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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38496

 

Canopy Growth Corporation

(Exact name of registrant as specified in its charter)

 

 

Canada

N/A

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Hershey Drive

Smiths Falls, Ontario

K7A 0A8

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (855) 558-9333

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common shares, no par value

 

CGC

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 8, 2022, there were 485,933,246 common shares of the registrant issued and outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Condensed Interim Consolidated Balance Sheets

1

 

Condensed Interim Consolidated Statements of Operations and Comprehensive (Loss) Income

2

 

Condensed Interim Consolidated Statements of Shareholders’ Equity

3

 

Condensed Interim Consolidated Statements of Cash Flows

5

 

Notes to Condensed Interim Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

66

Item 4.

Controls and Procedures

68

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

69

Item 1A.

Risk Factors

69

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 3.

Defaults Upon Senior Securities

72

Item 4.

Mine Safety Disclosures

72

Item 5.

Other Information

72

Item 6.

Exhibits

72

Signatures

73

 

Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (“Quarterly Report”) to the “Company”, “Canopy Growth”, “we”, “us” and “our” refer to Canopy Growth Corporation, its direct and indirect wholly-owned subsidiaries and, if applicable, its joint ventures and investments accounted for by the equity method; the term “cannabis” means the plant of any species or subspecies of genus Cannabis and any part of that plant, including all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers; and the term “U.S. hemp” has the meaning given to the term “hemp” in the U.S. Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), including hemp-derived cannabidiol (“CBD”).

 

This Quarterly Report contains references to our trademarks and trade names and to trademarks and trade names belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us or our business by, any other companies.

 

All currency amounts in this Quarterly Report are stated in Canadian dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “CDN$” are to Canadian dollars and all references to “US$” are to U.S. dollars.

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

 

 

September 30,
2022

 

 

March 31,
2022

 

ASSETS

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

746,719

 

 

$

776,005

 

Short-term investments

 

 

396,702

 

 

 

595,651

 

Restricted short-term investments

 

 

12,352

 

 

 

12,216

 

Amounts receivable, net

 

 

108,236

 

 

 

96,443

 

Inventory

 

 

211,209

 

 

 

204,387

 

Prepaid expenses and other assets

 

 

62,957

 

 

 

52,700

 

Total current assets

 

 

1,538,175

 

 

 

1,737,402

 

Other financial assets

 

 

625,059

 

 

 

800,328

 

Property, plant and equipment

 

 

864,523

 

 

 

942,780

 

Intangible assets

 

 

223,501

 

 

 

252,695

 

Goodwill

 

 

136,513

 

 

 

1,866,503

 

Other assets

 

 

14,499

 

 

 

15,342

 

Total assets

 

$

3,402,270

 

 

$

5,615,050

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

68,203

 

 

$

64,270

 

Other accrued expenses and liabilities

 

 

88,577

 

 

 

75,278

 

Current portion of long-term debt

 

 

321,976

 

 

 

9,296

 

Other liabilities

 

 

63,645

 

 

 

64,054

 

Total current liabilities

 

 

542,401

 

 

 

212,898

 

Long-term debt

 

 

1,032,134

 

 

 

1,491,695

 

Deferred income tax liabilities

 

 

9,758

 

 

 

15,991

 

Liability arising from Acreage Arrangement

 

 

-

 

 

 

47,000

 

Warrant derivative liability

 

 

691

 

 

 

26,920

 

Other liabilities

 

 

153,257

 

 

 

190,049

 

Total liabilities

 

 

1,738,241

 

 

 

1,984,553

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

35,900

 

 

 

36,200

 

Canopy Growth Corporation shareholders' equity:

 

 

 

 

 

 

Common shares - $nil par value; Authorized - unlimited number of shares;
   Issued -
480,260,882 shares and 394,422,604 shares, respectively

 

 

7,818,089

 

 

 

7,482,809

 

Additional paid-in capital

 

 

2,516,811

 

 

 

2,519,766

 

Accumulated other comprehensive loss

 

 

(33,707

)

 

 

(42,282

)

Deficit

 

 

(8,676,020

)

 

 

(6,370,337

)

Total Canopy Growth Corporation shareholders' equity

 

 

1,625,173

 

 

 

3,589,956

 

Noncontrolling interests

 

 

2,956

 

 

 

4,341

 

Total shareholders' equity

 

 

1,628,129

 

 

 

3,594,297

 

Total liabilities and shareholders' equity

 

$

3,402,270

 

 

$

5,615,050

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

1


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

 

 

 

Three months ended September 30,

 

 

Six months ended September 30,

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Revenue

 

$

130,359

 

 

$

145,648

 

 

$

253,221

 

 

$

301,071

 

 

Excise taxes

 

 

12,496

 

 

 

14,274

 

 

 

25,243

 

 

 

33,488

 

 

Net revenue

 

 

117,863

 

 

 

131,374

 

 

 

227,978

 

 

 

267,583

 

 

Cost of goods sold

 

 

114,042

 

 

 

202,514

 

 

 

225,549

 

 

 

311,485

 

 

Gross margin

 

