Business Overview                                      54
     Recent Developments                                    55
     Consolidated Results of Operations                     57
     Summary of financial results     -     ROW             61
     Summary of financial results -     U.S.                62
     Non-G    AAP Measures                                  62
     Liquidity and Capital Resources                        67
     Critical Accounting Estimates                          68


Management's discussion and analysis of financial condition and results of
operations is provided as a supplement to, and should be read in conjunction
with, the consolidated financial statements and related notes, which are
included in Item 8 of this Annual Report on Form 10-K (this "Annual Report"), to
enhance the understanding of our operations and our present business
environment.

This discussion contains Forward-Looking Statements that involve risks and uncertainties.

For more information about our operations and the risks facing our business, see Item 1 "Business" and Item 1A "Risk Factors", respectively, of this Annual Report.

Business Overview

Cronos 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 is building an iconic brand portfolio. Cronos' diverse international brand portfolio includes Spinach®, PEACE NATURALS® and Lord Jones®.



Unless otherwise noted or the context indicates otherwise, references in this
Annual Report to the "Company", "Cronos", "we", "us" and "our" refer to Cronos
Group Inc., its direct and indirect wholly owned subsidiaries and, if
applicable, its joint ventures and investments accounted for by the equity
method; the term "cannabis" means the plant of any species or subspecies of
genus Cannabis and any part of that plant, including all derivatives, extracts,
cannabinoids, isomers, acids, salts, and salts of isomers; the term "U.S. hemp"
has the meaning given to term "hemp" in the U.S. Agricultural Improvement Act of
2018, including hemp-derived cannabidiol ("CBD").

Strategy

Cronos seeks to create value for shareholders by focusing on four core strategic priorities:

•growing a portfolio of iconic brands that responsibly elevate the consumer experience;

•developing a diversified global sales and distribution network;

•establishing an efficient global supply chain; and

•creating and monetizing disruptive intellectual property.

Business Segments

We report through two segments: "United States" (the "U.S. segment") and "Rest of World" (the "ROW segment"). These two segments represent the geographic regions in which we operate and the different product offerings within each geographic region.

The U.S. segment manufactures, markets and distributes U.S. hemp-derived products through e-commerce, retail and hospitality partner channels in the United States under the Lord Jones® brand.



The ROW segment is involved in the cultivation, manufacturing, and marketing of
cannabis products for the medical and adult-use markets. In Canada, Cronos
operates two wholly owned license holders under the Cannabis Act (Canada) (the
"Cannabis Act"), Peace Naturals Project Inc. ("Peace Naturals"), which has
production facilities near Stayner, Ontario (the "Peace Naturals Campus"), and
Thanos Holdings Ltd., known as Cronos Fermentation ("Cronos Fermentation"),
which has a production facility in Winnipeg, Manitoba. In Israel, the Company
operates under the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the
cultivation, production and marketing of dried flower, pre-rolls and oils in the
Israeli medical market. Cronos has established two strategic joint ventures in
Canada and Israel. Additionally, as of December 31, 2022, Cronos held
approximately 10% of the issued capital of Vitura Health Limited ("Vitura"),
formerly known as Cronos Australia Limited, which is listed on the Australian
Securities Exchange under the trading symbol "VIT" and approximately 13.7% of
the issued capital of Natuera.

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Recent Developments

COVID-19

In December 2019, an outbreak of a novel strain of coronavirus, COVID-19, was
identified in Wuhan, China. Since then, COVID-19 has spread across the globe,
including the U.S., Canada and Israel, and other countries in which Cronos or
its affiliates operate, and was recognized as a pandemic by the World Health
Organization. The COVID-19 pandemic resulted in a sharp contraction in many
areas of the global economy and increased volatility and uncertainty in the
capital markets. In response to the pandemic, the governments of many countries,
provinces, states, municipalities, and other geographic regions took
preventative or protective actions, including closures of certain businesses,
mandatory quarantines, limits on individuals' time outside of their homes,
travel restrictions and social distancing or other preventative measures. Such
measures have been eased or lifted in varying degrees by different governments
of various countries, states and municipalities since implementation in 2020,
but the continued spread of COVID-19 and increased infection rates has caused,
and may continue to cause, some jurisdictions to roll back reopening plans that
had been underway and re-impose quarantines, border closures, closure of certain
businesses and stay-at-home orders.

The COVID-19 pandemic continues to impact the global economy and, specifically,
the U.S., Canada, Israel, and the other countries in which Cronos or its
affiliates operate. We continue to closely monitor and respond, where possible,
to the ongoing COVID-19 pandemic. As the global situation continues to change
rapidly, ensuring the health and safety of our employees remains one of our top
priorities.

In the U.S., numerous states have continued to remove their COVID-19 related
restrictions. This has resulted in the re-opening of, and increased occupancy
capacities in, retail outlets, including those that sell our products. Any
reinstatement of restrictions on the operations of retail outlets could
negatively impact our short-term results of operations in the U.S. Additionally,
in the U.S., there have been a number of supply chain challenges, such as
container ships facing delays due to congestion in ports, impacting many
industries, including the industries in which we operate. Although we have not
yet seen a significant impact from supply chain disruptions, we continue to
monitor our supply chain closely.

In Canada, COVID-19 restrictions began gradually easing at the end of June 2021
as the vaccination rate increased. The lockdown measures taken in the first six
months of 2021 to slow infection rates negatively impacted our short-term
revenue growth in Canada in 2021. The increase in cases related to the Omicron
variant of COVID-19 beginning in December 2021 caused the reinstatement of some
restrictions on non-essential retail stores in some provinces, including Quebec,
in early 2022; however, those restrictions have eased in most other provinces.
Each province is responsible for implementing re-opening plans and certain
provinces, including Ontario, are progressing through phases of re-opening which
may permit continued increases to the allowance of in-person shopping, typically
in the form of percentage of store capacity. All provinces have some form of
cannabis retail open to consumers, and most provinces have lifted the
requirement that retail shoppers show proof of vaccination before entering
retail stores. The potential for recurring retail restrictions is ongoing, which
could negatively impact our results of operations.

In Israel, most COVID-19 restrictions have been removed as vaccination rates
have increased. Occupancy limitations in retail outlets have been removed,
including those that sell our products. We do not expect the remaining COVID-19
restrictions to have a material impact on our short-term revenue growth in
Israel.

Collectively, the effects of the COVID-19 pandemic have adversely affected our
results of operations and, if the effects continue unabated, could continue to
do so as long as measures to combat the COVID-19 pandemic remain in effect or
supply chains continue to be challenged. At this time, neither the duration nor
scope of the disruption can be predicted; therefore, the ultimate impact to our
business cannot be reasonably estimated, but such impact could materially
adversely affect our business, financial condition and results of operations.

Despite the impacts of the COVID-19 pandemic, we believe that our significant
cash on hand and short-term investments will be adequate to meet liquidity and
capital requirements for at least the next twelve months.

2022 Business Highlights

Spinach® Branded Product Portfolio Expansion in Canada

Throughout 2022, the Company expanded its Spinach® gummies portfolio under both SOURZ by Spinach® and Spinach FEELZ™, with the following new products:

•April 2022: SOURZ by Spinach® Cherry Lime (Hybrid), 10mg of THC per pack

•July 2022: Spinach FEELZ™ DEEP DREAMZ CBN, 10mg of THC and 5mg of CBN per pack

•October 2022: SOURZ by Spinach® Tropical Triple Berry 2:1 CBD:THC, 20mg of CBD and 10mg of THC per pack

•December 2022: Spinach FEELZ™ 1:3 THC+CBC Mango Lime, 10mg of THC and 30mg of CBC per pack


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Table of Contents In 2022, Cronos was also focused on renovating both its vape and pre-roll offerings and launched the products below in those categories in 2022:

Vape:

•August 2022: Spinach FEELZ™ Deep Dreamz Blackberry Kush (7:1 THC|CBN) 1-gram vape

•May 2022: Spinach® Cosmic Green Apple and Polar Mint Vortex (800 mg/g THC) 1-gram vapes



In November, 2022, Cronos launched two infused pre-rolls in Canada. The first,
Fully Charged Atomic GMO, was launched under the Spinach® brand and is offered
in a 5-pack with 0.5 grams per pre-roll. Second, Cronos launched Tropical Diesel
CBG, a 3-pack of CBG infused pre-rolls with 0.5 grams per pre-roll under the
Spinach FEELZ™ sub-brand.

