Cronos Group Reports 2021 Fourth Quarter and Full-Year Results

Consolidated net revenue increased 59% in Full Year 2021 compared to Full Year 2020

Announces the planned exit of its Peace Naturals Campus in Stayner, Ontario

to streamline supply chain and improve profitability

TORONTO, March 01, 2022 (GLOBE NEWSWIRE) — Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group” or the “Company”), today announces its 2021 fourth quarter and full-year business results.

“I am proud of the dedication and resilience our team has shown throughout the past year as we navigated through a dynamic market environment,” said Kurt Schmidt, President and CEO, Cronos Group. “Our fourth quarter 2021 results indicate positive momentum, which we will look to carry forward as we begin to implement our strategic and operational realignment initiatives. As we look to 2022, we will continue to realign Cronos Group’s organizational structure to match our strategy, with a primary focus on adult-use products and elevating our brands through rare cannabinoids. We also remain intensely focused on positioning ourselves for long-term opportunities by continuing to invest in our brands, creating and supporting an efficient manufacturing strategy, investing in rare cannabinoids and innovation, and readying Cronos Group for entry into the U.S. cannabis market once federally permitted. We are optimistic about the future of the Company and the year ahead.”

“In addition to the results we are announcing today and in line with our focus on enhancing agility and fostering long-term growth, we have made the decision to exit our Peace Naturals Campus in Stayner, Ontario. As we continue to execute our asset-light approach and focus on brands and R&D, we will continue to leverage our joint venture with Cronos GrowCo and other contract manufacturing partnerships moving forward. We are grateful to our Stayner associates for their hard work and the contributions they have made to Cronos Group, and appreciate their ongoing support in helping to provide a seamless transition out of the facility throughout 2022.”

Financial Results

(in thousands of USD)	Three months ended December 31,						Change					Year ended December 31,						Change
		2021			2020		$			%			2021			2020		$			%
Net revenue
United States	$	3,106		$	3,506		$	(400	)	(11	)%	$	9,874		$	9,495		$	379		4	%
Rest of World		22,689			13,540			9,149		68	%		64,561			37,224			27,337		73	%
Consolidated net revenue		25,795			17,046			8,749		51	%		74,435			46,719			27,716		59	%

Cost of sales		23,852			16,913			6,939		41	%		80,008			46,497			33,511		72	%
Inventory write-down		—			15,031			(15,031	)	(100	)%		11,961			26,055			(14,094	)	(54	)%
Gross profit	$	1,943		$	(14,898	)	$	16,841		113	%	$	(17,534	)	$	(25,833	)	$	8,299		32	%
Gross margin ⁽ⁱ⁾		8	%		(87	)%		N/A		95	pp		(24	)%		(55	)%		N/A		31	pp

Net loss ⁽ⁱⁱ⁾	$	(133,892	)	$	(111,712	)	$	(22,180	)	(20	)%	$	(397,204	)	$	(75,270	)	$	(321,934	)	(428	)%

Adjusted EBITDA ⁽ⁱⁱⁱ⁾	$	(27,357	)	$	(53,133	)	$	25,776		49	%	$	(160,463	)	$	(147,253	)	$	(13,210	)	(9	)%

Other Data
Cash and cash equivalents ^(iv)												$	886,973		$	1,078,023		$	(191,050	)	(18	)%
Short-term investments ^(iv)													117,684			211,766			(94,082	)	(44	)%
Capital expenditures ^(v)		567			10,963			(10,396	)	(95	)%		12,262			35,391			(23,129	)	(65	)%

(i) Gross margin is defined as gross profit divided by net revenue.

(ii) Net loss of $133.9 million in Q4 2021 increased by $22.2 million from Q4 2020. The increase in losses year-over-year was primarily driven by an increase in operating loss that was primarily driven by a combined $123.9 million in non-cash impairment charges. Net loss of $397.2 million in Full-Year 2021 increased by $321.9 million from Full-Year 2020. The increase in losses year-over-year was primarily driven by an increase in operating loss that was primarily driven by a combined $363.7 million in non-cash impairment charges.

(iii) See “Non-GAAP Measures” for more information, including a reconciliation of adjusted earnings (loss) before interest, taxes, depreciation and amortization (“Adjusted EBITDA”).

(iv) Dollar amounts are as of the last day of the period indicated.

(v) Capital expenditures represents component information of investing activities and is defined as the sum of purchase of property, plant and equipment, net of disposals, and purchase of intangible assets, net of disposals.

