美国
证券交易委员会
华盛顿特区20549
表格
（标记一）
根据1934年证券交易法第13或15(d)节的季度报告 |
截至季度结束
或者
根据1934年证券交易法第13或15(d)节的转型报告书 |
过渡期从 走开 到
委托文件编号：001-39866
(根据其章程规定的注册人准确名称)
（国家或其他管辖区的 公司成立或组织） |
（IRS雇主 |
，（主要行政办公地址） |
(邮政编码) |
公司电话号码，包括区号：（
在法案第12(b)条的规定下注册的证券：
每一类的名称 |
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交易 符号: |
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在其上注册的交易所的名称 |
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请在以下复选框中打勾，指示注册人：(1)在前12个月(或注册人被要求提交这些报告的更短期间内)已经提交了1934年证券交易法第13或15(d)条规定需要提交的所有报告；以及(2)在过去的90天内一直受到了此类文件提交要求的限制。
请在以下复选框中打勾，指示注册人是否已经电子提交了根据Regulation S-T规则405条(本章节的§232.405条)需要提交的所有互动数据文件在过去的12个月内(或注册人被要求提交这些文件的更短期间内)。
请勾选标记以说明注册人是大型快速申报人、加速申报人、非加速申报人、较小的报告公司还是新兴成长型公司。请查看《交易所法》第120亿.2条中“大型快速申报人”、“加速申报人”、“较小的报告公司”和“新兴成长型公司”的定义。
大型加速文件管理器 |
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非加速过滤器 |
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规模较小的申报公司 |
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新兴成长型公司 |
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如果是新兴成长型企业，请勾选复选标记，表明注册者已选择不使用延长过渡期来符合根据证券交易法第13(a)条规定提供的任何新财务会计准则。 ☐
请勾选“是”，如果报告人是外壳公司（定义见证券交易法规则12b-2）。是
截至2024年11月7日，注册公司有分别于2024年6月30日和
目录
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第I部分 |
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项目1。 |
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1 |
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3 |
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5 |
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Notes to the Condensed Interim Consolidated Financial Statements |
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事项二 |
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第3项。 |
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事项4。 |
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第二部分 |
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项目1。 |
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项目1A。 |
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事项二 |
64 |
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第3项。 |
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事项4。 |
64 |
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项目5。 |
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项目6。 |
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66 |
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除非另有说明或上下文另有指示，本第10-Q表格季度报告（“季度报告”）中提及的“公司”、“Canopy Growth”、“我们”、“我们”和“我们”的参考均指Canopy Growth Corporation及其直接和间接完全拥有的子公司和按权益法核算的投资；“大麻”一词指植物属的任何物种或亚种，以及该植物的任何部分，包括所有衍生物、提取物、大麻素、同分异构体、酸类、盐以及同分异构体的盐；而“大麻”一词的含义参照2018年美国农业改进法中对“大麻”的定义，包括来源于大麻的大麻二酚（“CBD”）。 ● 而“大麻”一词的含义参照2018年美国农业改进法中对“大麻”的定义，包括来源于大麻的大麻二酚（“CBD”）。
本季度报告中涉及我们的商标和商业名称，以及其他实体拥有的商标和商业名称。仅为方便起见，本季度报告中提到的商标和商业名称可能没有 ® 或 ™ 符号，但这些参考并不意味着他们各自的所有者不会按照适用法律的规定全面主张其权利。我们不打算通过使用或展示其他公司的商标或商业名称来暗示与其他公司之间的关系，或者暗示其他公司对我们或我们的业务的认可或赞助。
本季度报告中所有货币金额均以加拿大元（货币报告货币）表示，除非另有说明。所有提到“美元”或“CDN$”的是指加拿大元，所有提到“美元”是指美元。
i
P第一部分—财务信息
第一条. 财务报表。
canopy growth corporation
简短的临时公司合并资产负债表
(以加拿大元千位计，除每股数和每股数据外，未经审计)
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9月30日, |
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3月31日 |
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资产 |
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流动资产： |
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现金及现金等价物 |
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$ |
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短期投资 |
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开空期限较短的投资 |
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应收账款净额 |
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库存 |
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停止经营的业务的资产 |
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- |
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预付款项和其他资产 |
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总流动资产 |
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权益法投资 |
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其他金融资产 |
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房地产、厂房及设备 |
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无形资产 |
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商誉 |
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其他 |
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资产总额 |
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$ |
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负债和股东权益 |
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流动负债: |
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应付账款 |
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$ |
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其他应计费用和负债 |
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开多次数 |
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其他负债 |
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流动负债合计 |
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长期债务 |
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其他负债 |
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负债合计 |
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canopy growth公司股东权益： |
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股本 |
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额外实收资本 |
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累计其他综合损失 |
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$ |
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Canopy Growth公司股东权益总额 |
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非控制权益 |
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股东权益合计 |
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负债和股东权益合计 |
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$ |
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$ |
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附注是这些简明中期合并财务报表的组成部分。
1
canopy growth corporation
简明综合中期财务报表
运营和综合损失
(以加拿大元千位计，除每股数和每股数据外，未经审计)
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截至9月30日的三个月， |
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截至9月30日的六个月 |
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2024 |
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2023 |
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2024 |
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2023 |
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营业收入 |
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$ |
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$ |
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$ |
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$ |
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消费税 |
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营业收入 |
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营业成本 |
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毛利率 |
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营业费用 |
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销售，总务及管理费用 |
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基于股份的报酬 |
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资产减值和重组损益 |
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营业费用总计 |
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持续经营业务的营业亏损 |
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其他收入（费用）净额 |
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持续经营活动的税前亏损 |
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所得税费用 |
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持续经营的净亏损 |
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合并后终止经营 |
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净损失 |
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普通股股东所享有的终止经营 |
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归属 canopy growth 公司的净亏损 |
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每股基本和摊薄亏损1 |
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持续经营业务 |
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$ |
( |
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$ |
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$ |
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已停止运营的业务 |
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每股基本和摊薄亏损 |
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$ |
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$ |
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基本和稀释后加权平均普通股 |
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综合收益（损失）： |
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持续经营的净亏损 |
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其他综合收益（损失），净额，减去所得税 |
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Fair value changes of own credit risk of financial liabilities |
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外币翻译 |
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其他综合收益（损失）净额，扣除所得税 |
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持续经营活动的综合损失 |
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停止经营活动综合收益（损失） |
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综合损失 |
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终止经营活动的综合损失 |
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- |
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归属于canopy growth的综合损失 |
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1
附注是这些简明中期合并财务报表的组成部分。
2
压缩的中期综合股东权益表
（以千加元计，未经审计）
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2024年9月30日结束的六个月 |
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额外实收资本 |
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累积的 |
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股本 |
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基于股份的储备 |
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权证 |
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所有权变更 |
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其他综合收益（亏损） |
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$ |
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非控制权益 |
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总计 |
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2024年3月31日结存余额 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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ATM计划发行的普通股 |
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- |
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其他普通股发行及股票发行成本 |
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认证股证权行权 |
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基于股份的报酬 |
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限制性股票单位的发行和归属 |
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偿还期票并发行可兑换股 |
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Canopy美国交易 |
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至尊债务结算 |
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综合损失 |
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- |
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2024年6月30日余额 |
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$ |
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$ |
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$ |
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$ |
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从ATM计划发行的普通股 |
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其他普通股的发行和发行费用 |
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认证股证权行权 |
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行使前期股权激励计划股票期权 |
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基于股份的报酬 |
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限制性股份单位的发行和授予 |
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最高债务结算 |
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附注是这些简明中期合并财务报表的组成部分。
3
canopy growth corporation
压缩的中期综合股东权益表
（以千加元计，未经审计）
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2023年9月30日止六个月 |
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额外实收资本 |
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累积的 |
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股本 |
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基于股份的储备 |
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权证 |
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所有权变更 |
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可赎回的非控制股份 |
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其他综合收益（亏损） |
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非控制权益 |
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2023年3月31日的余额 |
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其他普通股份发行及 |
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基于股份的报酬 |
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限制股份发行和解限股份 |
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可赎回非控股权益变动 |
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可赎回权益赎回 |
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综合收益（损失） |
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2023年6月30日的余额 |
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定向增发，扣除发行成本后 |
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其他发行普通股份和 |
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行使先前的股权激励 |
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基于股份的报酬 |
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发行和解除限制的分享 |
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可赎回非控股权益的变化 |
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与所有权变更有关的变化 |
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可赎回权益的赎回 |
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综合收益（损失） |
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2023年9月30日结余 |
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附注是这些简明中期合并财务报表的组成部分。
4
canopy growth corporation
简明的临时综合报表净现金流
（以千加元计，未经审计）
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截至9月30日的六个月 |
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经营活动现金流量： |
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净损失 |
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持续经营的净亏损 |
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固定资产折旧 |
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无形资产摊销 |
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基于股份的报酬 |
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资产减值和重组损益 |
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与非现金公允价值调整和相关费用有关 |
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经营资产和负债的变动，扣除对业务收购的影响净额: |
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应收账款 |
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预付款项和其他资产 |
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应付账款及应计费用 |
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其他，包括非现金外币 |
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持续经营业务的经营活动产生的净现金流量 |
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经营活动中使用的现金流量净额-已停止运营业务 |
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经营活动使用的净现金流量 |
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投资活动现金流量： |
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购买和存入房地产、厂房及设备 |
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购买无形资产 |
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处置固定资产及设备收入 |
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短期投资赎回 |
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出售或取消子公司的净现金流出 |
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投资于其他金融资产 |
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其他投资活动 |
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终止运营的投资活动提供的（使用的）净现金流量 |
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筹集资金的现金流量： |
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普通股和认股权证发行收入 |
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行使股票期权所得 |
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行使认股权收到的款项 |
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发行长期债务和可转换债券 |
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偿还长期债务 |
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其他融资活动 |
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筹集资金的净现金流量 |
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汇率变动对现金及现金等价物的影响 |
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现金及现金等价物的净增加（减少） |
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现金及现金等价物期初余额1 |
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现金及现金等价物期末余额2 |
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1包括我们停止运营的现金资产 $ |
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2包括我们已停止运营的现金$ |
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附注是这些简明中期合并财务报表的组成部分。
5
canopy growth corporation
简明中期合并现金流量表
（以千加元计，未经审计）
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截至9月30日的六个月 |
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2024 |
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现金流量补充披露 |
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本期现金收入： |
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所得税 |
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利息 |
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期间支付的现金： |
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所得税 |
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利息 |
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非现金投资和融资活动 |
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购置固定资产、无形资产和其他长期资产所支付的现金（元） |
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附注是这些简明中期合并财务报表的组成部分。
6
华美家居天和集团
简短的临时C的注意事项合并财务报表
（以加拿大元千元为单位，未经审计，除非另有说明）
1. 业务描述
canopy growth公司是一家在加拿大注册成立的上市公司，总部位于安大略省史密斯瀑布市 Hershey Drive 1号。在这里提到的“canopy growth”或“该公司”指的是canopy growth公司及其子公司。
该公司主要业务是根据加拿大《大麻法案》（Cannabis Act）生产、分销和销售各种大麻和大麻素产品，适用于成年人使用和医疗用途。该公司在加拿大运用一系列不同品牌，根据2018年第16号法案（"大麻法案"）的规定，在2018年10月17日生效并规范加拿大的医疗和成年人用大麻市场。该公司还扩展至加拿大以外的法定允许、合法和受监管的司法管辖区，在澳大利亚、德国和其他部分全球市场，该公司及其子公司开展业务。此外，该公司在各种全球市场，包括美国，生产、销售和分销雾化器和类似的大麻配件。 大麻股大麻法案，于2018年10月17日生效，规范了加拿大的医疗和成年人用大麻市场。该公司还扩展至加拿大以外的法定允许、合法和受监管的司法管辖区，在澳大利亚、德国和其他一些全球市场。此外，该公司通过其子公司在各种全球市场，包括美国，生产、销售和分销雾化器和类似的大麻配件。
2。演示基础
这些简明的中期合并财务报表以加元列报，并根据美利坚合众国普遍接受的会计原则（“美国公认会计原则”）编制。Canopy Growth已确定加元是最相关和最合适的报告货币，因为尽管公司在多个地区的相对业务规模持续变化，但其大部分业务均以加元进行，其财务业绩由管理层内部以加元编制和审查。公司的简要中期合并财务报表以及其中包含的财务信息以千加元报告，但股票和每股金额或另有说明除外。
根据美国公认会计原则编制的经审计的年度合并财务报表中通常包含的某些信息和脚注披露已被省略或简短。这些简明的中期合并财务报表应与公司截至2024年3月31日财年的10-k表年度报告（“年度报告”）中包含的经审计的合并财务报表一起阅读，其编制基础与年度报告中所述的会计政策一致。
这些简明的中期合并财务报表未经审计，反映了管理层认为必要的调整（包括正常的经常性调整），这些调整是根据美国公认会计原则提供中期公允业绩表所必需的。
不应将这些简明的中期合并财务报表中报告的业绩视为整个财年的预期业绩的必然指标。除非另有说明，否则下述政策始终适用于列报的所有期间。
继续关注
这些简明的中期合并财务报表是根据美国公认会计原则在持续经营的基础上编制的，其中考虑了正常业务过程中资产的变现和负债的清偿。
在公司截至2023年12月31日的简明中期合并财务报表中，由于某些重大债务将在短期内到期，经常性运营亏损以及为其业务和运营提供资金所需的额外融资，公司对公司自这些简明中期合并财务报表发布之日起至少十二个月的持续经营能力提出了实质性怀疑。
截至提交年度报告时，公司通过完成多项资产负债表行动，成功地缓解了实质性疑虑，年度报告对此进行了进一步描述。在截至2024年9月30日的六个月中，公司完成了其他行动并制定了自动柜员机计划（定义见下文），共发行和出售了
7
合并原则
这些简明中期综合财务报表包括公司及公司控制的所有实体的账户，以及公司为主要受益者或具有可变利益实体的主要受益者的情况。所有公司间往来账户和交易在合并时已被消除。
2019年7月31日，Cloud Chain Network and Technology (Tianjin) Co., Limited (CCM Tianjin或 WFOE，以前称为Chain Cloud Mall Network and Technology (Tianjin) Co., Limited)，E-commerce Tianjin和E-commerce Tianjin的股东中国公民薛泽尧先生和徐凯先生，签订以下协议，或统称“变量利益实体协议”或“VIE 协议”，根据此协议，CCM Tianjin拥有控制和运营E-commerce Tianjin业务（“VIE业务”）的合同权利。 因此，根据ASC 810，自那时起，E-Commerce Tianjin纳入了公司的合并财务报表中。
可变利益实体（“VIE”）是指一种实体，其没有足够的股东权益来支持其活动，除非有额外的次级财务支持，或者其结构使得股东缺乏控制实体活动的能力，或者在实体的盈亏中不实质性参与。在签订合同协议时，以及此后，如果有重新考虑的事件发生，公司将进行评估以判断该安排是否包含对实体的可变权益，以及该实体是否是一个VIE。VIE的主要受益者是具有既有权力指导最显著影响VIE经济绩效的活动，又有义务吸收损失或有权从VIE获得的利益可能对VIE具有重大影响的一方。根据ASC 810 - 合并报表公司确定其为VIE的主要受益者后，将合并该VIE的账户。
权益法投资
权益法下的投资包括那些公司可以对另一实体行使重大影响，并持有另一实体的普通股和/或实质上的普通股的投资。除非选择公允价值法，否则以权益法会计处理权益法下的投资。根据权益法，投资按成本记账，并随后调整为公司在被投资实体的净利润（损失）、综合收益（损失）和从被投资方收到的分配所占份额。如果投资的当前公允价值低于其账面价值，这可能表明应记录减值损失。任何确认的减值损失在后续期间不会撤销。
估计的使用
根据美国通用会计准则，编制这些简明中期合并财务报表及附注需要管理层进行涉及影响报告金额的估计和假设。实际结果可能与这些估计不同。需要重要判断和估计的财务报表领域如下所示：
信贷损失拨备- 评估涉及判断，并整合基于可获得信息的损失估计，并包括考虑到回收能力的相关信息，以及经济和业务状况、违约趋势和其他内外部因素。根据经验和新信息，金额可能会发生变化，这可能导致需要调整影响未来期间的账面价值的结果。
存货减值准备 - 公司根据公司对产品需求、生产要求、市场状况和监管环境的预测，记录库存准备金。实际损失可能与管理层的估计不同。
资产的预计使用年限、减值考虑和物业、设备及无形资产的摊销 - 对资本和无形资产的摊销取决于基于管理层判断的有用寿命的估计。
商誉和不定期无形资产减值测试需要管理层在减值测试模型中进行估计。公司至少每年进行商誉和不定期无形资产的减值测试。报告单元的公允价值是通过贴现未来现金流量模型确定的，其中包括对未来事件的假设，特别是未来现金流量、增长率和折现率。
长期资产减值受判断定义资产组和确定减值指标的影响，以及用于衡量减值损失的估计。
法律诉讼 判断用于确定可能发生损失的概率，以及确定估计金额。记录的金额基于管理层的判断，实际记录的金额可能无法实现。
金融工具的公允价值衡量 采用附注23中描述的各种估值方法可能涉及不确定性，并基于公司的判断和从这些技术中估计的任何价值可能无法实现或无法实现。
可变利益实体的合并 是否公司是可变利益实体的主要受益人的确定需要重大判断。评估需要对可变利益实体的权力和利益进行定性分析。
各项权证和本函协议应一并阅读，并且具有相同的效力，就好像每项权证和本函协议均包含于一份文件中。除本函协议明确修改的内容之外，权证和交易文件的条款和义务保持不变，权证和交易文件应继续全面有效。
8
公司股东于2023年9月25日举行的年度股东大会和特别股东大会上批准了股份合并。股份合并于2023年12月15日生效。与股份合并相关的任何零头普通股均不发行。股份合并产生的任何零头普通股被视为已由其注册所有者提交给公司以无偿取消。此外，公司现有的任何可转换证券的行权或转换价格和/或可发行的普通股数量将按比例调整与股份合并相关。
公司发行并流通的普通股，每股金额以及可转换为普通股的未行使权益工具和奖励，以及与Acreage修订安排（以下所定义）和Floating Share安排（以下所定义）相关的固定股份（以下所定义）和浮动股份（以下所定义）的兑换比率，均已根据公司及其附注的这些简明中期合并财务报表的所有早期期间进行了回顾性调整，以反映所有过去期间的股份合并。
新会计政策
暂未采纳的会计准则
《修订和重新制定的2020年The Aaron's Company, Inc.股权和激励计划》，（参考到2024年5月16日提交给美国证券交易委员会的S-8表格附注4.3）。
2023年11月，财务会计准则委员会（“FASB”）发布了《章节报告（第280号）：报表片段披露的改进（“ASU 2023-07”）》，通过增强对主要通过向首席运营决策者定期提供的重要部门费用的披露，扩大了可报告片段的披露要求，并将这些费用包括在每个报告的片段利润或损失措施中。 ASU 2023-07自2023年12月15日后开始的财政年度和2024年12月15日后开始的财政年度内的中期期间生效。公司正在评估对合并财务报表的影响，并预计在截至2025年3月31日的财政年度实施ASU 2023-07的条款。
所得税
2023年12月，FASB发布了《所得税（第740号）：所得税披露的改进（“ASU 2023-09”）》，主要通过调整税率协调和所得税支付的细分，增强了所得税披露。ASU 2023-09自2024年12月15日后开始的年度期间生效，可提前采纳。公司正在评估对合并财务报表的影响，并预计在截至2026年3月31日的财政年度实施ASU 2023-09的条款。
3资产 canopy growth 美国
资产 canopy growth 美国
2022年10月24日，canopy growth 完成了一系列战略交易（“重组”），以创建总部位于美国的控股公司 canopy usa llc（“canopy usa”），截至2022年10月24日，canopy usa 持有先前由 canopy growth 持有的某些美国大麻股投资。
本次《The Secret of Us Tour》巡演结束后，格雷西将重新加入泰勒·斯威夫特（Taylor Swift）的备受赞誉的Eras巡演，成为第二个北美巡演的直接支持角色。去年，格雷西在美国进行了30多场泰勒·斯威夫特（Taylor Swift）的巡演，然后在纽约、纳什维尔和洛杉矶举行了一系列限量版的Aaron Dessner原声演出。为了创建 canopy usa，纳斯达克证券交易所（“纳斯达克”）向公司表明，整合“违反联邦法律活动所产生的资产和收入”的公司无法继续在纳斯达克上市。由于公司致力于遵守纳斯达克的上市要求，公司和 canopy usa 对公司在 canopy usa 利益的初始结构进行了某些调整，旨在促进 canopy usa 的财务报表中 canopy usa 财务结果的取消合并。这些变化包括，修改公司、其全资子公司和 canopy usa 之间的保护协议（如下所定义）的条款，修改 canopy usa 有限责任公司协议的条款，并修改与 canopy usa 中的第三方投资者的某些协议的条款以消除任何有权获得保证回报的权利（统称为“重组修正案”）。2023年5月19日，公司和 canopy usa 执行了这些重组修正案，其中包括签订第一 A&R 保护协议（如下所定义），修改和重订 canopy usa 的有限责任公司协议（“A&R llc 协议”），以便：（i）消除之前由 canopy usa 授予公司的某些负面契约，以及委托给 canopy usa 董事会的未被 canopy growth 提名的经理批准以下关键决定（统称为“关键决定”）的权限：（a）canopy usa 的年度业务计划；（b）关于 canopy usa 及其任何子公司的高管的决策；（c）增加支付给 canopy usa 或其任何子公司的任何现任、前任或未来雇员或经理的报酬、奖金水平或其他福利；（d）关于 canopy usa 或其任何子公司的任何其他高管报酬计划事项；以及（e）行使 wana 期权（如下所定义）或 jetty 期权（如下所定义），这明确表示公司在 canopy usa 董事会的候选人将不被允许就任何关键决定进行投票。
9
公司 拥有非表决股份（如下定义）；（二）将Canopy USA董事会的经理人数量从四名减少到三名，包括将公司提名权减少到一名经理人；（三）修订Canopy USA股本，包括（a）创建一类新的Canopy USA B类股份（如下定义），在非表决股份或Canopy USA普通股（如下定义）转换为Canopy USA B类股份之前不得发行；（b）修改非表决股份的条款，使非表决股份可转换为Canopy USA B类股份（而不是Canopy USA普通股）；以及（c）修改Canopy USA普通股的条款，使得在所有非表决股份转换为Canopy USA B类股份后，Canopy USA普通股将根据其条款自动转换为Canopy USA B类股份，前提是发给Canopy USA普通股原持有人的Canopy USA B类股份数量不得少于
大约，在与重组修订相关的基本报表方面，于2023年5月19日，Canopy USA和Huneeus 2017不可撤销信托（“信托”）签署了一份股票购买协议（“信托SPA”），规定了信托以高达美国
此外，根据A&R Protection Agreement和用来买入Wana和Jetty的期权协议的条款和条件，Canopy Growth可能需要发行额外的普通股，以满足对Wana和Jetty股东的某些延迟和/或期权行使支付。 Canopy Growth将收到Canopy USA发行的额外非投票股作为未来向Wana和Jetty股东发行的公司普通股的补偿。
2023年11月3日，公司收到了SEC（“Staff”）工作人员的来信，其中工作人员指出，尽管Reorganization Amendments的存在，一旦Canopy USA收购Wana、Jetty或Acreage Holdings, Inc.（“Acreage”），将反对根据美国通用会计准则从公司财务报表中取消Canopy USA的财务业绩数据的做法。公司随后与SEC（“OCA”）的首席会计官办公室进行了讨论，并确定必须对Canopy USA的结构进行某些额外修订（“Additional Reorganization Amendments”），以便在Canopy USA收购Wana、Jetty或Acreage时，便于根据美国通用会计准则将Canopy USA从Canopy Growth的财务报表中取消。与Additional Reorganization Amendments相关，Canopy USA及其成员签署了二次修订有限责任公司协议（“Second A&R LLC Agreement”）。根据Second A&R LLC Agreement，非投票股的条款已经修改，使得非投票股仅在纳斯达克证券交易所或纽约证券交易所允许上市栽培、分销或拥有大麻的公司后才转换成Canopy USA b级股（“Stock Exchange Permissibility Date”）。根据公司与OCA的讨论，一旦使Additional Reorganization Amendments生效，公司相信Staff不会反对根据美国通用会计准则取消Canopy USA的财务业绩数据于公司财务报表之上。
根据重组、重组修订和额外的重组修订，2024年5月6日，Canopy Growth美国行使了期权（“Wana Options”）以收购北美大麻食品品牌中的领先者Mountain High Products，LLC，Wana Wellness，LLC和The Cima Group，LLC（合称“Wana”），随后完成了收购Wana Wellness，LLC和 The Cima Group ，LLC的交易。2024年10月8日，Canopy Growth美国完成了对Mountain High Products, LLC的收购。此外，Canopy Growth美国行使了期权（“Jetty Options”）以收购总部位于加利福尼亚的高品质大麻提取物生产商和清洁雾化技术的先驱Lemurian, Inc.（“Jetty”），随后完成了收购Jetty的第一笔交易。2024年6月4日，行使了收购Acreage的已发行和待售E类优先投票股份（“Fixed Shares”）的期权（“Acreage Option”）。 Canopy Growth美国还直接和间接持有TerrAscend Corp.（“TerrAscend”）资本利益，TerrAscend是北美领先的大麻运营商，在宾夕法尼亚，新泽西，密歇根和加利福尼亚拥有垂直整合的业务，并在马里兰拥有获得许可的种植和加工业务。
Canopy Growth美国目前持有以下资产的所有权利益，以及其他资产：
10
Following the implementation of the Reorganization, Canopy USA was determined to be a variable interest entity pursuant to ASC 810 - Consolidations (“ASC 810”) and prior to the completion of the Reorganization Amendments and the Additional Reorganization Amendments, Canopy Growth was determined to be the primary beneficiary of Canopy USA. As a result of such determination and in accordance with ASC 810, Canopy Growth consolidated the financial results of Canopy USA up to April 30, 2024.