Intellectual property initiatives



In 2022, we continued to progress our fermentation initiative in partnership
with Ginkgo. We achieved equity milestones for the following cannabinoids in
2022:

•June 2022: tetrahydrocannabivaric acid ("THCVA")

•November 2022: cannabichromenic acid ("CBCA")

•December 2022: cannabichromevarinic acid ("CBCVA")

Strategic and Organizational Update



In February 2023, the Company announced a shift in its strategic plans for the
Realignment, with the intent to retain select components of its operations at
the Peace Naturals Campus, namely distribution and warehousing, certain research
and development activities and manufacturing of certain of the Company's
proprietary innovation products.

Appointments



In March 2022, the Board of Directors appointed Cronos's founder, Mike
Gorenstein, as Chairman, President and Chief Executive Officer. Mr. Gorenstein
previously served as Chairman, President and Chief Executive Officer of Cronos
until September 2020, when he transitioned to the Executive Chairman role.

In April 2022, the Company appointed Terry Doucet as Senior Vice President,
Legal, Regulatory Affairs and Corporate Secretary, after serving in an interim
capacity since December 2021. Mr. Doucet has been with Cronos since 2018 and has
guided Cronos through significant growth over the last few years, including the
build-out of the Company's Legal and Regulatory Affairs teams, the Altria
Investment, the Ginkgo Strategic Partnership, the PharmaCann Option and various
product commercialization initiatives.

In August 2022, the Company appointed Arye Weigensberg as Senior Vice President,
Head of Research & Development, after serving in an interim capacity since
November 2021. Prior to serving as interim Head of Research and Development, Mr.
Weigensberg was the General Manager and Vice President of Research and
Technology at Cronos Research Labs. Before joining the Company, Mr. Weigensberg
was the CEO of Altria Israel Ltd (an Altria research and development hub). Since
joining Cronos, Mr. Weigensberg has played a foundational role developing the
scope of our rare cannabinoid work, while advancing our research capabilities to
forge new strategies for differentiated cannabis products.

In October 2022, Jeff Jacobson was appointed Chief Growth Officer. Mr. Jacobson
previously served as the Company's Senior Vice President, Head of Growth (North
America). Mr. Jacobson has been with Cronos since December 2016 and was a
co-founder of Peace Naturals Project Inc. Mr. Jacobson's expertise and
experience in licensing and compliance, new business development, project
management and resource management assist Cronos in developing and penetrating
domestic and international markets.

In November 2022, the Company appointed James Holm as Chief Financial Officer
after nearly two decades of finance and accounting experience at leading
companies across industries. He most recently served as the Global Vice
President of Finance Transformation at Vertiv, a global provider of critical
digital infrastructure and continuity solutions, where he led the company's
centralization, standardization and optimization to a Global Shared Service hub
for finance processes. Before joining Vertiv, Mr. Holm served as Finance Leader,
Finance Solutions & Process Transformation Organization at Worldpay, one of the
largest global payment processors. There he drove financial reporting accuracy,
capabilities and enhancements across the company. Earlier in his career, he held
multiple positions of increasing seniority in the finance department during his
eight-year tenure at Procter and Gamble.

2021 Compared to 2020

Results of Operations



For a discussion of our 2021 results of operations compared to 2020, see Part
II, Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations," in our Annual Report on Form 10-K for the year ended
December 31, 2021.

Cash Flows

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For a discussion of our 2021 cash flows compared to 2020, see Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in our Annual Report on Form 10-K for the year ended December 31,
2021.

Foreign currency exchange rates



All currency amounts in this Annual 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 December 31,
2022 and December 31, 2021, as reported on Bloomberg. Transactions affecting the
shareholders' equity (deficit) are translated at historical foreign exchange
rates. The consolidated statements of net income (loss) and comprehensive income
(loss) and consolidated statements of cash flows of our foreign operations are
translated into dollars by applying the average foreign exchange rate in effect
for the years ended December 31, 2022, December 31, 2021, and December 31, 2020,
as reported on Bloomberg.

The exchange rates used to translate from Canadian dollars ("C$") to dollars are shown below:



(Exchange rates are shown as C$ per $)              Year ended December 31,
                                            2022              2021              2020
Average rate                                1.3017            1.2541            1.3411
Spot rate                                   1.3554            1.2746            1.2751

Consolidated Results of Operations



The tables below set forth our consolidated results of operations, expressed in
thousands of U.S. dollars for the periods presented. Our consolidated financial
results for these periods are not necessarily indicative of the consolidated
financial results that we will achieve in future periods.

                                                                            

Year ended December 31,


                                                                            2022                    2021
Net revenue before excise taxes                                       $        114,456       $            89,486
Excise taxes                                                                  (22,552)                  (15,051)
Net revenue                                                                     91,904                    74,435
Cost of sales                                                                   79,935                    80,008
Inventory write-down                                                                 -                    11,961
Gross profit                                                                    11,969                  (17,534)
Operating expenses:
Sales and marketing                                                             22,282                    44,937
Research and development                                                        13,381                    23,331
General and administrative                                                      71,178                    96,482
Restructuring costs                                                              5,333                         -
Share-based compensation                                                        15,115                    10,151
Depreciation and amortization                                                    6,025                     4,484

Impairment loss on goodwill and indefinite-lived intangible assets

          -                   236,056
Impairment loss on long-lived assets                                             3,493                   127,619
Total operating expenses                                                       136,807                   543,060
Operating loss                                                               (124,838)                 (560,594)
Other income (expense)                                                         (9,721)                   163,459
Income tax benefit (expense)                                                  (34,175)                       431
Loss from discontinued operations                                                    -                     (500)
Net loss                                                                     (168,734)                 (397,204)
Net loss attributable to non-controlling interest                                    -                   (1,097)
Net loss attributable to Cronos Group                                 $     

(168,734) $ (396,107)


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Summary of select financial results



                               Year ended December 31,                  Change
                              2022                  2021            $             %
Net revenue              $    91,904             $ 74,435       $ 17,469         23   %
Cost of sales                 79,935               80,008            (73)         -   %
Inventory write-down               -               11,961        (11,961)      (100)  %
Gross profit                  11,969              (17,534)        29,503        168   %
Gross margin(i)                   13   %              (24) %           N/A       37  pp

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

Net revenue



For 2022, we reported consolidated net revenue of $91.9 million, representing a
$17.5 million increase from 2021. This change was primarily due to higher
cannabis flower sales in the Israeli medical market and higher cannabis extract
sales in the Canadian adult-use market, partially offset by a reduction in
revenue in the U.S. segment, lower cannabis flower sales in the Canadian
adult-use market driven by an unfavorable price/mix shift and the impact of the
weakening Canadian dollar against the U.S. dollar during 2022.

Cost of sales



For 2022, we reported consolidated cost of sales of $79.9 million, essentially
flat with 2021, despite a 23% increase in net revenue. This was primarily due to
lower cannabis biomass costs, lower sales volumes in the U.S. segment and the
impact of the weakening Canadian dollar against the U.S. dollar during the
period, partially offset by higher sales volumes in the ROW segment and lower
fixed cost absorption due to the timing of the wind-down of cultivation and
certain production activities associated with the change in the nature of
operations at the Peace Naturals Campus.

Inventory write-downs



For 2021, we reported inventory write-downs of $12.0 million, primarily related
to cannabis strains and potency levels that were no longer in-line with consumer
preferences in the Canadian market and adjustments for obsolete inventory in
Canada. We reported no inventory write-downs for 2022.