Fourth Quarter 2021

Net revenue of $25.8 million in Q4 2021 increased by $8.7 million from Q4 2020. The increase year-over-year was primarily driven by continued growth in the adult-use market in Canada and increased sales in the Israeli medical market.
Gross profit of $1.9 million in Q4 2021 improved by $16.8 million from Q4 2020. The improvement year-over-year was primarily driven by increased gross profit in the Rest of World (“ROW”) segment as well as a decline in inventory write-downs.
Adjusted EBITDA of $(27.4) million in Q4 2021 improved by $25.8 million from Q4 2020. The improvement year-over-year was primarily driven by the improvement in gross profit and a decrease in sales and marketing and research and development expenses.
Capital expenditures of $0.6 million in Q4 2021 decreased by $10.4 million from Q4 2020. The decrease year-over-year was primarily driven by a reduction in construction costs in the ROW segment and a decrease in costs related to the implementation of the Company’s enterprise resource planning (“ERP”) system.

Full-Year 2021

Net revenue of $74.4 million in Full-Year 2021 increased by $27.7 million from Full-Year 2020. The increase year-over-year was primarily driven by continued growth in the adult-use market in Canada and increased sales in the Israeli medical market
Gross profit of $(17.5) million in Full-Year 2021 improved by $8.3 million from Full-Year 2020. The improvement year-over-year was primarily driven by a reduction in inventory write-downs and favorable sales mix of our cannabis extract products in the ROW segment.
Adjusted EBITDA of $(160.5) million in Full-Year 2021 decreased by $13.2 million from Full-Year 2020. The decrease year-over-year was primarily driven by an increase in sales and marketing expenses, general and administrative expenses, which were primarily due to an increase in the allowance for expected credit losses of $12.0 million, and research and development expenses.
Capital expenditures of $12.3 million in Full-Year 2021 decreased by $23.1 million from Full-Year 2020. The decrease year-over-year was primarily driven by a reduction in construction costs in the ROW segment and a decrease in costs related to the implementation of the Company’s ERP system.

Business Updates

Strategic and Organizational Update

Following a careful evaluation of the Company’s global supply chain, the Company has announced today the planned exit of its Peace Naturals Campus in Stayner, Ontario, Canada.

Cronos Group will continue to operate the Peace Naturals Campus with a phased reduction and transition of activities with a planned exit by the end of 2022. Various research and development initiatives, inclusive of cannabinoid formulation, product development, tissue culture and micropropagation will continue across multiple facilities available to Cronos Group.

Continuing to optimize and maintain an agile supply chain is a core element of Cronos Group’s strategy. Importantly, Cronos Group has focused on building joint ventures and partnerships around the world with best-in-class operators, such as Cronos GrowCo (“GrowCo”) the Company’s joint venture with leading Canadian large-scale greenhouse operators. As GrowCo has developed its capabilities, it has become an important component of the Company’s biomass supply. Cronos Group looks forward to leveraging GrowCo’s capabilities in premium flower cultivation and efficient downstream processing, with the intention to improve profitability of the Company’s Canadian operations. Cronos Group intends to obtain a sales license from Health Canada at GrowCo’s facility to maintain the Company’s customer relationships and ability to continue supplying the Canadian market. In addition to further leveraging its joint venture with GrowCo, Cronos Group will continue to maintain a network of third-party licensed producers to supplement its cultivation and manufacturing needs.

As a result of the Company’s planned exit from the Peace Naturals Campus, the Company has incurred a $119.9 million non-cash impairment charge on long-lived assets in the fourth quarter of 2021. In addition, the Company expects to incur charges of approximately $4.5 million in connection with the planned exit, all of which impact the ROW segment. These charges include employee-related costs, such as severance, relocation and other termination benefits, as well as contract termination and other related costs, which are expected to be incurred primarily in the second half of 2022. In addition, the Company anticipates capital expenditures of approximately $2.5 million to modernize information technology systems and build distribution capabilities.

Rest of World Results

Cronos Group’s ROW reporting segment includes results of the Company’s operations for all markets outside of the U.S.

(in thousands of USD)	Three months ended December 31,						Change					Year ended December 31,						Change
		2021			2020		$			%			2021			2020		$			%
Cannabis flower	$	18,857		$	11,559		$	7,298		63	%	$	55,194		$	27,932		$	27,262		98	%
Cannabis extracts		3,787			1,938			1,849		95	%		8,807			8,759			48		1	%
Other		45			43			2		(5)	%		560			533			27		5	%
Net revenue		22,689			13,540			9,149		68	%		64,561			37,224			27,337		73	%

Cost of sales		20,287			15,232			5,055		33	%		70,193			41,162			29,031		71	%
Inventory write-down		—			15,031			(15,031	)	(100)	%		11,961			26,055			(14,094	)	(54)	%
Gross profit	$	2,402		$	(16,723)		$	19,125		114	%	$	(17,593)		$	(29,993)		$	12,400		41	%
Gross margin		11	%		(124)	%		N/A		135	pp		(27)	%		(81)	%		N/A		54	pp

Fourth Quarter 2021

Net revenue of $22.7 million in Q4 2021 increased by $9.1 million from Q4 2020. The increase year-over-year was primarily driven by growth in the adult-use extracts and flower categories in Canada and sales in the Israeli medical market.
Gross profit of $2.4 million in Q4 2021 improved by $19.1 million from Q4 2020. The improvement year-over-year was primarily driven by a reduction in inventory write-downs and increased sales of cannabis extracts, which carry higher gross profit and gross margin than other product categories.