Ownership of U.S. Cannabis Investments
Following the implementation of the Reorganization, the shares and interests in Acreage, Wana, Jetty and TerrAscend are held, directly or indirectly, by Canopy USA, and Canopy Growth no longer holds a direct interest in any shares or interests in such entities, other than the Acreage Option, which was exercised on June 4, 2024. Canopy Growth holds non-voting and non-participating shares (the “Non-Voting Shares”) in the capital of Canopy USA. The Non-Voting Shares do not carry voting rights, rights to receive dividends or other rights upon dissolution of Canopy USA. Following the Reorganization Amendments, the Non-Voting Shares are convertible into Class B shares of Canopy USA (the “Canopy USA Class B Shares”), provided that such conversion shall only be permitted following the Stock Exchange Permissibility Date. The Company also has the right (regardless of the fact that its Non-Voting Shares are non-voting and non-participating) to appoint one member to the Canopy USA board of managers (the “Canopy USA Board”).
On October 24, 2022, Canopy USA and the Company also entered into an agreement with, among others, Nancy Whiteman, the controlling shareholder of Wana, which was amended and restated on May 19, 2023 and on April 30, 2024, whereby subsidiaries of Canopy USA agreed to pay additional consideration in order to acquire the Wana Options and the future payments owed in connection with the exercise of the Wana Options were reduced to US$
As of November 7, 2024, the Trust holds
Canopy Growth and Canopy USA are also party to a protection agreement (the “Protection Agreement”) to provide for certain covenants in order to preserve the value of the Non-Voting Shares held by Canopy Growth until such time as the Non-Voting Shares are converted in accordance with their terms, provided that, such conversion shall only be permitted following the Stock Exchange Permissibility Date, but does not provide Canopy Growth with the ability to direct the business, operations or activities of Canopy USA. The Protection Agreement was amended and restated in connection with: (a) the Reorganization Amendments (the “First A&R Protection Agreement”); and (b) the Additional Reorganization Amendments (the “Second A&R Protection Agreement” and together with the First A&R Protection Agreement, the “A&R Protection Agreement”).
11
Upon closing of Canopy USA’s acquisition of Acreage, Canopy Growth will receive additional Non-Voting Shares from Canopy USA in consideration for the issuance of common shares of the Company that shareholders of Acreage will receive in accordance with the terms of the Existing Acreage Arrangement Agreement and the Floating Share Arrangement Agreement (as defined below).
Until such time as Canopy Growth converts the Non-Voting Shares into Canopy USA Class B Shares following the Stock Exchange Permissibility Date, Canopy Growth will have no economic or voting interest in Canopy USA, Wana, Jetty, TerrAscend, or Acreage. Canopy USA, Wana, Jetty, TerrAscend, and Acreage will continue to operate independently of Canopy Growth.
Acreage Agreements
On October 24, 2022, Canopy Growth entered into an arrangement agreement with Canopy USA and Acreage, as amended (the “Floating Share Arrangement Agreement”), pursuant to which, subject to approval of the holders of the Floating Shares and the terms and conditions of the Floating Share Arrangement Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of the Floating Share Arrangement in exchange for
On October 24, 2022, the Company and Canopy USA entered into a third amendment to tax receivable agreement (the “Amended TRA”) with, among others, certain current or former unitholders (the “Holders”) of High Street Capital Partners, LLC, a subsidiary of Acreage (“HSCP”), pursuant to HSCP’s amended tax receivable agreement (the “TRA”) and related tax receivable bonus plans with Acreage. Pursuant to the Amended TRA, the Company, on behalf of Canopy USA, agreed to issue common shares of the Company with a value of US$
In addition to shareholder and court approvals, the Floating Share Arrangement is subject to applicable regulatory approvals including, but not limited to, Toronto Stock Exchange (“TSX”) approval and the satisfaction of certain other closing conditions, including the conditions set forth in the Acreage Amended Arrangement. The Floating Share Arrangement received the requisite approval from the holders of Floating Shares at the special meeting of Acreage shareholders held on March 15, 2023 and on March 20, 2023 Acreage obtained a final order from the Supreme Court of British Columbia approving the Floating Share Arrangement.
On June 4, 2024, the Acreage Option was exercised in accordance with the terms of the arrangement agreement dated April 18, 2019, as amended on May 15, 2019, September 23, 2020 and November 17, 2020 (the “Existing Acreage Arrangement Agreement”). Concurrently with the closing of the acquisition of the Fixed Shares pursuant to the exercise of the Acreage Option, the Fixed Shares will be issued to Canopy USA. Accordingly, Canopy Growth will not hold any Fixed Shares or Floating Shares. Completion of the acquisition of the Fixed Shares is subject to the satisfaction of certain conditions set forth in the Existing Acreage Arrangement Agreement. The acquisition of the Floating Shares pursuant to the Floating Share Arrangement is anticipated to occur immediately prior to the acquisition of the Fixed Shares pursuant to the Existing Acreage Arrangement Agreement such that
On June 3, 2024, the Company exercised its option to acquire certain outstanding debt of Acreage (the “Debt Acquisition”) in connection with the option agreement dated November 15, 2022 (the “Option Agreement”) among a wholly-owned subsidiary of Canopy Growth (the “Optionor”) and the lenders (the “Lenders”) party to Acreage’s credit agreement dated as of December 16, 2021, as amended by the first amendment to credit agreement dated as of on October 24, 2022 and the second amendment to credit agreement dated as of April 28, 2023.
The Optionor entered into various agreements in connection with the Debt Acquisition in order to acquire approximately $
The Optionor subsequently transferred approximately $
12
On September 13, 2024, the Optionor entered into a series of transactions with, among others, Acreage, the Rolling Lender and an arm's length third-party lender (the "Other Lender"). Pursuant to such transactions, all of Acreage's indebtedness held by the Rolling Lender was acquired by the Other Lender. Following the acquisition by the Other Lender, the Optionor, the Other Lender and Acreage, among others, amended and restated the First ARCA pursuant to a second amended and restated credit agreement dated as of September 13, 2024 (the "Second ARCA"). Pursuant to the Second ARCA and an agreement among lenders entered into on September 13, 2024 between, among others, the Optionor and the Other Lender, all interest owing to the Optionor under the Second ARCA is, subject to the consent of the Other Lender, to be paid-in-kind and not in cash. Under the Second ARCA, as of September 13, 2024, the Optionor was owed an aggregate principal amount equal to approximately $
Deconsolidation of Canopy USA
As of April 30, 2024, as a result of the series of transactions related to the Additional Reorganization Amendments described above (the “Canopy USA Transactions”), Canopy Growth has deconsolidated the financial results of Canopy USA and has a non-controlling interest in Canopy USA as of such date. The deconsolidation of Canopy USA occurred after completion of the following structural amendments: (i) execution of the Second A&R LLC Agreement, (ii) execution of the Second A&R Protection Agreement and (iii) completion of the initial tranche closing of the Trust Transaction, which included the election of a third member to the Canopy USA Board such that the Canopy USA Board is comprised of an appointee of the Trust, Ms. Whiteman, and the Company.
Canopy Growth's deconsolidation of Canopy USA resulted in recognition of an equity method investment (see Note 11) and a loan receivable recorded at fair value (see Note 12).
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The gain on derecognition of Canopy USA is the differences between the carrying amounts of the derecognized assets, liabilities and non-controlling interest, value of common shares issued, and the fair value of the retained non-controlling interest in Canopy USA, being the equity method investment and the Canopy Elevate I LLC, Canopy Elevate II LLC and Canopy Elevate III LLC (collectively, “Elevate”) loan receivable. The gain on derecognition is reflected in other income (expense), net.
4. BIOSTEEL
On September 14, 2023, following a review of the strategic options for the BioSteel business unit, Canopy Growth ceased funding the operations of BioSteel Sports Nutrition Inc. ("BioSteel Canada"). BioSteel Canada commenced proceedings (the "CCAA Proceedings") under the Companies' Creditors Arrangement Act (the "CCAA") in the Ontario Superior Court of Justice (Commercial List) (the "CCAA Court") and sought and obtained recognition of that proceeding under Chapter 15 of the United States Bankruptcy Code. To assist with the sale process, the CCAA Court approved the appointment of a monitor as required under the CCAA.
13
The strategic decisions made encompassed all operations of the BioSteel business unit, including those of BioSteel Canada. For this reason, the BioSteel segment results for all periods prior to the September 14, 2023 deconsolidation of BioSteel Canada, including costs to exit, were classified as discontinued operations.
As a result of the foregoing, Canopy Growth no longer has a controlling interest in BioSteel US and BioSteel Manufacturing and has deconsolidated both entities effective November 16, 2023. The deconsolidation of BioSteel US and BioSteel Manufacturing and related impairment charges were classified under losses from discontinued operations.
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|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net revenue |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||
Cost of goods sold |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Operating expenses |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Operating loss |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other income (expense), net1 |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income tax (expense) recovery |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net income (loss) on , net of tax |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
1
Investment in BioSteel Entities
The CCAA Proceedings for BioSteel Canada have been completed. Canopy Growth continues to have a
Canopy Growth's Amounts Receivable from BioSteel Entities
Prior to Canopy Growth's deconsolidation of BioSteel Canada, Canopy Growth made significant secured loans to BioSteel Canada for purposes of funding its operations. The secured loans and corresponding interest were considered intercompany transactions and eliminated in Canopy Growth's consolidated financial statements prior to September 14, 2023, being the deconsolidation date. As of the deconsolidation date, the secured loans and corresponding interest are now considered related party transactions and have been recognized in Canopy Growth's consolidated financial statements at their estimated fair value of $
As of the deconsolidation date for BioSteel US and BioSteel Manufacturing, Canopy Growth has recorded remaining amounts legally receivable from BioSteel US and BioSteel Manufacturing at their estimated fair value.
The remaining amounts legally receivable from the BioSteel Entities are measured at their expected recoverable amounts. As of September 30, 2024, the receivable balance from the BioSteel Entities is $
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Receivable from BioSteel Entities |
|
$ |
- |
|
|
$ |
|
|
Total assets of discontinued operations |
|
$ |
- |
|
|
$ |
|
|
|
|
|
|
|
|
|
||
Total liabilities of discontinued operations |
|
$ |
- |
|
|
$ |
- |
|
14
5. LOSS ON ASSET IMPAIRMENT AND RESTRUCTURING
In the three months ended September 30, 2024, the Company recorded a loss on asset impairment and restructuring which primarily related to the non-cash impairment of divestiture-related assets, employee restructuring costs and other costs associated with previous restructuring actions.
In the six months ended September 30, 2024, the Company recorded a loss on asset impairment and restructuring which primarily related to the non-cash impairment of divestiture-related assets, employee restructuring costs and other costs associated with previous restructuring actions. This was partially offset by a gain related to the remeasurement of a restructured lease facility upon execution of the related exit agreement.
As a result, in the three and six months ended September 30, 2024, the Company recognized a loss on asset impairment and restructuring of $
6. CASH AND CASH EQUIVALENTS
The components of cash and cash equivalents are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Cash |
|
$ |
|
|
$ |
|
||
Cash equivalents |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
7. SHORT-TERM INVESTMENTS
The components of short-term investments are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Term deposits |
|
$ |
|
|
$ |
|
||
|
|
$ |
|
|
$ |
|
||
The amortized cost of short-term investments at September 30, 2024 is $
8. AMOUNTS RECEIVABLE, NET
The components of amounts receivable, net are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
Indirect taxes receivable |
|
|
|
|
|
|
||
Interest receivable |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Included in the accounts receivable, net balance at September 30, 2024 is an allowance for doubtful accounts of $
9. INVENTORY
The components of inventory are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Raw materials, packaging supplies and consumables |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
In the three and six months ended September 30, 2024, the Company recorded write-downs related to inventory in cost of goods sold of $
15
10. PREPAID EXPENSES AND OTHER ASSETS
The components of prepaid expenses and other assets are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Deposits |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
11.权益法投资
权益法投资的元件如下:
|
|
9月30日, |
|
|
3月31日 |
|
||
|
|
2024 |
|
|
2024 |
|
||
资产 canopy growth 美国 |
|
$ |
|
|
$ |
- |
|
|
|
|
$ |
|
|
$ |
- |
|
|
通过持有非表决股，公司在Canopy美国拥有非参与和非表决权益，并将此权益分类为权益法投资。公司选择按公允价值记录其对Canopy美国的投资。有关Canopy美国投资公允价值确定所使用的估值技术和输入，请参阅注释23 以获取有关确定Canopy USA投资公允价值所使用的估值技术和输入的信息。
16
下表概述其他金融资产的变化。关于如何计算重要投资的公允价值的详细信息已包含在注释中。 23.
|
|
|
|
|
|
|
|
|
|
|
|
|
外币 |
|
|
|
|
|
|
|
||||||
|
|
|
|
期末余额 |
|
|
|
|
|
|
|
|
货币翻译(b) |
|
|
|
|
|
期末余额 |
|
||||||
|
|
|
|
3月31日 |
|
|
|
|
|
公允价值 |
|
|
调整 |
|
|
|
|
|
9月30日, |
|
||||||
实体 |
|
工具 |
|
2024 |
|
|
加法 |
|
|
变更 |
|
|
调整后的数据 |
|
|
其他 |
|
|
2024 |
|
||||||
Acreage1 |
|
固定股份期权和浮动股份协议 |
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
- |
|
||
TerrAscend可兑换股份 |
|
可兑换股份 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|||
TerrAscend - 2022年12月 |
|
权证 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
||||
TerrAscend |
|
选项 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|||
Wana |
|
选项 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
- |
|
||
Jetty |
|
Options |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
- |
|
||
Acreage Hempco1 |
|
公司债券 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
- |
|
||
Acreage Debt Option Premium |
|
选项 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|||
Acreage Tax Receivable Agreement |
|
其他 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
- |
|
||
土地负债 |
|
应收贷款 |
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
|
||
提升贷款应收款2 |
|
应收贷款 |
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
||
其他-按公允价值计入净利润 |
|
各种各样 |
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
其他-分类为持有待售投资 |
|
应收贷款 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
1 有关Acreage修订安排和Acreage Hempco（如下所定义）的信息，请参阅附注27。
2 在公司基本报表中取消Canopy USA的财务结果之后，此前以摊销成本记录的Elevate贷款应收款现在以公允价值记录。从取消Canopy USA的保留非控股权益再度衡量是附注3中描述的处置合并实体收益的一部分。.
