Cronos Group Archives - Green Market Report

Debra BorchardtMay 7, 2021
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Cronos Group Inc. (NASDAQ: CRON) released its 2021 first-quarter business results with net revenue of $12.6 million versus last year’s $4.2 million for the same time period. The revenue from Cronos missed estimates by $4.81 million. It also dropped sequentially from the fourth quarter’s consolidated net revenue of $17 million.

The company said that the increase was due to continued growth in the adult-use Canadian cannabis market, sales in the Israeli medical cannabis market. In addition to that, an increase in sales in the U.S. segment driven by new U.S. hemp-derived CBD products introductions, partially offset by strategic price reductions on various adult-use cannabis products in Canada in the second half of 2020.

The Cronos first-quarter GAAP EPS of -$0.44 missed by $0.35. Cronos shares were trading down by almost 5% in early trading and were lately selling at $7.24. Traders on social media were pointing out the company has reported six consecutive quarters of negative gross margin. Gross margins for the first quarter were (23%) versus last year’s (77%) for the same time period.

Cronos also reported an adjusted EBITDA loss of $37.1 million in the first quarter which was marginally higher than last year’s loss of $5.7 million. The company attributed the increase in losses to an increase in sales and marketing costs due to brand development in the U.S. segment, and an increase in research and development costs driven by increased spending on product development and developing cannabinoid intellectual property. It was partially offset by decreases in sales and marketing spend in the ROW segment, gross loss, and general and administrative expenses.

“In the first quarter of 2021, our results in Canada were impacted by market dynamics due to the COVID-19 pandemic and ensuing stay-at-home orders and various other restrictions. Despite this, we continued to push forward our innovation pipeline and execute on our strategy, which was a true testament to the strength of our team,” said Kurt Schmidt, President and CEO, Cronos Group.

Brand Updates

It seems the marketing costs will probably remain elevated. In April 2021, Cronos Group announced that its Lord Jones brand launched a brand campaign entitled, “A Higher Order”. The campaign features new creative assets along with a mix of market activations including out-of-home advertising and television spots in select U.S. test markets. In April 2021, Lord Jones also launched a new product, the Lord Jones CBD Bump & Smooth Body Serum, which is designed to deliver non-abrasive chemical exfoliation that reduces bumpiness to reveal smoother, brighter-looking skin. The product is available on the Lord Jones website and is expected to be on Sephora’s website and in their retail outlets in the coming weeks.

In the coming weeks, Cronos said it intends to launch Spiniach edibles, a new product category in the Canadian adult-use market. The company is late to enter the edibles market in Canada but explained this by saying it aims to be the best, not necessarily the first.

In the first quarter of 2021, Cronos Israel successfully launched PEACE NATURALS branded pre-rolls into the Israeli medical cannabis market. This launch follows the successful launch of dried flower and oils to the Israeli medical cannabis market in 2020. Cronos Israel continues to execute in Israel’s rapidly growing market.


Debra BorchardtFebruary 26, 2021
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Cronos Group Inc. (NASDAQ: CRON) released its 2020 fourth quarter and full-year business results for the quarter ending in December. Cronos delivered net revenue increased 133% to $17.0 million in the fourth quarter versus $9.7 million for the same time period in 2019. The net loss for the quarter was a whopping $111 million versus last year’s net income of $61 million.  The stock was slipping by 2% in early trading as the fourth quarter GAAP EPS of -$0.31 missed by $0.23.

The company said that the increase year-over-year was primarily driven by continued growth in the adult-use market in Canada, sales in the Israeli medical market, and growth in our U.S. segment. The adjusted EBITDA loss of $53.1 million in the quarter increased by $1.5 million from 2019. The increase in losses year-over-year was primarily driven by an increase in general and administrative expenses and an increase in R&D spending.