Full-Year 2021

Net revenue of $64.6 million in Full-Year 2021 increased by $27.3 million from Full-Year 2020. The increase year-over-year was primarily driven by growth in the adult-use flower category in Canada and increased sales in the Israeli medical market.
Gross profit of $(17.6) million in Full-Year 2021 improved by $12.4 million from Full-Year 2020. The improvement year-over-year was primarily driven by a reduction in inventory write-downs and favorable sales mix of cannabis extract products.

United States Results

Cronos Group’s U.S. reporting segment includes results of the Company’s operations for all brands and products in the U.S.

(in thousands of USD)	Three months ended December 31,						Change					Year ended December 31,						Change
		2021			2020		$			%			2021			2020		$			%
Net revenue	$	3,106			3,506		$	(400	)	(11)	%	$	9,874		$	9,495		$	379		4	%

Cost of sales		3,565			1,681			1,884		112	%		9,815			5,335			4,480		84	%
Gross profit	$	(459)		$	1,825		$	(2,284	)	(125)	%	$	59		$	4,160		$	(4,101	)	(99)	%
Gross margin		(15)	%		52	%		N/A		(67)	pp		1	%		44	%		N/A		(43)	pp

Fourth Quarter 2021

Net revenue of $3.1 million in Q4 2021 decreased by $0.4 million from Q4 2020. The decrease year-over-year was primarily driven by a reduction in volume due to competitive pressures.
Gross profit of $(0.5) million in Q4 2021 decreased by $2.3 million from Q4 2020. The decrease year-over-year was primarily due to increased production costs and inventory valuation adjustments to reflect net realizable value.

Full-Year 2021

Net revenue of $9.9 million in Full-Year 2021 increased by $0.4 million from Full-Year 2020. The increase year-over-year was primarily driven by the introduction of new U.S. hemp-derived CBD products.
Gross profit of $0.1 million in Full-Year 2021 decreased by $4.1 million from Full-Year 2020. The decrease year-over-year was primarily due to the costs associated with the introduction of new products, inventory valuation adjustments to reflect net realizable value, and increased headcount.

Conference Call

The Company will host a conference call and live audio webcast on Tuesday, March 1, 2022 at 8:30 a.m. EST to discuss 2021 Fourth Quarter and Full-Year business results. An audio replay of the call will be archived on the Company’s website for replay. Instructions for the conference call are provided below:

Live audio webcast:

https://ir.thecronosgroup.com/events-presentations
Toll Free from the U.S. and Canada dial-in: (866) 795-2258
International dial-in: (409) 937-8902
Conference ID: 6599242

About Cronos Group

Cronos Group is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos Group is building an iconic brand portfolio. Cronos Group’s diverse international brand portfolio includes

Spinach

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,

PEACE NATURALS

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,

Lord Jones

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,

Happy Dance

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and

PEACE+

™. For more information about Cronos Group and its brands, please visit:

thecronosgroup.com

.

Forward-looking statements

This press release may contain information that may constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, “Forward-Looking Statements”), which are based upon our current internal expectations, estimates, projections, assumptions and beliefs. All information that is not clearly historical in nature may constitute Forward-Looking Statements. In some cases, Forward-Looking Statements can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, expressions and phrases, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussion of strategy. Forward-Looking Statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of historical fact.

Forward-Looking Statements include, but are not limited to, statements with respect to:

