Cronos Group Inc

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 as further discussed under “Business—Altria Strategic Investment” in Part I, Item 1 of this Annual Report. As of December 31, 2023, we had $669.3 million in cash and cash equivalents and $192.2 million in short term investments, compared to $764.6 million in cash and cash equivalents and $113.1 million in short term investments as of December 31, 2022. As of both December 31, 2023 and December 31, 2022, we had no external financing.

Cash flows

2023 cash flows vs 2022 cash flows

Operating activities

During 2023, we used $42.8 million of cash in operating activities, compared to $88.9 million in 2022, representing a decrease in cash used of $46.1 million. This change is primarily driven by an $88.3 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, partially offset by and a net decrease in changes in operating assets and liabilities of $42.2 million related to payments for income taxes, the timing of collections of receivables, payments for accruals and payables, and purchases of inventory.

Investing activities

During 2023, we used $59.5 million of cash in investing activities, compared to $1.8 million during 2022, representing an increase of $57.7 million in net cash used. This change is primarily driven by higher net purchases of short-term investments, partially offset by higher net repayments on loan receivables and lower purchases of property, plant and equipment.

Financing activities

During 2023, cash used in financing activities was $1.0 million, as compared to $2.9 million in 2022, representing a decrease in net cash used of $1.9 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 believe we have adequate liquidity to meet working capital requirements.

Our material cash requirements include the following contractual and other obligations as of December 31, 2023:

Leases

We have operating leases for land, buildings and office space. As of December 31, 2023, the future minimum payments required under these leases totaled $3.0 million, with $1.1 million payable within 12 months. Refer to Note 8 “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, 2023, Cronos GrowCo had approximately $0.8 million undrawn on its credit facility, with no amounts expected to be drawn within 12 months. The Mucci Promissory Note and Cannasoul Collaboration Loan (each as defined below) have been fully drawn. Refer to Note 5 “Loans Receivable, net” to the consolidated financial statement in Item 8 of this Annual Report for further information.

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. As of December 31, 2023, the Company had purchase obligations of $13.0 million, with $10.1 million payable within 12 months. Other purchase obligations consist of noncancellable obligations related to maintenance, internet, and telecommunication service. As of December 31, 2023, we had other purchase obligations of $4.4 million, with $2.2 million payable within 12 months.