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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 June 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 August 5, 2022, there were 479,978,742 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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

Item 4.

Controls and Procedures

50

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults Upon Senior Securities

51

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

51

Signatures

53

 

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)

 

 

June 30,

2022

 

 

March 31,

2022

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

769,495

 

 

$

776,005

 

Short-term investments

 

 

447,620

 

 

 

595,651

 

Restricted short-term investments

 

 

12,177

 

 

 

12,216

 

Amounts receivable, net

 

 

96,626

 

 

 

96,443

 

Inventory

 

 

205,513

 

 

 

204,387

 

Prepaid expenses and other assets

 

 

62,141

 

 

 

52,700

 

Total current assets

 

 

1,593,572

 

 

 

1,737,402

 

Other financial assets

 

 

602,229

 

 

 

800,328

 

Property, plant and equipment

 

 

926,369

 

 

 

942,780

 

Intangible assets

 

 

242,479

 

 

 

252,695

 

Goodwill

 

 

138,419

 

 

 

1,866,503

 

Other assets

 

 

14,459

 

 

 

15,342

 

Total assets

 

$

3,517,527

 

 

$

5,615,050

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

64,647

 

 

$

64,270

 

Other accrued expenses and liabilities

 

 

59,913

 

 

 

75,278

 

Current portion of long-term debt

 

 

193,072

 

 

 

9,296

 

Other liabilities

 

 

86,776

 

 

 

64,054

 

Total current liabilities

 

 

404,408

 

 

 

212,898

 

Long-term debt

 

 

1,264,645

 

 

 

1,491,695

 

Deferred income tax liabilities

 

 

14,658

 

 

 

15,991

 

Liability arising from Acreage Arrangement

 

 

-

 

 

 

47,000

 

Warrant derivative liability

 

 

1,555

 

 

 

26,920

 

Other liabilities

 

 

149,341

 

 

 

190,049

 

Total liabilities

 

 

1,834,607

 

 

 

1,984,553

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

37,150

 

 

 

36,200

 

Canopy Growth Corporation shareholders' equity:

 

 

 

 

 

 

 

 

Common shares - $nil par value; Authorized - unlimited number of shares;

   Issued - 417,217,611 shares and 394,422,604 shares, respectively

 

 

7,601,570

 

 

 

7,482,809

 

Additional paid-in capital

 

 

2,515,453

 

 

 

2,519,766

 

Accumulated other comprehensive loss

 

 

(21,554

)

 

 

(42,282

)

Deficit

 

 

(8,454,214

)

 

 

(6,370,337

)

Total Canopy Growth Corporation shareholders' equity

 

 

1,641,255

 

 

 

3,589,956

 

Noncontrolling interests

 

 

4,515

 

 

 

4,341

 

Total shareholders' equity

 

 

1,645,770

 

 

 

3,594,297

 

Total liabilities and shareholders' equity

 

$

3,517,527

 

 

$

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 June 30,

 

 

 

 

 

2022

 

 

2021

 

 

Revenue

 

 

$

122,862

 

 

$

155,423

 

 

Excise taxes

 

 

 

12,747

 

 

 

19,214

 

 

Net revenue

 

 

 

110,115

 

 

 

136,209

 

 

Cost of goods sold

 

 

 

111,507

 

 

 

108,971

 

 

Gross margin

 

 

 

(1,392

)

 

 

27,238

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 

103,413

 

 

 

112,574

 

 

Share-based compensation

 

 

 

5,439

 

 

 

13,126

 

 

Asset impairment and restructuring costs

 

 

 

1,727,985

 

 

 

89,249

 

 

Total operating expenses

 

 

 

1,836,837

 

 

 

214,949

 

 

Operating loss

 

 

 

(1,838,229

)

 

 

(187,711

)

 

Loss from equity method investments

 

 

 

-

 

 

 

(100

)

 

Other income (expense), net

 

 

 

(245,578

)

 

 

580,666

 

 

(Loss) income before income taxes

 

 

 