有关在公司基本报表中取消Canopy USA的财务结果的信息，请参阅附注3。在2024年4月30日取消Canopy USA之后，公司取消确认了部分美国大麻投资，包括但不限于Acreage、Wana、Jetty和TerrAscend的浮动份额权益。
Acreage债务
2024年6月3日，公司按照与对Acreage信贷协议，即2021年12月16日修订的信贷协议首次修订日期为2022年10月24日，第二次修订信贷协议日期为2023年4月28日的出让方和放贷方签署的期权协议，完成了债务收购。
出让方签署了与债务收购相关的各种协议，以便以$向某些放贷方交换以取得已收债务
The Optionor subsequently transferred approximately $
On September 13, 2024, the Optionor entered into a series of transactions with, among others, Acreage, the Rolling Lender and the Other Lender. Pursuant to such transactions, all of Acreage's indebtedness held by the Rolling Lender was acquired by the Other Lender. Following the acquisition by the Other Lender, the Optionor, the Other Lender and Acreage, among others, entered into the Second ARCA. Pursuant to the Second ARCA and an agreement among lenders entered into on September 13, 2024 between, among others, the Optionor and the Other Lender, all interest owing to the Optionor under the Second ARCA is, subject to the consent of the Other Lender, to be paid-in-kind and not in cash. Under the Second ARCA, as of September 13, 2024, the Optionor was owed an aggregate principal amount equal to approximately $
17
13资产、计划和设备
财产、厂房和设备的组成如下：
|
|
9月30日, |
|
|
3月31日 |
|
||
|
|
2024 |
|
|
2024 |
|
||
建筑物和温室 |
|
$ |
|
|
$ |
|
||
生产和仓库设备 |
|
|
|
|
|
|
||
租赁改良 |
|
|
|
|
|
|
||
办公室和实验室设备 |
|
|
|
|
|
|
||
计算机设备 |
|
|
|
|
|
|
||
土地 |
|
|
|
|
|
|
||
开多为使用权资产 |
|
|
|
|
|
|
||
建筑物和温室 |
|
|
|
|
|
|
||
在制资产 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
减：累计折旧 |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
2024年9月30日三个月和六个月的营业成本中包含的折旧费用是 $
14无形资产
无形资产的组成如下：
|
|
2024年9月30日 |
|
|
酒精饮料销售 $ 32,907 45.5％ $ 30,136 42.1％ $ 66,223 |
|
||||||||||
|
|
毛利 |
|
|
净利 |
|
|
毛利 |
|
|
净利 |
|
||||
|
|
搬运 |
|
|
搬运 |
|
|
搬运 |
|
|
搬运 |
|
||||
|
|
金额 |
|
|
金额 |
|
|
金额 |
|
|
金额 |
|
||||
有限寿命的无形资产 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
知识产权 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
分销渠道 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
运营许可证 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
软件和域名 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
品牌 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
流动摊销无形资产 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
总计 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
无限期使用的无形资产 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
已取得品牌 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
无形资产总额 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
2024年9月30日结束的三个和六个月内，包含在销售成本中的摊销费用为 $
15. GOODWILL
The changes in the carrying amount of goodwill are as follows:
Balance, March 31, 2023 |
|
$ |
|
|
Impairment losses |
|
|
( |
) |
Foreign currency translation adjustments |
|
|
( |
) |
Balance, March 31, 2024 |
|
$ |
|
|
Foreign currency translation adjustments |
|
|
|
|
Balance, September 30, 2024 |
|
$ |
|
18
The Company does not believe that an event occurred or circumstances changed during the six months ended September 30, 2024 that would, more likely than not, reduce the fair value of the Storz & Bickel® (“Storz & Bickel”) reporting unit below its carrying value. Therefore, the Company concluded that the quantitative goodwill impairment assessment was not required for the Storz & Bickel reporting unit at September 30, 2024. The carrying value of goodwill associated with the Storz & Bickel reporting unit was $
The Company is required to perform its next annual goodwill impairment analysis on March 31, 2025, or earlier should there be an event that occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
16. OTHER ACCRUED EXPENSES AND LIABILITIES
The components of other accrued expenses and liabilities are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Employee compensation |
|
$ |
|
|
$ |
|
||
Taxes and government fees |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
17. DEBT
The components of debt are as follows:
|
|
|
|
September 30, |
|
|
March 31, |
|
||
|
|
Maturity Date |
|
2024 |
|
|
2024 |
|
||
Credit facility |
|
|
|
|
|
|
|
|||
Principal amount |
|
|
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
|
|
||
Deferred financing costs |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||
Supreme convertible debentures |
|
|
|
|
|
|
|
|||
Accretion debentures |
|
|
|
|
|
|
|
|||
May 2024 Convertible Debenture |
|
|
|
|
|
|
- |
|
||
Promissory note |
|
|
|
- |
|
|
|
|
||
Other revolving debt facility, loan, and financings |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less: current portion |
|
|
|
|
( |
) |
|
|
( |
) |
Long-term portion |
|
|
|
$ |
|
|
$ |
|
||
Credit Facility
On March 18, 2021, the Company entered into a term loan credit agreement (the "Credit Agreement") providing for a
On July 13, 2023, as part of the Company's balance sheet deleveraging initiatives, the Company entered into agreements with certain of its lenders under the Credit Agreement pursuant to which certain additional amendments were made to the Credit Agreement (the Credit Agreement, as amended as of July 13, 2023, is referred to herein as the "Amended Credit Agreement"). The
19
Amended 信贷协议要求公司支付或回购信贷额度下的本金债务，金额等于$的美元等值
根据修订后的信用协议条款，公司于2023年8月11日和2023年9月14日回购额外的信贷设施下未偿本金金额，使用完成资产销售所得的净额（“2024年第二季度清偿”）。2024年第二季度清偿导致总计减少$金额的本金。
根据修订后的信用协议条款，公司于2023年11月28日和2023年12月27日回购并偿还信贷设施下未偿本金金额，使用完成资产销售所得的净额（“2024年第三季度清偿”）。2024年第三季度清偿导致总计减少$金额的本金。
2024年2月21日，公司在信贷设施下回购了额外的未偿本金金额（"2024年第四季度偿还"）。2024年第四季度偿还导致总本金减少$
2024年4月29日和2024年6月28日，公司在信贷设施下回购了额外的未偿本金金额（"2025年第一季度偿还"）。2025年第一季度偿还导致总本金减少$
2024年8月8日，公司与信用协议债权人达成修正协议（“修正协议”），该协议涉及于2021年3月18日签订的信用协议，以及于2022年10月24日和2023年7月13日期修改，参与方包括公司、11065220加拿大有限公司作为借款人，以及作为行政和抵押代理的威明顿信托国家协会。根据修正协议的条款，信用设施的到期日被延长至
此外，如果在2025年3月31日前进行同等条款的可选预付款，则信用设施的到期日将进一步延长至2027年9月18日。修正协议还包括对特定负面契约、资产剥离偿还规定和违约事件的变更。
2024年9月27日，公司在信贷渠道下回购了额外的未偿本金金额（“2025年第二季度偿还”）。2025年第二季度偿还导致债券本金总额减少$
截至2024年8月8日，信贷渠道到期日为
证券保证借款的第二次修订和重申的 promissory note
2023年4月13日，公司与星座品牌（CBI）的关联方Greenstar Canada Investment有限合伙企业（“Greenstar”）签署了一份交换协议（“2023年4月交换协议”），以获得并取消美元
2024年4月18日，公司与Greenstar签订了一项交易协议（“2024年4月交易协议”），根据协议，Greenstar将大约$的本金额中的$部分转换为公司的股份（“可交换股份”），计算方法基于每股可交换价
20
Share equal to $
Supreme Cannabis Convertible Debentures and Accretion Debentures
On October 19, 2018, The Supreme Cannabis Company, Inc. (“Supreme Cannabis”) entered into an indenture with Computershare Trust Company of Canada (the “Trustee”) pursuant to which Supreme Cannabis issued
In addition, on September 9, 2020, Supreme Cannabis issued new senior unsecured non-convertible debentures (the “Accretion Debentures”). The principal amount began at $nil and accreted at a rate of
As a result of the completion of an arrangement on June 22, 2021 by the Company and Supreme Cannabis, pursuant to which the Company acquired
In connection with the Supreme Arrangement, the Company, Supreme Cannabis and the Trustee entered into a supplemental indenture whereby the Company agreed to issue common shares upon conversion of any Supreme Debenture.
Prior to September 9, 2023, the Supreme Debentures were not redeemable. Beginning on and after September 9, 2023, Supreme Cannabis may from time to time, upon providing 60 days prior written notice to the Trustee, redeem the Supreme Debentures outstanding, provided that the Accretion Debentures have already been redeemed in full.
During the three and six months ended September 30, 2024, principal payments on Accretion Debentures totaled $
On August 20, 2024, the Company entered into an exchange and subscription agreement (the “August 2024 Supreme Convertible Debt Exchange”) with a single institutional investor (the “August 2024 Investor”) pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $
May 2024 Convertible Debenture
On May 2, 2024, the Company entered into an exchange and subscription agreement (the “Exchange and Subscription Agreement”) with a single institutional investor (the “May 2024 Investor”) pursuant to which, among other things, the May 2024 Investor delivered to the Company approximately $
21
The May 2024 Convertible Debenture is convertible into Canopy Growth common shares at the option of the May 2024 Investor at a conversion price equal to $
18. OTHER LIABILITIES
The components of other liabilities are as follows:
|
|
As at September 30, 2024 |
|
|
As at March 31, 2024 |
|
||||||||||||||||||
|
|
Current |
|
|
Long-term |
|
|
Total |
|
|
Current |
|
|
Long-term |
|
|
Total |
|
||||||
Lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Acquisition consideration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Refund liability |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||
Settlement liabilities and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
19. SHARE CAPITAL
CANOPY GROWTH
Authorized
An unlimited number of common shares.
(i) Equity financings
On June 6, 2024, the Company established an at-the-market equity program that allows it to sell up to US$
22
(ii) 其他普通股股份发行和股本交易
在截至2024年9月30日的六个月内，公司进行了以下其他发行和股本交易：
|
|
普通股股数 |
|
|
分享 |
|
|
分享 |
|
|||
其他发行和股份发行成本 |
|
|
- |
|
|
$ |
( |
) |
|
$ |
- |
|
总计 |
|
|
- |
|
|
$ |
( |
) |
|
$ |
- |
|
截至2023年9月30日的六个月内，公司进行了以下其他发行和股本交易：
|
|
普通股股数1 |
|
|
分享 |
|
|
分享 |
|
|||
可转换债券的结算 |
|
|
|
|
$ |
|
|
$ |
- |
|
||
canopy growth票据的结算 |
|
|
|
|
|
|
|
|
- |
|
||
债券的结算 |
|
|
|
|
|
|
|
|
- |
|
||
其他发行及股份发行成本 |
|
|
|
|
|
|
|
|
( |
) |
||
总计 |
|
|
|
|
$ |
|
|
$ |
( |
) |
||
1
（iii）warrants
|
|
数量 |
|
|
平均数 |
|
|
权证 |
|
|||
2024年3月31日尚未偿还的余额 |
|
|
|
|
$ |
|
|
$ |
|
|||
权证发行 |
|
|
|
|
|
|
|
|
|
|||
认证股证权行权 |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
2024年9月30日尚未偿还的余额 |
|
|
|
|
$ |
|
|
$ |
|
|||
|
|
数量 |
|
|
平均数 |
|
|
权证 |
|
|||
2023年3月31日的未偿余额1 |
|
|
|
|
$ |
|
|
$ |
|
|||
定向增发认股权证发行 |
|
|
|
|
|
|
|
|
|
|||
截至2023年9月30日尚未结清的余额1 |
|
|
|
|
$ |
|
|
$ |
|
|||
1
2
(iv) 交换股份发行
2024年4月18日，Greenstar和CBG Holdings LLC（以下简称“CBG”），CBI的间接，完全拥有的子公司交换了所有
20股份奖励报酬
canopy growth公司股份奖励计划
2023年9月25日，公司股东批准了新的综合股权激励计划（"综合股权激励计划"），根据该计划，公司可以发行基于股份的长期激励。综合股权激励计划取代了公司之前的股权激励计划，该计划最初于2018年7月30日获得公司股东批准（“先前的股权激励计划”，连同综合股权激励计划，构成“激励计划”）。股东批准
23
公司的年度代理委托书于2023年8月9日向证券交易委员会提交，详细说明了全面股权激励计划及替代先前股权激励计划。
公司的所有董事、员工和顾问有资格根据全面股权激励计划获得普通股购买期权（“期权”）、限制性股份单位（“RSUs”）、延期股份单位或基于股份的奖励（统称为“奖励”），但受一定限制。全面股权激励计划允许每份期权的最长期限为
全面股权激励计划于2023年9月25日通过。
根据激励计划授予的奖励行使或归属时，可供发行的普通股最大数量为
全员股权激励计划由董事会的企业治理、薪酬和提名委员会（“CGCN委员会”）管理，该委员会酌情确定行使价格，不得低于授予日的公允市场价值（定义见全员股权激励计划），归属条款和到期日，最长为（从发行之日算起）奖励，受全员股权激励计划限制。日起的日期）。
以下是期权在持续中的变化摘要 2024年9月30日结束的六个月：
|
|
Options |
|
|
已授予和预期于2021年1月2日授予股份 |
|
||
2024年3月31日的未清余额 |
|
|
|
|
$ |
|
||
期权授予 |
|
|
|
|
|
|
||
期权行权 |
|
|
( |
) |
|
|
|
|
期权到期/被放弃 |
|
|
( |
) |
|
|
|
|
截至2024年9月30日未偿余额 |
|
|
|
|
$ |
|
||
以下是截至某日为止所有期权的概要 2024年9月30日：
|
|
期权未行权 |
|
|
可行权期权 |
|
||||||||||
|
|
|
|
|
加权平均 |
|
|
|
|
|
加权平均 |
|
||||
|
|
|
|
|
剩余 |
|
|
|
|
|
剩余 |
|
||||
|
|
未结算 |
|
|
合同年限 |
|
|
可以行使 |
|
|
合同年限 |
|
||||
行使价格区间 |
|
2024年9月30日 |
|
|
(年) |
|
|
2024年9月30日 |
|
|
(年) |
|
||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
1 先前期权和行使价格金额已根据分拆来进行了回溯调整，该分拆于2023年12月15日生效。请参阅备注2
截至2024年9月30日，未到期期权和可行权期权的加权平均行使价格为 $
基于销售的版税费被视为可变考虑，因此只有当这类销售发生时才会承认收入。 $
24
公司使用Black-Scholes期权定价模型，在测量日期确定授予的期权的公允价值 在截至2024年和2023年9月30日的三个月内，通过应用以下假设来确定测量日期
|
|
9月30日, |
|
9月30日, |
|
|
2024 |
|
2023 |
无风险利率 |
|
|
- |
|
期权的预期寿命（年） |
|
|
- |
|
预期波动率 |
|
|
- |
|
预期弃权率 |
|
|
- |
|
预期股息收益 |
|
|
- |
|
每个期权的Black-Scholes价值 |
|
$ |
|
- |
通过使用公司历史波动率来估计波动率。年预期寿命代表预期获得的期权预计持续的时间。无风险利率基于剩余期限等于期权预期寿命的加拿大零息政府债券。
截至2024年9月30日的三个月和六个月，公司记录 $
以下是公司在2024年9月30日之前六个月内RSUs和PSUs变化的总结： 2024年9月30日止六个月：
|
|
RSU数量 |
|
|
2024年3月31日未清偿余额 |
|
|
|
|
已授予的RSUs和PSUs |
|
|
|
|
已释放的RSUs和PSUs |
|
|
( |
) |
RSUs和PSUs被取消和被没收 |
|
|
( |
) |
2024年9月30日未偿余额 |
|
|
|
|
21. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income includes the following components:
|
|
Foreign currency translation adjustments |
|
|
Changes of own credit risk of financial liabilities |
|
|
Accumulated other comprehensive income (loss) |
|
|||
As at March 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Disposal of consolidated entities |
|
|
|
|
|
- |
|
|
|
|
||
Extinguishment of promissory note and issuance of exchangeable shares |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Other comprehensive income |
|
|
|
|
|
- |
|
|
|
|
||
As at September 30, 2024 |
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
( |
) |
|
|
Foreign currency translation adjustments |
|
|
Changes of own credit risk of financial liabilities |
|
|
Accumulated other comprehensive income (loss) |
|
|||
As at March 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Settlement of unsecured senior notes, net of deferred income tax |
|
|
- |
|
|
|
|
|
|
|
||
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
As at September 30, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
22. NONCONTROLLING INTERESTS
The net change in the noncontrolling interests is as follows:
|
|
Other |
|
|
Total |
|
||
As at March 31, 2024 |
|
$ |
|
|
$ |
|
||
Comprehensive income (loss) |
|
|
- |
|
|
|
- |
|
Canopy USA Transaction |
|
|
( |
) |
|
|
( |
) |
As at September 30, 2024 |
|
$ |
- |
|
|
$ |
- |
|
25
|
|
BioSteel |
|
|
Other |
|
|
Total |
|
|||
As at March 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Comprehensive loss |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Net loss attributable to redeemable noncontrolling interest |
|
|
|
|
|
- |
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
- |
|
|
|
|
||
Ownership changes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
As at September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
23. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value measurements are made using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:
The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.
The Company records cash, accounts receivable, interest receivable and accounts payable, and other accrued expenses and liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis may include items such as property, plant and equipment, goodwill and other intangible assets, equity and other investments and other assets. The Company determines the fair value of these items using Level 3 inputs, as described in the related sections below.
The following table represents the Company's financial assets and liabilities measured at estimated fair value on a recurring basis:
|
|
Fair value measurement using |
|
|
|
|
||||||||||
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
prices in |
|
|
other |
|
|
Significant |
|
|
|
|
||||
|
|
active |
|
|
observable |
|
|
unobservable |
|
|
|
|
||||
|
|
markets |
|
|
inputs |
|
|
inputs |
|
|
|
|
||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Restricted short-term investments |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Equity method investments |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Other financial assets |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Restricted short-term investments |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Other financial assets |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Other liabilities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
26
The following table summarizes the valuation techniques and significant unobservable inputs in the fair value measurement of significant level 3 financial instruments:
|
Financial asset / financial liability |
|
Valuation techniques |
|
Significant unobservable inputs |
|
Relationship of unobservable inputs to fair value |
|
Canopy USA Equity Method Investment |
|
|
|
|||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
Elevate Loan Receivable |
|
|
|
|||
|
Acreage Debt |
|
|
|
24. REVENUE
Revenue is disaggregated as follows:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Canada cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian adult-use cannabis1 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Canadian medical cannabis2 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International markets cannabis |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Storz & Bickel |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
This Works |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||
Other |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
|
|
|
|
|
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|
|
|
|
|
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|
||||
Net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1
2
The Company recognizes variable consideration related to estimated future product returns and price adjustments as a reduction of the transaction price at the time revenue for the corresponding product sale is recognized. Net revenue reflects actual returns and variable consideration related to estimated returns and price adjustments in the amount of $
27
25. OTHER INCOME (EXPENSE), NET
Other income (expense), net is disaggregated as follows:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Fair value changes on other financial assets |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Fair value changes on equity method investments |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Fair value changes on debt |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Fair value changes on acquisition related contingent |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Gain (charges) related to settlement of debt |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Interest income |
|
|
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|
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|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency gain (loss) |
|
|
|
|
|
|
|
|
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|
||||
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
26. INCOME TAXES
There have been no material changes to income tax matters in connection with normal course operations during the six months ended September 30, 2024.
The Company is subject to income tax in numerous jurisdictions with varying income tax rates. During the most recent period ended and the fiscal year to date, there were no material changes to the statutory income tax rates in the taxing jurisdictions where the majority of the Company’s income for tax purposes was earned, or where its temporary differences or losses are expected to be realized or settled. Although statutory income tax rates remain stable, the Company’s effective income tax rate may fluctuate, arising as a result of the Company’s evolving footprint, discrete transactions and other factors that, to the extent material, are disclosed in these financial statements.
The Company continues to believe that the amount of unrealized tax benefits appropriately reflects the uncertainty of items that are or may in the future be under discussion, audit, dispute or appeal with a tax authority or which otherwise result in uncertainty in the determination of income for tax purposes. If appropriate, an unrealized tax benefit will be realized in the reporting period in which the Company determines that realization is not in doubt. Where the final determined outcome is different from the Company’s estimate, such difference will impact the Company’s income taxes in the reporting period during which such determination is made.
27. ACREAGE ARRANGEMENT
On September 23, 2020, the Company and Acreage entered into a second amendment (the “Acreage Amending Agreement”) to the arrangement agreement (the “Original Acreage Arrangement Agreement”) and plan of arrangement (the “Original Acreage Arrangement”) between the Company and Acreage dated April 18, 2019, as amended on May 15, 2019. In connection with the Acreage Amending Agreement, the Company and Acreage implemented an amended and restated plan of arrangement (the “Acreage Amended Arrangement”) on September 23, 2020. Pursuant to the terms of the Original Acreage Arrangement, shareholders of Acreage and holders of certain securities convertible into the existing Acreage subordinated voting shares as of June 26, 2019, received an immediate aggregate total payment of US$
The Acreage Amended Arrangement provides for, among other things, the following:
28
See Note 3 for information regarding the Reorganization. In connection with the Reorganization and the Floating Share Arrangement Agreement, Canopy Growth irrevocably waived the Acreage Floating Option and subject to, among other things, the terms of the Floating Share Arrangement Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares. Following the implementation of the Reorganization, Canopy USA, holds certain U.S. cannabis investments previously held by the Company, which is expected to enable Canopy USA to consummate the acquisition of Acreage. On June 4, 2024, the Acreage Option was exercised and the closing of the transaction contemplated by the Acreage Option remains subject to certain closing conditions.
In connection with the Acreage Amended Arrangement, on September 23, 2020, an affiliate of the Company advanced US$
28. COMMITMENTS AND CONTINGENCIES
Legal proceedings
In the ordinary course of business, the Company is at times subject to various legal proceedings and disputes, including the proceedings specifically discussed below. The Company assesses the liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, a liability is recorded in the consolidated financial statements. Where a loss is only reasonably possible or the amount of the loss cannot be reasonably estimated, no liability is recorded in the consolidated financial statements, but disclosures, as necessary, are provided.
For the three months ended September 30, 2024 there have been no material changes with respect to provisions relating to legal proceedings for the Company.
29. SEGMENT INFORMATION
Reportable segments
The Company reports its financial results for the following
29
These segments reflect how the Company's operations are managed, how the Company's Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured. The Company's CODM evaluates the performance of these segments, with a focus on (i) segment net revenue, and (ii) segment gross margin as the measure of segment profit or loss. Accordingly, information regarding segment net revenue and segment gross margin for the comparative periods has been restated to reflect the aforementioned change in reportable segments. The remainder of the Company's operations include revenue derived from, and cost of sales associated with, the Company's non-cannabis extraction activities and other ancillary activities; these are included within "other".
|
|
Three months ended |
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Six months ended |
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||||||||||
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September 30, |
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September 30, |
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September 30, |
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September 30, |
|
||||
|
|
2024 |
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|
2023 |
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|
2024 |
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2023 |
|
||||
Segmented net revenue |
|
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|
||||
Canada cannabis |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International markets cannabis |
|
|
|
|
|
|
|
|
|
|
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|
||||
Storz & Bickel |
|
|
|
|
|
|
|
|
|
|
|
|
||||
This Works |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Other |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Segmented gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canada cannabis |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International markets cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Storz & Bickel |
|
|
|
|
|
|
|
|
|
|
|
|
||||
This Works |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Other |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
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|
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|
||||
Share-based compensation |
|
|
|
|
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|
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|
||||
Loss (gain) on asset impairment and restructuring |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Operating loss from continuing operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income (expense), net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss from continuing operations before incomes taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Asset information by segment is not provided to, or reviewed by, the Company’s CODM as it is not used to make strategic decisions, allocate resources, or assess performance.
Entity-wide disclosures
Disaggregation of net revenue by geographic area:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Canada |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Disaggregation of property, plant and equipment by geographic area:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Canada |
|
$ |
|
|
$ |
|
||
Germany |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
For the three months ended September 30, 2024,
30
For the six months ended September 30, 2024,
30. SUBSEQUENT EVENTS
ATM Program
Since September 30, 2024, the Company sold an additional
Credit Facility Paydown
On October 16, 2024, the Company made an early prepayment under its Credit Facility in an aggregate principal amount equal to US$
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This Management’s Discussion and Analysis (“MD&A”) should be read together with other information, including our unaudited condensed interim consolidated financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report (the “Interim Financial Statements”), our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended March 31, 2024 (the “Annual Report”), Part I, Item 1A, Risk Factors, of the Annual Report and Part II, Item 1A, Risk Factors, of this Quarterly Report. This MD&A provides additional information on our business, recent developments, financial condition, cash flows and results of operations, and is organized as follows:
We prepare and report our Interim Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our Interim Financial Statements, and the financial information contained herein, are reported in thousands of Canadian dollars, except share and per share amounts or as otherwise stated. We have determined that the Canadian dollar is the most relevant and appropriate reporting currency as, despite continuing shifts in the relative size of our operations across multiple geographies, the majority of our operations are conducted in Canadian dollars and our financial results are prepared and reviewed internally by management in Canadian dollars.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and other applicable securities laws, which involve certain known and unknown risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and the performance of our investments. These forward-looking statements are generally identified by their use of such terms and phrases as “intend,” “goal,” “strategy,” “estimate,” “expect,” “project,” “projections,” “forecasts,” “plans,” “seeks,” “anticipates,” “potential,” “proposed,” “will,” “should,” “could,” “would,” “may,” “likely,” “designed to,” “foreseeable future,” “believe,” “scheduled” and other similar expressions. Our actual results or outcomes may differ materially from those anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.
