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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 December 31, 2021

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 February 8, 2022, there were 394,170,916 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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

59

Item 4.

Controls and Procedures

61

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

62

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 3.

Defaults Upon Senior Securities

62

Item 4.

Mine Safety Disclosures

62

Item 5.

Other Information

62

Item 6.

Exhibits

63

Signatures

64

 

Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (“Quarterly Report”) to the “Corporation”, “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, 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)

 

 

December 31,

2021

 

 

March 31,

2021

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

615,146

 

 

$

1,154,653

 

Short-term investments

 

 

807,884

 

 

 

1,144,563

 

Restricted short-term investments

 

 

12,208

 

 

 

11,332

 

Amounts receivable, net

 

 

100,901

 

 

 

92,435

 

Inventory

 

 

365,750

 

 

 

367,979

 

Prepaid expenses and other assets

 

 

86,267

 

 

 

67,232

 

Total current assets

 

 

1,988,156

 

 

 

2,838,194

 

Other financial assets

 

 

898,497

 

 

 

708,167

 

Property, plant and equipment

 

 

1,080,179

 

 

 

1,074,537

 

Intangible assets

 

 

338,753

 

 

 

308,167

 

Goodwill

 

 

1,988,250

 

 

 

1,889,354

 

Other assets

 

 

15,195

 

 

 

5,061

 

Total assets

 

$

6,309,030

 

 

$

6,823,480

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

67,837

 

 

$

67,262

 

Other accrued expenses and liabilities

 

 

76,007

 

 

 

100,813

 

Current portion of long-term debt

 

 

15,702

 

 

 

9,827

 

Other liabilities

 

 

79,700

 

 

 

106,428

 

Total current liabilities

 

 

239,246

 

 

 

284,330

 

Long-term debt

 

 

1,494,665

 

 

 

1,573,136

 

Deferred income tax liabilities

 

 

27,366

 

 

 

21,379

 

Liability arising from Acreage Arrangement

 

 

103,000

 

 

 

600,000

 

Warrant derivative liability

 

 

37,491

 

 

 

615,575

 

Other liabilities

 

 

195,618

 

 

 

107,240

 

Total liabilities

 

 

2,097,386

 

 

 

3,201,660

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

68,700

 

 

 

135,300

 

Canopy Growth Corporation shareholders' equity:

 

 

 

 

 

 

 

 

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

   Issued - 394,157,998 shares and 382,875,179 shares, respectively

 

 

7,478,834

 

 

 

7,168,557

 

Additional paid-in capital

 

 

2,482,372

 

 

 

2,415,650

 

Accumulated other comprehensive loss

 

 

(26,727

)

 

 

(34,240

)

Deficit

 

 

(5,795,721

)

 

 

(6,068,156

)

Total Canopy Growth Corporation shareholders' equity

 

 

4,138,758

 

 

 

3,481,811

 

Noncontrolling interests

 

 

4,186

 

 

 

4,709

 

Total shareholders' equity

 

 

4,142,944

 

 

 

3,486,520

 

Total liabilities and shareholders' equity

 

$

6,309,030

 

 

$

6,823,480

 

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 December 31,

 

 

Nine months ended December 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

155,024

 

 

$

169,907

 

 

$

456,095

 

 

$

439,823

 

Excise taxes

 

 

14,052

 

 

 

17,379

 

 

 

47,540

 

 

 

41,613

 

Net revenue

 

 

140,972

 

 

 

152,528

 

 

 

408,555

 

 

 

398,210

 

Cost of goods sold

 

 

130,882

 

 

 

127,943

 

 

 

442,367

 

 

 

341,050

 

Gross margin

 

 

10,090

 

 

 

24,585

 

 

 

(33,812

)

 

 

57,160

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

116,835

 

 

 

144,078

 

 

 

355,165

 

 

 

426,723

 

Share-based compensation

 

 

6,777

 

 

 

19,963

 

 

 

35,856

 

 

 

72,632

 

Expected credit losses on financial assets and related charges

 

 

-

 

 

 

13,735

 

 

 

-

 

 

 

108,480

 

Asset impairment and restructuring costs

 

 

36,439

 

 

 

400,422

 

 

 

128,198

 