“Our fourth quarter 2020 results are the summation of the hard work and perseverance the company has put into this past year despite the challenges of 2020. As we look to 2021, I’m incredibly excited about the teams we have supporting our brands and the breakthrough research and development (“R&D”), innovation and exciting marketing campaigns Cronos Group plans to execute on. We are poised to build upon the growth we experienced in 2020 as we continue to push cannabinoid innovation and differentiated product offerings under our portfolio of brands,” said Kurt Schmidt, President and CEO of Cronos Group. “My goals this year will be to focus on building a winning team by fostering a collaborative, performance-driven culture; continue to focus on creating disruptive technology and innovation; grow and develop our brands and strengthen our ability to compete through R&D, strategic global infrastructure and engaging in the legislative process in key markets.”

Full Year Results

Cronos reported net revenue grew by 83% to $37.2 million for the full year of 2020 versus $16.8 million for 2019. The company attributed the increase year-over-year to continued growth in the adult-use market in Canada and sales in the Israeli medical market. It was partially offset by non-recurring wholesale revenue in the Canadian market in Full-Year 2019 and strategic price reductions on various adult-use cannabis products in Canada in Full-Year 2020. The net loss for the year was $75 million versus last year’s net income of $1.1 million.

Gross loss of $30.0 million in Full-Year 2020 increased by $10.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by third party purchased flower associated with adult-use products in Canada and a decline in wholesale sales in Full-Year 2020 versus Full-Year 2019. The company said it expects that gross margin will continue to fluctuate as price and mix change from quarter-to-quarter. Adjusted EBITDA loss of $98.3 million in Full-Year 2020 increased by $13.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by an increase in gross loss, increased R&D spending, increased general and administrative expenses, and higher sales and marketing costs related to brand development.

Write Downs

Still, Cronos wrote down an inventory of $26.1 million for the full year 2020 on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market. The company said it may incur further inventory write-downs due to pricing pressures in the marketplace.

The company incurred an inventory write-down in the fourth quarter of $15.0 million on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market.

 


Kaitlin DomangueFebruary 25, 2021
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It’s time for your Daily Hit of cannabis financial news for February 25th, 2021. 

On the Site

Should You Use CBD Gummies to Help Mental Health? 

There is plenty of evidence to show that CBD can have a profound impact on mental health. This article dives into some of the research and studies that exist include: 

  • Anti-inflammatory
  • Anxiety relief from CBD 
  • CBD’s interaction with serotonin receptors in the brain
  • And other additional pieces of research 

 

Innovative Industrial Stock Sells Off Despite Solid Earnings

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market closed on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

 

Valens Reiterate Guidance Despite Slight Drop in Sales

The Valens Company Inc. (OTCQX: VLNCF) reported its fourth quarter and fiscal year financial results for the period ended November 30, 2020. Valens reported gross revenue for the fourth fiscal quarter fell to $17.9 million from $18.5 million in the third quarter of 2020. The net loss increased to $16.6 million sequentially over the third quarter’s net loss of $3 million.

 

PharmaDrug Files For DMT To Be Used for Kidney Transplants

PharmaDrug Inc. (CSE: BUZZ) (OTC Pink: LMLLF) has filed for an application with the U.S. Food and Drug Administration to receive Orphan Drug Designation (“ODD”) for N,N-Dimethyltryptamine or DMT in the prevention of ischemia-reperfusion injury in patients undergoing kidney transplantation.

 

Indus Holdings Buys Lowell Herb for $39 Million

California-based Indus Holdings, Inc. (OTCQX: INDXF) is buying Lowell Herb Co. and Lowell Smokes in a deal valued at $39 million. The acquisition includes trademark brands, product portfolio, and production assets of Lowell from The Hacienda Group effective immediately. The company will change its name to Lowell Farms Inc.

 

Acreage Holdings Sells Florida Property for $60 Million

Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

In Other News

MJ Holdings, Inc. to Acquire Medical and Recreational Cultivation Licenses 

MJ Holdings, Inc. (OTC PINK: MJNE) has reached a point of being ready to purchase two cultivation licenses (recreational and medical) and two production licenses (recreational and medical) and transfer the appropriate license to proprietary land. 

