees associated with the Cronos GrowCo expansion transaction.

Current wording

(vi)For the three and nine months ended September 30, 2024, transaction costs represent professional fees associated with the Cronos GrowCo Transaction.

Previous wording

(v)For the three and six months ended June 30, 2024 and 2023, other, net related to (gain) loss on disposal of assets and (gain) loss on revaluation of derivative liabilities.

Current wording

(viii)For the three and nine months ended September 30, 2024 and 2023, other, net related to (gain) loss on disposal of assets and (gain) loss on revaluation of derivative liabilities.