the uncertainties associated with the COVID-19 pandemic, including our ability, and the abilities of our joint ventures and our suppliers and distributors, to effectively deal with the restrictions, limitations and health issues presented by the COVID-19 pandemic, the ability to continue our production, distribution and sale of our products, and demand for and the use of our products by consumers;
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 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 U.S. hemp (including CBD and other U.S. hemp derived cannabinoids) products;
the laws and regulations and any amendments thereto relating to the U.S. hemp industry in the U.S., including the promulgation of regulations for the U.S. hemp industry by the U.S. Department of Agriculture and relevant state regulatory authorities;
expectations related to our announced realignment (the “Realignment”) and any progress, challenges and effects related thereto as well as changes in strategy, metrics, investments, reporting structure, costs, operating expenses, employee turnover and other changes with respect thereto;
the timing of our exit from our facility in Stayner, Ontario and the expected costs and benefits from the wind-down of the Stayner facility;
our ability to effectively wind-down the Stayner facility in an organized fashion and acquire raw materials from other suppliers, including GrowCo;
the grant, renewal and impact of any license or supplemental license to conduct activities with cannabis or any amendments thereof;
our international activities and joint venture interests, including required regulatory approvals and licensing, anticipated costs and timing, and expected impact;
our ability to successfully create and launch brands and further create, launch and scale U.S. hemp-derived consumer products and cannabis products;
the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis including CBD and other cannabinoids;
expectations regarding the implementation and effectiveness of key personnel changes;
the anticipated benefits and impact of the Altria Group’ Inc.’s (“Altria”) investment in us (the “Altria Investment”), pursuant to a subscription agreement dated December 7, 2018;
the potential exercise of one warrant of the Company included as part of the Altria Investment held by Altria, pre-emptive rights and/or top-up rights in connection with the Altria Investment, including proceeds to us that may result therefrom;
expectations regarding the use of proceeds of equity financings, including the proceeds from the Altria Investment;
the legalization of the use of cannabis for medical or adult-use in jurisdictions outside of Canada, the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized;
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 with Ginkgo Bioworks Holdings, Inc.;
our ability to execute on our strategy and the anticipated benefits of such strategy;
expectations of the amount or frequency of impairment losses, including as a result of the write-down of intangible assets, including goodwill;
the ongoing impact of the legalization of additional cannabis product types and forms for adult-use in Canada, including federal, provincial, territorial and municipal regulations pertaining thereto, the related timing and impact thereof and our intentions to participate in such markets;
the future performance of our business and operations;
our competitive advantages and business strategies;
the competitive conditions of the industry;
the expected growth in the number of customers using our products;
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;
expectations regarding acquisitions and dispositions and the anticipated benefits therefrom;
uncertainties as to our ability to exercise an option to buy Class A shares of common stock of PharmaCann Inc. (the “PharmaCann Option”) in the near term or the future, in full or in part, including the uncertainties as to the status and future development of federal legalization of cannabis in the U.S. and our ability to realize the anticipated benefits of the transaction with PharmaCann, Inc. (“PharmaCann”);
expectations regarding revenues, expenses and anticipated cash needs;
expectations regarding cash flow, liquidity and sources of funding;
expectations regarding capital expenditures;
the expansion of our production and manufacturing, the costs and timing associated therewith and the receipt of applicable production and sale licenses;
expectations regarding our growing, production and supply chain capacities;
expectations regarding the resolution of litigation and other legal and regulatory proceedings, reviews and investigations;
expectations with respect to future production costs;
expectations with respect to future sales and distribution channels and networks;
the expected methods to be used to distribute and sell our products;
the anticipated future gross margins of our operations;
accounting standards and estimates;
our ability to timely and effectively remediate any material weaknesses in our internal control over financial reporting; and
expectations regarding the costs and benefits associated with our contracts and agreements with third parties, including under our third-party supply and manufacturing agreements.

Certain of the Forward-Looking Statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.

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 efficiently and effectively exit the Stayner facility, receive the benefits of the Stayner exit and acquire raw materials on a timely and cost-effective basis from third-parties, including GrowCo; (ii) our ability, and the abilities of our joint ventures and our suppliers and distributors, to effectively deal with the restrictions, limitations and health issues presented by the COVID-19 pandemic and the ability to continue our production, distribution and sale of our products and customer demand for and use of our products; (iii) management’s perceptions of historical trends, current conditions and expected future developments; (iv) our ability to generate cash flow from operations; (v) general economic, financial market, regulatory and political conditions in which we operate; (vi) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (vii) consumer interest in our products; (viii) competition; (ix) anticipated and unanticipated costs; (x) government regulation of our activities and products including, but not limited, to the areas of taxation and environmental protection; (xi) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (xii) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xiii) our ability to conduct operations in a safe, efficient and effective manner; (xiv) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; (xv) our ability to realize the expected cost savings, efficiencies and other benefits of our Realignment and employee turnover related thereto; (xvi) our ability to complete planned dispositions, and, if completed, obtain our anticipated sales price; (xvii) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann; and (xviii) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.

By their nature, Forward-Looking Statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the Forward-Looking Statements in this press release 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, the risk that we may not be able to exit our Stayner facility in a disciplined manner or achieve the anticipated benefits of the exit or be able to access raw materials on a timely and cost-effective basis from third-parties, including GrowCo; the COVID-19 pandemic 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; the risk that we will not complete planned dispositions, or, if completed, obtain our anticipated sales price; the implementation and effectiveness of key personnel changes; the risks that our Realignment, the closure of the Stayner facility 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; future levels of revenues; consumer demand for cannabis and U.S. hemp products; our ability to manage disruptions in credit markets or changes to our credit ratings; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; business strategies, growth opportunities and expected investment; the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); the potential effects of judicial, regulatory or other proceedings, or threatened litigation or proceedings, on our business, financial condition, results of operations and cash flows; volatility in and/or degradation of general economic, market, industry or business conditions; compliance with applicable environmental, economic, health and safety, energy and other policies and regulations and in particular health concerns with respect to vaping and the use of cannabis and U.S. hemp products in vaping devices; the anticipated effects of actions of third parties such as competitors, activist investors or federal (including U.S. federal), state, provincial, territorial or local regulatory authorities or self-regulatory organizations; changes in regulatory requirements in relation to our business and products; legal or regulatory obstacles that could prevent us from being able to exercise the PharmaCann Option and thereby realizing the anticipated benefits of the transaction with PharmaCann; dilution of our fully diluted ownership of PharmaCann and the loss of our rights as a result of that dilution; our remediation of material weaknesses in our internal control over financial reporting and the improvement of our control environment and our systems, processes and procedures; and the factors discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on Forward-Looking Statements.