Gross profit



For 2022, we reported consolidated gross profit of $12.0 million, representing a
$29.5 million improvement from 2021. The improvement in gross profit is
primarily due to increased revenue in the ROW segment driven mainly by a
favorable mix of cannabis extract products, which carry a higher gross profit
and gross margin than other product categories, higher sales of cannabis flower
in Israel, the absence of inventory write-downs in 2022, and lower cannabis
biomass costs, partially offset by lower revenue in the U.S. segment and lower
fixed cost absorption due to the timing of the wind-down of cultivation and
certain production activities associated with the change in the nature of
operations at the Peace Naturals Campus.

Operating expenses

                                                        Year ended December 31,                            Change
                                                        2022                   2021                 $                   %
Sales and marketing                             $      22,282              $  44,937          $  (22,655)                (50) %
Research and development                               13,381                 23,331              (9,950)                (43) %
General and administrative                             71,178                 96,482             (25,304)                (26) %
Restructuring costs                                     5,333                      -               5,333                 100  %
Share-based compensation                               15,115                 10,151               4,964                  49  %
Depreciation and amortization                           6,025                  4,484               1,541                  34  %
Impairment loss on goodwill and
indefinite-lived intangible assets                          -                236,056            (236,056)               (100) %
Impairment loss on long-lived assets                    3,493                127,619            (124,126)                (97) %
Operating expenses                              $     136,807              $ 543,060          $ (406,253)                (75) %


Sales and marketing



For 2022, we reported sales and marketing expenses of $22.3 million,
representing a decrease of $22.7 million from 2021. The decrease was primarily
due to lower advertising and marketing spend and lower personnel-related costs
in the U.S. segment as a result of the Realignment.

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Research and development

For 2022, we reported research and development expenses of $13.4 million, representing a decrease of $10.0 million from 2021. This decrease was primarily due to lower costs associated with the Ginkgo Collaboration Agreement and cancellation of beauty-focused product development spending in the U.S. segment.

General and administrative



For 2022, we reported general and administrative expenses of $71.2 million,
representing a decrease of $25.3 million from 2021. The decrease was primarily
due to lower expected credit losses on our loans to joint venture partners when
compared to 2021, lower legal and advisory fees associated with strategic
initiatives and lower personnel-related costs associated with the Realignment.

Restructuring costs



For 2022, we reported restructuring costs of $5.3 million, compared to no
restructuring costs in 2021. The restructuring costs in 2022 were related to
Realignment activities. For further information, see Note 16 "Restructuring" to
the consolidated financial statements in Item 8 of this Annual Report.

Share-based compensation



For 2022, we reported share-based compensation expenses of $15.1 million,
representing an increase of $5.0 million from 2021. The increase was primarily
due to the acceleration of expense on equity awards granted to certain executive
employees in connection with their separation from the Company as well as the
approval for grant of previously held-back equity awards granted to certain
executives in connection with the SEC and OSC settlements. For further
information, see Note 10 "Share-based Compensation" to the consolidated
financial statements in Item 8 of this Annual Report.

Depreciation and amortization



For 2022, depreciation and amortization expenses were $6.0 million, representing
an increase of $1.5 million from 2021. The increase was primarily due to higher
amortization on our Ginkgo exclusive license intangible assets.

Impairment loss on goodwill and indefinite-lived intangible assets



For 2021, we reported impairment loss on goodwill and intangible assets of
$236.1 million due to impairment charges on the goodwill associated with our
U.S. reporting unit and impairment on our Lord Jones® brand. For 2022, we
reported no such impairment losses. For further information, see Note 6
"Goodwill and Intangible Assets, net" to the consolidated financial statements
in Item 8 of this Annual Report.

Impairment loss on long-lived assets



During 2022, we recorded impairment charges of $3.5 million related to the
right-of-use lease asset and leasehold improvements associated with our
corporate headquarters in Toronto, Ontario, Canada, which the Company plans to
sublease. For 2021, we recorded an impairment charge of $119.9 million on
long-lived assets related to the previously announced planned exit from the
Peace Naturals Campus. Additionally, in 2021, we recorded impairment charges of
$4.8 million related to our Ginkgo exclusive licenses for cannabigerolic acid
("CBGA") and cannabigerovarinic acid ("CBGVA") for the difference between the
fair value of the licenses and the consideration paid. Furthermore, in 2021, our
U.S. segment recorded impairment charges of $1.2 million on property, plant, and
equipment where the carrying value of those assets was not recoverable and a
$1.7 million impairment charge related to ceasing use of certain leased premise
and the derecognition of the associated right-of-use asset. See Note 5
"Property, plant and equipment, net" Note 6, "Goodwill and Intangible Assets,
net" and Note 7 "Leases" to the consolidated financial statements in Item 8 of
this Annual Report for additional information.

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Total other income, income tax benefit (expense) and loss from discontinued
operations

                                                    Year ended December 31,                         Change(i)
                                                    2022                 2021                 $                   %
Interest income, net                          $      22,537          $    9,071          $  13,466                 148  %
Gain on revaluation of derivative liabilities        14,060             151,360           (137,300)                (91) %
Impairment loss on other investments                (61,392)                  -            (61,392)                   N/M
Share of income (loss) from equity method
investments                                           3,114              (6,313)             9,427                 149  %
Gain on revaluation of financial instruments         14,739               8,611              6,128                  71  %
Foreign currency transaction loss                    (2,286)                  -             (2,286)                   N/M
Other, net                                             (493)                730             (1,223)               (168) %
Total other income                                   (9,721)            163,459           (173,180)               (106) %
Income tax benefit (expense)                        (34,175)                431            (34,606)                   N/M
Loss from discontinued operations                         -                (500)               500                (100) %
Net loss                                      $    (168,734)         $ (397,204)         $ 228,470                  58  %

(i)"N/M" is defined as not meaningful.

Interest income, net

For 2022, we reported interest income, net of $22.5 million, representing an increase of $13.5 million from 2021 primarily due to higher short-term investment balances and higher interest rates in 2022 when compared to 2021.

Gain on revaluation of derivative liabilities



For 2022, we reported a gain on revaluation of derivative liabilities of $14.1
million, representing a decrease of $137.3 million from 2021 primarily due to
the greater impact on the derivative liabilities in 2021 from the decreased
estimated term of the derivative instruments and the decreased price of Cronos
common shares.

Impairment loss on other investments



For 2022, impairment loss on other investments was $61.4 million, driven by
impairment charges recorded on our PharmaCann Option for the difference between
its estimated fair value and its carrying amount. There were no such impairment
losses on other investments during 2021. For more information, see Note 3
"Investments" to the consolidated financial statements in Item 8 of this Annual
Report for additional information.

Share of income (loss) from equity method investments



For 2022, we reported share of income from equity method investments of $3.1
million, representing an increase of $9.4 million from 2021. The change was
primarily due to improved results from our equity method investment in Cronos
GrowCo.

Gain (loss) on revaluation of financial instruments



For 2022, we reported a gain on revaluation of financial instruments of $14.7
million, representing an increase of $6.1 million from 2021. The increase was
due to the change in fair value of our investment in Vitura. See Note 3
"Investments" to the consolidated financial statements in Item 8 of this Annual
Report for additional information.

Foreign currency transaction loss

For 2022, foreign currency transaction loss was $2.3 million, which related to certain foreign currency-denominated intercompany loans anticipated to be settled in the foreseeable future. There were no such foreign currency transaction gains or losses during 2021.

Other, net

For 2022, other, net was a loss of $0.5 million, compared to income of $0.7 million in 2021. The change was primarily due to loss on disposal of assets associated with the Realignment, partially offset by $0.4 million of dividend income from our Vitura investment during 2022.

Income tax benefit (expense)



For 2022, we reported income tax expense of $34.2 million, compared to an income
tax benefit of $0.4 million in 2021. The change was due primarily to a capital
gain for tax purposes of $479.8 million, which resulted in an income tax
liability of $34.2 million, related to the irrevocable relinquishment by Altria
of the Warrant on December 16, 2022.

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Loss from discontinued operations

For 2021, we reported loss from discontinued operations of $0.5 million. There was no such loss from discontinued operations in 2022.