Forward-looking statements include, but are not limited to, statements with respect to:
32
33
Certain of the forward-looking statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.
The forward-looking statements contained herein are based upon certain material assumptions, including: (i) management’s perceptions of historical trends, current conditions and expected future developments; (ii) our ability to generate cash flow from operations; (iii) general economic, financial market, regulatory and political conditions in which we operate; (iv) the production and manufacturing capabilities and output from our facilities, strategic alliances and equity investments; (v) consumer interest in our products; (vi) competition; (vii) anticipated and unanticipated costs; (viii) government regulation of our activities and products including but not limited to the areas of taxation and environmental protection; (ix) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (x) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xi) our ability to conduct operations in a safe, efficient and effective manner; (xii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; and (xiii) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.
By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking statements in this Quarterly Report and other reports we file with, or furnish to, the Securities and Exchange Commission (the “SEC”) and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf. Such factors include, without limitation, our limited operating history; our ability to continue as a going concern; risks that we may be required to write down intangible assets, including goodwill, due to impairment; the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); our ability to maintain an effective system of internal control; the diversion of management time on matters related to Canopy USA; the ability of parties to certain transactions to receive, in a timely manner and on satisfactory terms, the necessary regulatory approvals; the risks that the Trust’s future ownership interest in Canopy USA is not quantifiable, and the Trust may have significant ownership and influence over Canopy USA; the risks relating to the conditions set forth in the Floating Share Arrangement Agreement and the Existing Acreage Arrangement Agreement not being satisfied or waived; the risks related to Acreage’s financial statements expressing doubt about its ability to continue as a going concern; the risks in the event that Acreage cannot satisfy its debt obligations as they become due; volatility in and/or degradation of general economic, market, industry or business conditions; risks relating to our current and future operations in emerging markets; compliance with applicable environmental, economic, health and safety, energy and other policies and regulations and in particular health concerns with respect to vaping and the use of cannabis products in vaping devices; risks and uncertainty regarding future product development; changes in regulatory requirements in relation to our business and products; our reliance on licenses issued by and contractual arrangements with various federal, state and provincial governmental authorities; inherent uncertainty associated with projections; future levels of revenues and the impact of increasing levels of competition; third-party manufacturing risks; third-party transportation risks; inflation risks; our exposure to risks related to an agricultural business, including wholesale price volatility and variable product quality; changes in laws, regulations and guidelines and our compliance with such laws, regulations and guidelines; risks relating to inventory write downs; risks relating to our ability to refinance debt as and when required on terms favorable to us and to comply with covenants contained in our debt facilities and debt instruments; risks associated with jointly owned investments; our ability to manage disruptions in credit markets or changes to our credit ratings; the success or timing of completion of ongoing or anticipated capital or maintenance projects; risks related to the integration of acquired businesses; the timing and manner of the legalization of cannabis in the United States; business strategies, growth opportunities and expected investment; counterparty risks and liquidity risks that may impact our ability to obtain loans and other credit facilities on favorable terms; the potential effects of judicial, regulatory or other proceedings, litigation or threatened litigation or proceedings, or reviews or investigations, on our business, financial condition, results of operations and cash flows; risks associated with divestment and restructuring; the anticipated effects of actions of third parties such as competitors, activist investors or federal, state, provincial, territorial or local regulatory authorities, self-regulatory organizations, plaintiffs in litigation or persons threatening litigation; consumer demand for cannabis and hemp products; the implementation and effectiveness of key personnel changes; risks related to stock exchange restrictions; risks related to the protection and enforcement of our intellectual property rights; the risks related to our exchangeable shares (the “Exchangeable Shares”) having different rights from our common shares and there may never be a trading market for the Exchangeable Shares; future levels of capital, environmental or
34
maintenance expenditures, general and administrative and other expenses; and the factors discussed under the heading “Risk Factors” in the Annual Report and in Item 1A of Part II of this Quarterly Report. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements.
Forward-looking statements are provided for the purposes of assisting the reader in understanding our financial performance, financial position, and cash flows as of and for periods ended on certain dates and to present information about management’s current expectations and plans relating to the future, and the reader is cautioned that the forward-looking statements may not be appropriate for any other purpose. While we believe that the assumptions and expectations reflected in the forward-looking statements are reasonable based on information currently available to management, there is no assurance that such assumptions and expectations will prove to have been correct. Forward-looking statements are made as of the date they are made and are based on the beliefs, estimates, expectations, and opinions of management on that date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward-looking statements, except as required by law. The forward-looking statements contained in this Quarterly Report and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees, and other persons authorized to speak on our behalf are expressly qualified in their entirety by these cautionary statements.
Part 1 - Business Overview
We are a world-leading cannabis company which produces, distributes, and sells a diverse range of cannabis and cannabis related products. Cannabis products are principally sold for adult-use and medical purposes under a portfolio of distinct brands. Our core operations are in Canada, Europe and Australia and we hold a significant non-controlling, non-voting interest in an entity that participates in the sale of cannabis and hemp derived products in the United States.
Using a consumer-driven approach, our portfolio delivers diverse products that offer experiences for occasions our consumers seek. Our mainstream and premium branded product portfolio includes multiple cannabis formats, such as high-quality dried flower, oils, softgel capsules, infused beverages, edibles and topical formats, as well as vaporizer devices, in addition to cannabis accessories, designed to meet the needs of consumers worldwide.
Our cannabis cultivation operations are focused in two facilities, our greenhouse facility in Kincardine, Ontario and the DOJA facility in Kelowna, British Columbia. We believe that the cultivation capacity in the Kincardine facility and the DOJA facility, as well as externally sourced cannabis flower supply can meet the current demand for our premium dried flower. The receipt of our European Union Good Manufacturing Practices (“EU GMP”) certification at the Kincardine facility enables us to continue exporting certified medical cannabis to medical markets in Europe as well as other medical cannabis markets around the world.
Our licensed operational capacity in Canada includes advanced manufacturing capability for oil and softgel encapsulation, pre-rolled joints (“PRJ”) (infused and non-infused), and hash production, which is primarily completed at our Smiths Falls, Ontario facility. Through our in-house manufacturing capabilities of adult-use cannabis products, we can process and package bulk cannabis flower, PRJ and vape products, whether internally or externally sourced, into high quality cannabis products. Our remaining products are manufactured through an adaptive third-party sourcing model for all cannabis beverages, edibles, and extracts. We are confident that our production and manufacturing capabilities and know-how are sufficient to meet the diverse needs of our adult-use and medical cannabis consumers in Canada.
Today, we offer a broad portfolio of brands and products and continue to expand our portfolio to include new innovative cannabis products and formats. We maintain agreements to supply all Canadian provinces and territories with our adult-use products for sale through their established retail distribution systems. Through our Spectrum Therapeutics website, patients who have registered with Spectrum Therapeutics are able to purchase products online and have them shipped directly to the address indicated on their registration document. We have developed several programs to improve access to medical cannabis for authorized patients through income-tested compassionate pricing program whereby eligible low-income patients may obtain a 20% discount on regular prices of medical cannabis. We also provide support through our customer care team to help patients identify if their medication is covered under the growing number of private health plans that have a medical cannabis component.
Our Canopy Medical and Spectrum Therapeutics brands continue to serve the medical market in Europe and Australia. Our European medical cannabis business operates in accordance with the specific regulatory framework in place in the relevant jurisdictions, including supplying EU GMP compliant pharmaceutical products. In Australia, Spectrum Therapeutics continues to support Australian medical patients through imported products.
We also offer premier herbal vaporizer products under the Storz & Bickel® (“Storz & Bickel”) brand.
Our cannabis products contain THC, CBD, or a combination of these two cannabinoids which are found in the cannabis sativa plant species. THC is the primary psychoactive or intoxicating cannabinoid found in cannabis. We also refer throughout this MD&A to “hemp,” which is a term used to classify varieties of the cannabis sativa plant that contain CBD and 0.3% or less THC content (by dry weight). Conversely, references to the term “marijuana” refers to varieties of the cannabis sativa plant with more than 0.3% THC.
35
Segment Reporting
We report our financial results for the following four reportable segments:
These segments reflect how our operations are managed, how our Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), allocates resources and evaluates performance, and how our internal management financial reporting is structured. Our CODM evaluates the performance of these segments, with a focus on (i) segment net revenue, and (ii) segment gross margin as the measure of segment profit or loss. The information regarding segment net revenue and segment gross margin for the comparative periods has been restated to reflect the aforementioned change in reportable segments. The remainder of our operations include revenue derived from, and cost of sales associated with, our non-cannabis extraction activities and other ancillary activities; these are included within "other."
Canopy USA
On October 24, 2022, Canopy Growth completed a number of strategic transactions (the “Reorganization”) in connection with the creation of Canopy USA, a U.S.-domiciled holding company wherein, as of October 24, 2022, Canopy USA, holds certain U.S. cannabis investments previously held by Canopy Growth.
Following the creation of Canopy USA, the Nasdaq communicated its position to the Company stating that companies that consolidate “the assets and revenues generated from activities in violation under federal law cannot continue to list on Nasdaq”. Since the Company is committed to compliance with the listing requirements of the Nasdaq, the Company and Canopy USA effectuated certain changes to the initial structure of the Company’s interest in Canopy USA that were intended to facilitate the deconsolidation of the financial results of Canopy USA within the Company’s financial statements. These changes included, among other things, modifying the terms of the Protection Agreement (as defined below) between the Company, its wholly-owned subsidiary and Canopy USA as well as the terms of Canopy USA’s limited liability company agreement and amending the terms of certain agreements with third-party investors in Canopy USA to eliminate any rights to guaranteed returns (collectively, the “Reorganization Amendments”). On May 19, 2023, the Company and Canopy USA implemented the Reorganization Amendments, which included, entering into the First A&R Protection Agreement (as defined below) and amending and restating Canopy USA’s limited liability company agreement (the “A&R LLC Agreement”) in order to: (i) eliminate certain negative covenants that were previously granted by Canopy USA in favor of the Company as well as delegating to the managers of the Canopy USA Board (as defined below) not appointed by Canopy Growth the authority to approve the following key decisions (collectively, the “Key Decisions”): (a) the annual business plan of Canopy USA; (b) decisions regarding the executive officers of Canopy USA and any of its subsidiaries; (c) increasing the compensation, bonus levels or other benefits payable to any current, former or future employees or managers of Canopy USA or any of its subsidiaries; (d) any other executive compensation plan matters of Canopy USA or any of its subsidiaries; and (e) the exercise of the Wana Options (as defined below) or the Jetty Options, which for greater certainty means that the Company’s nominee on the Canopy USA Board will not be permitted to vote on any Key Decisions while the Company owns Non-Voting Shares; (ii) reduce the number of managers on the Canopy USA Board from four to three, including, reducing the Company’s nomination right to a single manager; (iii) amend the share capital of Canopy USA to, among other things, (a) create a new class of Canopy USA Class B Shares (as defined below), which may not be issued prior to the conversion of the Non-Voting Shares or the Class A shares of Canopy USA (the “Canopy USA Common Shares”) into Canopy USA Class B Shares; (b) amend the terms of the Non-Voting Shares such that the Non-Voting Shares will be convertible into Canopy USA Class B Shares (as opposed to Canopy USA Common Shares); and (c) amend the terms of the Canopy USA Common Shares such that upon conversion of all of the Non-Voting Shares into Canopy USA Class B Shares, the Canopy USA Common Shares will, subject to their terms, automatically convert into Canopy USA Class B Shares, provided that the number of Canopy USA Class B Shares to be issued to the former holders of the Canopy USA Common Shares will be equal to no less than 10% of the total issued and outstanding Canopy USA Class B Shares following such issuance. Accordingly, as a result of the Reorganization Amendments, in no circumstances will the Company, at the time of such conversions, own more than 90% of the Canopy USA Class B Shares.
In connection with the Reorganization Amendments, on May 19, 2023, Canopy USA and Huneeus 2017 Irrevocable Trust (the “Trust”) entered into a share purchase agreement (the “Trust SPA”), which sets out the terms of the Trust’s investment in Canopy
36
USA in the aggregate amount of up to US$20 million (the “Trust Transaction”). Agustin Huneeus, Jr. is the trustee of the Trust and is an affiliate of a shareholder of Jetty. Pursuant to the terms of the Trust SPA, the Trust will, subject to certain terms and conditions contained in the Trust SPA be issued Canopy USA Common Shares in two tranches with an aggregate value of up to US$10 million along with warrants of Canopy USA to acquire additional Canopy USA Common Shares. In addition, subject to the terms of the Trust SPA, the Trust has also been granted options to acquire additional Voting Shares (as defined in the A&R LLC Agreement) with a value of up to an additional US$10 million and one such additional option includes the issuance of additional warrants of Canopy USA. On April 26, 2024, Canopy USA completed the first tranche closing of the Trust Transaction in accordance with the Trust SPA. As of November 7, 2024, the Trust holds an aggregate 28,571,429 Canopy USA Common Shares and warrants to acquire up to 85,714,284 Voting Shares expiring on April 26, 2031.
In addition, subject to the terms and conditions of the A&R Protection Agreement (as defined below) and the terms of the option agreements to acquire Wana and Jetty, as applicable, Canopy Growth may be required to issue additional common shares in satisfaction of certain deferred and/or option exercise payments to the shareholders of Wana and Jetty. Canopy Growth will receive additional Non-Voting Shares from Canopy USA as consideration for any Company common shares issued in the future to the shareholders of Wana and Jetty.
On November 3, 2023, the Company received a letter from the staff of the SEC (the “Staff”) in which the Staff indicated that, despite the Reorganization Amendments, it would object to the deconsolidation of the financial results of Canopy USA from the Company's financial statements in accordance with U.S. GAAP once Canopy USA acquires Wana, Jetty or the Fixed Shares of Acreage. The Company subsequently had discussions with the Office of Chief Accountant of the SEC (the “OCA”) and determined to make certain additional amendments to the structure of Canopy USA (the “Additional Reorganization Amendments”) to facilitate the deconsolidation of Canopy USA from the financial results of Canopy Growth in accordance with U.S. GAAP upon Canopy USA’s acquisition of Wana, Jetty or Acreage. In connection with the Additional Reorganization Amendments, Canopy USA and its members entered into a second amended and restated limited liability company agreement (the “Second A&R LLC Agreement”). In accordance with the terms of the Second A&R LLC Agreement, the terms of the Non-Voting Shares have been amended such that the Non-Voting Shares are only convertible into Canopy USA Class B Shares following the date that the NASDAQ Stock Market or The New York Stock Exchange permit the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana (as defined in 21 U.S.C 802) in the United States (the “Stock Exchange Permissibility Date”). Based on the Company’s discussions with the OCA, upon effectuating the Additional Reorganization Amendments, the Company believes that the Staff would not object to the deconsolidation of the financial results of Canopy USA from the Company’s financial statements in accordance with U.S. GAAP.
Following the Reorganization, Reorganization Amendments and Additional Reorganization Amendments, on May 6, 2024, Canopy USA exercised the options (the “Wana Options”) to acquire Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, “Wana”) leading cannabis edibles brand in North America and subsequently closed the transactions to acquire Wana Wellness, LLC and The Cima Group, LLC. On October 8, 2024, Canopy USA closed the acquisition of Mountain High Products, LLC. In addition, Canopy USA exercised the options (the “Jetty Options”) to acquire Lemurian, Inc. (“Jetty”) a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology and subsequently completed the first tranche closing to acquire Jetty. On June 4, 2024, the option to acquire the issued and outstanding Class E subordinate voting shares (the “Fixed Shares”) of Acreage (the “Acreage Option”) was exercised. Canopy USA also holds direct and indirect interests in the capital of TerrAscend Corp. (“TerrAscend”), a leading North American cannabis operator with vertically integrated operations and a presence in Pennsylvania, New Jersey, Michigan and California as well as licensed cultivation and processing operations in Maryland.
Canopy USA currently holds an ownership interest in the following assets, among others:
37
Following the implementation of the Reorganization, Canopy USA was determined to be a variable interest entity pursuant to ASC 810 - Consolidations (“ASC 810”) and prior to the completion of the Reorganization Amendments and the Additional Reorganization Amendments, Canopy Growth was determined to be the primary beneficiary of Canopy USA. As a result of such determination and in accordance with ASC 810, Canopy Growth consolidated the financial results of Canopy USA up to April 30, 2024.
Ownership of U.S. Cannabis Investments
Following the implementation of the Reorganization, the shares and interests in Acreage, Wana, Jetty and TerrAscend are held, directly or indirectly, by Canopy USA, and Canopy Growth no longer holds a direct interest in any shares or interests in such entities, other than the Acreage Option, which was exercised on June 4, 2024. Canopy Growth holds non-voting and non-participating shares (the “Non-Voting Shares”) in the capital of Canopy USA. The Non-Voting Shares do not carry voting rights, rights to receive dividends or other rights upon dissolution of Canopy USA. Following the Reorganization Amendments, the Non-Voting Shares are convertible into Class B shares of Canopy USA (the “Canopy USA Class B Shares”), provided that such conversion shall only be permitted following the Stock Exchange Permissibility Date. The Company also has the right (regardless of the fact that its Non-Voting Shares are non-voting and non-participating) to appoint one member to the Canopy USA board of managers (the “Canopy USA Board”).
On October 24, 2022, Canopy USA and the Company also entered into an agreement with, among others, Nancy Whiteman, the controlling shareholder of Wana, which was amended and restated on May 19, 2023 and on April 30, 2024, whereby subsidiaries of Canopy USA agreed to pay additional consideration in order to acquire the Wana Options and the future payments owed in connection with the exercise of the Wana Options were reduced to US$3.00 in exchange for the issuance of Canopy USA Common Shares and Canopy Growth common shares (the “Wana Amending Agreement”). In accordance with the terms of the Wana Amending Agreement, on April 30, 2024, (i) Canopy USA issued 60,955,929 Canopy USA Common Shares and (ii) Canopy Growth issued 1,086,279 Canopy Growth common shares to the shareholders of Wana. The Canopy USA Common Shares issued to Ms. Whiteman, or entities controlled by Ms. Whiteman, are subject to a repurchase right exercisable at any time after April 30, 2027, being the 36 month anniversary of the closing of the transaction contemplated by the Wana Amending Agreement (the “Wana Repurchase Right”) to repurchase all Canopy USA Common Shares that have been issued at a price per Canopy USA Common Share equal to the fair market value as determined by an appraiser. As part of this agreement, Canopy USA has granted Ms. Whiteman the right to appoint one member to the Canopy USA Board and a put right on the same terms and conditions as the Wana Repurchase Right.
As of November 7, 2024, the Trust holds 28,571,429 Canopy USA Common Shares, the shareholders of Wana collectively hold 60,955,929 Canopy USA Common Shares and a wholly-owned subsidiary of the Company holds all of the issued and outstanding Non-Voting Shares in the capital of Canopy USA, representing approximately 72.3% of the issued and outstanding shares in Canopy USA on an as-converted basis.
Canopy Growth and Canopy USA are also parties to a protection agreement (the “Protection Agreement”) to provide for certain covenants in order to preserve the value of the Non-Voting Shares held by Canopy Growth until such time as the Non-Voting Shares are converted in accordance with their terms, provided that, such conversion shall only be permitted following the Stock Exchange Permissibility Date, but does not provide Canopy Growth with the ability to direct the business, operations or activities of Canopy USA. The Protection Agreement was amended and restated in connection with: (a) the Reorganization Amendments (the “First A&R Protection Agreement”); and (b) the Additional Reorganization Amendments (the “Second A&R Protection Agreement” and together with the First A&R Protection Agreement, the “A&R Protection Agreement”).
Upon closing of Canopy USA’s acquisition of Acreage, Canopy Growth will receive additional Non-Voting Shares from Canopy USA in consideration for the issuance of common shares of the Company that shareholders of Acreage will receive in accordance with the terms of the Existing Acreage Arrangement Agreement and the Floating Share Arrangement Agreement.
Until such time as Canopy Growth converts the Non-Voting Shares into Canopy USA Class B Shares following the Stock Exchange Permissibility Date, Canopy Growth will have no economic or voting interest in Canopy USA, Wana, Jetty, TerrAscend, or Acreage. Canopy USA, Wana, Jetty, TerrAscend, and Acreage will continue to operate independently of Canopy Growth.
Acreage Agreements
On October 24, 2022, Canopy Growth entered into an arrangement agreement with Canopy USA and Acreage, as amended (the “Floating Share Arrangement Agreement”), pursuant to which, subject to approval of the holders of the Floating Shares and the terms and conditions of the Floating Share Arrangement Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of the Floating Share Arrangement in exchange for 0.045 of a Company common share for each Floating Share held. In connection with the Floating Share Arrangement Agreement, Canopy Growth has irrevocably waived the right to acquire all of the issued and outstanding Floating Shares (the “Acreage Floating Option”) existing under the Existing Acreage Arrangement Agreement.