Forward-Looking Statements are provided for the purposes of assisting the reader in understanding our financial performance, financial position and cash flows as of and for periods ended on certain dates and to present information about management’s current expectations and plans relating to the future, and the reader is cautioned not to place undue reliance on these Forward-Looking Statements because of their inherent uncertainty and to appreciate the limited purposes for which they are being used by management. While we believe that the assumptions and expectations reflected in the Forward-Looking Statements are reasonable based on information currently available to management, there is no assurance that such assumptions and expectations will prove to have been correct. Forward-Looking Statements are made as of the date they are made and are based on the beliefs, estimates, expectations and opinions of management on that date. We undertake no obligation to update or revise any Forward-Looking Statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such Forward-Looking Statements. The Forward-Looking Statements contained in this press release 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 are expressly qualified in their entirety by these cautionary statements.

As used in this press release, “CBD” means cannabidiol and “U.S. hemp” has the meaning given to the term “hemp” in the U.S. Agricultural Improvement Act of 2018, including hemp-derived CBD.

Cronos Group Inc.

Consolidated Balance Sheets

As of December 31, 2021 and 2020

(In thousands of USD)

	As of December 31,
		2021			2020
Assets
Current assets
Cash and cash equivalents	$	886,973		$	1,078,023
Short-term investments		117,684			211,766
Accounts receivable, net		22,067			8,928
Other receivables		5,765			10,033
Current portion of loans receivable, net		5,460			7,083
Prepaids and other current assets		8,967			11,161
Inventory, net		32,802			44,002
Held-for-sale assets		—			1,176
Total current assets		1,079,718			1,372,172
Investments in equity accounted investees, net		16,764			19,235
Other investments		118,392			—
Non-current portion of loans receivable, net		80,635			87,191
Property, plant and equipment, net		74,070			187,599
Right-of-use assets		8,882			9,776
Goodwill		1,098			179,522
Intangible assets, net		18,079			69,720
Other assets		100			467
Total assets	$	1,397,738		$	1,925,682

Liabilities
Current liabilities
Accounts payable	$	11,218		$	19,346
Accrued liabilities		26,069			22,756
Current portion of lease obligation		2,711			1,322
Derivative liabilities		14,375			163,410
Total current liabilities		54,373			206,834
Due to non-controlling interests		1,913			2,188
Non-current portion of lease obligation		7,095			8,492
Deferred income tax liability		81			—
Total liabilities		63,462			217,514

Shareholders’ equity
Share capital		595,497			569,260
Additional paid-in capital		32,465			34,596
Retained earnings		659,416			1,064,509
Accumulated other comprehensive income		49,865			42,999
Total equity attributable to shareholders of Cronos Group		1,337,243			1,711,364
Non-controlling interests		(2,967	)		(3,196	)
Total shareholders’ equity		1,334,276			1,708,168
Total liabilities and shareholders’ equity	$	1,397,738		$	1,925,682

Cronos Group Inc.

Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)

For the years ended December 31, 2021, 2020 and 2019

(In thousands of USD, except share and per share amounts)