Results of Operations by Business Segment: 2022 compared with 2021



The tables below set forth our consolidated results of operations by our two
business segments: the ROW segment and the U.S. segment, expressed in U.S.
dollars and in thousands for the periods presented. Our consolidated financial
results for these periods are not necessarily indicative of the consolidated
financial results that we will achieve in future periods. Certain totals in the
tables below will not sum to exactly 100% due to rounding.

Summary of financial results - ROW



                               Year ended December 31,                  Change
                              2022                  2021            $             %
Net revenue              $    86,749             $ 64,561       $ 22,188         34   %
Cost of sales                 71,313               70,193          1,120          2   %
Inventory write-down               -               11,961        (11,961)      (100)  %
Gross profit                  15,436              (17,593)        33,029        188   %
Gross margin                      18   %              (27) %           N/A       45  pp


Net revenue - ROW

                          Year ended December 31,                  Change
                             2022                2021           $            %
Cannabis flower     $      63,593             $ 55,194      $  8,399        15  %
Cannabis extracts          22,522                8,807        13,715       156  %
Other                         634                  560            74        13  %
Net revenue         $      86,749             $ 64,561      $ 22,188        34  %


For 2022, the ROW segment reported net revenue of $86.7 million, representing an
increase of $22.2 million from 2021. This increase was primarily due to higher
cannabis extract sales in the Canadian adult-use market and higher cannabis
flower sales in the Israeli medical market, partially offset by lower cannabis
flower sales in the Canadian adult-use market driven by an unfavorable price/mix
shift and the impact of the weakening Canadian dollar against the U.S. dollar
during 2022.

Cost of sales - ROW

For 2022, the ROW segment reported a year-over-year increase in cost of sales of
2%, while net revenue increased 34%. This increase was primarily due to higher
sales volumes and lower fixed cost absorption due to the timing of the wind-down
of cultivation and certain production activities associated with the change in
the nature of operations at the Peace Naturals Campus, partially offset by lower
cannabis biomass costs and the impact of the weakening Canadian dollar against
the U.S. dollar during 2022.

Inventory write-downs - ROW

We reported no inventory write-downs for 2022. For 2021, we reported inventory
write-downs of $12.0 million, primarily related to cannabis strains and potency
levels that were no longer in-line with consumer preferences in the Canadian
market and adjustments for obsolete inventory in Canada.

Gross profit - ROW



For 2022, the ROW segment reported gross profit of $15.4 million, representing
an increase of $33.0 million from 2021. The improvement in gross profit is
primarily due to increased revenue driven mainly by a favorable mix of cannabis
extract products, which carry a higher gross profit and gross margin than other
product categories, sales of cannabis flower in Israel, the absence of inventory
write-downs in 2022, and lower cannabis biomass costs, partially offset by lower
fixed cost absorption due to the timing of the wind-down of cultivation and
certain production activities at the Peace Naturals Campus.

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Summary of financial results - U.S.



                      Year ended December 31,                   Change
                      2022                   2021           $            %
Net revenue     $      5,155              $ 9,874       $ (4,719)      (48)  %
Cost of sales          8,622                9,815         (1,193)      (12)  %

Gross profit    $     (3,467)             $    59       $ (3,526)          N/M
Gross margin             (67)  %                1  %           N/A     (68) pp


Net revenue - U.S.

For 2022, the U.S. segment reported net revenue of $5.2 million, representing a
decrease of $4.7 million from 2021. The decrease in sales was driven by the
decision to exit the adult beauty business, a decrease in promotional spending
and SKU rationalization efforts as the Company implements the Realignment in the
U.S. segment.

Cost of sales - U.S.

For 2022, the U.S. segment reported cost of sales of $8.6 million, representing
a decrease of $1.2 million from 2021. This decrease was primarily due to lower
sales volumes due to the decision to exit the adult beauty business, partially
offset by higher inventory reserves associated with discontinued products.

Gross profit - U.S.



For 2022, the U.S. segment reported negative gross profit of $3.5 million,
representing a decrease in gross profit of $3.5 million from 2021. This decrease
was primarily due to the decision to exit the adult beauty business and higher
inventory reserves associated with discontinued products.


Non-GAAP Measures



Cronos reports its financial results in accordance with Generally Accepted
Accounting Principles in the United States ("U.S. GAAP"). This Annual Report
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 Annual Report are reconciled to their
closest reported GAAP measure. Reconciliations of historical adjusted financial
measures to corresponding U.S. GAAP measures are provided below.

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 ongoing business
performance of our operating segments. 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; transaction costs related
to strategic projects; impairment loss on other investments; foreign currency
transaction loss; other, net; loss from discontinued operations; restructuring
costs; 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 OSC's investigations of the Restatements and legal costs
defending shareholder class action complaints brought against us as a result of
the 2019 restatement (see Part I, Item 3, Legal Proceedings, of this Annual
Report for a discussion of the settlement of the SEC's and OSC's regulatory
reviews relating to the Restatements and shareholder class action complaints
relating to the restatement of the 2019 interim financial statements).

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.

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Adjusted EBITDA is reconciled to net income (loss) as follows:



(in thousands of U.S. dollars)                                        Year ended December 31, 2022
                                                      US                ROW             Corporate             Total
Net loss                                         $ (84,194)         $ (54,129)         $ (30,411)         $ (168,734)
Interest income, net                                (4,518)           (18,019)                 -             (22,537)
Income tax expense                                       -             34,175                  -              34,175
Depreciation and amortization                        1,485             11,637                  -              13,122
EBITDA                                             (87,227)           (26,336)           (30,411)           (143,974)
Share of income from equity accounted
investments                                              -             (3,114)                 -              (3,114)

Impairment loss on long-lived assets(ii)                 -              3,493                  -               3,493
Gain on revaluation of derivative
liabilities(iii)                                         -            (14,060)                 -             (14,060)
Gain on revaluation of financial instruments(iv)         -            (14,739)                 -             (14,739)

Impairment loss on other investments(vi)            61,392                  -                  -              61,392
Foreign currency transaction loss                        -              2,286                  -               2,286
Other, net(vii)                                        169                324                  -                 493

Restructuring costs(ix)                              1,788              3,545                  -               5,333
Share-based compensation(x)                          3,744             11,371                  -              15,115
Financial statement review costs(xi)                     -                  -              7,167               7,167
Adjusted EBITDA                                  $ (20,134)         $ (37,230)         $ (23,244)         $  (80,608)


(in thousands of U.S. dollars)                                        Year ended December 31, 2021
                                                      US                 ROW             Corporate             Total
Net loss                                         $ (283,883)         $ (81,811)         $ (31,510)         $ (397,204)
Interest income, net                                    (40)            (9,031)                 -              (9,071)
Income tax benefit                                      (89)              (342)                 -                (431)
Depreciation and amortization                           917             14,485                  -              15,402
EBITDA                                             (283,095)           (76,699)           (31,510)           (391,304)
Share of loss from equity method investments              -              6,313                  -               6,313
Impairment loss on goodwill and indefinite-lived
intangible assets(i)                                236,019                 37                  -             236,056
Impairment loss on long-lived assets(ii)              2,955            124,664                  -             127,619
Gain on revaluation of derivative
liabilities(iii)                                          -           (151,360)                 -            (151,360)
Gain on revaluation of financial instruments(iv)          -             (8,611)                 -              (8,611)
Transaction costs(v)                                      -                  -              3,801               3,801

Other, net(vii)                                           3               (733)                 -                (730)
Loss from discontinued operations(viii)                   -                500                  -                 500
Share-based compensation(x)                           3,401              6,750                  -              10,151
Financial statement review costs(xi)                      -                  -              7,102               7,102
Adjusted EBITDA                                  $  (40,717)         $ (99,139)         $ (20,607)         $ (160,463)


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(in thousands of U.S. dollars)                                        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
Depreciation and amortization                          234              6,811                  -               7,045
EBITDA                                             (76,793)            22,073            (30,573)            (85,293)
Share of loss from equity accounted investments          -              4,510                  -               4,510
Impairment loss on goodwill and indefinite-lived
intangible assets(i)                                40,000                  -                  -              40,000

Gain on revaluation of derivative
liabilities(iii)                                         -           (129,254)                 -            (129,254)
Loss on revaluation of financial instruments(iv)         -                  9                  -                   9
Transaction costs(v)                                    40                  -                  -                  40

Other, net(vii)                                         20              1,805                  -               1,825
Loss from discontinued operations(viii)                  -                650                  -                 650
Share-based compensation(x)                          8,714              6,647                  -              15,361
Financial statement review costs(xi)                     -                  -              9,688               9,688
Gain on disposal of investments(xii)                     -             (4,789)                 -              (4,789)
Adjusted EBITDA                                  $ (28,019)         $ (98,349)         $ (20,885)         $ (147,253)


(i)For the year ended December 31, 2021, impairment loss on goodwill and
indefinite-lived intangible assets relates to impairment on goodwill and
intangible assets related to our U.S. segment and impairment on an
indefinite-lived trademark related to our ROW segment. For the year ended
December 31, 2020, impairment loss on goodwill and indefinite-lived intangible
assets relates to impairment on goodwill and intangible assets related to our
U.S. segment. See Note 6 "Goodwill and Intangible Assets, net" to the
consolidated financial statements under Item 8 of this Annual Report.