38
On October 24, 2022, the Company and Canopy USA entered into a third amendment to tax receivable agreement (the “Amended TRA”) with, among others, certain current or former unitholders (the “Holders”) of High Street Capital Partners, LLC, a subsidiary of Acreage (“HSCP”), pursuant to HSCP’s amended tax receivable agreement (the “TRA”) and related tax receivable bonus plans with Acreage. Pursuant to the Amended TRA, the Company, on behalf of Canopy USA, agreed to issue common shares of the Company with a value of US$30.4 million to certain Holders as consideration for the assignment of such Holder’s rights under the TRA to Canopy USA. As a result of the Amended TRA, Canopy USA is the sole member and beneficiary under the TRA. In connection with the foregoing, the Company issued: (i) 564,893 common shares with a value of $20.6 million (US$15.2 million) to certain Holders on November 4, 2022 as the first installment under the Amended TRA; and (ii) 710,208 common shares with a value of $20.6 million (US$15.2 million) to certain Holders on March 17, 2023, as the second installment under the Amended TRA. The Company, on behalf of Canopy USA, also agreed to issue common shares of the Company with a value of approximately US$19.6 million to certain eligible participants pursuant to HSCP’s existing tax receivable bonus plans to be issued immediately prior to completion of the Floating Share Arrangement.
In addition to shareholder and court approvals, the Floating Share Arrangement is subject to applicable regulatory approvals including, but not limited to, TSX approval and the satisfaction of certain other closing conditions, including the conditions set forth in the amended and restated plan of arrangement (the “Acreage Amended Arrangement”) implemented by Canopy Growth and Acreage on September 23, 2020 in connection with the Existing Acreage Arrangement Agreement. The Floating Share Arrangement received the requisite approval from the holders of Floating Shares at the special meeting of Acreage shareholders held on March 15, 2023 and on March 20, 2023 Acreage obtained a final order from the Supreme Court of British Columbia approving the Floating Share Arrangement.
On June 4, 2024, the Acreage Option was exercised in accordance with the terms of the arrangement agreement dated April 18, 2019, as amended on May 15, 2019, September 23, 2020 and November 17, 2020 (the “Existing Acreage Arrangement Agreement”), with such exercise being completed in advance of the Exercise Outside Date (as defined in the Floating Share Arrangement Agreement). Concurrently with the closing of the acquisition of the Fixed Shares pursuant to the exercise of the Acreage Option, the Fixed Shares will be issued to Canopy USA. Accordingly, Canopy Growth will not hold any Fixed Shares or Floating Shares. Completion of the acquisition of the Fixed Shares is subject to the satisfaction of certain conditions set forth in the Existing Acreage Arrangement Agreement. The acquisition of the Floating Shares pursuant to the Floating Share Arrangement is anticipated to occur immediately prior to the acquisition of the Fixed Shares pursuant to the Existing Acreage Arrangement Agreement such that 100% of the issued and outstanding shares of Acreage will be owned by Canopy USA on closing of the acquisition of both the Fixed Shares and the Floating Shares.
On June 3, 2024, the Company exercised its option to acquire certain outstanding debt of Acreage (the “Debt Acquisition”) in connection with the option agreement dated November 15, 2022 (the “Option Agreement”) among a wholly-owned subsidiary of Canopy Growth (the “Optionor”) and the lenders (the “Lenders”) party to Acreage’s credit agreement dated as of December 16, 2021, as amended by the first amendment to credit agreement dated as of October 24, 2022 and the second amendment to credit agreement dated as of April 28, 2023.
The Optionor entered into various agreements in connection with the Debt Acquisition in order to acquire approximately US$99.8 million of Acreage’s outstanding debt (the “Acquired Debt”) from certain Lenders in exchange for US$69.8 million in cash and the release of approximately US$30.1 million (the “Option Premium”) that was held in escrow pursuant to the Option Agreement. As reported in the Annual Report, the Option Premium was not included in Canopy Growth’s cash and cash equivalents as of March 31, 2024.
The Optionor subsequently transferred approximately US$2.2 million of the Acquired Debt to the other Lender (the “Rolling Lender”) and entered into a series of agreements with the Rolling Lender and Acreage, among others, including an amended and restated credit agreement (the "First ARCA"), which provided for, among other things, the Acquired Debt, certain interest payments to be paid-in-kind, revisions to certain financial covenants and, following certain events, an extension to the maturity date.
On September 13, 2024, the Optionor entered into a series of transactions with, among others, Acreage, the Rolling Lender and an arm's length third-party lender (the "Other Lender"). Pursuant to such transactions, all of Acreage's indebtedness held by the Rolling Lender was acquired by the Other Lender. Following the acquisition by the Other Lender, the Optionor, the Other Lender and Acreage, among others, amended and restated the First ARCA pursuant to a second amended and restated credit agreement dated as of September 13, 2024 (the "Second ARCA"). Pursuant to the Second ARCA and an agreement among lenders entered into on September 13, 2024 between, among others, the Optionor and the Other Lender, all interest owing to the Optionor under the Second ARCA is, subject to the consent of the Other Lender, to be paid-in-kind and not in cash. Under the Second ARCA, as of September 13, 2024, the Optionor was owed an aggregate principal amount equal to approximately US$102 million which is subordinate to approximately US$65 million owed to the Other Lender.
39
Recent Developments
Canopy USA
As described above, Canopy Growth has implemented the Reorganization Amendments and the Additional Reorganization Amendments and Canopy USA subsequently completed the first tranche closing of the Trust Transaction and exercised the Wana Options and the Jetty Options, such that we will not consolidate the financial results of Canopy USA as of April 30, 2024. Following the implementation of the Reorganization, Canopy USA was determined to be a variable interest entity pursuant to ASC 810 and prior to the completion of the Reorganization Amendments and the Additional Reorganization Amendments, Canopy Growth was determined to be the primary beneficiary of Canopy USA. As a result of such determination and in accordance with ASC 810, Canopy Growth consolidated the financial results of Canopy USA up to April 30, 2024.
Deconsolidation of Canopy USA
As of April 30, 2024, as a result of the series of transactions related to the Additional Reorganization Amendments described above (the “Canopy USA Transactions”), Canopy Growth has deconsolidated the financial results of Canopy USA and has a non-controlling interest in Canopy USA as of such date. The deconsolidation of Canopy USA occurred after completion of the following structural amendments: (i) execution of the Second A&R LLC Agreement, (ii) execution of the Second A&R Protection Agreement and (iii) completion of the initial tranche closing of the Trust Transaction, which included the election of a third member to the Canopy USA Board such that the Canopy USA Board is comprised of an appointee from the Trust, Ms. Whiteman, and the Company.
Canopy Growth's deconsolidation of Canopy USA resulted in recognition of an equity method investment and a loan receivable recorded at fair value.
Balance Sheet Deleveraging Initiatives
On April 18, 2024, the Company entered into an exchange agreement (the “April 2024 Exchange Agreement”) with Greenstar Canada Investment Limited Partnership (“Greenstar”), an affiliate of Constellation Brands, Inc. (“CBI”), pursuant to which Greenstar converted approximately $81.2 million of the principal amount of the $100 million principal amount of a promissory note (the “CBI Note”) into 9,111,549 Exchangeable Shares (the “Note Exchange”), calculated based on a price per Exchangeable Share equal to $8.91. Pursuant to the terms of the April 2024 Exchange Agreement, all accrued but unpaid interest on the CBI Note together with the remaining principal amount of the CBI Note was cancelled and forgiven for no additional consideration by Greenstar. Following the closing of the Note Exchange, there is no outstanding balance owing under the CBI Note and the CBI Note has been cancelled.
On April 29, 2024 and June 28, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the "First Quarter 2025 Paydowns"). The First Quarter 2025 Paydowns resulted in an aggregate principal reduction of $11.2 million (US$8.2 million) for a cash payment of $11.2 million (US$8.2 million).
On August 20, 2024, the Company entered into an exchange and subscription agreement (the "August 2024 Supreme Convertible Debt Exchange") with a single institutional investor (the “August 2024 Investor”) pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $2.7 million of aggregate principal amount of outstanding Supreme Debentures (as defined below) in exchange for 291,351 common shares of the Company and $0.03 million in cash for accrued interest.
On September 27, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the "Second Quarter 2025 Paydown"). The Second Quarter 2025 Paydown resulted in an aggregate principal reduction of $1.1 million (US$0.9 million) for a cash payment of $1.1 million (US$0.9 million).
On October 16, 2024, the Company made an early prepayment under the Credit Facility in an aggregate principal amount equal to US$100.0 million of the principal amount outstanding thereunder at a discounted price of US$97.5 million. Pursuant to the Amending Agreement, the US$100.0 million prepayment of the Credit Facility was required to be made by December 31, 2024.
May 2024 Convertible Debenture
On May 2, 2024, the Company entered into an exchange and subscription agreement (the “Exchange and Subscription Agreement”) with a single institutional investor (the “May 2024 Investor”) pursuant to which, among other things, the May 2024 Investor delivered to the Company approximately $27.5 million aggregate principal amount of outstanding Supreme Debentures and Accretion Debentures (as defined below) held by the May 2024 Investor and paid the Company approximately US$50 million in exchange for the Company issuing to the May 2024 Investor (i) a new senior unsecured convertible debenture of the Company (the “May 2024 Convertible Debenture”) with an aggregate principal amount of approximately $96.4 million maturing five years from the closing date (the “Closing Date”) of the transaction (the “Transaction”) and (ii) 3,350,430 common share purchase warrants (the “May 2024 Investor Warrants”) of the Company. Each May 2024 Investor Warrant entitles the holder to acquire one Canopy Share at an exercise price equal to $16.18 per Canopy Share for a period of five years from the Closing Date. The May 2024 Convertible Debenture bears interest at a rate of 7.50% per annum, payable in semi-annual payments in cash or, at the option of the Company, in
40
Canopy Shares for the first four semi-annual interest payments after the Closing Date, subject to satisfaction of certain conditions, including the prior approval of the TSX.
The Exchange and Subscription Agreement granted the May 2024 Investor, for a period of four months from the Closing Date (the “Agreement ROFR Term”), a right of first refusal to subscribe for, and to be issued, as the sole investor in any proposed non-brokered private placement that the Company wishes to complete during the Agreement ROFR Term (the “Proposed Private Placement”); provided, however, that the May 2024 Investor shall subscribe for 100% of the Proposed Private Placement on the same terms and conditions contemplated in the Proposed Private Placement.
The May 2024 Convertible Debenture is convertible into Canopy Shares at the option of the May 2024 Investor at a conversion price equal to $14.38 per share. The May 2024 Convertible Debenture is subject to a forced conversion feature upon notice from the Company in the event that the average closing trading price of the Canopy Shares on the TSX exceeds $21.57 for a period of 10 consecutive trading days. In addition, pursuant to the terms of the May 2024 Convertible Debenture, for so long as the principal amount under the May 2024 Convertible Debenture remains outstanding (the “Debenture ROFR Term”), the Company granted the May 2024 Investor a right of first refusal to subscribe for, and to be issued, as an investor in any debt or equity financing that the Company wishes to complete during the Debenture ROFR Term (the “Proposed Financing”); provided, however, that the May 2024 Investor shall subscribe for 25% of the Proposed Financing on the same terms and conditions contemplated in the Proposed Financing.
Canadian Federal Budget Proposals
For capital gains realized on or after June 25, 2024, proposals originally released on June 10, 2024 with revised proposals released on August 12, 2024 and September 23, 2024, (collectively the “Capital Gains Proposals”), would generally increase the capital gains inclusion rate from one-half to two-thirds for corporations and trusts, and from one-half to two-thirds for individuals on the portion of capital gains realized, including capital gains realized indirectly through a trust or partnership, in a taxation year (or in each case the portion of the year beginning on June 25, 2024, in the case of the 2024 taxation year) that exceed $250,000. The Capital Gains Proposals also include transitional rules that effectively adjust the capital gains inclusion rate for taxation years beginning on or before June 24, 2024 and ending on or after June 25, 2024 to generally include only one-half of net capital gains realized (or deemed to be realized) on or before June 24, 2024. The Capital Gains Proposals further propose to adjust the value of capital losses realized in previous years so that two-thirds of capital losses realized prior to June 25, 2024 will be deductible against capital gains included in income at the two-thirds inclusion rate such that a capital loss will offset an equivalent capital gain regardless of the inclusion rate (additional adjustments would be required where the capital gains have been subjected to an effective inclusion rate of one-half rather than the basic inclusion rate of two-thirds). Revised alternative minimum tax rules were enacted on June 20, 2024, which may increase a shareholder’s liability for such tax.
Part 2 - Results of Operations
The results of operations presented below reports the financial performance of the continuing operations of Canopy Growth for the three and six months ended September 30, 2024. Further to Note 4 in the Company’s accompanying financial statements, the BioSteel segment results for all periods prior to September 14, 2023 and November 16, 2023, being the effective dates of deconsolidation as a result of the CCAA Proceedings (as defined below), are classified as discontinued operations and therefore are excluded from continuing operations.
On September 14, 2023, Canopy Growth ceased funding the operations of BioSteel Sports Nutrition Inc. (“BioSteel Canada”) and commenced proceedings (the "CCAA Proceedings") under the Companies' Creditors Arrangement Act (the "CCAA") in the Ontario Superior Court of Justice (Commercial List) (the "CCAA Court") and sought and obtained recognition of that proceeding under Chapter 15 of the United States Bankruptcy Code.
Discussion of Results of Operations for the Three Months Ended September 30, 2024
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars, except share amounts and |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Selected consolidated financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
62,991 |
|
|
$ |
69,595 |
|
|
$ |
(6,604 |
) |
|
|
(9 |
%) |
Gross margin percentage |
|
|
35 |
% |
|
|
34 |
% |
|
|
- |
|
|
100 bps |
|
|
Net loss from continuing operations |
|
$ |
(131,550 |
) |
|
$ |
(148,162 |
) |
|
$ |
16,612 |
|
|
|
11 |
% |
Net loss from continuing operations |
|
$ |
(131,550 |
) |
|
$ |
(148,162 |
) |
|
$ |
16,612 |
|
|
|
11 |
% |
Basic and diluted loss per share from |
|
$ |
(1.52 |
) |
|
$ |
(2.07 |
) |
|
$ |
0.55 |
|
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
1 For the three months ended September 30, 2024, the weighted average number of outstanding common shares, basic and diluted, totaled 86,827,991 (three months ended September 30, 2023 - 71,629,443). |
|
|||||||||||||||
2 Prior year share and per share amounts have been retrospectively adjusted to reflect the Share Consolidation, which became effective on December 15, 2023. |
|
|||||||||||||||
41
Revenue
We report net revenue in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Revenue derived from the remainder of our operations are included within "other". The following table presents segmented net revenue for the three months ended September 30, 2024 and 2023:
Net Revenue |
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Canada cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian adult-use cannabis1 |
|
$ |
18,388 |
|
|
$ |
24,087 |
|
|
$ |
(5,699 |
) |
|
|
(24 |
%) |
Canadian medical cannabis2 |
|
|
18,689 |
|
|
|
16,179 |
|
|
|
2,510 |
|
|
|
16 |
% |
|
|
$ |
37,077 |
|
|
$ |
40,266 |
|
|
$ |
(3,189 |
) |
|
|
(8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International markets cannabis3 |
|
$ |
10,060 |
|
|
$ |
8,977 |
|
|
$ |
1,083 |
|
|
|
12 |
% |
Storz & Bickel |
|
$ |
15,854 |
|
|
$ |
11,991 |
|
|
$ |
3,863 |
|
|
|
32 |
% |
This Works |
|
$ |
- |
|
|
$ |
7,074 |
|
|
$ |
(7,074 |
) |
|
|
(100 |
%) |
Other |
|
|
- |
|
|
|
1,287 |
|
|
|
(1,287 |
) |
|
|
(100 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
62,991 |
|
|
$ |
69,595 |
|
|
$ |
(6,604 |
) |
|
|
(9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
1 Reflects excise taxes of $8,903 and other revenue adjustments, representing our determination of returns and pricing adjustments, of $1,300 for the three months ended September 30, 2024 (three months ended September 30, 2023 - excise taxes of $10,829 and other revenue adjustments of $500). |
|
|||||||||||||||
2 Reflects excise taxes of $2,064 for the three months ended September 30, 2024 (three months ended September 30, 2023 - $1,652). |
|
|||||||||||||||
3 Reflects other revenue adjustments of $nil for the three months ended September 30, 2024 (three months ended September 30, 2023 - $70). |
|
|||||||||||||||
Net revenue was $63.0 million in the second quarter of fiscal 2025, a decrease of $6.6 million as compared to $69.6 million in the second quarter of fiscal 2024.
Canada cannabis
Net revenue from our Canada cannabis segment was $37.1 million in the second quarter of fiscal 2025, as compared to $40.3 million in the second quarter of fiscal 2024.
Canadian adult-use cannabis net revenue was $18.4 million in the second quarter of fiscal 2025, as compared to $24.1 million in the second quarter of fiscal 2024. The year-over-year decrease is primarily attributable to lower sales volumes, which were partially affected by supply constraints for certain products as a result of financial difficulties with our contract manufacturers and lower sales velocity due to continued increase in price competition.
Canadian medical cannabis net revenue was $18.7 million in the second quarter of fiscal 2025, as compared to $16.2 million in the second quarter of fiscal 2024. The year-over-year increase is primarily attributable to an increase in the average size of medical orders placed by our customers due largely to an increase in the percentage of insured customers, and a larger assortment of cannabis product choices offered to our customers.
International markets cannabis
International markets cannabis revenue was $10.1 million in the second quarter of fiscal 2025, as compared to $9.0 million in the second quarter of fiscal 2024. The year-over-year increase is primarily attributable to the increased shipments of flower products in Europe, driven by Poland and Germany, which was offset by a decline in our Australian medical business.
Storz & Bickel
Revenue from Storz & Bickel was $15.9 million in the second quarter of fiscal 2025, as compared to $12.0 million in the second quarter of fiscal 2024. The year-over-year increase is primarily attributable to strong growth in Germany and the U.S., sales of our Mighty vaporizer and contribution from Venty, our new portable vaporizer that was launched in the third quarter of fiscal 2024.
This Works
Revenue from This Works was $nil in the second quarter of fiscal 2025, as compared to $7.1 million in the second quarter of fiscal 2024. The year-over-year decrease is due to the completion of the divestiture of This Works on December 18, 2023.
42
Cost of Goods Sold and Gross Margin
The following table presents cost of goods sold, gross margin and gross margin percentage on a consolidated basis for the three months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars except where indicated) |
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
|||||
Net revenue |
|
$ |
62,991 |
|
|
$ |
69,595 |
|
|
$ |
(6,604 |
) |
|
|
(9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of goods sold |
|
$ |
41,153 |
|
|
$ |
46,169 |
|
|
$ |
(5,016 |
) |
|
|
(11 |
%) |
Gross margin |
|
|
21,838 |
|
|
|
23,426 |
|
|
|
(1,588 |
) |
|
|
(7 |
%) |
Gross margin percentage |
|
|
35 |
% |
|
|
34 |
% |
|
|
- |
|
|
100 bps |
|
|
Cost of goods sold was $41.2 million in the second quarter of fiscal 2025, as compared to $46.2 million in the second quarter of fiscal 2024. Our gross margin was $21.8 million in the second quarter of fiscal 2025, or 35% of net revenue, as compared to a gross margin of $23.4 million and gross margin percentage of 34% of net revenue in the second quarter of fiscal 2024. The year-over-year increase in the gross margin percentage is primarily attributable to improvement in our international markets cannabis segment, primarily due to an increase in sales mix to higher-margin Poland as well as a lower overall cost structure.
We report gross margin and gross margin percentage in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Cost of sales associated with the remainder of our operations are included within "other". The following table presents segmented gross margin and gross margin percentage for the three months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars except where indicated) |
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
|||||
Canada cannabis segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
37,077 |
|
|
$ |
40,266 |
|
|
$ |
(3,189 |
) |
|
|
(8 |
%) |
Cost of goods sold |
|
|
25,127 |
|
|
|
25,964 |
|
|
|
(837 |
) |
|
|
(3 |
%) |
Gross margin |
|
|
11,950 |
|
|
|
14,302 |
|
|
|
(2,352 |
) |
|
|
(16 |
%) |
Gross margin percentage |
|
|
32 |
% |
|
|
36 |
% |
|
|
|
|
(400) bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International markets cannabis segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
10,060 |
|
|
$ |
8,977 |
|
|
$ |
1,083 |
|
|
|
12 |
% |
Cost of goods sold |
|
|
5,320 |
|
|
|
6,286 |
|
|
|
(966 |
) |
|
|
(15 |
%) |
Gross margin |
|
|
4,740 |
|
|
|
2,691 |
|
|
|
2,049 |
|
|
|
76 |
% |
Gross margin percentage |
|
|
47 |
% |
|
|
30 |
% |
|
|
|
|
1,700 bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Storz & Bickel segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
15,854 |
|
|
$ |
11,991 |
|
|
$ |
3,863 |
|
|
|
32 |
% |
Cost of goods sold |
|
|
10,706 |
|
|
|
8,073 |
|
|
|
2,633 |
|
|
|
33 |
% |
Gross margin |
|
|
5,148 |
|
|
|
3,918 |
|
|
|
1,230 |
|
|
|
31 |
% |
Gross margin percentage |
|
|
32 |
% |
|
|
33 |
% |
|
|
|
|
(100) bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
This Works segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
- |
|
|
$ |
7,074 |
|
|
$ |
(7,074 |
) |
|
|
(100 |
%) |
Cost of goods sold |
|
|
- |
|
|
|
3,688 |
|
|
|
(3,688 |
) |
|
|
(100 |
%) |
Gross margin |
|
|
- |
|
|
|
3,386 |
|
|
|
(3,386 |
) |
|
|
(100 |
%) |
Gross margin percentage |
|
|
- |
% |
|
|
48 |
% |
|
|
|
|
(4,800) bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
- |
|
|
$ |
1,287 |
|
|
$ |
(1,287 |
) |
|
|
(100 |
%) |
Cost of goods sold |
|
|
- |
|
|
|
2,158 |
|
|
|
(2,158 |
) |
|
|
(100 |
%) |
Gross margin |
|
|
- |
|
|
|
(871 |
) |
|
|
871 |
|
|
|
100 |
% |
Gross margin percentage |
|
|
- |
% |
|
|
(68 |
%) |
|
|
|
|
6,800 bps |
|
||
Canada cannabis
Gross margin for our Canada cannabis segment was $12.0 million in the second quarter of fiscal 2025, or 32% of net revenue, as compared to $14.3 million in the second quarter of fiscal 2024, or 36% of net revenue. The year-over-year decrease in the gross margin percentage was primarily attributable to lower adult-use sales, partially offset by increased sales in higher-margin medical
43
business, the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023 and a year-over-year decrease in write-downs of excess inventory.