“In consideration of $1.250M and 200,000 shares of our common stock (Purchase Price), we will soon fully control our own destiny as we have applied to transfer the cultivation licenses to our proprietary land: The Farm. We have arranged an amicable separation under our existing management agreement with Curaleaf/Acres and are developing our cultivation facility on The Farm for our own use. With the enormous Las Vegas tourism industry soon to be on the rebound, we are well positioned to meet or exceed our fair share of demand,” said Paris Balaouras, Founder and Chief Cultivation Officer of MJ Holdings, Inc. 

 

Cronos Group Earnings Preview for Q4 2020 

Cronos Group (OTC:CRON), is set to announce their earnings for the fourth quarter of 2020. The consensus EPS estimate is -$0.08, and the revenue estimate at $13.23 million. The company has beat estimates 75% of the time over the last year, and has beaten revenue estimates 25% of the time. 

 

Kalamazoo Mayor to Attend Ribbon Cutting Ceremony of Cookies Store 

Kalamazoo’s mayor, David Anderson, has confirmed his participation in a ribbon cutting ceremony for a Cookies retail location on February 26th. The event was announced by the company in a press release. 

Cookies is owned by California rapper and entrepreneur, Berner. 

“The Midwest is an important part of Cookies’ overall expansion plan, and our partnership with Gage Cannabis has been integral,” Cookies CEO Berner said in a news release. “We’ve seen tremendous demand from cannabis consumers in Michigan and the surrounding areas and look forward to continuing to serve them as our partnership grows with this second location.”


Debra BorchardtNovember 5, 2020
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Cronos Group Inc. (NASDAQ: CRON) reported that its third-quarter net revenue of $11.4 million increased by $5.6 million from the third quarter in 2019. The stock was moving higher by over 7% in early trading as the earnings per share of $0.19 beat the analyst estimates by $0.25. In addition to the earnings, Kurt Schmidt was named President and Chief Executive Officer.

The company said the increase was due to continued growth in the adult-use Canadian cannabis market, the inclusion of the Redwood acquisition in its financial results and growth in the Israeli medical cannabis market. However, Cronos also said that the revenue increase was partially offset by non-recurring wholesale revenue in the Canadian market in the third quarter in 2019 and strategic price reductions on various adult-use cannabis products in certain Canadian provinces in the 2020 third quarter.

Despite the increased revenue, Cronos still delivered an operating loss of $41.2 million in the third quarter which was $10.5 million higher than the third quarter in 2019. The company attributed the increase in losses to higher share-based payments related to separation agreements with certain Redwood employees, increased general and administrative expenses inclusive of review costs and costs related to the previously disclosed restatement of the company’s 2019 interim financial statements, higher sales and marketing costs related to brand development, and R&D spending, partially offset by a decrease in gross loss. A gain on the revaluation of derivative liabilities resulted in $105 million, which led to a net income figure of $68 million. A currency translation boosted this to a comprehensive net income of $$94 million.

The company continues to lose money, albeit less than in 2019, as the gross loss of $1.5 million in the third quarter decreased by $1.6 million from last year’s $3.1 million. The company attributed the decrease in losses to an increase in net revenue and the gross profit contribution of the U.S. business segment. This was offset by an increase in the cost of sales primarily driven by a higher volume of adult-use sales and the associated third-party purchased flower and a decline in wholesale sales.

“The opportunities before Cronos Group are more exciting than ever and I am honored to have brought the company to this important inflection point as we bring on Kurt Schmidt to serve as our new President and CEO,” said Mike Gorenstein, Executive Chairman of Cronos Group. “We look forward to continuing to launch innovative cannabinoid products in Canada and to expand our portfolio of U.S. hemp-derived CBD brands. Internationally, we’re pleased with the progress we have made in Israel and as regulations continue to evolve, we will look to establish ourselves as a leader in the markets in which we operate.”