(ii)For the year ended December 31, 2022, impairment loss on long-lived assets
relates to the Company's decision to seek a sublease for leased office space in
Toronto, Ontario, Canada during the first quarter of 2022. For the year ended
December 31, 2021, impairment loss on long-lived assets relates to impairment
charges on property, plant and equipment and definite-lived intangible assets in
the Canadian asset group, impairment charges for the differences between the
consideration paid to Ginkgo for the achievement of two equity milestones in
connection with the Ginkgo Collaboration Agreement and the fair values of the
CBGA exclusive license and CBGVA exclusive license as well as impairment on
leased premises in the U.S. segment. See Note 5 "Property, Plant and Equipment,
net" and Note 6 "Goodwill and Intangible Assets, net" to the consolidated
financial statements in Item 8 of this Annual Report.

(iii)For the years ended December 31, 2022, 2021 and 2020, the gain on
revaluation of derivative liabilities represents the fair value changes on the
derivative liabilities. See Note 8 "Derivative Liabilities" to the consolidated
financial statements in Item 8 of this Annual Report.

(iv)For the years ended December 31, 2022 and 2021, gain on revaluation of
financial instruments relates primarily to our unrealized holding gain on our
mark-to-market investment in Vitura as well as revaluations of financial
liabilities resulting from deferred share units ("DSUs") granted to directors.
For the year ended December 31, 2020, loss on revaluation of financial
instruments relates to revaluations of financial liabilities resulting from
DSUs. See Note 3 "Investments" and Note 10 "Share-based Compensation" to the
consolidated financial statements in Item 8 of this Annual Report.

(v)For the years ended December 31, 2021 and 2020, transaction costs represent
legal, financial and other advisory fees and expenses incurred in connection
with various strategic investments. These costs are included in general and
administrative expenses on the consolidated statements of net income (loss) and
comprehensive income (loss).

(vi)For the year ended December 31, 2022, impairment loss on other investments
related to the PharmaCann Option for the difference between its fair value and
carrying amount. See Note 3 "Investments" to the consolidated financial
statements in Item 8 of this Annual Report.

(vii)For the year ended December 31, 2022, other, net primarily related to
related to $646 loss on disposal of assets and $390 of dividends declared by
Vitura on the Company's 55,176,065 ordinary shares in the capital of Vitura. For
the years ended December 31, 2021 and 2020, other, net is primarily related to
(gain) loss on reclassification of held-for-sale assets and (gain) loss on
disposal of assets.

(viii)For the years ended December 31, 2021 and 2020, loss from discontinued operations relates to the discontinuance of Original B.C. Ltd. ("OGBC").



(ix)For the year ended December 31, 2022, restructuring costs related to the
employee-related severance costs and other restructuring costs associated with
the Realignment, including the change in the nature of operations at the Peace
Naturals Campus. See Note 16 "Restructuring" to the consolidated financial
statements in Item 8 of this Annual Report.

(x)For the years ended December 31, 2022, 2021 and 2020, share-based
compensation relates to the vesting expenses of share-based compensation awarded
to employees under our share-based award plans as described in Note 10
"Share-based Compensation" to the consolidated financial statements in Item 8 of
this Annual Report.

(xi)For the years ended December 31, 2022, 2021 and 2020, financial statement
review costs include costs related to the restatements of the Company's 2019
interim financial statements and second quarter 2021 interim financial
statements, costs related to the Company's responses to requests for information
from various regulatory authorities relating to such restatements, the costs
related to the Settlement Order and Settlement Agreement and legal costs
defending shareholder class action complaints brought against the Company as a
result of the 2021 and 2019 restatements.

(xii)For the year ended December 31, 2020, gain on disposal of investments is
primarily comprised of the gain recorded related to the sale of common shares of
Aurora, which were received in connection with the achievement of a milestone
related to Aurora's acquisition of Whistler ("Whistler Transaction") in 2020 and
as a result of the closing of the Whistler Transaction in 2019. There were no
disposals of investments during the years ended December 31, 2022 and 2021. See
Note 3 "Investments" to the consolidated financial statements in Item 8 of this
Annual Report.

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Constant Currency

To supplement the consolidated financial statements presented in accordance with
U.S. GAAP, we have presented constant currency adjusted financial measures for
net revenues, gross profit, gross profit margin, operating expenses, net income
(loss) and Adjusted EBITDA for 2022, as well as cash and cash equivalents and
short-term investment balances as of December 31, 2022 compared to December 31,
2021, which are considered non-GAAP financial measures. We present constant
currency information to provide a framework for assessing how our underlying
operations performed excluding the effect of foreign currency rate fluctuations.
To present this information, current and prior period income statement results
in currencies other than U.S. dollars are converted into U.S. dollars using the
average exchange rates from the comparative period in 2021 rather than the
actual average exchange rates in effect during 2022; constant currency current
period balance sheet information is translated at the prior year-end spot rate
rather than the current year-end spot rate. All growth comparisons relate to the
corresponding period in 2021. We have provided this non-GAAP financial
information to aid investors in better understanding the performance of our
segments. The non-GAAP financial measures presented in this Annual Report should
not be considered as a substitute for, or superior to, the measures of financial
performance prepared in accordance with U.S. GAAP.

The table below sets forth certain measures of consolidated results from continuing operations on an as-reported and constant currency basis for 2022 compared to 2021, as well as cash and cash equivalents and short-term investments as of December 31, 2022, compared to December 31, 2021, on an as-reported and constant currency basis (in thousands):



                                                        As Reported                                                    As Adjusted for Constant Currency
                                                                                                               Year ended
                            Year ended December 31,                      As Reported Change                   December 31,              Constant Currency Change
                           2022                 2021                     $                     %                  2022                    $                   %
Net revenue            $   91,904          $    74,435          $         17,469               23   %       $      95,237           $    20,802               28   %
Gross profit               11,969              (17,534)                   29,503              168   %              12,571                30,105              172   %
Gross margin                   13  %               (24) %                       N/A            37  pp                  13   %                  N/A            37  pp

Operating expenses        136,807              543,060                  (406,253)             (75)  %             140,064              (402,996)             (74)  %
Net loss                 (168,734)            (397,204)                  228,470               58   %            (170,888)              226,316               57   %
Adjusted EBITDA           (80,608)            (160,463)                   79,855               50   %             (82,116)               78,347               49   %

                                                                                                             As of December
                               As of December 31,                        As Reported Change                        31,                  Constant Currency Change
                           2022                 2021                     $                     %                  2022                    $                   %
Cash and cash
equivalents            $  764,644          $   886,973          $       (122,329)             (14)  %       $     793,525           $   (93,448)             (11)  %
Short-term investments    113,077              117,684                    (4,607)              (4)  %             120,246                 2,562                2   %
Total cash and cash
equivalents and        $  877,721          $ 1,004,657          $       (126,936)             (13)  %       $     913,771           $   (90,886)              (9)  %
short-term investments



