Investments

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Variable Interest Entities

The Company holds variable interests in Cronos Growing Company Inc. (“Cronos GrowCo”), Natuera S.à.r.l (“Natuera”), MedMen Canada Inc. (“MedMen Canada”) and Cannasoul Lab Services Ltd. (“CLS”).

Cronos GrowCo is a joint venture incorporated under the Canada Business Corporations Act (“CBCA”) on June 14, 2018 with the objective of building a cannabis production greenhouse, applying for cannabis licenses under the Cannabis Act (Canada), and growing, cultivating, extracting, producing and selling cannabis in accordance with such licenses. Cronos Group holds variable interests in Cronos GrowCo through its ownership of 50% of Cronos GrowCo’s common shares and senior secured debt in Cronos GrowCo. Cronos GrowCo’s economic performance is driven by the quantity and strains of cannabis grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.

MedMen Canada is a joint venture incorporated under the CBCA on March 13, 2018, with the objective of the retail sale and marketing of cannabis products in Canada. MedMen Canada holds the exclusive license to the MedMen brand in Canada for a minimum term of 20 years. Cronos holds variable interests in MedMen Canada through its ownership of 50% of MedMen Canada’s common shares and other subordinated debt in the entity. MedMen Canada’s economic performance is driven by the quantity and strains of cannabis sold. Subject to applicable law, the joint venture partners mutually determine the quantity and strains of cannabis to be sold in MedMen Canada’s retail stores, if and when stores are opened.

Natuera is a joint venture registered in Luxembourg with the objective of cultivating and commercializing medical cannabis to serve the export market. Cronos holds variable interests in Natuera through its ownership of 50% of Natuera’s common shares and other debt in the entity. Natuera’s economic performance is driven by the quantity and strains of cannabis to be grown. The joint venture partners mutually determine the quantity and strains of cannabis grown.

The Company’s investments in Cronos GrowCo, Natuera and MedMen Canada are exposed to economic variability from each entity’s performance; however, the Company does not consolidate the entities as it does not have the power to direct the activities that most significantly impact each entities’ economic performance. Thus, Cronos Group is not considered the primary beneficiary of each entity. These investments are accounted for as equity method investments classified as “Investments in equity accounted investees” in the consolidated balance sheets.

CLS is a wholly owned subsidiary of Cannasoul Analytics Ltd., incorporated with the purpose of establishing a commercial cannabis analytical testing laboratory located on the premises of Cronos Israel (the “Cannasoul Collaboration”). Cronos Israel will advance ILS 8,297 (approximately $2,574) by a non-recourse loan to CLS over a period of two years from April 1, 2020 for the capital and operating expenditures of the laboratory. The loan will bear interest at 3.5% annually. Cronos Israel will receive 70% of the profits of the laboratory until such time as it has recovered 150% of the amounts advanced to CLS, after which time it will receive 50% of the laboratory profits. As a result, the Company is exposed to economic variability from CLS’s performance. The Company does not consolidate CLS as it does not have the power to direct the activities that most significantly impact the entity’s economic performance; thus, the Company is not considered the primary beneficiary of the entity. The carrying amount of the non-recourse loan is recorded under loans receivable and the full loan amount, ILS 8,297, represents the Company’s maximum potential exposure to losses through the Cannasoul Collaboration. See Note 8 for further information regarding loans receivable.

(a)Equity Method Investments

A reconciliation of the carrying amount of the investments in associates and joint ventures is as follows:


	Ownership interest	Carrying Amount
		December 31, 2020		December 31, 2019
Cronos Australia(i)	31%	$	—	$	(346)
Cronos GrowCo(ii)	50%	19,235		1,501

Natuera	50%	—		(598)
		$	19,235	$	557

(i)On October 25, 2019, Cronos Australia issued 40 million new shares in an initial public offering at an offering price of A$0.50 per share. The Company’s ownership in Cronos Australia decreased from 50% to 31% on November 7, 2019 when Cronos Australia began trading on the Australian Securities Exchange. This resulted in a reconsideration event, which required the reassessment of the Company’s variable interest entity conclusion. Upon reconsideration, the Company determined that the entity was no longer a variable interest entity as of December 31, 2019 and is now reported under the equity method.

