Canadian cannabis company Cronos Group is pulling out of the U.S. hemp-derived CBD market.
The Toronto-based company said the wind-down is meant “to improve its cash flow in the near term and position itself to directly enter the U.S. THC market when the necessary changes in U.S. regulatory conditions occur.”
Cronos acquired its hemp assets in 2019 from Redwood Holding Group in a deal worth $300 million.
The Lord Jones brand acquired as part of that deal will be relaunched in the Canadian adult-use cannabis market.
Cronos said the move will result in inventory write-offs, severance costs and impairment charges worth up to $1.8 million during its ongoing second quarter.
The company also is boosting its target for operating-expense savings in 2023 to $20 million-$25 million, up from $10 million to $20 million previously.
“We believe that one day, the U.S. will be one of the most important cannabis markets in the world,” Cronos CEO Mike Gorenstein said in a statement.
“But we also believe our resources are best spent on staying laser-focused on becoming cash-flow positive by driving cost savings and process efficiencies for our borderless adult-use products.”
Cronos lost $168.7 million during its last full fiscal year and posted a net loss of $19.3 million during its first quarter of 2023.
The company reported $861.5 million in cash on its balance sheet as of March 31.
Altria Group invested $1.8 billion in Cronos in a deal that closed in 2019, but the tobacco giant abandoned its warrant to purchase more Cronos shares in late 2022.
Last October, Cronos announced settlements with both the U.S. Securities and Exchange Commission and the Ontario Securities Commission.
Shares of Cronos trade as CRON on the Nasdaq and the Toronto Stock Exchange.