International markets cannabis
Gross margin for our international markets cannabis segment was $4.7 million in the second quarter of fiscal 2025, or 47% of net revenue, as compared to $2.7 million in the second quarter of fiscal 2024, or 30% of net revenue. The year-over-year increase in the gross margin percentage is primarily attributable to the shift in sales mix to higher-margin Poland, a shift in sales mix within individual markets to higher margin products, and a lower cost structure relating to our overall international cannabis operations.
Storz & Bickel
Gross margin for our Storz & Bickel segment was $5.1 million in the second quarter of fiscal 2025, or 32% of net revenue, as compared to $3.9 million in the second quarter of fiscal 2024, or 33% of net revenue. The year-over-year gross margin percentage remained consistent period over period as rebates provided to clear out remaining stock of a previously planned discontinued product were offset by strong margins realized on other product sales.
This Works
Gross margin for our This Works segment was $nil in the second quarter of fiscal 2025, or 0% of net revenue, as compared to $3.4 million in the second quarter of fiscal 2024, or 48% of net revenue. The year-over-year decrease in the gross margin percentage is due to the completion of the divestiture of This Works on December 18, 2023.
Operating Expenses
The following table presents operating expenses for the three months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
16,798 |
|
|
$ |
20,129 |
|
|
$ |
(3,331 |
) |
|
|
(17 |
%) |
Sales and marketing |
|
|
14,983 |
|
|
|
19,601 |
|
|
|
(4,618 |
) |
|
|
(24 |
%) |
Acquisition, divestiture, and other costs |
|
|
3,930 |
|
|
|
10,488 |
|
|
|
(6,558 |
) |
|
|
(63 |
%) |
Depreciation and amortization |
|
|
6,019 |
|
|
|
7,393 |
|
|
|
(1,374 |
) |
|
|
(19 |
%) |
Selling, general and administrative expenses |
|
|
41,730 |
|
|
|
57,611 |
|
|
|
(15,881 |
) |
|
|
(28 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense |
|
|
5,221 |
|
|
|
2,717 |
|
|
|
2,504 |
|
|
|
92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss (gain) on asset impairment and restructuring |
|
|
20,830 |
|
|
|
(29,895 |
) |
|
|
50,725 |
|
|
|
170 |
% |
Total operating expenses |
|
$ |
67,781 |
|
|
$ |
30,433 |
|
|
$ |
37,348 |
|
|
|
123 |
% |
Selling, general and administrative expenses
Selling, general and administrative expenses were $41.7 million in the second quarter of fiscal 2025, as compared to $57.6 million in the second quarter of fiscal 2024.
General and administrative expense was $16.8 million in the second quarter of fiscal 2025, as compared to $20.1 million in the second quarter of fiscal 2024. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023 and (ii) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023.
Sales and marketing expense was $15.0 million in the second quarter of fiscal 2025, as compared to $19.6 million in the second quarter of fiscal 2024. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023 and (ii) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023.
Acquisition, divestiture, and other costs were $3.9 million in the second quarter of fiscal 2025, as compared to $10.5 million in the second quarter of fiscal 2024. In the second quarter of fiscal 2025, costs were incurred primarily in relation to:
Comparatively, in the second quarter of fiscal 2024, costs were incurred primarily in relation to:
44
Depreciation and amortization expense was $6.0 million in the second quarter of fiscal 2025, as compared to $7.4 million in the second quarter of fiscal 2024. The year-over-year decrease is primarily attributable to the previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business.
Share-based compensation expense
Share-based compensation expense was $5.2 million in the second quarter of fiscal 2025, as compared to $2.7 million in the second quarter of fiscal 2024. The year-over-year increase is primarily attributable to: (i) the first quarter of fiscal 2025 grant of 0.8 million options and 0.7 million restricted share units, and (ii) higher forfeitures in the second quarter of fiscal 2024 due to previously-noted restructuring actions.
Loss (gain) on asset impairment and restructuring
Loss (gain) on asset impairment and restructuring recorded in operating expenses were $20.8 million in the second quarter of fiscal 2025, as compared to $(29.9) million in the second quarter of fiscal 2024.
Loss on asset impairment and restructuring recorded in the second quarter of fiscal 2025 related primarily to the non-cash impairment of divestiture-related assets, employee restructuring costs, and ongoing holding costs to maintain previously restructured sites.
Comparatively, in the second quarter of fiscal 2024, the gain on asset impairment and restructuring was primarily related to a gain on the sale of our production facility at 1 Hershey Drive in Smiths Falls, Ontario. The gain is due to the sale proceeds exceeding the carrying value that was previously impaired at March 31, 2023. This gain was partially offset by various incremental impairment losses and other costs associated with the restructuring of our Canadian cannabis operations that were initiated in the three months ended March 31, 2023.
Other
The following table presents other income (expense), net, and income tax expense for the three months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Other income (expense), net |
|
|
(85,305 |
) |
|
|
(128,334 |
) |
|
|
43,029 |
|
|
|
34 |
% |
Income tax expense |
|
|
(302 |
) |
|
|
(12,821 |
) |
|
|
12,519 |
|
|
|
98 |
% |
Other income (expense), net
Other income (expense), net was an expense amount of $85.3 million in the second quarter of fiscal 2025, as compared to an expense amount of $128.3 million in the second quarter of fiscal 2024. The year-over-year change of $43.0 million is primarily attributable to:
Comparatively, the expense amount in the second quarter of fiscal 2024 was primarily attributable to fair value decreases relating to our investments in:
45
These fair value decreases were partially offset by fair value increases related to our investments in:
Income tax expense
Income tax expense in the second quarter of fiscal 2025 was $0.3 million, compared to income tax expense of $12.8 million in the second quarter of fiscal 2024. In the second quarter of fiscal 2025, income tax expense consisted of deferred income tax expense of $0.2 million (compared to an expense of $12.5 million in the second quarter of fiscal 2024) and current income tax expense of $0.1 million (compared to an expense of $0.3 million in the second quarter of fiscal 2024).
The decrease of $12.3 million in the deferred income tax expense is primarily a result of the settlements of the Canopy Notes (as defined below) in the second quarter of fiscal 2024 and utilization of losses for tax purposes, where the accounting criteria for recognition of an asset has been met.
The decrease of $0.2 million in current income tax expense arose primarily as a result of the utilization of group’s tax attributes to shelter tax on income for tax purposes.
Net Loss from Continuing Operations
The net loss from continuing operations in the second quarter of fiscal 2025 was $131.6 million, as compared to a net loss of $148.2 million in the second quarter of fiscal 2024. The year-over-year decrease in the net loss is primarily attributable to: (i) the year-over-year change in other income (expense), net, of $43.0 million; and (ii) offset by the change from gain to loss on asset impairment and restructuring costs. These variances are described above.
46
Adjusted EBITDA (Non-GAAP Measure)
Our “Adjusted EBITDA” is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management calculates Adjusted EBITDA as the reported net income (loss), adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; restructuring costs recorded in cost of goods sold; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition, divestiture, and other costs. Asset impairments related to periodic changes to our supply chain processes are not excluded from Adjusted EBITDA given their occurrence through the normal course of core operational activities. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of businesses.
The following table presents Adjusted EBITDA for the three months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss from continuing operations |
|
$ |
(131,550 |
) |
|
$ |
(148,162 |
) |
|
$ |
16,612 |
|
|
|
11 |
% |
Income tax expense |
|
|
302 |
|
|
|
12,821 |
|
|
|
(12,519 |
) |
|
|
(98 |
%) |
Other (income) expense, net |
|
|
85,305 |
|
|
|
128,334 |
|
|
|
(43,029 |
) |
|
|
(34 |
%) |
Share-based compensation |
|
|
5,221 |
|
|
|
2,717 |
|
|
|
2,504 |
|
|
|
92 |
% |
Acquisition, divestiture, and other costs |
|
|
4,078 |
|
|
|
10,488 |
|
|
|
(6,410 |
) |
|
|
(61 |
%) |
Depreciation and amortization |
|
|
10,307 |
|
|
|
12,530 |
|
|
|
(2,223 |
) |
|
|
(18 |
%) |
Loss (gain) on asset impairment and restructuring |
|
|
20,830 |
|
|
|
(29,895 |
) |
|
|
50,725 |
|
|
|
170 |
% |
Restructuring costs recorded in cost of goods sold |
|
|
- |
|
|
|
(689 |
) |
|
|
689 |
|
|
|
100 |
% |
Adjusted EBITDA |
|
$ |
(5,507 |
) |
|
$ |
(11,856 |
) |
|
$ |
6,349 |
|
|
|
54 |
% |
The Adjusted EBITDA loss in the second quarter of fiscal 2025 was $5.5 million, as compared to an Adjusted EBITDA loss of $11.9 million in the second quarter of fiscal 2024. The year-over-year decrease in Adjusted EBITDA loss is primarily attributable to the year-over-year decrease in our selling, general and administrative expenses.
Discussion of Results of Operations for the Six Months Ended September 30, 2024
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars, except share amounts and |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Selected consolidated financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
129,203 |
|
|
$ |
145,853 |
|
|
$ |
(16,650 |
) |
|
|
(11 |
%) |
Gross margin percentage |
|
|
35 |
% |
|
|
25 |
% |
|
|
- |
|
|
1,000 bps |
|
|
Net loss from continuing operations |
|
$ |
(260,741 |
) |
|
$ |
(158,731 |
) |
|
$ |
(102,010 |
) |
|
|
(64 |
%) |
Net loss from continuing operations |
|
$ |
(260,741 |
) |
|
$ |
(158,731 |
) |
|
$ |
(102,010 |
) |
|
|
(64 |
%) |
Basic and diluted loss per share from |
|
$ |
(3.14 |
) |
|
$ |
(2.50 |
) |
|
$ |
(0.64 |
) |
|
|
(26 |
%) |
1 For the six months ended September 30, 2024, the weighted average number of outstanding common shares, basic and diluted, totaled 83,056,230 (six months ended September 30, 2023 - 63,383,000). |
|
|||||||||||||||
2 Prior year share and per share amounts have been retrospectively adjusted to reflect the Share Consolidation, which became effective on December 15, 2023. |
|
|||||||||||||||
47
Revenue
We report net revenue in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Revenue derived from the remainder of our operations are included within "other". The following table presents segmented net revenue for the six months ended September 30, 2024 and 2023:
Net Revenue |
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Canada cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian adult-use cannabis |
|
$ |
37,271 |
|
|
$ |
48,358 |
|
|
$ |
(11,087 |
) |
|
|
(23 |
%) |
Canadian medical cannabis2 |
|
|
37,484 |
|
|
|
31,801 |
|
|
|
5,683 |
|
|
|
18 |
% |
|
|
$ |
74,755 |
|
|
$ |
80,159 |
|
|
$ |
(5,404 |
) |
|
|
(7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International markets cannabis3 |
|
$ |
20,142 |
|
|
$ |
19,139 |
|
|
$ |
1,003 |
|
|
|
5 |
% |
Storz & Bickel |
|
$ |
34,306 |
|
|
$ |
30,064 |
|
|
$ |
4,242 |
|
|
|
14 |
% |
This Works |
|
$ |
- |
|
|
$ |
13,091 |
|
|
$ |
(13,091 |
) |
|
|
(100 |
%) |
Other |
|
|
- |
|
|
|
3,400 |
|
|
|
(3,400 |
) |
|
|
(100 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
129,203 |
|
|
$ |
145,853 |
|
|
$ |
(16,650 |
) |
|
|
(11 |
%) |
1Reflects excise taxes of $16,420 and other revenue adjustments, representing our determination of returns and pricing adjustments, of $2,500 for the six months ended September 30, 2024 (six months ended September 30, 2023 - excise taxes of $21,855 and other revenue adjustments of $1,370). |
|
|||||||||||||||
2 Reflects excise taxes of $4,118 for the six months ended September 30, 2024 (six months ended September 30, 2023 - $3,012). |
|
|||||||||||||||
3 Reflects other revenue adjustments of $nil for the six months ended September 30, 2024 (six months ended September 30, 2023 - $137). |
|
|||||||||||||||
Net revenue was $129.2 million in the six months ended September 30, 2024, a decrease of $16.7 million as compared to $145.9 million in the six months ended September 30, 2023.
Canada cannabis
Net revenue from our Canada cannabis segment was $74.8 million in the six months ended September 30, 2024, as compared to $80.2 million in the six months ended September 30, 2023.
Canadian adult-use cannabis net revenue was $37.3 million in the six months ended September 30, 2024, as compared to $48.4 million in the six months ended September 30, 2023. The year-over-year decrease is primarily attributable to lower sales volumes, which were partially affected by supply constraints for certain products as a result of financial difficulties with our contract manufacturers and lower sales velocity due to continued increase in price competition.
Canadian medical cannabis net revenue was $37.5 million in the six months ended September 30, 2024, as compared to $31.8 million in the six months ended September 30, 2023. The year-over-year increase is primarily attributable to an increase in the average size of medical orders placed by our customers due largely to an increase in the percentage of insured customers, and a larger assortment of cannabis product choices offered to our customers.
International markets cannabis
International markets cannabis revenue was $20.1 million in the six months ended September 30, 2024, as compared to $19.1 million in the six months ended September 30, 2023. The year-over-year increase is primarily attributable to the increased shipments of flower products in Europe, driven by Poland and Germany, which was offset by a decline in our Australian medical business.
Storz & Bickel
Revenue from Storz & Bickel was $34.3 million in the six months ended September 30, 2024, as compared to $30.1 million in the six months ended September 30, 2023. The year-over-year increase is primarily attributable to strong growth in Germany and the U.S., sales of our Mighty vaporizer and contribution from Venty, our new portable vaporizer that was launched in the third quarter of fiscal 2024.
This Works
Revenue from This Works was $nil in the six months ended September 30, 2024, as compared to $13.1 million in the six months ended September 30, 2023. The year-over-year decrease is due to the completion of the divestiture of This Works on December 18, 2023.
48
Cost of Goods Sold and Gross Margin
The following table presents cost of goods sold, gross margin and gross margin percentage on a consolidated basis for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars except where indicated) |
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
|||||
Net revenue |
|
$ |
129,203 |
|
|
$ |
145,853 |
|
|
$ |
(16,650 |
) |
|
|
(11 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of goods sold |
|
$ |
84,334 |
|
|
$ |
108,665 |
|
|
$ |
(24,331 |
) |
|
|
(22 |
%) |
Gross margin |
|
|
44,869 |
|
|
|
37,188 |
|
|
|
7,681 |
|
|
|
21 |
% |
Gross margin percentage |
|
|
35 |
% |
|
|
25 |
% |
|
|
- |
|
|
1,000 bps |
|
|
Cost of goods sold was $84.3 million in the six months ended September 30, 2024, as compared to $108.7 million in the six months ended September 30, 2023. Our gross margin was $44.9 million in the six months ended September 30, 2024, or 35% of net revenue, as compared to a gross margin of $37.2 million and gross margin percentage of 25% of net revenue in the six months ended September 30, 2023. The year-over-year increase in the gross margin percentage is primarily attributable to:
We report gross margin and gross margin percentage in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Cost of sales associated with the remainder of our operations are included within "other". The following table presents segmented gross margin and gross margin percentage for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars except where indicated) |
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
|||||
Canada cannabis segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
74,755 |
|
|
$ |
80,159 |
|
|
$ |
(5,404 |
) |
|
|
(7 |
%) |
Cost of goods sold |
|
|
50,711 |
|
|
|
66,125 |
|
|
|
(15,414 |
) |
|
|
(23 |
%) |
Gross margin |
|
|
24,044 |
|
|
|
14,034 |
|
|
|
10,010 |
|
|
|
71 |
% |
Gross margin percentage |
|
|
32 |
% |
|
|
18 |
% |
|
|
|
|
1,400 bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International markets cannabis segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
20,142 |
|
|
$ |
19,139 |
|
|
$ |
1,003 |
|
|
|
5 |
% |
Cost of goods sold |
|
|
11,777 |
|
|
|
12,967 |
|
|
|
(1,190 |
) |
|
|
(9 |
%) |
Gross margin |
|
|
8,365 |
|
|
|
6,172 |
|
|
|
2,193 |
|
|
|
36 |
% |
Gross margin percentage |
|
|
42 |
% |
|
|
32 |
% |
|
|
|
|
1,000 bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Storz & Bickel segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
34,306 |
|
|
$ |
30,064 |
|
|
$ |
4,242 |
|
|
|
14 |
% |
Cost of goods sold |
|
|
21,846 |
|
|
|
18,439 |
|
|
|
3,407 |
|
|
|
18 |
% |
Gross margin |
|
|
12,460 |
|
|
|
11,625 |
|
|
|
835 |
|
|
|
7 |
% |
Gross margin percentage |
|
|
36 |
% |
|
|
39 |
% |
|
|
|
|
(300) bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
This Works segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
- |
|
|
$ |
13,091 |
|
|
$ |
(13,091 |
) |
|
|
(100 |
%) |
Cost of goods sold |
|
|
- |
|
|
|
6,810 |
|
|
|
(6,810 |
) |
|
|
(100 |
%) |
Gross margin |
|
|
- |
|
|
|
6,281 |
|
|
|
(6,281 |
) |
|
|
(100 |
%) |
Gross margin percentage |
|
|
- |
% |
|
|
48 |
% |
|
|
|
|
(4,800) bps |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
- |
|
|
$ |
3,400 |
|
|
$ |
(3,400 |
) |
|
|
(100 |
%) |
Cost of goods sold |
|
|
- |
|
|
|
4,324 |
|
|
|
(4,324 |
) |
|
|
(100 |
%) |
Gross margin |
|
|
- |
|
|
|
(924 |
) |
|
|
924 |
|
|
|
100 |
% |
Gross margin percentage |
|
|
- |
% |
|
|
(27 |
%) |
|
|
|
|
2,700 bps |
|
||
49
Canada cannabis
Gross margin for our Canada cannabis segment was $24.0 million in the six months ended September 30, 2024, or 32% of net revenue, as compared to $14.0 million in the six months ended September 30, 2023, or 18% of net revenue. The year-over-year increase in the gross margin percentage was primarily attributable to: (i) the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023; (ii) a year-over-year decrease in write-downs of excess inventory; and (iii) strong Canadian medical cannabis sales.
International markets cannabis
Gross margin for our international markets cannabis segment was $8.4 million in the six months ended September 30, 2024, or 42% of net revenue, as compared to $6.2 million in the six months ended September 30, 2023, or 32% of net revenue. The year-over-year increase in the gross margin percentage is primarily attributable to the shift in sales mix to higher-margin Poland as well as a lower cost structure relating to our overall international cannabis operations.
Storz & Bickel
Gross margin for our Storz & Bickel segment was $12.5 million in the six months ended September 30, 2024, or 36% of net revenue, as compared to $11.6 million in the six months ended September 30, 2023, or 39% of net revenue. The year-over-year decrease in the gross margin percentage is driven primarily by a shift in product mix as additional rebates were provided to clear out remaining stock of a previously planned discontinued product.
This Works
Gross margin for our This Works segment was $nil in the six months ended September 30, 2024, or 0% of net revenue, as compared to $6.3 million in the six months ended September 30, 2023, or 48% of net revenue. The year-over-year decrease in the gross margin percentage is due to the completion of the divestiture of This Works on December 18, 2023.
Operating Expenses
The following table presents operating expenses for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
35,705 |
|
|
$ |
45,621 |
|
|
$ |
(9,916 |
) |
|
|
(22 |
%) |
Sales and marketing |
|
|
30,231 |
|
|
|
40,352 |
|
|
|
(10,121 |
) |
|
|
(25 |
%) |
Acquisition, divestiture, and other costs |
|
|
11,705 |
|
|
|
19,392 |
|
|
|
(7,687 |
) |
|
|
(40 |
%) |
Depreciation and amortization |
|
|
12,057 |
|
|
|
15,009 |
|
|
|
(2,952 |
) |
|
|
(20 |
%) |
Selling, general and administrative expenses |
|
|
89,698 |
|
|
|
120,374 |
|
|
|
(30,676 |
) |
|
|
(25 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense |
|
|
9,372 |
|
|
|
6,434 |
|
|
|
2,938 |
|
|
|
46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss (gain) on asset impairment and restructuring |
|
|
20,850 |
|
|
|
(27,961 |
) |
|
|
48,811 |
|
|
|
175 |
% |
Total operating expenses |
|
$ |
119,920 |
|
|
$ |
98,847 |
|
|
$ |
21,073 |
|
|
|
21 |
% |
Selling, general and administrative expenses
Selling, general and administrative expenses were $89.7 million in the six months ended September 30, 2024, as compared to $120.4 million in the six months ended September 30, 2023.
General and administrative expense was $35.7 million in the six months ended September 30, 2024, as compared to $45.6 million in the six months ended September 30, 2023. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023 and (ii) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023.
Sales and marketing expense was $30.2 million in the six months ended September 30, 2024, as compared to $40.4 million in the six months ended September 30, 2023. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023 and (ii) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023.
Acquisition, divestiture, and other costs were $11.7 million in the six months ended September 30, 2024, as compared to $19.4 million in the six months ended September 30, 2023. In the six months ended September 30, 2024, costs were incurred primarily in relation to:
50
Comparatively, in the six months ended September 30, 2023, costs were incurred primarily in relation to:
Depreciation and amortization expense was $12.1 million in the six months ended September 30, 2024, as compared to $15.0 million in the six months ended September 30, 2023. The year-over-year decrease is primarily attributable to the previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business.