New Products

Cronos Group’s U.S. segment launched a new hemp-derived CBD skincare and personal care brand called Happy Dance, in partnership with actress Kristen Bell. Happy Dance products are made with CBD from premium full-spectrum hemp extract and provide consumers with high-quality skincare at an accessible price point. Happy Dance launched with three product offerings: All-Over Whipped Body Butter +CBD, Head-To-Toe Coconut Melt +CBD and Stress Away Bath Bomb +CBD, all of which are currently available online, with intentions to enter the brick and mortar channel in the future.

In October 2020, the U.S. segment also launched new full-spectrum tinctures under its hemp-derived CBD brand, Lord Jones. The full-spectrum tinctures are available in two flavors, peppermint, and orange. The U.S. segment anticipates launching a Lord Jones branded hemp-derived CBD infused Lip Balm in November 2020.

“In such a short period of time, Mike and the Cronos team have achieved several impressive milestones,” said Kurt Schmidt, President and CEO of Cronos Group. “From being the first pure-play cannabis company to list on the NASDAQ, to scaling operations worldwide, Cronos Group is well-positioned to continue to thrive.” Schmidt previously served as Director and Chief Executive Officer of Blue Buffalo Company, Ltd. from 2012 through 2016. Prior to joining Blue Buffalo, Mr. Schmidt was Deputy Executive Vice President at Nestlé S.A., where he was responsible for Nestlé Nutrition, including several science-oriented and heavily regulated businesses. He also served as a member of Nestlé’s Executive Committee.


Debra BorchardtOctober 30, 2020
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Altria Group (NYSE: MO) reported its third-quarter earnings as regular smokers seem to be holding steady, but its stake in the vape company Juul Labs and cannabis company Cronos Group (CRON) didn’t fare as well.

Altria took another massive writedown on its investment in Jull Labs. The original 38% stake in the e-cigarette company was $12.8 billion it has now been marked down to just $1.6 billion. That’s a drop of 88% devaluation. On top of all that, Altria wrote off another $2.6 billion and took $1.40 per share in charges to earnings.

With regards to Cronos, the company has this to say in its filing:

Altria has considered the impact of COVID-19 on the business of Cronos, including its sales, distribution, operations, supply chain and liquidity. Cronos continues to be impacted by COVID-19, due in part to government action requiring closures or limited occupancy of retail stores in the United States. During the second quarter of 2020, Cronos recorded an impairment charge on goodwill and intangible assets as a result of the impact of COVID-19 (which Altria recorded in the third quarter of 2020 due to its one-quarter lag in reporting Cronos’s results). In addition, the fair value of Altria’s investment in Cronos was approximately 20% less than its carrying value of $1.0 billion at September 30, 2020. While Altria believes that this decline in fair value is temporary, it will continue to monitor its investment in Cronos, including the impact of COVID-19 on Cronos’s business and market valuation.

 

The company reported the loss on the Cronos financial instruments for the quarter was $105 million, for the past nine months $202 million. For the last 12 months ending in September, Altria reported a loss on Cronos-related financial instruments of $317 million.

“Altria continued to demonstrate its resilience during the third quarter while navigating the challenges presented by the COVID-19 pandemic,” said Billy Gifford, Altria’s Chief Executive Officer. “In the third quarter, our tobacco businesses delivered strong financial performance once again and we continued to make progress against our 10-year Vision.”

Altria gave the following guidance:

Altria narrows its 2020 full-year adjusted diluted earnings guidance based on year-to-date performance and insight into an additional quarter of ABI earnings contributions. Altria now expects its 2020 full-year adjusted diluted EPS to be in a range of $4.30 to $4.38, representing a growth rate of 2% to 4% from an adjusted diluted EPS base of $4.21 in 2019. Altria also narrows its expectation for its 2020 full-year adjusted effective tax rate to be in a range of 24.5% to 25.5%.
 
