Cronos Group (TSX: CRON) (NASDAQ: CRON) reported its first quarter 2020 financial results early this morning, with revenues of US$8.4 million on a consolidated basis, however the firm reported a loss on a gross basis due to inventory writedowns, and an overall operating loss of US$45.0 million.
While top line revenue was up on a quarter over quarter basis from the firms fourth quarter 2019 revenues of $7.3 million, this is about where the positive aspects of the quarter end. The company generated $8.4 million in sales during the quarter, however they then had to write off $8.0 million in cannabis and cannabis extract inventory due to previously entered supply contracts at prices higher than the market can bare. This write down follows a $24.0 million write down that the company took last quarter.
Cronos as a result ended the quarter without even making a gross profit, with a gross loss of $6.5 million.
The long term viability of the company is also in question, given that Cronos generated $38.5 million in expenses while recording that $8.4 million in sales. The largest expense was that of general and administrative at $23.7 million, up from $7.2 million in the comparable period. Sales and marketing came in at $7.1 million as well, while research and development amounted to $4.6 million. The firm managed to post a positive net income of $75.7 million due to a gain on a derivative liability of $113.4 million.
Looking at the firms balance sheet, cash and cash equivalents decreased over the quarter from $1.2 billion to $1.1 billion, while short term investments declined to $206.2 million from $306.3 million. Inventory climbed from $38.1 million to $43.1 million, representing numerous quarters worth of inventory still sitting in storage. Current liabilities decreased to $1.4 billion from $1.6 billion during the quarter.
In terms of liabilities, Cronos saw its accounts payables decrease marginally, from $35.3 million to that of $34.2 million. The largest change is associated with the aforementioned derivative liability, which declined from $297.2 million to $166.2. Total current liabilities as a result fell from $332.9 million to $201.5 million.
Cronos Group last traded at $5.59 on the Nasdaq.
Information for this analysis was found via Sedar and Cronos Group. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.