Share-based compensation expense
Share-based compensation expense was $9.4 million in the six months ended September 30, 2024, as compared to $6.4 million in the six months ended September 30, 2023. The year-over-year increase is primarily attributable to: (i) the first quarter of fiscal 2025 grant of 0.8 million options and 0.7 million restricted share units, and (ii) higher forfeitures in the first half of fiscal 2024 due to previously-noted restructuring actions.
Loss (gain) on asset impairment and restructuring
Loss (gain) on asset impairment and restructuring recorded in operating expenses were $20.9 million in the six months ended September 30, 2024, as compared to $(28.0) million in the six months ended September 30, 2023.
Loss on asset impairment and restructuring recorded in the six months ended September 30, 2024 related primarily to the non-cash impairment of divestiture-related assets, employee restructuring costs, and ongoing holding costs to maintain previously restructured sites. These amounts were offset by a gain related to remeasurement of a lease liability upon execution of the surrender agreement.
Comparatively, in the six months ended September 30, 2023, the gain on asset impairment and restructuring was primarily related to a gain on the sale of our production facility at 1 Hershey Drive in Smiths Falls, Ontario. The gain is due to the sale proceeds exceeding the carrying value that was previously impaired at March 31, 2023. This gain was partially offset by various incremental impairment losses and other costs associated with the restructuring of our Canadian cannabis operations that were initiated in the three months ended March 31, 2023.
Other
The following table presents other income (expense), net, and income tax expense for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Other income (expense), net |
|
|
(179,194 |
) |
|
|
(82,233 |
) |
|
|
(96,961 |
) |
|
|
(118 |
%) |
Income tax expense |
|
|
(6,496 |
) |
|
|
(14,839 |
) |
|
|
8,343 |
|
|
|
56 |
% |
Other income (expense), net
Other income (expense), net was an expense amount of $179.2 million in the six months ended September 30, 2024, as compared to an expense amount of $82.2 million in the six months ended September 30, 2023. The year-over-year change of $97.0 million is primarily attributable to:
51
These fair value decreases were partially offset by a fair value increases related to our investments in:
Comparatively, the expense amount in the six months ended September 30, 2023 was primarily attributable to fair value decreases relating to our investments in: (i) the Wana financial instrument ($49.1 million); (ii) the Jetty financial instrument ($17.3 million); and the Acreage Hempco debenture ($17.9 million). The fair value decreases were partially offset by fair value increases associated with our investments in: (i) the Acreage financial instrument ($21.3 million); (ii) the TerrAscend Exchangeable Shares ($33.1 million); and the TerrAscend Warrants ($13.2 million).
Income tax expense
Income tax expense in the six months ended September 30, 2024 was $6.5 million, compared to income tax expense of $14.8 million in the six months ended September 30, 2023. In the six months ended September 30, 2024, income tax expense consisted of
52
deferred income tax expense of $6.2 million (compared to an expense of $14.0 million in the six months ended September 30, 2023) and current income tax expense of $0.3 million (compared to an expense of $0.8 million in the six months ended September 30, 2023).
The decrease of $7.8 million in the deferred income tax expense is primarily a result of: (i) a decrease due to the settlements of the Canopy Notes in the second quarter of fiscal 2024 relative to the settlements of the CBI Note in fiscal 2025; and (ii) an increase due to the realization of deferred taxes for entities that historically did not meet the deferred tax asset recognition criteria.
The decrease of $0.5 million in current income tax expense arose primarily in connection with previously cash taxable legal entities that are no longer taxable and as a result of the utilization of group’s tax attributes to shelter tax on income for tax purposes.
Net Loss from Continuing Operations
The net loss from continuing operations in the six months ended September 30, 2024 was $260.7 million, as compared to a net loss of $158.7 million in the six months ended September 30, 2023. The year-over-year increase in the net loss is primarily attributable to: (i) the year-over-year change in other income (expense), net, of $97.0 million; (ii) the change from gain to loss on asset impairment and restructuring costs; and (iii) offset by the decrease in selling, general and administrative expenses and improvement in gross margins. These variances are described above.
Adjusted EBITDA (Non-GAAP Measure)
Our “Adjusted EBITDA” is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management calculates Adjusted EBITDA as the reported net income (loss), adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; restructuring costs recorded in cost of goods sold; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition, divestiture, and other costs. Asset impairments related to periodic changes to our supply chain processes are not excluded from Adjusted EBITDA given their occurrence through the normal course of core operational activities. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of businesses.
The following table presents Adjusted EBITDA for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|
|
|
|
|
|
|||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Net loss from continuing operations |
|
$ |
(260,741 |
) |
|
$ |
(158,731 |
) |
|
$ |
(102,010 |
) |
|
|
(64 |
%) |
Income tax expense |
|
|
6,496 |
|
|
|
14,839 |
|
|
|
(8,343 |
) |
|
|
(56 |
%) |
Other (income) expense, net |
|
|
179,194 |
|
|
|
82,233 |
|
|
|
96,961 |
|
|
|
118 |
% |
Share-based compensation |
|
|
9,372 |
|
|
|
6,434 |
|
|
|
2,938 |
|
|
|
46 |
% |
Acquisition, divestiture, and other costs |
|
|
12,705 |
|
|
|
19,392 |
|
|
|
(6,687 |
) |
|
|
(34 |
%) |
Depreciation and amortization |
|
|
21,337 |
|
|
|
29,641 |
|
|
|
(8,304 |
) |
|
|
(28 |
%) |
Loss (gain) on asset impairment and restructuring |
|
|
20,850 |
|
|
|
(27,961 |
) |
|
|
48,811 |
|
|
|
175 |
% |
Restructuring costs recorded in cost of goods sold |
|
|
- |
|
|
|
(689 |
) |
|
|
689 |
|
|
|
100 |
% |
Adjusted EBITDA |
|
$ |
(10,787 |
) |
|
$ |
(34,842 |
) |
|
$ |
24,055 |
|
|
|
69 |
% |
The Adjusted EBITDA loss in the six months ended September 30, 2024 was $10.8 million, as compared to an Adjusted EBITDA loss of $34.8 million in the six months ended September 30, 2023. The year-over-year decrease in Adjusted EBITDA loss is primarily attributable to the year-over-year increase in our gross margin and the year-over-year decrease in our selling, general and administrative expenses.
Part 3 – Financial Liquidity and Capital Resources
The Interim Financial Statements have been prepared in accordance with generally accepted accounting principles on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
In our condensed interim consolidated financial statements for the quarterly period ended December 31, 2023, we raised substantial doubt about our ability to continue as a going concern for at least twelve months from the issuance of those condensed interim consolidated financial statements, due to certain material debt obligations coming due in the short-term, recurring losses from operations and additional required financing to fund our business and operations.
As of the filing of the Annual Report, we were able to successfully mitigate the substantial doubt by completing several balance sheet actions as further described in the Annual Report. During the six months ended September 30, 2024, we completed additional actions and established our at-the-market equity program (the “ATM Program”), issued and sold an aggregate of 16,805,852 common shares for gross proceeds of $138.5 million under the ATM Program, received additional proceeds from the BioSteel Canada asset sale, amended the terms of the Credit Facility thereby extending the maturity date of the Credit Facility, and paid down certain debt balances. We continue to evaluate different strategies and may pursue additional actions that are expected to further increase our
53
liquidity position, including, but not limited to, pursuing additional actions under our cost-savings plan and seeking additional financing from both the public and private markets through the issuance of equity and/or debt securities.
We have access to further liquidity through public offerings of equity and debt securities. To facilitate such offerings, in June 2024, we filed (a) a shelf registration statement with the SEC that is effective for a term of three years and expires in June 2027 (the “Shelf Registration Statement”); and (b) a short form base shelf prospectus dated June 5, 2024 that is effective for a 25 month period (the “Canadian Shelf Prospectus”). The amount of securities to be issued pursuant to the Shelf Registration Statement was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. Pursuant to the Canadian Shelf Prospectus we may sell securities up to an aggregate total offering price of US$500 million (or the equivalent thereof in other currencies). The securities covered by the Shelf Registration Statement and the Canadian Shelf Prospectus include: (i) common shares; (ii) exchangeable shares; (iii) debt securities; (iv) subscription receipts; (v) warrants; and (viii) units consisting of one or more of such securities or any combination of these securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
We may also access liquidity through the ATM Program, pursuant to which we may sell, from time to time, up to US$101.1 million of additional common shares as of the date hereof. Refer to Notes 19 and 30 to the Interim Financial Statements.
As a result of our plans above and the financial results at September 30, 2024, we conclude that the substantial doubt about our ability to continue as a going concern continues to be alleviated.
As of September 30, 2024, we had cash and cash equivalents of $228.4 million and short-term investments of $2.8 million.
We have recently completed the following debt and equity financings and repayments:
The Exchange and Subscription Agreement granted the May 2024 Investor, during the Agreement ROFR Term, a right of first refusal to subscribe for, and to be issued, as the sole investor in a Proposed Private Placement; provided, however, that the May 2024 Investor shall subscribe for 100% of the Proposed Private Placement on the same terms and conditions contemplated in the Proposed Private Placement.
The May 2024 Convertible Debenture is convertible into Canopy Shares at the option of the May 2024 Investor at a conversion price equal to $14.38 per share. The May 2024 Convertible Debenture is subject to a forced conversion feature upon notice from us in the event that the average closing trading price of the Canopy Shares on the TSX exceeds $21.57 for a period of 10 consecutive trading days. In addition, pursuant to the terms of the May 2024 Convertible Debenture, during Debenture ROFR Term, we granted the May 2024 Investor a right of first refusal to subscribe for, and to be issued, as an investor in a Proposed Financing; provided, however, that the May 2024 Investor shall subscribe for 25% of the Proposed Financing on the same terms and conditions contemplated in the Proposed Financing.
During the six months ended September 30, 2024 we sold an aggregate of 16,805,852 common shares at an average price of $8.24 per common share, for gross proceeds of $138.5 million and net proceeds, inclusive of commissions and fees, of $136.4 million. During the six months ended September 30, 2024, we paid an aggregate amount of $2.1 million as compensation to the agents involved in the sale of our common shares under the ATM Program.
54
In addition to the above, we continue to review and pursue selected external financing sources to ensure adequate financial resources. These potential sources include, but are not limited to: (i) obtaining financing from traditional or non-traditional investment capital organizations; (ii) obtaining funding from the sale of our common shares or other equity or debt instruments; and (iii) obtaining debt financing with lending terms that more closely match our business model and capital needs. We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, and open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Cash Flows
The following table presents cash flows for the six months ended September 30, 2024 and 2023:
|
|
Six months ended September 30, |
|
|||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities1 |
|
$ |
(105,632 |
) |
|
$ |
(227,322 |
) |
Investing activities2 |
|
$ |
(31,993 |
) |
|
|
202,717 |
|
Financing activities |
|
$ |
194,717 |
|
|
|
(407,298 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
$ |
1,024 |
|
|
|
(2,129 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
58,116 |
|
|
|
(434,032 |
) |
Cash and cash equivalents, beginning of period3 |
|
$ |
170,300 |
|
|
|
677,007 |
|
Cash and cash equivalents, end of period4 |
|
$ |
228,416 |
|
|
$ |
242,975 |
|
1 Includes net cash used in operating activities from discontinued operations of $nil and $(54,709) for the six months ended September 30, 2024 and 2023, respectively. |
|
|||||||
2 Includes net cash provided by investing activities from discontinued operations of $13,414 and $(17,122) for the six months ended September 30, 2024 and 2023, respectively. |
|
|||||||
3 Includes cash of our discontinued operations of $nil and $9,314 for March 31, 2024 and 2023, respectively. |
|
|||||||
4 Includes cash of our discontinued operations of $nil and $2,599 for September 30, 2024 and 2023, respectively. |
|
|||||||
Operating activities
Cash used in operating activities totaled $105.6 million in the six months ended September 30, 2024, as compared to cash used of $227.3 million in the six months ended September 30, 2023. The decrease in the cash used in operating activities is primarily due to: (i) the year-over-year decrease in our working capital spending, resulting from our previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business; and (ii) a reduction in the cash interest paid resulting from a reduction in our debt balances.
Investing activities
The cash used in investing activities totaled $32.0 million in the six months ended September 30, 2024, as compared to cash provided of $202.7 million in the six months ended September 30, 2023.
In the six months ended September 30, 2024, purchases of property, plant and equipment were $6.5 million, primarily related to building improvements and production equipment enhancements made at certain of our Canadian cultivation and production facilities. Comparatively, in the six months ended September 30, 2023, we invested $2.6 million in production equipment enhancements made at certain of our Canadian cultivation and production facilities, and at our Storz & Bickel facilities.
In the six months ended September 30, 2024, our strategic investments in other financial assets were $95.3 million and related primarily to the cash payment to acquire the outstanding principal, including all accrued and unpaid interest thereon, of Acreage’s debt, being an amount up to US$150.0 million (the “Acreage Debt”). Comparatively, in the six months ended September 30, 2023, our strategic investments in other financial assets were $0.5 million and related primarily to our investment in Indiva.
Net redemptions of short-term investments in the six months ended September 30, 2024 were $30.2 million, as compared to net redemptions of $81.0 million in the six months ended September 30, 2023. The year-over-year decrease in the net redemptions reflects the continued redemption of our short-term investments, largely to fund operations and investing activities as described above. As at September 30, 2024, we had short-term investments remaining of $2.8 million.
Net cash flow on sale or deconsolidation of subsidiaries in the six months ended September 30, 2024 was an outflow of $7.0 million and related to the deconsolidation of Canopy USA, refer to Note 3 in the Company’s accompanying financial statements for details. Comparatively, there were no sale or deconsolidation of subsidiaries in the six months ended September 30, 2023.
55
Additional cash inflows during the six months ended September 30, 2024 include proceeds of $4.9 million from the sale of property, plant and equipment, primarily in relation to previous restructuring actions. Comparatively, additional cash inflows during the six months ended September 30, 2023 include proceeds of $152.4 million from the sale of property, plant and equipment, primarily relating to facilities sold in connection with the restructuring actions associated with our Canadian cannabis operations and transition to an asset-light model.
Finally, other investing activities resulted in a cash inflow of $28.3 million in the six months ended September 30, 2024, primarily related to cash receipts from various loan repayments. Comparatively, other investing activities in the six months ended September 30, 2023 of $9.7 million primarily related to completing the purchase of the remaining 45% of the common shares of Les Serres Vert Cannabis Inc., in connection with the restructuring actions related to our Canadian cannabis operations initiated in the fourth quarter of fiscal 2023.
Financing activities
The cash provided by financing activities in the six months ended September 30, 2024 was $194.7 million, as compared to cash used of $407.3 million in the six months ended September 30, 2023. In the six months ended September 30, 2024, $138.5 million in gross proceeds were received from the sale of common shares as part of the ATM Program and $8.5 million in gross proceeds were received from the exercise of warrants, these amounts were offset by share issuance costs of $4.7 million.
In addition, $68.3 million was received relating to the Exchange and Subscription Agreement, offset by long-term debt repayments of $13.5 million which related primarily to the First Quarter 2025 Paydowns and Second Quarter 2025 Paydowns.
Other financing activities resulted in a cash outflow of $7.1 million, which related primarily to: (i) share issuance costs, as noted above and (ii) finance lease payments.
Comparatively, in the six months ended September 30, 2023, we made repayments of long-term debt in the amount of $415.2 million, which related to the various paydowns of our Credit Facility and settlement of the 4.25% unsecured senior notes due in 2023 (the “Canopy Notes”). Other financing activity cash outflow of $25.9 million related primarily to payments made in connection with terminating the finance lease for the cultivation facility in Mirabel, Quebec. In addition, debt extinguishment and issuance costs, and share issue costs contributed to the cash outflow. The cash outflows were offset by proceeds from the issuance of common shares.
Free Cash Flow (Non-GAAP Measure)
Free cash flow is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management believes that free cash flow presents meaningful information regarding the amount of cash flow required to maintain and organically expand our business, and that the free cash flow measure provides meaningful information regarding our liquidity requirements.
The following table presents free cash flows for the three and six months ended September 30, 2024, and 2023:
|
|
Three months ended September 30, |
|
|
Six months ended September 30, |
|
||||||||||
(in thousands of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net cash used in operating activities - continuing |
|
$ |
(53,852 |
) |
|
$ |
(66,393 |
) |
|
$ |
(105,632 |
) |
|
$ |
(172,613 |
) |
Purchases of and deposits on property, plant |
|
|
(2,589 |
) |
|
|
(690 |
) |
|
|
(6,509 |
) |
|
|
(2,636 |
) |
Free cash flow1 - continuing operations |
|
$ |
(56,441 |
) |
|
$ |
(67,083 |
) |
|
$ |
(112,141 |
) |
|
$ |
(175,249 |
) |
1Free cash flow is a non-GAAP measure, and is calculated as net cash provided by (used in) operating activities, less purchases of and deposits on property, plant and equipment. |
|
|||||||||||||||
Free cash flow in the three months ended September 30, 2024 was an outflow of $56.4 million, as compared to an outflow of $67.1 million in the three months ended September 30, 2023. The year-over-year decrease in the free cash outflow primarily reflects the decrease in cash used in operating activities, as described above.
Free cash flow in the six months ended September 30, 2024 was an outflow of $112.1 million, as compared to an outflow of $175.2 million in the six months ended September 30, 2023. The year-over-year decrease in the free cash outflow primarily reflects the decrease in cash used in operating activities, as described above.
Debt
Since our formation, we have financed our cash requirements primarily through the issuance of common shares of Canopy Growth, including the $5.1 billion investment by CBI in the third quarter of fiscal 2019, and debt. Total debt outstanding as of September 30, 2024 was $553.9 million, a decrease from $597.2 million as of March 31, 2024. The total principal amount owing was $574.1 million at September 30, 2024, a decrease from $622.0 million at March 31, 2024. The decreases were primarily due to: (i) the April 2024 Exchange Agreement, which resulted in the settlement of all amounts owing under the CBI Note; (ii) the First Quarter
56
2025 Paydowns resulting in an aggregate principal reduction of $11.2 million; (iii) the Second Quarter 2025 Paydown resulting in an aggregate principal reduction of $1.1 million; and (iv) the August 2024 Supreme Convertible Debt Exchange (as defined below) and offset by the Exchange and Subscription Agreement where a cash payment of approximately US$50 million was received and approximately $27.5 million of aggregate principal amount outstanding Supreme Debentures and Accretion Debentures were settled in exchange for a new senior unsecured convertible debenture with an aggregate principal amount of $96.4 million.
Credit Facility
On March 18, 2021, the Company entered into a term loan credit agreement (the "Credit Agreement") providing for a five-year, first lien senior secured term loan facility in an aggregate principal amount of US$750.0 million (the “Credit Facility”).
The Company had the ability to obtain up to an additional US$500.0 million of incremental senior secured debt pursuant to the Credit Agreement. Pursuant to the balance sheet actions completed in connection with the Reorganization, on October 24, 2022, we entered into agreements with certain of our lenders under the Credit Agreement pursuant to which we agreed to purchase in the aggregate US$187.5 million of the principal amount outstanding under the Credit Facility at a discounted price of US$930 per US$1,000 or US$174.4 million in the aggregate. The first payment, which was oversubscribed, in the amount of approximately $117.5 million (US$87.9 million) was made on November 10, 2022 to reduce the principal indebtedness under the Credit Facility by approximately $126.3 million (US$94.4 million). The second payment of approximately $116.8 million (US$87.2 million) was made on April 17, 2023 to reduce principal indebtedness under the Credit Facility by approximately $125.6 million (US$93.8 million). Additionally, on October 24, 2022, we and certain of our lenders agreed to make certain amendments to the Credit Agreement which, among other things, resulted in: (i) a reduction to the minimum liquidity covenant to no less than US$100.0 million following completion of the second principal repurchase on April 17, 2023; (ii) certain changes to the application of net proceeds from asset sales; (iii) the establishment of a new committed delayed draw term credit facility in an aggregate principal amount of US$100.0 million; and (iv) the elimination of the additional US$500.0 million incremental term loan facility.
On July 13, 2023, we entered into an amended Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement required the Company to prepay or repurchase principal indebtedness under the Credit Facility in an amount equal to the U.S. dollar equivalent of $93,000 at a discounted price of US$930 per US$1,000 (the "July 2023 Paydown"). In addition, pursuant to the Amended Credit Agreement we agreed to apply certain net proceeds from asset sales to prepay or repurchase principal indebtedness under the Credit Facility and receive principal reductions at, in certain circumstances, a discounted price of US$950 per US$1,000. The Amended Credit Agreement also includes, among other things, amendments to the minimum liquidity covenant such that the US$100.0 million minimum ceased to apply concurrently with the July 2023 Paydown. The July 2023 Paydown was made on July 21, 2023.
On each of August 11, 2023 and September 14, 2023, pursuant to the terms of the Amended Credit Agreement, we repurchased additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the “Second Quarter 2024 Paydowns”). The Second Quarter 2024 Paydowns resulted in an aggregate principal reduction of $73.3 million (US$54.5 million) for a cash payment of $69.6 million (US$51.8 million).
On each of November 28, 2023 and December 27, 2023, pursuant to the terms of the Amended Credit Agreement, we repurchased and repaid, as applicable, additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the "Third Quarter 2024 Paydowns"). The Third Quarter 2024 Paydowns resulted in an aggregate principal reduction of $65.4 million (US$48.5 million) for a cash payment of $63.2 million (US$46.9 million).
On February 21, 2024, we repurchased and repaid, as applicable, additional outstanding principal amounts under the Credit Facility (the "Fourth Quarter 2024 Paydowns"). The Fourth Quarter 2024 Paydowns resulted in an aggregate principal reduction of $31.1 million (US$23.0 million) for a cash payment of $28.0 million (US$20.7 million).
On April 29, 2024 and June 28, 2024, we made the First Quarter 2025 Paydowns. The First Quarter 2025 Paydowns resulted in an aggregate principal reduction of $11.2 million (US$8.2 million) for a cash payment of $11.2 million (US$8.2 million).