While the 2020 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic. Altria will continue to monitor conditions for ATCs, including unemployment rates, disposable income (which may be impacted by potential future changes in government stimulus and federal unemployment benefit payments), mobility and purchasing behaviors.
 
Altria revises its estimates for 2020 full-year domestic cigarette industry volumes to be in a range of unchanged versus the prior year to down 1.5% based on better year-to-date industry performance and expectations for continued category resilience. This range replaces Altria’s previous estimates of down 2% to 3.5% versus the prior year.

Debra BorchardtAugust 6, 2020
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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) stock fell over 13% to lately trade at $6.03 after the company reported a net loss for the second quarter of $107 million versus last year’s earnings of $185 million for the same time period. The loss of $0.31 cents per share was worse than the FactSet estimate for a loss of $0.07 per share.

Cronos Group delivered net revenue of $9.9 million in the quarter for an increase of $2.2 million over last year’s $7.6 million. The company said that the increase year-over-year was primarily driven by continued growth in the adult-use Canadian cannabis market, sales resulting from the launch of cannabis vaporizers in the Canadian market, including both adult-use and direct-to-consumer, and the inclusion of the Redwood acquisition in its financial results, partially offset by non-recurring wholesale revenue in the Canadian market in Q2 2019.

“In the second quarter of 2020, we continued our progress despite unprecedented shifts in our industry and the global economy. We officially entered the Israeli medical cannabis market, with Cronos Israel commencing the sale of PEACE NATURALS branded dried flower products to medical patients. During these extraordinary times, it is very encouraging to see that we are making progress against our strategy across our global footprint,” said Mike Gorenstein, CEO of Cronos Group.

The company’s gross (loss) was $(3.0) million in the quarter versus $4.1 million for the same time period last year. The decrease year-over-year was primarily driven by an increase in cost of sales driven by a higher volume of adult-use sales and the lack of wholesale revenue, as well as an inventory write-down of $3.1 million on dried cannabis and cannabis extracts.

COVID Problems

Cronos Group said that the ongoing restrictions and closures experienced by retail stores in the U.S. as a result of the COVID-19 pandemic had negatively impacted sales and demand which has resulted in slower than expected. The company said it expects the revenue growth and operating results in the U.S. reporting unit to continue to be
negatively impacted as the decrease in customer demand and retail closures are expected to continue as a result of the pandemic.  The company reassessed the valuations on the U.S. and the Lord Jones brand and lowered those amounts. The company said it does not believe the declines in fair values are temporary. Cronos recorded $35.0 million of impairment charges on the U.S. reporting unit and $5.0 million on the Lord Jones brand for the three and six months ended June 30, 2020.

Litigation

On June 16, 2020, an alleged consumer filed a Statement of Claim on behalf of a class in the Court of Queen’s Bench of Alberta in Alberta, Canada, against the Company and other Canadian cannabis manufacturers and/or distributors. The Statement of Claim alleges claims related to the defendants’ advertised content of cannabinoids in cannabis products for medicinal use on or after June 16, 2010 and cannabis products for adult use on or after October 17, 2018. The Statement of Claim seeks a total of C$500 million for breach of contract, compensatory damages, and unjust enrichment or such other amount as may be proven in trial and C$5 million in punitive
damages against each defendant, including the Company. The Company has not responded to the Statement of the Claim.

A number of claims, including purported class actions, have been brought in the U.S. against companies engaged in the U.S. hemp business alleging, among other things, violations of state consumer protection, health and advertising laws. On April 8, 2020, a putative class action complaint was filed in the U.S. District Court for the Central District of California against Redwood, alleging violations of California’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, and breaches of the California Commercial Code for breach of express warranties and implied warranty of merchantability with respect to Redwood’s marketing and sale of U.S. hemp products. The complaint does not quantify a damage request. On April 14, 2020, the class action complaint was dismissed for certain pleading deficiencies and the plaintiff was granted leave until April 24, 2020 to amend the complaint to establish federal subject matter jurisdiction. As of the date of this Quarterly Report, the plaintiff has not refiled the
complaint and the complaint has been dismissed without prejudice. The company said it expects litigation and regulatory proceedings relating to the marketing, distribution and sale of its products to increase.