 

 

459,579

 

Total operating expenses

 

 

160,051

 

 

 

578,198

 

 

 

519,219

 

 

 

1,067,414

 

Operating loss

 

 

(149,961

)

 

 

(553,613

)

 

 

(553,031

)

 

 

(1,010,254

)

Loss from equity method investments

 

 

-

 

 

 

(671

)

 

 

(100

)

 

 

(40,851

)

Other income (expense), net

 

 

34,282

 

 

 

(290,567

)

 

 

810,769

 

 

 

(21,106

)

(Loss) income before income taxes

 

 

(115,679

)

 

 

(844,851

)

 

 

257,638

 

 

 

(1,072,211

)

Income tax recovery

 

 

183

 

 

 

15,600

 

 

 

490

 

 

 

18,086

 

Net (loss) income

 

 

(115,496

)

 

 

(829,251

)

 

 

258,128

 

 

 

(1,054,125

)

Net (loss) income attributable to noncontrolling interests and

   redeemable noncontrolling interest

 

 

(6,571

)

 

 

75,129

 

 

 

(14,307

)

 

 

(9,183

)

Net (loss) income attributable to Canopy Growth Corporation

 

$

(108,925

)

 

$

(904,380

)

 

$

272,435

 

 

$

(1,044,942

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share

 

$

(0.28

)

 

$

(2.43

)

 

$

0.70

 

 

$

(2.83

)

Basic weighted average common shares outstanding

 

 

393,818,282

 

 

 

372,908,767

 

 

 

390,423,083

 

 

 

369,418,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share

 

$

(0.28

)

 

$

(2.43

)

 

$

0.43

 

 

$

(2.83

)

Diluted weighted average common shares outstanding

 

 

393,818,282

 

 

 

372,908,767

 

 

 

410,986,802

 

 

 

369,418,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(115,496

)

 

$

(829,251

)

 

$

258,128

 

 

$

(1,054,125

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value changes of own credit risk of financial liabilities

 

 

16,200

 

 

 

(30,090

)

 

 

26,280

 

 

 

(82,560

)

Foreign currency translation

 

 

(15,479

)

 

 

(45,809

)

 

 

(18,767

)

 

 

(110,932

)

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

 

 

721

 

 

 

(75,899

)

 

 

7,513

 

 

 

(193,492

)

Comprehensive income (loss)

 

 

(114,775

)

 

 

(905,150

)

 

 

265,641

 

 

 

(1,247,617

)

Comprehensive income (loss) attributable to noncontrolling interests

   and redeemable noncontrolling interest

 

 

(6,571

)

 

 

75,129

 

 

 

(14,307

)

 

 

(9,183

)

Comprehensive income (loss) attributable to Canopy Growth

   Corporation

 

$

(108,204

)

 

$

(980,279

)

 

$

279,948

 

 

$

(1,238,434

)

 

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, 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

 

 

296,574

 

 

 

(30,126

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

266,448

 

Replacement equity instruments

   from the acquisition of Supreme

   Cannabis

 

 

-

 

 

 

5,566

 

 

 

13,350

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,916

 

Exercise of Omnibus Plan stock

   options

 

 

8,690

 

 

 

(3,235

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,455

 

Share-based compensation

 

 

-

 

 

 

35,172

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35,172

 

Issuance and vesting of restricted

   share units

 

 

5,013

 

 

 

(5,013

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Changes in redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

53,500

 

 

 

-

 

 

 

-

 

 

 

13,100

 

 

 

66,600

 

Ownership changes relating to

   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

684

 

 

 

684

 

Redemption of redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,617

 

 

 

(5,109

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,492

)

Comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,513

 

 

 

272,435

 

 

 

(14,307

)

 

 

265,641

 

Balance at December 31, 2021

 

$

7,478,834

 

 

$

483,150

 

 

$

2,581,788

 

 

$

(509,723

)

 

$

(72,843

)

 

$

(26,727

)

 

$

(5,795,721

)

 

$

4,186

 

 

$

4,142,944

 

 

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, 2020

 

$

6,373,544

 

 

$

517,741

 

 

$

2,638,951

 

 

$

(501,403

)

 

$

(40,134

)

 

$

220,899