CRONOS GROUP INC. Unaudited Condensed Interim Consolidated Financial Statements For the Three and Nine Months Ended

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

As at December 31, 2018, the Company held a 19% ownership interest in Whistler Marijuana Company ("Whistler"). During the nine months ended September 30, 2019, the Company divested its investment in Whistler.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

The following table summarizes the impacts of adopting IFRS 16 on the Company's unaudited condensed interim consolidated financial statements as at the date of initial application:

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

The following is the Company's policy for accounting for lease contracts in accordance with IFRS 16:

At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property and equipment. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

As at September 30, 2019, the Company has 75,649 plants classified as biological assets which are expected to ultimately yield 4,388 kg of dry cannabis (December 31, 2018 - 46,004 plants which were expected to ultimately yield 6,303 kg of dry cannabis).

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

As at September 30, 2019, the Company held 89 kg (December 31, 2018 - 29 kg) of dry cannabis and 7 kg (December 31, 2018 - 4 kg) of cannabis oils as retention samples, which are valued at $nil.

Costs incurred to transform biological assets up to the point of harvest ("production costs") are capitalized as they are incurred, which become the cost basis of the biological assets. These costs include direct costs such as nutrients, soil, and seeds, as well as other indirect costs such as utilities, an allocation of indirect labour, property taxes, and depreciation of equipment used in the growing process. The biological assets are then revalued to fair value less costs to sell immediately prior to harvest and at the end of each reporting period. Gains or losses arising from changes in the fair value less costs to sell, excluding capitalized production costs, are presented as unrealized changes in the fair value of biological assets. At the point of harvest, agricultural produce consisting of cannabis is considered inventory. The fair value less costs to sell becomes the cost base of inventory. Any subsequent post-harvest costs ("processing costs"), including direct costs attributable to processing and related overhead, are capitalized to inventory as they are incurred. Upon ultimate sale of inventory, the associated production and processing costs are presented as cost of sales before fair value adjustments; the remaining cost of inventory, associated with fair value less costs to sell prior to harvest, is presented as realized fair value adjustments on inventory sold in the period.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

The direct and indirect costs related to biological assets and inventory are allocated as follows. The allocation basis was consistent for the nine months ended September 30, 2019 and 2018, unless otherwise specified.

These inputs are level 3 on the fair value hierarchy, and are subject to volatility and several uncontrollable factors, which could significantly affect the fair value of biological assets and inventory in future periods.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

On September 5, 2019, the Company acquired Redwood. Redwood is a manufacturer and distributor of hemp-derived CBD infused products in the United States under the brand, Lord Jones . Redwood's products use pure hemp oil that contains natural phytocannabinoids and terpenes found in the plant. The Company plans to use its resources to capitalize on the significant demand to further create and scale hemp-derived consumer products and brands.

The Company acquired all of the issued and outstanding shares of Redwood (the "Redwood Acquisition") for an aggregate consideration of $375,555 ($283,159 USD), which included $301,138 ($227,050 USD) in cash and 5,086,586 common shares of the Company with a fair value of $74,417 ($56,109 USD). The fair value of the shares issued as part of the consideration paid was based on the average of the volume weighted average trading price of the common shares on NASDAQ on each of the ten consecutive trading days prior to the date of the Membership Interest Purchase Agreement dated August 1, 2019 (the "MIPA"), by and among the Company, Redwood Holding Group, LLC, and certain Key Persons solely for the purposes as described in the MIPA, at $14.74 per share.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)

During the third quarter of 2019, the Redwood Acquisition was unanimously approved by the board of directors of Redwood Holdings Group, LLC and by the Board following the unanimous recommendation of a special committee of independent directors ("Special Committee"). A Special Committee composed entirely of independent directors of the Company was formed to evaluate and make recommendations to the Board since Michael Gorenstein, Chief Executive Officer and a director of Cronos Group, and Jason Adler, a director of Cronos Group, each hold an indirect interest in Redwood Holding Group, LLC by way of their interest in certain funds affiliated with Gotham Green Partners, which were each limited liability company members of Redwood Holding Group, LLC.

The following table summarizes the Company's preliminary allocation of the purchase price to assets acquired and liabilities assumed at the acquisition date. The final purchase price allocation will be adjusted as needed, pending the finalization of customary post-close working capital adjustments and continued review of the estimates and assumptions used in valuing property and equipment and intangible assets, among other identifiable assets acquired and liabilities assumed, and will be finalized no later than one year after the acquisition date.

For the three and nine months ended September 30, 2019, acquisition-related costs of $7,914 and $11,501 are included in financing and transaction costs respectively.

During the period from September 5, 2019 to September 30, 2019, the Company recognized $897 in revenues and a net loss of $431 from Redwood operations. If the acquisition had occurred on January 1, 2019, the Company estimates it would have recorded an increase of $12,729 in revenues and an increase of $1,958 in net income for the nine months ended September 30, 2019.

There were no acquisitions during the three and nine months ended September 30, 2018.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2019 and September 30, 2018

(in thousands of CDN $, except where otherwise noted, and share, per share, weight, volume and plant amounts)