(ii)On September 25, 2020, the Company and 2645485 Ontario Inc. (“Mucci”), the other joint venture partner of Cronos GrowCo, agreed to capitalize certain historical advances made by each shareholder to Cronos GrowCo. Total aggregate gross advances to Cronos GrowCo, excluding any amounts advanced by the Company to Cronos GrowCo under the GrowCo Credit Facility, were C$49,300 ($37,010), of which the Company advanced 50% and Mucci advanced the remaining 50% for an amount of C$24,650 ($18,505) each. As a result, the Company transferred the advances of C$24,650 ($18,505) to investments in equity accounted investees in respect of Cronos GrowCo.

The Company’s share of net earnings (losses) from equity investments accounted for under the equity method of accounting as of and for the years ended December 31:


	2020		2019		2018
Whistler Medicinal Marijuana Company (“Whistler”)(i)	$	—	$	29	$	178
Cronos Australia	(363)		(1,101)		(588)
Cronos GrowCo	(1,537)		(167)		(100)
MedMen Canada	—		35		(213)
Natuera(ii)	(2,610)		(805)		—
	$	(4,510)	$	(2,009)	$	(723)

(i)Whistler was incorporated in British Columbia, Canada and is a license holder under the Cannabis Act (Canada) with production facilities in British Columbia, Canada. The Company fully divested its investment in Whistler during 2019. See Note 7.

(ii)The Company’s share of accumulated net losses in excess of its equity investment in Natuera has been applied as a loss allowance on the loan receivable. See Note 8.

The following is a summary of financial information for the Company’s equity method investments as of and for the year ended December 31:


	2020		2019		2018
Current assets	$	19,126	$	23,200	$	7,121
Non-current assets	122,099		76,212		27,129
Current liabilities	24,223		52,796		3,746
Non-current liabilities	76,313		33,189		13,201

Revenue	367		52		5,344
Gross profit	(631)		—		—
Net loss	(11,453)		(2,048)		(874)

(b)Advances to Joint Ventures


	MedMen Canada(i)		Cronos GrowCo(ii)		Cronos Australia(iii)		Natuera		Total
As of January 1, 2020	$	471	$	18,966	$	—	$	—	$	19,437
Transfer to investments in equity accounted investees(ii)	—		(18,505)		—		—		(18,505)
Interest on advances	—		—		37		—		37
Advances to joint ventures recovered from (applied to) carrying amount of investments	—		—		(38)		—		(38)
Effect from foreign exchange	(4)		(461)		1		—		(464)
As of December 31, 2020	$	467	$	—	$	—	$	—	$	467


	MedMen Canada(i)		Cronos GrowCo(ii)		Cronos Australia(iii)		Natuera		Total
As of January 1, 2019	$	1,244	$	2,970	$	475	$	—	$	4,689
Advances (repayments)	(852)		15,494		274		219		15,135
Advances to joint ventures recovered from (applied to) carrying amount of investments	35		22		(779)		(224)		(946)
Effect from foreign exchange	44		480		30		5		559
As of December 31, 2019	$	471	$	18,966	$	—	$	—	$	19,437

(i) Advance is unsecured, non-interest bearing, and there are no terms of repayment.

(ii)On September 25, 2020, the Company and Mucci agreed to capitalize historical advances made by each shareholder to Cronos GrowCo. The Company capitalized C$24,650 ($18,505) through a transfer of aggregate gross advances from advances to joint ventures to investments in equity accounted investees in respect of Cronos GrowCo. Refer to footnote (ii) to the first table set forth under Note 6(a).

(iii)A$1,500 is governed by an unsecured loan bearing interest at a rate of 12% per annum, calculated and compounded daily, in arrears, on the amounts advanced from the date of each advance. The loan is due on January 1, 2022. If the loan is overdue, the outstanding amount bears interest at an additional 2% per annum.

The Company determined that the maximum exposure to loss on variable interest entities is limited to the Company’s initial investment, advances and/or loans for each variable interest entity. The following is a summary of the maximum exposure to loss for the year ended December 31, 2020 and 2019:


	Ownership interest	Other Net Assets (Liabilities)		Maximum Exposure to Loss
Cronos Australia	31%	$	8,976	$	1,530
Cronos GrowCo	50%	109,329		21,125
MedMen Canada	50%	—		467
Natuera	50%	(6,849)		8,154
Balance as of December 31, 2020		$	111,456	$	31,276


	Ownership interest	Other Net Assets (Liabilities)		Maximum Exposure to Loss
Cronos Australia	31%	$	10,900	$	1,355
Cronos GrowCo	50%	3,091		20,700
MedMen Canada	50%	(199)		642
Natuera	50%	(358)		4,888
Balance as of December 31, 2019		$	13,434	$	27,585