On August 8, 2024, we entered into an amendment (the “Amending Agreement”) with all of the lenders to the Credit Facility under the Amended Credit Agreement. Pursuant to the terms of the Amending Agreement, the maturity date of the Credit Facility was extended to December 18, 2026 and a mandatory US$97.5 million prepayment of the Credit Facility at 97.5% of par thereby reducing the outstanding amount of the Credit Facility by US$100 million was required to be made by December 31, 2024. We made the mandatory prepayment on October 16, 2024. In addition, the maturity date of the Credit Facility will be further extended to September 18, 2027 if an optional prepayment on the same terms is made on or before March 31, 2025. Borrowings under the Credit Facility are available by either prime rate advances or SOFR advances. Prime rate advances bear interest at the applicable prime rate plus 7.50% per annum and are subject to a prime rate floor of 2.00%. SOFR advances bear interest at the adjusted term SOFR rate plus 8.50% per annum and are subject to an adjusted term SOFR rate floor of 1.00%. Our obligations under the Credit Facility are guaranteed by our material wholly-owned Canadian and U.S. subsidiaries. The Credit Facility is secured by substantially all of our assets and our material wholly-owned Canadian and U.S. subsidiaries, including material real property. The Amended Credit Agreement, as amended by the Amending Agreement contains representations and warranties, and affirmative and negative covenants.
57
On September 27, 2024, we made the Second Quarter 2025 Paydown. The Second Quarter 2025 Paydown resulted in an aggregate principal reduction of $1.1 million (US$0.9 million) for a cash payment of $1.1 million (US$0.9 million).
On October 16, 2024, the Company made an early prepayment under its Credit Facility in an aggregate principal amount equal to US$100.0 million of the principal amount outstanding thereunder at a discounted price of US$97.5 million. Pursuant to the Amending Agreement, the US$100.0 million prepayment of the Credit Facility was required to be made by December 31, 2024.
Supreme Cannabis Convertible Debentures and Accretion Debentures
On October 19, 2018, Supreme Cannabis Company, Inc. (“Supreme Cannabis”) issued 6.0% senior unsecured convertible debentures (the “Supreme Debentures”) for gross proceeds of $100.0 million. On September 9, 2020, the Supreme Debentures were amended to effect, among other things: (i) the cancellation of $63.5 million of principal amount of the Supreme Debentures; (ii) an increase in the interest rate to 8% per annum; (iii) the extension of the maturity date to September 10, 2025; and (iv) a reduction in the conversion price to $2.85.
In addition, on September 9, 2020, Supreme Cannabis issued new senior unsecured non-convertible debentures (the “Accretion Debentures”). The principal amount began at $nil and accretes at a rate of 11.06% per annum based on the remaining principal amount of the Supreme Debentures of $36.5 million to a maximum of $13.5 million, compounding on a semi-annual basis commencing on September 9, 2020, and ending on September 9, 2023. As of September 9, 2023, the principal amount of the Accretion Debentures was finalized as $10.4 million. The Accretion Debentures are payable in cash, but do not bear cash interest and are not convertible into Supreme Shares (as defined below). The principal amount of the Accretion Debentures will amortize, or be paid, at 1.0% per month over the 24 months prior to maturity.
As a result of the arrangement (the “Supreme Arrangement”) we completed with Supreme Cannabis on June 22, 2021 pursuant to which we acquired 100% of the issued and outstanding common shares of Supreme Cannabis (the “Supreme Shares”), the Supreme Debentures remain outstanding as securities of Supreme Cannabis, which, upon conversion will entitle the holder thereof to receive, in lieu of the number of Supreme Shares to which such holder was theretofore entitled, the consideration payable under the Supreme Arrangement that such holder would have been entitled to be issued and receive if, immediately prior to the effective time of the Supreme Arrangement, such holder had been the registered holder of the number of Supreme Shares to which such holder was theretofore entitled.
In connection with the Supreme Arrangement, we, Supreme Cannabis and Computershare Trust Company of Canada (the “Trustee”) entered into a supplemental indenture whereby we agreed to issue common shares upon conversion of any Supreme Debenture. In addition, we may force conversion of the Supreme Debentures outstanding with 30 days’ notice if the daily volume weighted average trading price of our common shares is greater than $385.90 for any 10 consecutive trading days. We, Supreme Cannabis and the Trustee entered into a further supplemental indenture whereby we agreed to guarantee the obligations of Supreme Cannabis pursuant to the Supreme Debentures and the Accretion Debentures.
Prior to September 9, 2023, the Supreme Debentures were not redeemable. Beginning on and after September 9, 2023, Supreme Cannabis may from time to time, upon providing 60 days prior written notice to the Trustee, redeem the Supreme Debentures outstanding, provided that the Accretion Debentures have already been redeemed in full.
Refer to the May 2024 Convertible Debenture details below for details on partial settlement of the Supreme Debentures and Accretion Debentures.
On August 20, 2024, we entered into the August 2024 Supreme Convertible Debt Exchange with the August 2024 Investor pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $2.7 million of aggregate principal amount of outstanding Supreme Debentures held by the August 2024 Investor in exchange for 291,351 common shares of the Company and $0.03 million in cash for accrued interest.
May 2024 Convertible Debenture
On May 2, 2024, we entered into the Exchange and Subscription Agreement with the May 2024 Investor pursuant to which, among other things, the May 2024 Investor delivered to us approximately $27.5 million aggregate principal amount of outstanding Supreme Debentures and Accretion Debentures held by the May 2024 Investor and paid us approximately US$50 million in exchange for us issuing to the May 2024 Investor (i) the May 2024 Convertible Debenture with an aggregate principal amount of $96.4 million maturing five years from the Closing Date of the Transaction and (ii) 3,350,430 May 2024 Investor Warrants of Canopy Growth. Each May 2024 Investor Warrant entitles the holder to acquire one Canopy Share at an exercise price equal to $16.18 per Canopy Share for a period of five years from the Closing Date. The May 2024 Convertible Debenture bears interest at a rate of 7.50% per annum, payable in semi-annual payments in cash or, at our option, in Canopy Shares for the first four semi-annual interest payments after the Closing Date, subject to satisfaction of certain conditions, including the prior approval of the TSX.
The Exchange and Subscription Agreement granted the May 2024 Investor, during the Agreement ROFR Term, a right of first refusal to subscribe for, and to be issued, as the sole investor in a Proposed Private Placement; provided, however, that the May 2024
58
Investor shall subscribe for 100% of the Proposed Private Placement on the same terms and conditions contemplated in the Proposed Private Placement.
The May 2024 Convertible Debenture is convertible into Canopy Shares at the option of the May 2024 Investor at a conversion price equal to $14.38 per share. The May 2024 Convertible Debenture is subject to a forced conversion feature upon notice from us in the event that the average closing trading price of the Canopy Shares on the TSX exceeds $21.57 for a period of 10 consecutive trading days. In addition, pursuant to the terms of the May 2024 Convertible Debenture, during the Debenture ROFR Term, we granted the May 2024 Investor a right of first refusal to subscribe for, and to be issued, as an investor in a Proposed Financing; provided, however, that the May 2024 Investor shall subscribe for 25% of the Proposed Financing on the same terms and conditions contemplated in the Proposed Financing.
Contractual Obligations and Commitments
Other than changes to our Supreme Cannabis Convertible Debentures and Accretion Debentures, the May 2024 Convertible Debenture, the CBI Note, the First Quarter 2025 Paydowns, the Second Quarter 2025 Paydown and certain agreements entered into in connection with the Reorganization, the Reorganization Amendments and the Additional Reorganization Amendments, as described above under “Recent Developments”, there have been no material changes to our contractual obligations and commitments from the information provided in the MD&A section in the Annual Report.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in the MD&A section in the Annual Report.
Impairment of goodwill
We do not believe that an event occurred or circumstances changed during the second quarter of fiscal 2025 that would, more likely than not, reduce the fair value of the Storz & Bickel reporting unit below its carrying value. Therefore, we concluded that the quantitative goodwill impairment assessment was not required for the Storz & Bickel reporting unit at September 30, 2024. The carrying value of goodwill associated with the Storz & Bickel reporting unit was $44,531 at September 30, 2024.
We are required to perform our next annual goodwill impairment analysis on March 31, 2025, or earlier should there be an event that occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the potential economic loss arising from adverse changes in market factors. As a result of our global operating, acquisition and financing activities, we are exposed to market risk associated with changes in foreign currency exchange rates, interest rates and equity prices. To manage the volatility relating to these risks, we may periodically purchase derivative instruments including foreign currency forwards. We do not enter into derivative instruments for trading or speculative purposes.
Foreign currency risk
Our Interim Financial Statements are presented in Canadian dollars. We are exposed to foreign currency exchange rate risk as the functional currencies of certain subsidiaries, including those in the United States and Europe, are not in Canadian dollars. The translation of foreign currencies to Canadian dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date, and for revenues and expense using an average exchange rate for the period. Therefore, fluctuations in the value of the Canadian dollar affect the reported amounts of net revenue, expenses, assets and liabilities. The resulting translation adjustments are reported as a component of accumulated other comprehensive income or loss on the consolidated balance sheet.
A hypothetical 10% change in the U.S. dollar against the Canadian dollar compared to the exchange rate at September 30, 2024, would affect the carrying value of net assets by approximately $83.2 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income (loss). A hypothetical 10% change in the euro against the Canadian dollar compared to the exchange rate at September 30, 2024, would affect the carrying value of net assets by approximately $19.8 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income (loss).
We also have exposure to changes in foreign exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. As a result, we have been impacted by changes in exchange rates and may be impacted for the foreseeable future.
59
Foreign currency derivative instruments may be used to hedge existing foreign currency denominated assets and liabilities, forecasted foreign currency denominated sales/purchases to/from third parties as well as intercompany sales/purchases, intercompany principal and interest payments, and in connection with acquisitions, divestitures or investments outside of Canada. Historically, while we have purchased derivative instruments to mitigate the foreign exchange risks associated with certain transactions, the impact of these hedging transactions on our financial statements has been immaterial.
Interest rate risk
Our cash equivalents and short-term investments are held in both fixed-rate and adjustable-rate securities. Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a lower rate, generating less interest income. As at September 30, 2024, our cash and cash equivalents, and short-term investments consisted of $91.7 million in interest rate sensitive instruments (March 31, 2024 – $88.0 million).
Our financial liabilities consist of long-term fixed rate debt and floating-rate debt. Fluctuations in interest rates could impact our cash flows, primarily with respect to the interest payable on floating-rate debt.
|
|
Aggregate Notional Value |
|
|
Fair Value |
|
|
Decrease in Fair Value - Hypothetical 1% Rate Increase |
|
|||||||||||||||
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||||||
Promissory note |
|
$ |
- |
|
|
$ |
100,000 |
|
|
$ |
- |
|
|
$ |
89,224 |
|
|
$ |
- |
|
|
$ |
(523 |
) |
Fixed interest rate debt |
|
|
99,862 |
|
|
|
38,186 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
||||
Variable interest rate debt |
|
|
474,203 |
|
|
|
469,819 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
||||
Equity price risk
We hold other financial assets and liabilities in the form of investments in shares, warrants, options, put liabilities, and convertible debentures that are measured at fair value and recorded through either net income (loss) or other comprehensive income (loss). We are exposed to price risk on these financial assets, which is the risk of variability in fair value due to movements in equity or market prices.
Information regarding the fair value of financial instrument assets and liabilities that are measured at fair value on a recurring basis, and the relationship between the unobservable inputs used in the valuation of these financial assets and their fair value is presented in Note 23 of the Interim Financial Statements.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There have been no changes in our “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Other than as disclosed below, we are not aware of: (a) any legal proceedings to which we are a party, or to which any of our properties is subject, which would be material to us or of any such proceedings being contemplated, (b) any penalties or sanctions imposed by a court relating to securities legislation, or other penalties or sanctions imposed by a court or regulatory body against us that would likely be considered important to a reasonable investor making an investment decision, and (c) any settlement agreements that we have entered into before a court relating to securities legislation or with a securities regulatory authority.
On May 23, 2023, an ostensible shareholder commenced a putative class action (Turpel v. Canopy Growth Corporation, et al., Case No. 1:23-cv-043022-PAE) against the Company and two of its officers in the U.S. District Court for the Southern District of New York on behalf of persons and entities that purchased or otherwise acquired the Company’s securities between May 31, 2022 and May 10, 2023, alleging violations of U.S. federal securities laws. Two similar cases were subsequently filed, captioned as Kantner v. Canopy Growth Corporation, et al., Case No. 1:23-cv-06266-PAE and Allen v. Canopy Growth Corporation, et al., Case No. 1:23-cv-05891-PAE.
On November 30, 2023, the U.S. District Court for the Southern District of New York consolidated the Turpel, Kantner and Allen actions (captioned as “In re Canopy Growth Securities Litigation, No. 23-cv-04302”) and appointed Chen Li as lead plaintiff. On January 22, 2024, the lead plaintiff filed a first amended complaint against the Company and certain of its current and former officers, alleging claims on behalf of persons and entities that purchased or otherwise acquired the Company’s securities between November 5, 2021 and June 22, 2023. The first amended complaint alleges that the Company made false or misleading statements and omissions regarding BioSteel’s revenue, performance and operations, and the Company’s internal controls over accounting and financial reporting in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The lead plaintiff seeks an unspecified amount of damages, attorneys’ fees and costs, and other relief. On March 7, 2024, the Company filed a motion to dismiss the first amended complaint and briefing on that motion was completed on April 11, 2024. On July 17, 2024, the U.S. District Court for the Southern District of New York dismissed the first amended complaint against the Company and all individual defendants with prejudice. On July 18, 2024, the district court issued a judgment closing the case. On August 9, 2024, lead plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On October 8, 2024, the parties filed a stipulation of voluntary dismissal of the appeal with prejudice. On October 9, 2024, the Court of Appeals for the Second Circuit entered an order dismissing the appeal.
On January 18, 2024, a follow-on derivative shareholder lawsuit, captioned Press v. Schmeling et al., was filed in the Supreme Court of the State of New York by ostensible shareholder Denise Press on behalf of Canopy Growth against the Company’s directors and certain of its officers alleging misstatements and omissions regarding revenue attributed to BioSteel Canada and the Company’s internal controls over accounting and financial reporting. The complaint asserts claims for breach of fiduciary duties, gross mismanagement, waste of corporate assets, unjust enrichment, and insider trading, and seeks damages, attorneys’ fees and costs, and equitable relief. All proceedings in this derivative shareholder lawsuit are currently stayed.
On June 27, 2023, an ostensible shareholder commenced a putative class action (Dziedziejko v. Canopy Growth Corporation et al., Court File No. CV-23-00701769-00CP) in the Ontario Superior Court of Justice against the Company, two of its officers, and the Company’s auditor on behalf of a putative class of all persons or entities who acquired Canopy Growth’s securities in the secondary market between June 1, 2021 to June 22, 2023 and held some or all of those securities until the close of trading on May 10, 2023 or June 22, 2023.
The plaintiff alleges that the Company’s disclosures contained misrepresentations within the meaning of the Securities Act (Ontario), that certain officers authorized, permitted, or acquiesced in the release of the impugned disclosures, that the Company and one of its officers acted in a manner that was oppressive or unfairly prejudicial to the proposed class members by failing to remedy alleged deficiencies in the Company’s internal controls, and that all of the defendants are liable for damages to the putative class. The action seeks an unspecified amount of damages, interest, legal fees, and the costs of administering a plan of distribution of the recovery. The Company was also named in two other putative class proceedings that were commenced between May 2023 and July 2023 in the Ontario Superior Court of Justice alleging that the Company’s disclosures contained misrepresentations. However, on November 10, 2023, the Ontario Superior Court of Justice decided a carriage motion staying those actions (Leonard v. Canopy Growth Corporation et al., Court File No. CV-23-00702281-00CP and Twidale v. Canopy Growth Corporation et al., Court File No. CV-23-00700135-00CP), and allowing Dziedziejko v. Canopy Growth Corporation et al., Court File No. CV-23-00701769-00CP to proceed to a class certification hearing.
On June 15, 2023, an ostensible shareholder commenced a putative class action (Asmaro v. Canopy Growth Corporation et al., Court File No. VLC-S-S-234351) against the Company and two of its officers in the Supreme Court of British Columbia on behalf of a putative class of all persons and entities who purchased or otherwise acquired securities of the Company between August 6, 2021 and May 10, 2023. The lawsuit alleges that the Company’s disclosures contained misrepresentations within the meaning of the Securities Act (British Columbia), that certain officers authorized, permitted, or acquiesced in the release of the impugned disclosures, and that all of the defendants are liable for damages to the putative class. The plaintiff seeks an unspecified amount of damages.
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In May 2023, in connection with the Company’s internal review of the financial reporting matters related to BioSteel Canada, as previously disclosed in the Annual Report (the “BioSteel Review”), the Company voluntarily self-reported to the SEC that the timing and amount of revenue recognition in the BioSteel Canada segment were under review. As a result of self-reporting the BioSteel Review, the Company is the subject of an ongoing investigation by the SEC. Although the Company is fully cooperating with the SEC and continues to voluntarily respond to requests in connection with this matter, it cannot predict when such matters will be completed or the outcome and potential impact. Any remedial measures, sanctions, fines or penalties, including, but not limited to, financial penalties and awards, injunctive relief and compliance conditions, imposed on the Company in connection with this matter could have a material adverse impact on our business, financial condition and results of operations. See “Risk Factors—Risks Relating to the Restatement of the Prior Financial Statements—As a result of self-reporting the BioSteel Review, the Company is the subject of an investigation by the SEC and an ongoing informal inquiry by regulatory authorities in Canada, and it cannot predict the timing of developments, and any adverse outcome of these continuing matters could have a material adverse effect on the Company” under Item 1A of the Annual Report.
The Company denies any alleged misconduct and liability for each of the claims asserted in the above-noted Court, believes that the defendants/respondents have meritorious defenses to the claims, and expects to vigorously defend the claims, although the Company cannot predict when or how they will be resolved or estimate what the potential loss or range of loss would be, if any.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any other legal proceedings other than described above, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, results of operations or prospects. Please refer to “Risk Factors” under Item 1A of the Annual Report for further discussion.
Item 1A. Risk Factors.
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A in the Annual Report. Except as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A in our Annual Report.
There can be no certainty that all conditions to the Floating Share Arrangement and the Acreage Amending Agreement will be satisfied or waived.
There can be no certainty, nor can the Company provide any assurance, that all conditions precedent contained in the Floating Share Arrangement Agreement and the Acreage Amending Agreement will be satisfied or waived. The Floating Share Arrangement is subject to certain conditions precedent which. There can be no certainty, nor can the Company provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied. If such conditions precedent are not satisfied, it may result in the acquisition of Acreage not being completed.
Acreage’s financial statements express doubt about its ability to continue as a going concern.
Acreage’s publicly available financial statements as of and for three and six months ended June 30, 2024 filed with the SEC on August 14, 2024 (“Acreage’s June 30, 2024 Financial Statements”) express doubt about Acreage’s ability to continue as a going concern. In particular, Acreage’s June 30, 2024 Financial Statements state: “[Acreage] had an accumulated deficit as of June 30, 2024, as well as a net loss and negative cash flow from operating activities for the six months ended June 30, 2024. These factors raise substantial doubt about [Acreage]’s ability to continue as a going concern for at least one year from the issuance of these financial statements.” In the event that Acreage is unable to continue as a going concern, the Acreage Amended Arrangement and the Floating Share Arrangement may not be completed. In the event that the Acreage Amended Arrangement and the Floating Share Arrangement are completed and Acreage is unable to continue as a going concern, this would have a negative impact on Canopy USA’s business, financial results and operations and have an adverse impact on the Company’s United States strategy, and, ultimately, the Company’s financial results and operations.
On June 3, 2024, the Company closed the Debt Acquisition pursuant to the credit agreement dated as of December 16, 2021, as amended by the first amendment to credit agreement dated as of on October 24, 2022, and the second amendment to credit agreement dated as of April 28, 2023 (the “Prior Acreage Credit Agreement”). The Company entered into various agreements in connection with the Debt Acquisition in order to, among other things, acquire the Acquired Debt in exchange for US$69.8 million in cash and the release of approximately US$30.1 million that was held in escrow pursuant to the option agreement dated November 15, 2022 among a wholly-owned subsidiary of Canopy Growth and the lenders party to the Prior Acreage Credit Agreement.
In view of the foregoing, Acreage’s continuation as a going concern is dependent upon its continued operations, which in turn is dependent upon, among other things, Acreage’s ability to meet its financial requirements. There is no assurance that Acreage will be successful in its plans to fund its operations and debt obligations as they become due and payable, which for greater certainty includes its debt obligations in favor of the Company in connection with the Acquired Debt. Accordingly, in the event Acreage cannot satisfy its debt obligations as they become due, the Acquired Debt may not be repaid and the Company may lose the entirety of its investment. In addition, Acreage may be required to terminate or significantly curtail its operations or enter into arrangements with third parties that may require Acreage to relinquish rights to certain aspects of its business and/or dispose of certain assets, which may
63
ultimately result in Acreage not being able to satisfy the conditions in the Acreage Amended Arrangement and the Floating Share Arrangement and the acquisition of Acreage not being completed.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
|
|
|
|
10.1# |
|
|
|
|
|
10.2# |
|
|
|
|
|
10.3# |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5 |
|
|
|
|
|
31.1* |
|
|
|
|
|
64
31.2* |
|
|
|
|
|
32.1** |
|
|
|
|
|
32.2** |
|
|
|
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act.
# This document has been identified as a management contract or compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
65
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
CANOPY GROWTH CORPORATION |
|
|
|
|
|
Date: November 8, 2024 |
|
By: |
/s/ David Klein |
|
|
|
David Klein |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: November 8, 2024 |
|
By: |
/s/ Judy Hong |
|
|
|
Judy Hong |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
66