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Net revenue

                                                        As Reported                                             As Adjusted for Constant Currency
                                                                                                         Year ended
                                Year ended December 31,                  As Reported Change             December 31,           Constant Currency Change
                                 2022                2021                $                 %                2022                  $                 %
Cannabis flower            $      63,593          $ 55,194          $   8,399               15  %       $   66,047          $   10,853               20  %
Cannabis extracts                 27,677            18,681              8,996               48  %           28,532               9,851               53  %
Other                                634               560                 74               13  %              658                  98               18  %
Net revenue                $      91,904          $ 74,435          $  17,469               23  %       $   95,237          $   20,802               28  %


                                                        As Reported                                              As Adjusted for Constant Currency
                                                                                                         Year ended
                               Year ended December 31,                   As Reported Change             December 31,           Constant Currency Change
                                2022                2021                $                  %                2022                  $                  %
Canada                    $      56,233          $ 50,294          $   5,939                12  %       $   58,367          $    8,073                16  %
Israel                           30,516            13,376             17,140               128  %           31,715              18,339               137  %
United States                     5,155             9,874             (4,719)              (48) %            5,155              (4,719)              (48) %
Other countries                       -               891               (891)             (100) %                -                (891)             (100) %
Net revenue               $      91,904          $ 74,435          $  17,469                23  %       $   95,237          $   20,802                28  %


Net Revenue

For 2022, net revenue on a constant currency basis was $95.2 million,
representing a 28% increase from 2021. Net revenue increased on a constant
currency basis primarily due to higher cannabis extract sales in the Canadian
adult-use market and higher cannabis flower sales in the Israeli medical market,
partially offset by a reduction in revenue in the U.S. segment and lower
cannabis flower sales in the Canadian adult-use market driven by an adverse
price/mix shift.

Gross profit



For 2022, gross profit on a constant currency basis was $12.6 million,
representing a 172% increase from 2021. Gross profit increased on a constant
currency basis primarily due to increased revenue in the ROW segment driven
mainly by a favorable mix of cannabis extract products, which carry a higher
gross profit and gross margin than other product categories, higher sales of
cannabis flower in Israel, the absence of inventory write-downs in 2022, and
lower cannabis biomass costs, partially offset by lower revenue in the U.S.
segment and lower fixed cost absorption due to the timing of the wind-down of
cultivation and certain production activities associated with the change in the
nature of operations at the Peace Naturals Campus.

Operating expenses



For 2022, operating expenses on a constant currency basis was $140.1 million,
representing a 74% decrease from 2021. Operating expenses decreased on a
constant currency basis primarily due to lower advertising and marketing spend
and lower payroll-related costs in the U.S. segment as a result of the
Realignment, reduced costs associated with the timing of Ginkgo milestones,
cancellation of beauty-focused product development spending in the U.S. segment,
and an expected credit loss allowance revaluation recognized in 2021, partially
offset by higher restructuring costs related to the Realignment.

Net loss



For 2022, net loss on a constant currency basis was $170.9 million, representing
a 57% improvement from 2021. Net loss improved primarily due to lower impairment
charges, higher gross profit, lower operating expenses, higher interest income
and higher income from equity method investments, partially offset by lower gain
on revaluation of derivative liabilities and higher share-based compensation
expense in 2022.

Adjusted EBITDA

For 2022, adjusted EBITDA on a constant currency basis was $82.1 million,
representing a 49% improvement from 2021. Adjusted EBITDA increased on a
constant currency basis primarily due to decreases in general and administrative
expenses, sales and marketing expenses, and research and development expenses as
a result of the Realignment, and an improvement in gross profit.

Cash and cash equivalents & short-term investments

Cash and cash equivalents and short-term investments on a constant currency basis decreased 9% to $913.8 million as of December 31, 2022 from $1,004.7 million as of December 31, 2021. The decrease in cash and cash equivalents and short-term investments is primarily due to cash flows used in operating activities in 2022.


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Liquidity and Capital Resources



We believe that our existing cash and cash equivalents and short-term
investments will be sufficient to fund our business operations and capital
expenditures over the next twelve months. Our primary need for liquidity is to
fund operations and capital expenditures. Our ability to fund operations and
capital expenditures depends on, among other things, future operating
performance and cash flows that are subject to general economic conditions and
financial and other factors, including factors beyond our control. Since 2019,
we have been funded by the C$2.4 billion (approximately $1.8 billion) Altria
investment in us, pursuant to which we issued to certain wholly owned
subsidiaries of Altria 149,831,154 of our common shares and one warrant, as
further discussed under "Altria Strategic Investment" in Item 1 of this Annual
Report. As of December 31, 2022, we had $764.6 million in cash and cash
equivalents and $113.1 million in short term investments, compared to $887.0
million in cash and cash equivalents and $117.7 million in short term
investments as of December 31, 2021. As of both December 31, 2022 and December
31, 2021, we had no external financing.

Cash flows



(In thousands of U.S. dollars)                                    Year 

ended December 31,


                                                       2022                2021                2020
Net cash used in operating activities              $  (88,948)         $ (153,616)         $ (144,871)
Net cash provided by (used in) investing
activities                                             (1,842)            (28,898)             20,150
Net cash used in financing activities                  (2,897)            (13,442)             (3,051)
Effect of foreign currency translation on cash and
cash equivalents                                      (28,642)              4,906               6,102
Net change in cash                                 $ (122,329)         $ (191,050)         $ (121,670)

2022 cash flows vs 2021 cash flows

Operating activities



During 2022, we used $88.9 million of cash in operating activities, compared to
$153.6 million in 2021, representing a decrease in net cash used of $66.8
million. This change is primarily driven by a $42.0 million increase in net
income after adjusting for non-cash items, such as impairment charges,
share-based payments, depreciation and amortization, and share of loss from
investments in equity method investments in 2022, and a net increase in changes
in operating assets and liabilities of $22.7 million related to the timing of
collections of accounts receivables, payments for income taxes, payments for
accruals and payables, and purchases of inventory.

Investing activities



During 2022, we used $1.8 million of cash in investing activities, compared to
$28.9 million during 2021, representing a decrease of $27.1 million in net cash
used. This change is primarily driven by the purchase of the PharmaCann Option
during 2021, lower purchases of property, plant and equipment and greater
repayments than disbursements on loans receivable during 2022, partially offset
by a higher level of short-term investments during 2022.

Financing activities



During 2022, cash used in financing activities was $2.9 million, as compared to
$13.4 million in 2021, representing a decrease of $10.5 million. This change is
primarily driven by a decrease in withholding taxes paid on share-based awards.

Cash requirements



In the near-term, we expect to use our available cash and investments to operate
our core business and develop new ways to serve our customers as well as invest
in our various strategic partnerships and in our investees. We have maintained
adequate liquidity to meet working capital requirements.

Our material cash requirements include the following contractual and other obligations as of December 31, 2022:

Leases



We have operating leases for buildings and office space, vehicles and land, and
a finance lease relating to equipment. As of December 31, 2022, the future
minimum payments required under these leases totaled $4.8 million, with $1.6
million payable within 12 months. Refer to Note 7 "Leases" to the consolidated
financial statements in Item 8 of this Annual Report for further information.

Loans receivable with related parties



We have entered into three loan agreements with affiliates. As of December 31,
2022, Cronos GrowCo had approximately $0.7 million undrawn on its loan
receivable, with no amounts expected to be drawn within 12 months. All other
loans receivable have been fully drawn. Refer to Note 4 "Loans Receivable, net"
to the consolidated financial statement in Item 8 of this Annual Report for
further information.

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Purchase obligations



Our purchase obligations primarily consist of contractual obligations to
maintain the ordinary course of business through information technology and
capital expenditures related to computer software, agricultural supply services
and data analytics. Other purchase obligations consist of noncancellable
obligations related to maintenance, internet, and telecommunication service. As
of December 31, 2022, we had purchase obligations of $13.5 million, with
$10.6 million payable within 12 months.