StaffJuly 1, 2020
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Editors Note: This is a guest post.

More and more countries decide to legalize cannabis and give entrepreneurs a chance to make money and keep the economy. 

In 2019, the marihuana stocks were supposed to prove their worth on Wall Street by generating steady profits. However, things didn’t go according to the plan. Many investors missed opportunities due to high tax rates and supply issues in the United States and Canada. These obstacles helped the black market to thrive and left marijuana stock investors just heart-broken – no one could predict the government’s roadblocks. 

Despite all these setbacks, some pot stocks still have good market value. Do you want to learn how entrepreneurs legally make money on selling cannabis these days? Just keep reading:

Canopy Growth And Its Bright Start

Canopy Growth Corporation (NYSE: CGC) (also known as Tweed Marijuana) was founded by two friends – Chuck Rifici and Bruce Linton, in 2013. 

In 2019, the company became the largest cannabis company in the world thanks to its value of shares and market capitalization. The company has even survived all challenges in 2019 without losing a single employee. During the crisis, there were 3200 employees in Canopy Growth. 

These days, Canopy Growth is legally selling their products to 16 other countries (Spain, Germany, Australia, Canada, Jamaica, Czech Republic, Chile, etc.). At the end of 2019, the company set up a partnership with a UK-based think-tank called Beckley Foundations, which will allow them to start selling medical cannabis all around the UK as well.

David Klei, the new CEO of Canopy Growth Corporation, says that it is only the beginning of their company. In 2019, they also announced the release of edible cannabis products such as chocolates and beverages. The company might show even more surprises at the end of 2020. Mr. Klei has a point – it is only the beginning.

Curaleaf Holdings and its Cannabis King named Boris 

Curaleaf Holdings (CURLF) is a Canadian company that produces and distributes cannabis-based products around the world. There is one special thing about the company. As the owners of the company state on their website and in numerous interviews, research and advocacy help them to become leaders in the competitive industry.

In 2020, Curaleaf operated more than 57 dispensaries around the US and Canada. No wonder, Boris Jordan, the chairman of Curaleaf, is called a Cannabis King in the American mass media. 

GW Pharmaceuticals 

GW Pharmaceuticals (NASDAQ:GWPH) is a pharmaceutical company based in the UK. It helps to treat patients with multiple sclerosis with the help of natural cannabis. 

In 2018, their cannabis-based products such as Sativex and Epidiolex were approved by the US Food and Drug Administration. We can find their products in London, Prague, and Las Vegas dispensaries

In 2020, the net worth of the company is $3.21 billion. At the moment, the company has its branches in Germany, France, Spain, Italy, and the US. 

Cronos Group

Cronos Group (CRON) is an innovative global cannabinoid company with an office in New York. In 2019, the company received a $2.4 billion equity investment from Altria Group ( the largest producer of tobacco).

Investors consider Cronos Group one of the most cash-rich pot stock in the industry. The company was founded in 2016 and was run by only 2o employees at the beginning. Right now, there are almost 1000 employees in Cronos Group. Mike Gorenstein, CEO of the company, says that they have even more ambitious plans for the future. 

Tilray 

Tilray (TLRY) is another cannabis company that has a great place in the stock market. Tilray is a Canadian pharmaceutical company that has operations in the unites States, New Zeland, Portugal, Australia, Germany, and Latin America. 

All you need to know about Tilray is that it is one of the first medical cannabis producers in North America. 

Once marijuana was legalized in the United States, Tilray was the first cannabis company legally exporting their products to Americans. The company debuted on the Nasqad Stock Market with $17 per share.

In 2018, the price increased to $214 per share. However, the crisis in August 2019 brought Tilray’s founder Brendan Kennedy back to Earth – the price crashed to $29 per share. Despite such a failure, the company is still afloat, with the capital of $1.18 billion. 