	Year ended December 31,
		2021			2020			2019
Net revenue, before excise taxes	$	89,486		$	54,353		$	25,639
Excise taxes		(15,051	)		(7,634	)		(1,889	)
Net revenue		74,435			46,719			23,750
Cost of sales		80,008			46,497			12,174
Inventory write-down		11,961			26,055			29,173
Gross profit		(17,534	)		(25,833	)		(17,597	)
Operating expenses
Sales and marketing		44,937			34,386			23,048
Research and development		23,331			20,366			12,155
General and administrative		96,482			80,569			81,479
Share-based payments		10,151			15,361			11,619
Depreciation and amortization		4,484			2,872			2,090
Impairment loss on goodwill and indefinite-lived intangible assets		236,056			40,000			—
Impairment loss on long-lived assets		127,619			—			—
Repurposing charges		—			—			5,328
Total operating expenses		543,060			193,554			135,719
Operating loss		(560,594	)		(219,387	)		(153,316	)
Other income (expense)
Interest income, net		9,071			18,415			27,969
Gain on revaluation of derivative liabilities		151,360			129,254			1,276,819
Gain on disposal of investments		—			4,789			16,277
Share of loss from equity accounted investments		(6,313	)		(4,510	)		(2,009	)
Gain (loss) on revaluation of financial instruments		8,611			(9	)		197
Other, net		730			(1,825	)		—
Total other income		163,459			146,114			1,319,253
Income (loss) before income taxes		(397,135	)		(73,273	)		1,165,937
Income tax expense (benefit)		(431	)		1,347			—
Income (loss) from continuing operations		(396,704	)		(74,620	)		1,165,937
Loss from discontinued operations		(500	)		(650	)		(363	)
Net income (loss)		(397,204	)		(75,270	)		1,165,574
Net loss attributable to non-controlling interest		(1,097	)		(2,133	)		(932	)
Net income (loss) attributable to Cronos Group	$	(396,107	)	$	(73,137	)	$	1,166,506
Comprehensive income (loss)
Net income (loss)	$	(397,204	)	$	(75,270	)	$	1,165,574
Foreign exchange gain on translation		8,192			14,951			37,687
Comprehensive income (loss)		(389,012	)		(60,319	)		1,203,261
Comprehensive income (loss) attributable to non-controlling interest		229			(2,343	)		(953	)
Comprehensive income (loss) attributable to Cronos Group	$	(389,241	)	$	(57,976	)	$	1,204,214
Net income (loss) from continuing operations per share
Basic	$	(1.07	)	$	(0.21	)	$	3.76
Diluted	$	(1.07	)	$	(0.21	)	$	3.33
Weighted average number of outstanding shares
Basic		370,390,965			351,576,848			310,067,179
Diluted		370,390,965			351,576,848			342,811,992

Cronos Group Inc.

Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)

For the three months ended December 31, 2021 and 2020

(In thousands of USD, except share and per share amounts, unaudited)

	Three months ended December 31,
		2021			2020
Net revenue, before excise taxes	$	31,394		$	19,956
Excise taxes		(5,599	)		(2,910	)
Net revenue		25,795			17,046
Cost of sales		23,852			16,913
Inventory write-down		—			15,031
Gross profit		1,943			(14,898	)
Operating expenses
Sales and marketing		10,653			13,537
Research and development		6,557			7,411
General and administrative		19,613			19,481
Share-based payments		2,420			2,463
Depreciation and amortization		1,455			620
Impairment loss on goodwill and indefinite-lived intangible assets		1,000			—
Impairment loss on long-lived assets		122,880			—
Repurposing charges		—			—
Total operating expenses		164,578			43,512
Operating loss		(162,635	)		(58,410	)
Other income (expense)
Interest income, net		2,385			3,149
Gain (loss) on revaluation of derivative liabilities		20,070			(53,541	)
Gain on disposal of investments		—			46
Share of loss from equity accounted investments		(2,141	)		(1,217	)
Gain (loss) on revaluation of financial instruments		8,463			(302	)
Other, net		(306	)		(947	)
Total other income (expense)		28,471			(52,812	)
Income (loss) before income taxes		(134,164	)		(111,222	)
Income tax expense (benefit)		(272	)		359
Income (loss) from continuing operations		(133,892	)		(111,581	)
Loss from discontinued operations		—			(131	)
Net income (loss)		(133,892	)		(111,712	)
Net income (loss) attributable to non-controlling interests		(255	)		(479	)
Net income (loss) attributable to Cronos Group	$	(133,637	)	$	(111,233	)

Comprehensive income (loss)
Net income (loss)	$	(133,892	)	$	(111,712	)
Foreign exchange gain (loss) on translation		1,256			50,605
Comprehensive income (loss)		(132,636	)		(61,107	)
Comprehensive income (loss) attributable to non-controlling interests		62			(693	)
Comprehensive income (loss) attributable to Cronos Group	$	(132,698	)	$	(60,414	)
Net income (loss) from continuing operations per share
Basic	$	(0.36	)	$	(0.31	)
Diluted	$	(0.36	)	$	(0.31	)
Weighted average number of outstanding shares
Basic		374,227,930			358,068,549
Diluted		374,227,930			358,068,549

Cronos Group Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2021, 2020, and 2019

(In thousands of USD)