 

3,821

 

 

 

(71,140

)

 

 

2,429

 

 

 

(43,902

)

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

125,842

 

 

 

125,756

 

 

 

229,255

 

 

 

238,330

 

 

Share-based compensation

 

 

9,858

 

 

 

15,953

 

 

 

15,297

 

 

 

29,079

 

 

Asset impairment and restructuring costs

 

 

43,968

 

 

 

2,510

 

 

 

1,771,953

 

 

 

91,759

 

 

Total operating expenses

 

 

179,668

 

 

 

144,219

 

 

 

2,016,505

 

 

 

359,168

 

 

Operating loss

 

 

(175,847

)

 

 

(215,359

)

 

 

(2,014,076

)

 

 

(403,070

)

 

Loss from equity method investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(100

)

 

Other income (expense), net

 

 

(47,844

)

 

 

195,821

 

 

 

(293,422

)

 

 

776,487

 

 

(Loss) income before income taxes

 

 

(223,691

)

 

 

(19,538

)

 

 

(2,307,498

)

 

 

373,317

 

 

Income tax (expense) recovery

 

 

(8,220

)

 

 

3,207

 

 

 

(11,969

)

 

 

307

 

 

Net (loss) income

 

 

(231,911

)

 

 

(16,331

)

 

 

(2,319,467

)

 

 

373,624

 

 

Net loss attributable to noncontrolling interests and
   redeemable noncontrolling interest

 

 

(10,105

)

 

 

(5,273

)

 

 

(14,513

)

 

 

(7,736

)

 

Net (loss) income attributable to Canopy Growth
   Corporation

 

$

(221,806

)

 

$

(11,058

)

 

$

(2,304,954

)

 

$

381,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share

 

$

(0.47

)

 

$

(0.03

)

 

$

(5.30

)

 

$

0.98

 

 

Basic weighted average common shares outstanding

 

 

471,592,150

 

 

 

393,274,758

 

 

 

435,229,653

 

 

 

388,696,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share

 

$

(0.47

)

 

$

(0.03

)

 

$

(5.30

)

 

$

0.72

 

 

Diluted weighted average common shares outstanding

 

 

471,592,150

 

 

 

393,274,758

 

 

 

435,229,653

 

 

 

409,158,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(231,911

)

 

$

(16,331

)

 

$

(2,319,467

)

 

$

373,624

 

 

Other comprehensive income (loss), net of income tax
   effect

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value changes of own credit risk of financial liabilities

 

 

1,249

 

 

 

9,420

 

 

 

28,309

 

 

 

10,080

 

 

Foreign currency translation

 

 

9,015

 

 

 

24,650

 

 

 

9,773

 

 

 

(3,288

)

 

Total other comprehensive income (loss), net of income tax
   effect

 

 

10,264

 

 

 

34,070

 

 

 

38,082

 

 

 

6,792

 

 

Comprehensive (loss) income

 

 

(221,647

)

 

 

17,739

 

 

 

(2,281,385

)

 

 

380,416

 

 

Comprehensive loss attributable to noncontrolling interests
   and redeemable noncontrolling interest

 

 

(10,105

)

 

 

(5,273

)

 

 

(14,513

)

 

 

(7,736

)

 

Comprehensive (loss) income attributable to Canopy Growth
   Corporation

 

$

(211,542

)

 

$

23,012

 

 

$

(2,266,872

)

 

$

388,152

 

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

2


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands of Canadian dollars, unaudited)

 

 

 

 

 

 

Additional paid-in capital

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

Share-based reserve

 

 

Warrants

 

 

Ownership changes

 

 

Redeemable noncontrolling interest

 

 

other comprehensive income (loss)

 

 

Deficit

 

 

Noncontrolling interests

 

 

Total

 

Balance at March 31, 2022

 

$

7,482,809

 

 

$

492,041

 

 

$

2,581,788

 

 

$

(509,723

)

 

$

(44,340

)

 

$

(42,282

)

 

$

(6,370,337

)

 

$

4,341

 

 

$

3,594,297

 

Cumulative effect from adoption
of ASU 2020-06

 

 

-

 

 

 

4,452

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(729

)

 

 

-

 

 

 

3,723

 

Other issuances of common
   shares and warrants

 

 

60,222

 

 

 

(353

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,869

 

Exercise of Omnibus Plan stock
   options

 

 

1,506

 

 

 

(1,236

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

270

 

Share-based compensation

 

 

-

 

 

 

14,838

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,838

 

Issuance and vesting of
   restricted share units

 

 

8,287

 

 

 

(8,287

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Changes in redeemable
   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,369

)

 

 

-

 

 

 

-

 

 

 

12,669

 

 

 

300

 

Ownership changes relating to
   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

459

 

 

 

459

 

Settlement of unsecured
   senior notes

 

 

265,265

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,507

)

 

 

-

 

 

 

-

 

 

 

235,758

 

Comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

38,082

 

 

 

(2,304,954

)

 

 

(14,513

)

 

 

(2,281,385

)

Balance at September 30, 2022

 

$

7,818,089