The Bottom Line 

The cannabis industry is growing rapidly around the world. We might expect even more companies on the market in the near future. However, at this point, entrepreneurs need more support from the government. 

Politicians might not be interested in helping the pot business. On the other hand, they should be the ones wanting to fight the illegal drug trade. Supporting local cannabis companies will not only help to generate the requisite public revenues and provide jobs but will also help to protect users from poor quality cannabis-based products. 

 


Debra BorchardtMay 8, 2020
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Cronos Group Inc. (NASDAQ: CRON) announced that its 2020 first-quarter net revenue rose to $8.4 million versus last’s year’s $5.4 million for the same time period. Cronos stock was lifted in early trading as the company beat revenue estimates by $0.25, but despite revenue rising 181% year-over-year, it missed estimates by $0.89 million.

Cronos said that the increase was primarily driven by continued growth in the adult-use Canadian cannabis market, sales resulting from the launch of cannabis vaporizers, and the inclusion of the Redwood acquisition in our financial results. The company reported a net income of $75.6 million, which was helped by a $113 million pre-tax unrealized gain resulting from the non-cash change in the fair value of financial derivative liabilities associated with the investment by Altria.

Losses though remain elevated as the company delivered an operating loss of $45.1 million in the record, which was also higher than last year’s operating loss of $34.9 million. The company said that it was due to increased headcount, internal review costs of $4.4 million related to the restatement of our 2019 interim financial statements, higher sales, and marketing costs related to brand development, and research and development costs related to our Ginkgo partnership, activities at Cronos Fermentation, and spending on vaporizer innovation at the Cronos Device Labs research and development center.

“Cronos Group started 2020 energized and determined to continue to see through our core strategic initiatives to drive long-term and sustainable growth. This quarter, we moved closer to officially entering the Israeli medical cannabis market with our Cronos Israel operations preparing to sell PEACE NATURALS™ branded dried flower products to medical patients. The Israeli medical market is a growing channel, and we look forward to serving this market in 2020 and beyond,” said Mike Gorenstein, CEO of Cronos Group.

Write-downs

Cronos said that it wrote-down $8 million on dried cannabis and cannabis extracts, primarily driven by fixed-price contracts negotiated prior to cannabis product price compression due to broader trends of oversupply in the Canadian market. The company said in a statement, “If we were to adjust for the effects of the inventory write-downs, gross profit in Q1 2020, would have been $1.5 million, representing a gross margin of 18%.” Cronos said it expects to incur more inventory write-downs as a result of pricing pressures and the repurposing of the Peace Naturals Campus.

COVID-19

Like most companies, Crons has also been affected by the pandemic. The company said that its distribution channels continue to see disruptions globally.  “Many brick-and-mortar retailers in the U.S., where Lord Jones products are distributed, have closed, although some retail partners continue to operate through their online sites.” The company noted that in Canada, brick-and-mortar cannabis retailers in certain provinces have mandated curbside click-and-collect models, reduced store opening hours, or have closed retail entirely. “Provincial purchasers and private retailers have also reduced staff on-site, which has led to a decrease in delivery availability and a reduction in the frequency and/or size of purchase orders.” The company also stated that it continues to have increased uncertainty in forecasting customer demand and sales velocity.

Gorenstein added, “Despite the challenges and uncertainty posed by the COVID-19 pandemic, we remain agile and focused as a business. Our brand portfolio continues to launch innovative products to consumers as we adapt to an online-first distribution model in both the U.S. and Canada. We continue to reach our stakeholders and consumers through creative digital marketing. And our product innovation and R&D projects continue to progress.”


Debra BorchardtMarch 30, 2020
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Good luck making sense of Cronos Group Inc. (CRON.TO) (CRON.TO) 2019 fourth quarter and full-year business results. The company said it will restate its unaudited interim financial statements for the first, second and third quarters of 2019. The icing on the earnings cake was that it will also reduce revenue for the three months ending March 31, 2019, by C$2.5 million and the three months ended September 30, 2019, by C$5.1 million.

