Cronos Group(CRON) - 2021 Q4 - Annual Report

Strategic Investments and Partnerships - Cronos Group made a strategic investment of approximately $110.4 million for a 10.5% stake in PharmaCann Inc., a leading U.S. cannabis company[241]. - Cronos Group's joint venture, Cronos GrowCo, began selling to Canadian license holders in the wholesale market in Q3 2021[243]. - The company appointed Jeff Jacobson as Senior Vice President, Head of Growth (North America), to enhance its market leadership[244]. Product Development and Launches - The company launched SOURZ by Spinach™, a new line of cannabis gummies, in June 2021, enhancing its product portfolio[241]. - In 2021, the company expanded its Spinach branded product portfolio with premium high-THC strains and launched its first cultured cannabinoid product, SPINACH FEELZ™[241]. Financial Performance - For FY 2021, the company reported consolidated net revenue of $74.4 million, an increase of 59% from $46.7 million in FY 2020[252]. - The consolidated cost of sales for FY 2021 was $80.0 million, representing a 72% increase from $46.5 million in FY 2020[253]. - The gross profit for FY 2021 was $(17.5) million, an improvement of $8.3 million compared to $(25.8) million in FY 2020[256]. - Operating expenses for FY 2021 totaled $543.1 million, a significant increase of 181% from $193.6 million in FY 2020[257]. - The net loss for FY 2021 was $(397.2) million, compared to a net loss of $(75.3) million in FY 2020, reflecting a 428% increase in losses[264]. - Adjusted EBITDA for the year ended December 31, 2021, was $(160.5) million, a decline from $(147.3) million in 2020, indicating a worsening operational performance[296]. Impairment Charges and Losses - Cronos Group reported a non-cash impairment charge of $119.9 million related to the planned exit from the Peace Naturals Campus in Ontario[245]. - The company reported an impairment loss on goodwill and indefinite-lived intangible assets of $236.1 million in FY 2021, a 490% increase from $40.0 million in FY 2020[262]. - The impairment loss on goodwill and indefinite-lived intangible assets for the year ended December 31, 2021, was $236.1 million, primarily related to the U.S. segment[300]. - The company recognized an impairment loss on long-lived assets of $127.6 million for the year ended December 31, 2021, reflecting significant asset write-downs[296]. Inventory and Sales - The company recorded consolidated inventory write-downs of $12.0 million in FY 2021, a decrease of 54% from $26.1 million in FY 2020[255]. - For FY 2021, the ROW segment reported net revenue of $64.6 million, an increase of 73% from FY 2020, primarily driven by growth in the adult-use market in Canada[275]. - The U.S. segment reported net revenue of $9.9 million in FY 2021, a 4% increase from FY 2020, primarily due to the introduction of new hemp-derived CBD products[281]. Cash Flow and Liquidity - The company has approximately $30.2 million in cash requirements related to R&D activities as of December 31, 2021, with $20.2 million payable within 12 months[293]. - As of December 31, 2021, the company had $887.0 million in cash and cash equivalents and $117.7 million in short-term investments, with no external financing[289]. - The company reported a net cash used in operating activities of $153.6 million for FY 2021, an increase of $8.7 million from FY 2020, primarily due to a rise in net loss[285]. Operational Challenges - The ongoing COVID-19 pandemic has caused supply chain challenges, but the company has not yet seen a significant impact on its operations[238]. Research and Development - Research and development expenses increased to $23.3 million in FY 2021, a 15% rise from $20.4 million in FY 2020[259]. Financial Instruments and Valuations - The company expects continued fluctuations in derivative valuations due to changes in share price, with a gain on revaluation of derivative liabilities of $151.4 million reported for FY 2021[266]. - The fair value of derivative liabilities is calculated using the Black-Scholes model, with significant assumptions impacting the valuation[309]. Shareholder and Transaction Costs - Share-based payments totaled $10.2 million for the year ended December 31, 2021, compared to $15.4 million in 2020[296]. - Transaction costs related to strategic projects amounted to $3.8 million for the year ended December 31, 2021[296].