Research and development obligations



We have entered into multiple R&D contracts with partners such as Ginkgo
Bioworks Holdings, Inc. ("Ginkgo"), as well as maintained internal cash
requirements related to R&D activities, to continue to improve processes and
gain knowledge on the cannabinoid industry. As of December 31, 2022, we had
approximately $1.7 million in cash requirements related to R&D, with
$1.7 million payable within 12 months. Refer to Note 9 "Commitments and
Contingencies" to the consolidated financial statements in Item 8 of this Annual
Report for further information.


Critical Accounting Estimates

Estimates and critical judgments by management



The preparation of the consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. These
estimates are reviewed periodically, and adjustments are made as appropriate in
the year they become known. Items for which actual results may differ materially
from these estimates are described in the following section.

Refer to Note 1 "Background, Basis of Presentation, and Summary of Significant
Accounting Policies" to the consolidated financial statements in Item 8 of this
Annual Report for further information on our critical accounting estimates and
policies, which are as follows:

Revenue recognition



Revenue is recognized when the control of the promised goods is transferred to
the customer in an amount that reflects the consideration we expect to be
entitled to in exchange for the performance obligation. Excise taxes remitted to
tax authorities are government-imposed excise taxes on cannabis products. Excise
taxes are recorded as a reduction of sales in net revenue in the consolidated
statements of income (loss) and comprehensive income (loss) and are recognized
as a current liability within accrued liabilities on the consolidated balance
sheets, with the liability subsequently reduced when the taxes are remitted to
the tax authority.

In addition, amounts disclosed as net revenue are net of allowances, discounts
and rebates. In determining the transaction price for the sale of goods, the
Company considers the effects of variable consideration and the existence of
significant financing components, if any. Some contracts for the sale of goods
may provide customers with a right of return, most-favored-customer rights, or
early payment discounts. In addition, the Company may provide, in certain
circumstances, a retroactive price reduction to a customer based primarily on
inventory movement. These items give rise to variable consideration. The Company
uses the expected value method to estimate the variable consideration because
this method best predicts the amount of variable consideration to which the
Company will be entitled. The Company uses historical evidence, current
information and forecasts to estimate the variable consideration. The Company
reduces revenue and recognizes a contract liability equal to the amount expected
to be refunded to the customer in the form of a future rebate or credit for a
retroactive price reduction, representing its obligation to return the
customer's consideration. The estimate is updated at each reporting period date.

Goodwill and indefinite-lived intangible assets

Goodwill and indefinite-lived intangible assets are not subject to amortization.
We test goodwill and indefinite-lived intangible assets for impairment annually,
or more frequently if an event occurs or circumstances change that could
indicate a potential impairment. We compare the fair value of our reporting
units with their carrying amount and recognize an impairment charge for the
amount by which the carrying amount exceeds the reporting unit's fair value.

We believe that the accounting estimate for goodwill and indefinite-lived
intangible assets is a critical accounting estimate because of the judgment
required in assessing the fair value of each of our reporting units. We estimate
fair value through various valuation methods, including the use of discounted
expected future cash flows of each reporting unit, as well as the use of the
relief-from-royalty method on the Lord Jones® brand. Significant inputs include
discount rates, growth rates, and cash flow projections, and, for the Lord
Jones® brand, royalty rate. These valuation inputs are considered Level 3 inputs
as defined by ASC 820 Fair Value Measurement. The expected future cash flows for
each reporting unit are significantly impacted by current market conditions. If
these market conditions and resulting expected future cash flows for each
reporting unit decline significantly, the actual results for each segment could
differ from our estimate, which would cause goodwill to be impaired. Our
accounting for goodwill and indefinite-lived intangible assets represents our
best estimate of future events.

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In the second quarter of 2021, we recognized impairment losses related to
goodwill and indefinite-lived intangible assets of $178.4 million and $56.5
million, respectively, in the U.S. reporting unit. During our annual
quantitative impairment test in the fourth quarter of 2021, an additional
impairment of $1.0 million was recognized on the Lord Jones® brand due to the
U.S. segment's sustained operating losses and lack of revenue growth. In 2020,
based on our assessments and after considering potential triggering events,
including COVID-19, we recognized an impairment loss related to goodwill and
indefinite-lived intangible assets of $35 million and $5 million, respectively,
in the U.S. reporting unit. During our annual quantitative impairment test in
the fourth quarter of 2020, no further impairment was recorded as both fair
values of the goodwill as well as the Lord Jones® brand exceeded carrying amount
by more than 10%.

Inventory valuation

We value our inventory at lower of cost or net realizable value determined using
weighted average cost. Inventory is reflected at the lower of cost or net
realizable value considering future demand, market conditions and market prices.
Our estimates are based upon assumptions believed to be reasonable, but that are
inherently uncertain and unpredictable. These valuations require the use of
management's assumptions that do not reflect unanticipated events and
circumstances that may occur. We record an inventory valuation adjustment for
excess, slow moving, and obsolete inventory that is equal to the excess of the
cost of the inventory over the estimated net realizable value. We also
experience inventory write-downs due to reduced market prices. The inventory
valuation adjustment to net realizable value establishes a new cost basis of the
inventory that cannot be subsequently reversed. Inventory valuation adjustments
are based on inventory levels, expected product life, and estimated product
demand. In assessing the ultimate realization of inventories, we are required to
make judgments as to future demand requirements compared with inventory levels.

Long-lived assets



Long-lived assets are primarily comprised of property, plant, and equipment and
definite-lived intangible assets. We evaluate long-lived assets for impairment
when events or changes in circumstances indicate, in management's judgment, that
the carrying amount of such assets may not be recoverable. Long-lived asset
recoverability is assessed on an asset group basis. We group assets and
liabilities for our asset groups at the reporting unit level, which is the
lowest level for which cash flows are separately identifiable. Long-lived asset
recoverability is measured by comparing the carrying amount of the asset group
with its estimated future undiscounted pre-tax cash flows over the remaining
life of the primary long-lived asset of the asset group. If the carrying amount
exceeds the estimated future undiscounted cash flows as part of the
recoverability assessment, an impairment charge is recognized equal to the
difference between the carrying amount and fair value of the asset group. The
impairment charge is allocated to the underlying long-lived assets in the asset
group on a relative carrying amount basis; however, carrying amount after
allocated impairment is subject to a floor of fair value on an individual asset
basis.

We believe the accounting estimates used in the long-lived asset impairment
assessment are critical accounting estimates because of the judgment required in
identifying indicators of impairment, determining asset groups, assessing future
undiscounted cash flows of the asset groups, and as applicable, evaluating the
fair value of the determined asset groups as well as the underlying long-lived
assets, once indicators of impairment have been identified.

We periodically evaluate whether impairment indicators related to our property,
plant and equipment, operating leases and other long-lived assets are present.
These impairment indicators may include a significant decrease in the market
price of a long-lived asset or asset group, early termination of an operating
lease, a significant adverse change to the extent or manner in which a
long-lived asset or asset group is being used or in its physical condition, or a
current-period operating or cash flow loss combined with a history of operating
or cash flow losses or a forecast that demonstrates continuing losses associated
with the use of a long-lived asset or asset group. If impairment indicators are
present, we estimate the fair value for the asset or group of assets. We
estimate fair value of long-lived assets through various valuation methods,
including the use of the indirect cost approach, income approach, and direct
comparison approach. The indirect cost approach is based on the estimated cost
to reproduce the asset as if new, adjusted for physical deterioration and
consideration of functional and economic obsolescence. The income approach is
based on estimated rental and capitalization rates. The direct comparison
approach is based on recent observable transactions of comparable assets. The
estimation of future undiscounted cash flows of the asset groups as well as each
of these fair value approaches are significantly impacted by market conditions.
A significant adverse change in market conditions could result in fair values
that differ from our estimates, which could adversely impact whether an
impairment exists and the extent to which an asset group and underlying assets
are impaired. The difference between the fair value and the carrying amount of
the asset group is recorded as an impairment charge.