“We are pleased that the Audit Committee has completed its review and that Cronos Group is now current with the filing of our financial reports. As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy,” said Mike Gorenstein, CEO of Cronos Group.

Fourth Quarter

Despite the restatements, the company reported net revenue of $7.3 million in the fourth quarter that topped last year’s fourth quarter by $3.0 million. The kicker is that the quarterly expenses were $43 million. The company spent $13 million in sales and marketing and another $14 million in general and administrative expenses. This is in one quarter for $7 million in revenue.

The company attributed the increase to a rise in the volume of products sold in the Rest of World segment and the Redwood acquisition, but that this was partially offset by a decrease in the price of products sold in the Rest of World segment.

Cronos also deliver an operating loss of ($63.9) million in the quarter driven by the inventory write-down of one-time charges related to the repurposing of certain facilities at the Peace Naturals Campus, an increase in general and administrative expenses in order to support Cronos Group’s growth strategy, an increase in sales and marketing in order to create, build and develop brands and an increase in R&D costs.

Full Year

For the full year of 2019, the company reported a net revenue of $23.8 million and an operating loss of ($121.5) million primarily driven by inventory write-downs in 2019. Cronos wrote down $29.4 million, made up of a one-time charge of $1.9 million, related to the repurposing of certain facilities at the Peace Naturals Campus, and a $27.5 million write-down on cannabis plants, based on the estimated market value of the specific strains previously in production, and cannabis oil, primarily driven by downward pressure in market prices during the year.

However, due to a $118 million unrealized gain on the revaluation of financial liabilities, primarily resulting from the non-cash change in the fair value of financial derivative liabilities associated with the investment by Altria Group, Inc. Cronos Group recorded a pre-tax unrealized gain of $1.2 billion.

 


Debra BorchardtFebruary 24, 2020
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Cronos Group’s (NASDAQ: CRON) (TSX: CRON) decision to delay its earnings release makes it the latest cannabis company to unsettle the market just as it is trying to crawl out of a bear market. On Monday the company stated it would delay its 2019 fourth quarter and full-year earnings release and conference call, previously scheduled for Thursday, February 27, 2020. According to the company statement, Cronos “has had a delay in the completion of its financial statements and will make a further announcement in a subsequent press release to schedule the date and time of the earnings conference call.”

This follows one month after the company’s Chief Operating Officer David Hsu resigned from his position and no successor was named. Hsu had joined the company in 2016 and oversaw all of Cronos Group’s operations including construction, cultivation, and manufacturing as Chief Operating Officer. Prior to joining Cronos Group, David spent over ten years consulting with Deloitte and CRG Partners, a premier turnaround consulting firm, where he operated and managed distressed companies with revenues of more than $500.

Stock Performance

The stock has taken a tumble along with most cannabis stocks over the past year. Cronos’ 52-week high was C$32 and the low was $7. The stock was lately trading at C$9.44 and seemed to be slowly building its way back up the charts.

Last Quarter Was Good

If Cronos is signaling that this quarter’s numbers will be disappointing, it will surprise investors. Last November, the company reported that its third-quarter net revenue increased 238% in Canadian dollars to $12.7 million versus last year’s $3.8 million for the same time period. Cronos attributed the gain to the launch of the adult-use market in Canada and the inclusion of Redwood from the date of closing on September 5, 2019, to the end of the quarter. Sequentially, net revenue rose 24% from $10.2 million in the second quarter as the company said that improvement was due to increased sales in domestic dried cannabis and the inclusion of Redwood.

Overall figures form Canada point to a strong end of 2019. Statistics Canada data showed cannabis sales in December climbed 8.1% sequentially to $146 million. This was the third straight month in a row sales have increased with the biggest increases coming from Ontario, Quebec and Alberta.


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