	Year ended December 31,
		2021			2020			2019
Operating activities
Net income (loss)	$	(397,204	)	$	(75,270	)	$	1,165,574
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on revaluation of derivative liabilities		(151,360	)		(129,254	)		(1,276,819	)
Impairment loss on goodwill and indefinite-lived intangible assets		236,056			40,000			—
Impairment loss on long-lived assets		127,619			—			—
Expected credit losses on long-term financial assets		12,202			2,437			—
Share-based payments		10,151			15,361			11,619
Depreciation and amortization		15,402			11,176			4,271
Share of loss from investments in equity accounted investees		6,313			4,510			2,009
Gain on disposal of investments		—			(4,789	)		(16,277	)
Loss (gain) on revaluation of financial instruments		(8,611	)		9			(197	)
Non-cash sales and marketing		1,383			2,863			410
Non-cash repurposing costs		—			—			4,439
Other non-cash operating activity expense (income)		(3,562	)		1,215			(46	)
Changes in operating assets and liabilities:
Accounts receivable, net		(13,163	)		(4,724	)		(566	)
Other receivables		3,838			(5,300	)		(10,509	)
Prepaids and other current assets		3,102			—			(4,585	)
Inventory, net		11,565			(4,866	)		(23,073	)
Accounts payable		(2,373	)		(3,292	)		(46	)
Accrued liabilities		(4,974	)		5,053			12,603
Net cash used in operating activities		(153,616	)		(144,871	)		(131,193	)

Investing activities
Proceeds from short-term investments		215,303			296,730			—
Purchase of short-term investments		(119,610	)		(201,326	)		(299,923	)
Purchase of investments		(110,392	)		—			(1,658	)
Proceeds from sale of investments		—			4,789			19,614
Proceeds from held-for-sale assets		2,770			—			—
Advances to joint ventures, net of repayments		(4,707	)		(44,652	)		(58,472	)
Purchase of property, plant and equipment, net of disposals		(11,144	)		(31,412	)		(38,664	)
Purchase of intangible assets, net of disposals		(1,118	)		(3,979	)		(289	)
Acquisition of Redwood		—			—			(224,295	)
Other non-cash investing activity expense		—			—			415
Net cash provided by (used in) investing activities		(28,898	)		20,150			(603,272	)

Cronos Group Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2021, 2020, and 2019

(In thousands of USD)

	Year ended December 31,
		2021			2020			2019
Financing activities
Advance to non-controlling interests		—			(1,019	)		—
Withholding taxes paid on equity awards		(13,458	)		(2,148	)		(915	)
Proceeds from Altria Investment		—			—			1,809,556
Proceeds from exercise of Top-up Rights		—			—			67,051
Proceeds from exercise of warrants and options		16			116			1,455
Share issuance costs		—			—			(3,722	)
Repayment of construction loan payable		—			—			(15,971	)
Advance under Credit Facility		—			—			48,715
Repayment of Credit Facility		—			—			(48,309	)
Net cash provided by (used in) financing activities		(13,442	)		(3,051	)		1,857,860
Effect of foreign currency translation on cash and cash equivalents		4,906			6,102			52,371
Net change in cash and cash equivalents		(191,050	)		(121,670	)		1,175,766
Cash and cash equivalents, beginning of period		1,078,023			1,199,693			23,927
Cash and cash equivalents, end of period	$	886,973		$	1,078,023		$	1,199,693

Supplementary cash flow information:
Interest paid	$	—		$	—		$	759
Interest received		8,988			18,105			25,520
Taxes paid		892			—			—

Non-GAAP Measures

Cronos Group reports its financial results in accordance with Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”). This press release refers to measures not recognized under U.S. GAAP (“non-GAAP measures”). These non-GAAP measures do not have a standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these non-GAAP measures are provided as a supplement to corresponding U.S. GAAP measures to provide additional information regarding our results of operations from management’s perspective. Accordingly, non-GAAP measures should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. All non-GAAP measures presented in this press release are reconciled to their closest reported U.S. GAAP measure.

Adjusted EBITDA

Management reviews Adjusted EBITDA, a non-GAAP measure which excludes non-cash items or items that do not reflect management’s assessment of on-going business performance of our operating segments. Management defines Adjusted EBITDA as net income (loss) before interest, tax expense, depreciation and amortization adjusted for: share of loss from equity accounted investments; impairment loss on goodwill and intangible assets; impairment loss on long-lived assets; gain on revaluation of derivative liabilities; gain on revaluation of financial instruments; transaction costs related to strategic projects; other, net; loss from discontinued operations; share-based payments; and review and investigation costs related to the restatements of the Company’s 2019 and 2021 interim financial statements, including costs related to the Company’s responses to the reviews of such financial statements by various regulatory authorities and legal costs defending shareholder class action complaints brought against the Company as a result of the 2019 restatement.

Management believes that Adjusted EBITDA provides the most useful insight into underlying business trends and results and provides a more meaningful comparison of year-over-year results. Management uses Adjusted EBITDA for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets.