(2,083,807

)

 

 

392,855

 

 

Income tax expense

 

 

 

(3,749

)

 

 

(2,900

)

 

Net (loss) income

 

 

 

(2,087,556

)

 

 

389,955

 

 

Net loss attributable to noncontrolling interests and

   redeemable noncontrolling interest

 

 

 

(4,408

)

 

 

(2,463

)

 

Net (loss) income attributable to Canopy Growth Corporation

 

 

$

(2,083,148

)

 

$

392,418

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share

 

 

$

(5.23

)

 

$

1.02

 

 

Basic weighted average common shares outstanding

 

 

 

398,467,568

 

 

 

384,055,133

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share

 

 

$

(5.23

)

 

$

0.84

 

 

Diluted weighted average common shares outstanding

 

 

 

398,467,568

 

 

 

404,546,243

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

$

(2,087,556

)

 

$

389,955

 

 

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

 

 

 

 

 

 

 

 

 

 

Fair value changes of own credit risk of financial liabilities

 

 

 

27,060

 

 

 

660

 

 

Foreign currency translation

 

 

 

758

 

 

 

(27,938

)

 

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

 

 

 

27,818

 

 

 

(27,278

)

 

Comprehensive (loss) income

 

 

 

(2,059,738

)

 

 

362,677

 

 

Comprehensive loss attributable to noncontrolling interests and

   redeemable noncontrolling interest

 

 

 

(4,408

)

 

 

(2,463

)

 

Comprehensive (loss) income attributable to Canopy Growth Corporation

 

 

$

(2,055,330

)

 

$

365,140

 

 

 

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

 

 

59,013

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,013

 

Exercise of Omnibus Plan stock

   options

 

 

1,282

 

 

 

(1,072

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

210

 

Share-based compensation

 

 

-

 

 

 

5,265

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,265

 

Issuance and vesting of restricted

   share units

 

 

7,600

 

 

 

(7,600

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Changes in redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,358

)

 

 

-

 

 

 

-

 

 

 

4,408

 

 

 

(950

)

Ownership changes relating to

   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

174

 

 

 

174

 

Settlement of convertible

   senior notes

 

 

50,866

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,090

)

 

 

-

 

 

 

-

 

 

 

43,776

 

Comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27,818

 

 

 

(2,083,148

)

 

 

(4,408

)

 

 

(2,059,738

)

Balance at June 30, 2022

 

$

7,601,570

 

 

$

493,086

 

 

$

2,581,788

 

 

$

(509,723

)

 

$

(49,698

)

 

$

(21,554

)

 

$

(8,454,214

)

 

$

4,515

 

 

$

1,645,770

 

 

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

 

3


 

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, 2021

 

$

7,168,557

 

 

$

480,786

 

 

$

2,568,438

 

 

$

(512,340

)

 

$

(121,234

)

 

$

(34,240

)

 

$

(6,068,156

)

 

$

4,709

 

 

$

3,486,520

 

Other issuances of common

   shares and warrants

 

 

285,915

 

 

 

(25,692

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

260,223

 

Replacement equity instruments

   from the acquisition of Supreme

   Cannabis

 

 

-

 

 

 

5,566

 

 

 

13,350

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,916

 

Exercise of Omnibus Plan stock

   options

 

 

5,522

 

 

 

(1,930

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,592

 

Share-based compensation

 

 

-

 

 

 

12,861

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,861

 

Issuance and vesting of restricted

   share units

 

 

3,563

 

 

 

(3,563

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Changes in redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,463

)

 

 

-

 

 

 

-

 

 

 

2,463

 

 

 

-

 

Ownership changes relating to

   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

265

 

 

 

265

 

Comprehensive (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,278

)

 

 

392,418

 

 

 

(2,463

)

 

 

362,677

 

Balance at June 30, 2021

 

$

7,463,557

 

 

$

468,028

 

 

$

2,581,788

 

 

$

(512,340

)

 

$

(123,697

)

 

$

(61,518

)

 

$

(5,675,738