During the first quarter of 2022, we concluded that indicators of impairment
were present with respect to our corporate headquarters, for which we determined
we would seek a sublease. As a result, we recognized an impairment charge of
$2.0 million related to the right-of-use lease asset associated with our
corporate headquarters. In addition, we recognized an impairment charge of $1.5
million during the year ended December 31, 2022 related to leasehold
improvements and other office equipment that we plan to include in any potential
sublease agreement. The determination to seek a sublease of the property and
include leasehold improvements and other office equipment in any potential
sublease agreement triggered the impairment charges. Both of the impairment
charges are recognized as impairment loss on long-lived assets on the
consolidated statements of net income (loss) and comprehensive income (loss).

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During the fourth quarter of 2021, we concluded that indicators of impairment
were present with respect to our Canadian asset group. As a result, we estimated
the undiscounted cash flows for the Canadian asset group and found that the
carrying amount exceeded its undiscounted cash flows. Subsequently, we estimated
the fair values of all long-lived assets in the Canadian asset group using the
indirect cost approach for personal property, the income and direct comparison
approaches for our facility in Stayner, Ontario, Canada, and the indirect cost
approach for our facility in Winnipeg, Manitoba Canada, and compared the fair
values attributable to the Canadian asset group to their respective carrying
amounts and recorded a non-cash impairment charge on long-lived assets of
$119.9 million. Refer to Note 5 "Property, plant and equipment, net" to the
consolidated financial statements in Item 8 of this Annual Report.

We account for the cannabinoid exclusive licenses originating from the Ginkgo
Strategic Partnership as definite-lived intangible assets in accordance with the
acquisition method of accounting. The cost of cash and equity in Cronos issued
in exchange for the cannabinoid exclusive licenses is initially recognized and
measured at the date of acquisition. On the date of acquisition, we then test
each cannabinoid exclusive license for impairment by comparing the cost and fair
value of each license. We believe that the accounting estimate for the
cannabinoid exclusive licenses is a critical accounting estimate because of the
judgment required in assessing their fair values and the expected future cash
flows are significantly impacted by the future expectations for products
containing each cannabinoid. We estimate the fair value using the
relief-from-royalty method. Each cannabinoid exclusive license is subject to
amortization.

In August 2021, the Ginkgo Equity Milestone was achieved related to
cannabigerolic acid ("CBGA"). At that time, we issued 1.5 million common shares
valued at $9.0 million based on the observable market price of the shares. In
exchange, we received process and background intellectual property related to
CBGA, as well as the CBGA exclusive license, which is a perpetual license with
exclusivity for 10 years from the date the license is granted. An impairment of
$1.8 million was recognized to record the CBGA exclusive license at its fair
value of $7.3 million.

In November 2021, the Ginkgo Equity Milestone was achieved related to
cannabigerovarinic acid ("CBGVA"). At that time, we issued 1.5 million common
shares valued at $8.2 million based on the observable market price of the
shares. In exchange, we received process and background intellectual property
related to CBGVA, as well as the CBGVA exclusive license, which is a perpetual
license with exclusivity for 10 years from the date the license is granted. An
impairment of $3.0 million, was recognized to record the CBGVA exclusive license
at its fair value of $5.3 million.

In June 2022, the Ginkgo Equity Milestone was achieved related to
tetrahydrocannabivaric acid ("THCVA"). At that time, we issued 2.2 million
common shares and paid cash of $600, for total consideration of $8.4 million
based on the observable market price of the shares. In exchange, we received
process and background intellectual property related to THCVA, as well as an
exclusive license with respect to THCVA, which is a perpetual license with
exclusivity for 10 years from the date the license is granted. No impairment was
recorded with respect to the THCVA exclusive license.

In November 2022, the Ginkgo Equity Milestone was achieved related to the early
commercialization of cannabichromenic acid ("CBCA"). At the time we issued 0.5
million common shares valued at $1.5 million based on the observable market
price of the shares. In exchange, we received process and background
intellectual property related to CBCA, as well as an exclusive license with
respect to CBCA, which is a perpetual license with exclusivity for 10 years from
the date the license is granted. No impairment was recorded with respect to the
CBCA exclusive license.

In December 2022, the Ginkgo Equity Milestone was achieved related to
cannabichromevarinic acid ("CBCVA"). At the time we issued 1.5 million common
shares valued at $3.7 million based on the observable market price of the
shares. In exchange, we received process and background intellectual property
related to CBCVA, as well as an exclusive license with respect to CBCVA, which
is a perpetual license with exclusivity for 10 years from the date the license
is granted. No impairment was recorded with respect to the CBCVA exclusive
license.

Refer to Note 6 "Goodwill and Intangible Assets, net" to the consolidated financial statements in Item 8 of this Annual Report.

Valuation of derivative liabilities



Prior to December 16, 2022, derivative liabilities consisted of the Altria
Warrant, Pre-emptive Rights, and certain Top-up Rights. On December 16, 2022,
Altria notified us that its wholly owned subsidiary, Altria Summit LLC,
irrevocably relinquished the Warrant and all rights that it may have held in the
Warrant or any common shares underlying the Warrant for no consideration. As of
December 31, 2022, derivative liabilities consisted of Pre-emptive Rights and
certain Top-up Rights. We measure derivative liabilities at fair value at each
reporting date until settlement with the re-measurement gain or loss being
recognized immediately in net income (loss) and comprehensive income (loss). We
calculate fair value of the derivative liabilities using the Black-Scholes
model. Significant assumptions are used in the valuation of derivative
liabilities, including the expected term and our stock price. The assumptions
used in computing the fair value of derivative liabilities reflect our best
estimates, but involve uncertainties relating to market and other conditions,
many of which are outside of our control. Sensitivity is performed on various
inputs, refer to Note 8 "Derivative Liabilities" to the consolidated financial
statements in Item 8 of this Annual Report.

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Impairment of other investments without readily determinable fair values



We hold other investments without readily determinable fair values that are
measured under the cost method less impairment, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or
similar investment of the same investee. Each reporting period, we qualitatively
assess if indicators of impairment are present, and, if present, we estimate the
fair value of the investments and record impairment charges on the consolidated
statements of income if the carrying value exceeds fair value. To estimate the
fair value of the investments, we use a combination of the income and market
approaches. Under the income approach, significant assumptions used in the
discounted cash flow method that require the use of judgment are the discount
rate, growth rates, cash flow projections, and the timing of federal
legalization of cannabis in the U.S. Under the market valuation approach, the
key assumptions that require judgment under the Guideline Public Companies
method are cash flow projections, selected multiples and the discount for lack
of marketability. As a result of our analysis, we recorded non-cash impairment
charges of $11.2 million, $29.0 million and $21.2 million in the first, third
and fourth quarters of 2022, respectively, related to the PharmaCann Option. No
such impairments were recorded during the year ended December 31, 2021, as no
indicators of impairment were present.

Share-based compensation



We measure the fair value of services received in exchange for all stock options
granted based on the fair market value of the award as of the grant date. We
compute the fair value of stock options with time-based vesting using the
Black-Scholes option-pricing model and recognize the cost of the equity awards
over the period that services are provided to earn the award. The Black-Scholes
option-pricing model includes assumptions regarding dividend yields, expected
volatility, expected option term and risk-free interest rates. The assumptions
used in computing the fair value of share-based compensation expense reflect our
best estimates, but involve uncertainties relating to market and other
conditions, many of which are outside of our control. We estimate expected
volatility based primarily on historical daily price changes of our stock and
peers. The expected option term is the number of years that we estimate that the
stock options will be outstanding prior to exercise.

Loans receivable, net



Loans receivable are presented net of an allowance for credit losses. In the
third quarter of 2021, we changed methodologies for estimating the allowance for
credit loss on loans receivable from the historical credit loss method to the
probability of default method. The probability of default rate is adjusted for
current conditions and reasonable and supportable forecasts of future losses as
necessary. We may also record a specific reserve for individual accounts when we
become aware of specific customer circumstances, such as in the case of a
bankruptcy filing or deterioration in the borrower's operating results or
financial condition. The allowance for credit loss accrual balance was $13.1
million and $14.6 million as of December 31, 2022 and 2021, respectively.

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