Adjusted EBITDA is reconciled to net income (loss) as follows for the years ended December 31, 2021 and 2020:

(in thousands of USD)	Year ended December 31, 2021
	US			ROW			Corporate			Total
Net income (loss)	$	(283,883	)	$	(81,811	)	$	(31,510	)	$	(397,204	)
Interest income, net		(40	)		(9,031	)		—			(9,071	)
Income tax benefit		(89	)		(342	)		—			(431	)
Share of loss from equity accounted investees		—			6,313			—			6,313
Impairment loss on goodwill and indefinite-lived intangible assets		236,019			37			—			236,056
Impairment loss on long-lived assets		2,955			124,664			—			127,619
Gain on revaluation of derivative liabilities		—			(151,360	)		—			(151,360	)
Gain on revaluation of financial instruments		—			(8,611	)		—			(8,611	)
Transaction costs		—			—			3,801			3,801
Other, net		3			(733	)		—			(730	)
Loss from discontinued operations		—			500			—			500
Share-based payments		3,401			6,750			—			10,151
Financial statement review costs		—			—			7,102			7,102
Depreciation and amortization		917			14,485			—			15,402
Adjusted EBITDA	$	(40,717	)	$	(99,139	)	$	(20,607	)	$	(160,463	)

(in thousands of USD)	Year ended December 31, 2020
	US			ROW			Corporate			Total
Net income (loss)	$	(77,368	)	$	32,671		$	(30,573	)	$	(75,270	)
Interest expense (income), net		18			(18,433	)		—			(18,415	)
Income tax expense		323			1,024			—			1,347
Share of loss from equity accounted investees		—			4,510			—			4,510
Impairment loss on goodwill and indefinite-lived intangible assets		40,000			—			—			40,000
Gain on revaluation of derivative liabilities		—			(129,254	)		—			(129,254	)
Loss on revaluation of financial instruments		—			9			—			9
Transaction costs		40			—			—			40
Gain on disposal of investments		—			(4,789	)		—			(4,789	)
Other, net		20			1,805			—			1,825
Loss from discontinued operations		—			650			—			650
Share-based payments		8,714			6,647			—			15,361
Financial statement review costs		—			—			9,688			9,688
Depreciation and amortization		234			6,811			—			7,045
Adjusted EBITDA	$	(28,019	)	$	(98,349	)	$	(20,885	)	$	(147,253	)

Adjusted EBITDA is reconciled to net income (loss) as follows for the three months ended December 31, 2021 and 2020:

(in thousands of USD)	Three months ended December 31, 2021
	US			ROW			Corporate			Total
Net income (loss)	$	(10,445	)	$	(116,489	)	$	(6,958	)	$	(133,892	)
Interest income, net		(13	)		(2,372	)		—			(2,385	)
Income tax benefit		(89	)		(183	)		—			(272	)
Share of loss from equity accounted investees		—			2,141			—			2,141
Impairment loss on goodwill and indefinite-lived intangible assets		1,000			—			—			1,000
Impairment loss on long-lived assets		—			122,880			—			122,880
Gain on revaluation of derivative liabilities		—			(20,070	)		—			(20,070	)
Gain on revaluation of financial instruments		—			(8,463	)		—			(8,463	)
Other, net		3			303			—			306
Share-based payments		867			1,553			—			2,420
Financial statement review costs		—			—			2,487			2,487
Depreciation and amortization		381			6,110			—			6,491
Adjusted EBITDA	$	(8,296	)	$	(14,590	)	$	(4,471	)	$	(27,357	)

(in thousands of USD)	Three months ended December 31, 2020
	US			ROW			Corporate			Total
Net income (loss)	$	(12,861	)	$	(92,969	)	$	(5,882	)	$	(111,712	)
Interest expense (income), net		4			(3,153	)		—			(3,149	)
Income tax expense		180			179			—			359
Share of loss from equity accounted investees		—			1,217			—			1,217
Loss on revaluation of derivative liabilities		—			53,541			—			53,541
Loss on revaluation of financial instruments		—			302			—			302
Gain on disposal of investments		—			(46	)		—			(46	)
Other, net		(1	)		948			—			947
Loss from discontinued operations		—			131			—			131
Share-based payments		783			1,680			—			2,463
Financial statement review costs		—			—			864			864
Depreciation and amortization		130			1,820			—			1,950
Adjusted EBITDA	$	(11,765	)	$	(36,350	)	$	(5,018	)	$	(53,133	)

Foreign currency exchange rates

All currency amounts in this press release are stated in U.S. dollars (“USD”), which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to USD. The assets and liabilities of the Company’s foreign operations are translated into USD at the exchange rate in effect as of December 31, 2021, December 31, 2020 and December 31, 2019 as reported using Bloomberg. Transactions affecting shareholders’ equity are translated at historical foreign exchange rates. The consolidated statements of net income (loss) and comprehensive income (loss) and the consolidated statements of cash flows of the Company’s foreign operations are translated into USD by applying the average foreign exchange rate in effect for the reporting period as reported using Bloomberg.

The exchange rates used to translate from USD to Canadian dollars (“C$”) is shown below: