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Canopy Growth Corp

Canopy Growth CorpCGC決算レポート

Nasdaq · cannabis industry

Canopy Growth Corporation, formerly Tweed Marijuana Inc., is a cannabis company based in Smiths Falls, Ontario.

What changed in Canopy Growth Corp's 10-K — 2022 vs 2023

Top changes in Canopy Growth Corp's 2023 10-K

1374 paragraphs added · 767 removed · 546 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

351 edited+159 added−109 removed210 unchanged
We may also be required to obtain and maintain certain permits, licenses and approvals in the jurisdictions where we source, process, or sell products derived from U.S. hemp. We may be unable to obtain or maintain any necessary licenses, permits or approvals.
We may also be required to obtain and maintain certain permits, licenses and approvals in the jurisdictions where we source, process, or sell products derived from U.S. hemp. We may be unable to obtain or maintain any necessary permits, licenses or approvals.
Until such standardized analytical assays and levels of detection are developed, the existing differences could cause confusion with our consumers which could lead to a negative perception of us and our products, increase the risk of litigation regarding cannabinoid content and regulatory enforcement action and could make it more difficult for us to comply with regulatory requirements regarding contents of ingredients and packaging and labeling.
Until such standardized analytical assays and levels of detection are developed, the existing differences could cause confusion with our consumers, which could lead to a negative perception of us and our products, increase the risk of litigation and regulatory enforcement action regarding cannabinoid content and could make it more difficult for us to comply with regulatory requirements regarding contents of ingredients and packaging and labeling.
Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation and demand), taxes, government programs and policies for the cannabis industry (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the sale of cannabis), and other market conditions, all of which are factors beyond our control.
Consequently, profitability is sensitive to fluctuations in wholesale, retail and supplier prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation and demand), taxes, government programs and policies for the cannabis industry (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the sale of cannabis), and other market conditions, all of which are factors beyond our control.
Adverse changes or developments affecting any facility, including but not limited to a breach of security, an inability to successfully grow cannabis plants or produce finished goods, unanticipated cost overruns in growing or producing products, an outbreak of a communicable illness (such as COVID-19) or a force majeure event, could have a material and adverse effect on our business, financial condition, prospects and results of operations.
Adverse changes or developments affecting any facility, including but not limited to a breach of security, an inability to successfully grow cannabis plants or produce finished goods, unanticipated cost overruns in growing or producing products, an outbreak of a communicable illness (such as COVID-19) or a force majeure event, could have a material and adverse effect on our business, financial condition, results of operations and growth prospects.
No assurance can be given that new laws, regulations and guidelines will not be enacted or that existing laws, regulations and guidelines will not be amended, repealed or interpreted or applied in a manner which could require extensive changes to our operations, increase compliance costs, give rise to material liabilities or a revocation of our licenses and other permits, restrict the growth opportunities that we currently anticipate or otherwise limit or curtail our operations.
No assurance can be given that new laws, regulations and guidelines will not be enacted or that existing laws, regulations and guidelines will not be amended, repealed or interpreted or applied in a manner which could require extensive changes to our operations, increase compliance costs, give rise to material liabilities or a revocation of our licenses and other permits, restrict the growth opportunities that we currently anticipate or 42 otherwise limit or curtail our operations.
In addition, in the United States, registered federal trademark protection is only available for goods and services that can be lawfully used in interstate commerce; the USPTO is not currently approving any trademark applications for cannabis, or certain goods containing U.S. hemp-derived CBD (such as dietary supplements and food) until the FDA and the USDA provides clearer guidance on the regulation of such products.
In addition, in the United States, registered federal trademark protection is only available for goods and services that can be lawfully used in interstate commerce; the USPTO is not currently approving any 56 trademark applications for cannabis, or certain goods containing U.S. hemp-derived CBD (such as dietary supplements and food) until the FDA and the USDA provides clearer guidance on the regulation of such products.
The 1961 UN Single Convention on Narcotic Drugs, as amended in 1972, classifies cannabis as a Schedule I (“substances with addictive properties, presenting a serious risk of abuse”) narcotic drug and as further amended by the December 2020 Commission on Narcotic Drugs, a Schedule IV (“the most 33 dangerous substances, already listed in Schedule I, which are particularly harmful and of extremely limited medical or therapeutic value”) narcotic drug.
The 1961 UN Single Convention on Narcotic Drugs, as amended in 1972, classifies cannabis as a Schedule I (“substances with addictive properties, presenting a serious risk of abuse”) narcotic drug and as further amended by the December 2020 Commission on Narcotic Drugs, a Schedule IV (“the most dangerous substances, already listed in Schedule I, which are particularly harmful and of extremely limited medical or therapeutic value”) narcotic drug.
Risks Relating to Our Products There is limited long-term data with respect to the efficacy, side effects and safety of our products, and future clinical research studies on the effects of cannabis, U.S. hemp, cannabinoids and cannabis-based products may lead to conclusions that dispute or conflict with our understanding and belief regarding their benefits, viability, safety, efficacy, dosing and social acceptance.
Risks Relating to Our Products There is limited long-term data with respect to the efficacy, side effects and safety of our products, and future clinical research studies on the effects of cannabis, U.S. hemp, cannabinoids and cannabis-based products may lead to conclusions that dispute or conflict with our understanding and belief regarding their benefits, commercial viability, safety, efficacy, dosing and social acceptance.
The mere presence of a cannabinoid (such as CBD) is not dispositive as 26 to whether the product is legal or illegal. The FDA, for instance, has approved drugs containing synthetic THC, though not naturally derived THC. There may be difficulty in maintaining consistent strains with consistent low levels of THC sufficient to meet U.S. regulatory requirements.
The mere presence of a cannabinoid (such as CBD) is not dispositive as to whether the product is legal or illegal. The FDA, for instance, has approved drugs containing synthetic THC, though not naturally derived THC. There may be difficulty in maintaining consistent strains with consistent low levels of THC sufficient to meet U.S. regulatory requirements.
If our revenue declines or fails to grow at a rate faster than our operating expenses, and we are unable to secure funding under terms that are favorable or acceptable to us, or at all, we will not be able to achieve and maintain profitability in future periods. As a result, we may continue to generate losses.
If our revenue declines or 31 fails to grow at a rate faster than our operating expenses, and we are unable to secure funding under terms that are favorable or acceptable to us, or at all, we will not be able to achieve and maintain profitability in future periods. As a result, we may continue to generate losses.
Further, the determination is based in part on the Company's operations and the mix, use and value of the Company's assets, which values may be treated as changing for U.S. federal income tax purposes as the Company's market capitalization changes. If the Company were to be classified as a PFIC in any taxable year during which a U.S.
Further, the determination is based in part on the Company’s operations and the mix, use and value of the Company’s assets, which values may be treated as changing for U.S. federal income tax purposes as the Company’s market capitalization changes. If the Company were to be classified as a PFIC in any 59 taxable year during which a U.S.
These events could result in physical damage to one or more of our properties, increases in fuel or other energy prices, the temporary or permanent closure of one or more of our facilities, the temporary lack of an adequate workforce in a market, the temporary or long-term disruption in the supply of products from suppliers, the temporary disruption in the transport of goods, delay in the delivery of goods to our facilities, and disruption to our information systems.
These events could result in physical damage to one or more of our properties, increases in fuel or other energy prices, the temporary or permanent closure of one or more of our facilities, the temporary lack of an adequate workforce in a market, the temporary or long-term disruption in the supply of products from suppliers, the temporary disruption in the transport of goods, delay in the delivery of goods to our facilities, and 62 disruption to our information systems.
Consequently, it may be difficult for investors in the United States to bring an action against such directors, officers or experts or to enforce against those persons or us a judgment obtained in a U.S. court predicated upon the civil liability provisions of U.S. federal securities laws or other 52 U.S. laws.
Consequently, it may be difficult for investors in the United States to bring an action against such directors, officers or experts or to enforce against those persons or us a judgment obtained in a U.S. court predicated upon the civil liability provisions of U.S. federal securities laws or other U.S. laws.
Future acquisitions or strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future acquisitions or strategic alliances will achieve, or that our existing acquisitions or strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future acquisitions or strategic alliances on satisfactory terms, or at all.
Future acquisitions or strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future acquisitions or strategic alliances will achieve, or that our existing acquisitions or strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future acquisitions, strategic alliances or investments on satisfactory terms, or at all.
In addition, we may need to obtain licenses from third parties who allege that we have infringed on their purported rights, whether or not such allegations have merit. Such licenses may not be available on terms acceptable to us, and we may be unable to obtain any licenses or other necessary or useful rights to such third-party intellectual property.
In addition, we may need to obtain licenses from third parties who allege that we have infringed on 57 their purported rights, whether or not such allegations have merit. Such licenses may not be available on terms acceptable to us, and we may be unable to obtain any licenses or other necessary or useful rights to such third-party intellectual property.
There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt.
There is no guarantee that we will be able to generate sufficient cash flow 55 or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt.
In response to the COVID-19 pandemic, various provinces and territories introduced a variety of response measures which impacted their respective cannabis regimes, which include in certain jurisdictions: forced store closures, restrictions or bans on in-store shopping experiences, and the authorization of private delivery services.
In response to the COVID-19 pandemic, various provinces and territories introduced a variety of response measures that impacted their respective cannabis regimes, which include certain jurisdictions: forced store closures, restrictions or bans on in-store shopping experiences, and the authorization of private delivery services.
Threats or instability in a country caused by political events including elections, change in government, changes in personnel or legislative bodies, foreign relations or military control present serious political and social risk and instability causing interruptions to the flow of business negotiations and influencing relationships with government officials.
Threats or instability in a country caused by political events, including elections, changes in government, changes in personnel or legislative bodies, foreign relations or military control present serious political and social risk and instability causing interruptions to the flow of business negotiations and influencing relationships with government officials.
The inability of our customers or suppliers to meet their financial or contractual obligations to us may result in disruption to our supply chain and operations and could result in financial losses. We have exposure to several customers who are license holders and, at least some of these customers are experiencing financial difficulties.
The inability of our customers or suppliers to meet their financial or contractual obligations to us may result in disruption to our supply chain and operations and could result in financial losses. 48 We have exposure to several customers who are license holders and, at least some of these customers are experiencing financial difficulties.
These investments and joint ventures are subject to the risks normally associated with any conduct of business in foreign and/or emerging countries including political risks; civil disturbance risks; changes in laws, regulations or policies of particular countries, including those relating to royalties, duties, imports, exports and currency; the cancellation or renegotiation of contracts; the imposition of royalties, net profits payments, tax increases or other claims by government entities, including retroactive claims; a disregard for due process and the rule of law by local courts; the risk of expropriation and nationalization; delays in obtaining or the inability to obtain necessary governmental permits or the reimbursement of refundable tax from fiscal authorities.
These investments are subject to the risks normally associated with any conduct of business in foreign and/or emerging countries, including political risks; civil disturbance risks; changes in laws, regulations or policies of particular countries, including those relating to royalties, duties, imports, exports and currency; the cancellation or renegotiation of contracts; the imposition of royalties, net profits payments, tax increases or other claims by government entities, including retroactive claims; a disregard for due process and the rule of law by local courts; the risk of expropriation and nationalization; delays in obtaining or the inability to obtain necessary governmental permits or the reimbursement of refundable tax from fiscal authorities.
Given the nature of our products and our lack of legal availability outside of certain legalized or regulated retail or distribution channels, as well as the concentration of inventory in our facilities, despite meeting or exceeding the applicable security requirements under applicable law, there remains a risk of theft.
Given the nature of our products and our products’ lack of legal availability outside of certain legalized or regulated retail or distribution channels, as well as the concentration of inventory in our facilities, despite meeting or exceeding the applicable security requirements under applicable law, there remains a risk of theft.
If the Department of Justice opted to pursue a policy of aggressively enforcing U.S. federal law against financiers or equity owners of cannabis-related businesses, then Acreage, TerrAscend and Wana, for instance, could face (i) seizure of their cash and other assets used to support or derived from their business activities; and/or (ii) the arrest of its employees, directors, officers, managers and/or investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis.
Department of Justice opted to pursue a policy of aggressively enforcing U.S. federal law against financiers or equity owners of cannabis-related businesses, then Acreage, TerrAscend, Wana and Jetty, for instance, could face (i) seizure of their cash and other assets used to support or derived from their business activities; and/or (ii) the arrest of its employees, directors, officers, managers and/or investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis.
Research in Canada, the United States and internationally regarding the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, U.S. hemp or isolated cannabinoids (such as CBD and THC) in dietary supplements, food or cosmetic products remains in early stages.
Research in Canada, the United States and internationally regarding the benefits, commercial viability, safety, efficacy, dosing and social acceptance of cannabis, U.S. hemp or isolated cannabinoids (such as CBD and THC) in dietary supplements, food or cosmetic products remains in early stages.
If not managed effectively, these increased demands may adversely 39 affect the services provided to customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations, particularly with respect to operations in countries outside of North America.
If not managed effectively, these increased demands may adversely affect the services provided to customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations, particularly with respect to operations in countries outside of North America.
If we are unable to effectively market our products and compete for market share, or if the 30 costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and results of operations could be adversely affected.
If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and results of operations could be adversely affected.
Such sanctions may result in restrictions on the sale of oil or other energy resources from Russia to other countries in the region and could result in an increase in our global shipping expenses, reduce our sales, or otherwise have an adverse effect on our European operations.
Such sanctions may result in restrictions on the sale of oil or other energy resources from Russia to other countries and could result in an increase in our global shipping expenses, reduce our sales, or otherwise have an adverse effect on our European operations.
Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labor unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, banking and currency controls and governmental regulations that favour or require us to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labor unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, banking and currency controls and governmental regulations that favor or require us to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
These laws and regulations may be subject to differing interpretations, which adds to the complexity of collecting, using, disclosing and processing personal data. Guidance on implementation and compliance practices are often updated or otherwise revised.
These laws and regulations may be subject to 51 differing interpretations, which adds to the complexity of collecting, using, disclosing and processing personal data. Guidance on implementation and compliance practices are often updated or otherwise revised.
We believe that the cannabis and U.S. hemp industries are highly dependent upon broad social acceptance and consumer perception regarding the safety, efficacy and quality of the cannabis and U.S. hemp products, as well as consumer views concerning 38 regulatory compliance.
We believe that the cannabis and U.S. hemp industries are highly dependent upon broad social acceptance and consumer perception regarding the safety, efficacy and quality of the cannabis and U.S. hemp products, as well as consumer views concerning regulatory compliance.
The change of 54 control provisions in certain of our existing arrangements , including, but not limited to, compensatory arrangements , or agreements we may enter into in the future, may be triggered upon the exercise of the CBG Warrants in part or in full.
The change of control provisions in certain of our existing arrangements, including, but not limited to, compensatory arrangements, or agreements we may enter into in the future, may be triggered upon the exercise of the CBG Warrants in part or in full.
In addition, the distribution and retail channels and applicable rules and regulations in the provinces continue to evolve and our ability to distribute and retail cannabis and cannabis products in Canada is dependent on the ability of the provinces and territories of Canada to establish licensed retail networks and outlets.
In addition, the distribution and retail channels and applicable rules and regulations in the provinces continue to evolve and our ability to distribute and sell cannabis and cannabis products in Canada is dependent on the ability of the provinces and territories of Canada to establish licensed retail networks and outlets.
On September 22, 2021, the Quebec government adopted Bill 64, an Act to modernize legislative provisions as regards the protection of personal information, which enacts significant changes to the requirements in Quebec relating to the collection, use, and disclosure of personal information, including, without limitation, by providing individuals with more significant rights and control over their personal information that are in many ways similar to the rights provided to data subjects under the GDPR.
On September 22, 2022, the Quebec government adopted Bill 64, an Act to modernize legislative provisions as regards the protection of personal information, which enacts significant changes to the requirements in Quebec relating to the collection, use, and disclosure of personal information, including, without limitation, by providing individuals with more significant rights and control over their personal information that are in many ways similar to the rights provided to data subjects under the GDPR.
The occurrence of one or more natural disasters, such as hurricanes, floods and earthquakes, unusually adverse weather, pandemic outbreaks, such as the COVID-19 virus, influenza and other highly communicable diseases or viruses, boycotts and geo-political events, such as civil unrest in countries in which our operations are located and acts of terrorism, or similar disruptions could adversely affect our business, financial condition and results of operations.
The occurrence of one or more natural disasters, such as hurricanes, floods and earthquakes, unusually adverse weather, pandemic outbreaks, such as the COVID-19 virus, influenza and other highly communicable diseases or viruses, boycotts and geo-political events, such as civil unrest in countries in which our operations are located and acts of terrorism, or similar disruptions could adversely affect our business, financial condition, results of operations and growth prospects.
For example, the Canadian federal regulatory regime requires plain packaging on cannabis products in order to prohibit testimonials, lifestyle branding and packaging that is appealing to youth.
For example, the Canadian federal regulatory regime requires plain packaging on cannabis products in order to prohibit testimonials, lifestyle branding and packaging that is appealing to 39 youth.
Holder” means a beneficial owner of our common shares that is (i) an individual who is a citizen or resident of the U.S. for U.S. federal income tax purposes, (ii) a corporation (or other entity taxable as a corporation for U.S. federal tax purposes) created or organized under the laws of the U.S. or any political subdivision thereof, including the states and the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust that (a) is subject to the primary supervision of a court within the U.S. and for which one or more U.S. persons have authority to control all substantial decisions or (b) has a valid election in effect under applicable U.S.
Holder” means a beneficial owner of Canopy Shares that is (i) an individual who is a citizen or resident of the U.S. for U.S. federal income tax purposes, (ii) a corporation (or other entity taxable as a corporation for U.S. federal tax purposes) created or organized under the laws of the U.S. or any political subdivision thereof, including the states and the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust that (a) is subject to the primary supervision of a court within the U.S. and for which one or more U.S. persons have authority to control all substantial decisions or (b) has a valid election in effect under applicable U.S.
Amendments to current laws, regulations and guidelines governing the production, sale and use of cannabis and cannabis-based products, more 29 stringent implementation or enforcement thereof or other unanticipated events, including changes in political conditions and/or regimes or political instability, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation, governmental regulations relating to foreign investment and the cannabis business more generally, and changes in attitudes toward cannabis, are beyond our control and could require extensive changes to our operations, which in turn may result in a material adverse effect on our business, financial condition and results of operations.
Amendments to current laws, regulations and guidelines governing the production, sale and use of cannabis and cannabis-based products, more stringent implementation or enforcement thereof or other unanticipated events, including changes in political conditions and/or regimes or political instability, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation, governmental regulations relating to foreign investment and the cannabis business more generally, and changes in attitudes toward cannabis, are beyond our control and could require extensive changes to our operations, which in turn may result in a material adverse effect on our business, financial condition, results of operations and growth prospects.
The Tranche A Warrants may be exercised in full or in part at any time on or prior to November 1, 2023 and the Tranche B Warrants and Tranche C Warrants may be exercised in full or in part at any time on or prior to November 1, 2026, from time to time, in accordance with the terms thereof, and entitles the holder thereof, upon valid exercise in full thereof, to acquire, accept and receive from us an aggregate of 139,745,453 common shares (subject to adjustment in accordance with the terms of such warrants).
The Tranche A Warrants may be exercised in full or in part at any time on or prior to November 1, 2023 and the Tranche B Warrants and Tranche C Warrants may be exercised in full or in part at any time on or prior to November 1, 2026, in accordance with the terms thereof, and entitles the holder thereof, upon valid exercise in full thereof, to acquire, accept and receive from us an aggregate of 139,745,453 Canopy Shares (subject to adjustment in accordance with the terms of such warrants).
In addition, certain institutional investors may base their investment decisions on consideration of our environmental, governance, diversity and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet such criteria may result in limited or no investment in our common shares by those institutions, which could adversely affect the trading price of our common shares.
In addition, certain institutional investors may base their investment decisions on consideration of our environmental, governance, diversity and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet such criteria may result in limited or no investment in the Canopy Shares by those institutions, which could adversely affect the trading price of the Canopy Shares.
Loss of demand for our product, product liability claims and increased regulation stemming from unfavorable scientific studies on vaporizer products could have a material adverse effect on our business, results of operations and financial condition. We are subject to risks and uncertainty regarding our U.S. hemp operations. A small part of our business involves products containing U.S. hemp.
Loss of demand for our products, product liability claims and increased regulation stemming from unfavorable scientific studies on vaporizer products could have a material adverse effect on our business, financial condition, results of operations and growth prospects. We are subject to risks and uncertainty regarding our U.S. hemp operations. A small part of our business involves products containing U.S. hemp.
Furthermore, any product recall affecting the cannabis or U.S. hemp industries more broadly could lead consumers to lose confidence in the safety and security of the products sold by participants in these industries generally, which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, any product recall affecting the cannabis or U.S. hemp industries more broadly could lead consumers to lose confidence in the safety and security of the products sold by participants in these industries generally, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, necessary regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition and results of operations.
The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, necessary regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Moreover, the parties with which we do business may perceive that they are exposed to reputational risk as a result of our cannabis or U.S. hemp related business activities. Failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition and results of operations.
Moreover, the parties with which we do business may perceive that they are exposed to reputational risk as a result of our cannabis or U.S. hemp related business activities. Failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The failure to raise such capital could result in a delay or indefinite postponement of our current business objectives or in our inability to continue to operate our business.
The failure to raise such capital could result in a delay or indefinite postponement of our current business 34 objectives or in our inability to continue to operate our business.
These factors may impact our ability to obtain loans and other credit facilities in the future and, if obtained, on terms favorable to us. If these risks materialize, our operations could be adversely impacted and the price of our common shares could be adversely affected. We may hedge or enter into forward sales, which involves inherent risks.
These factors may impact our ability to obtain loans and other credit facilities in the future and, if obtained, on terms favorable to us. If these risks materialize, our operations could be adversely impacted and the price of the Canopy Shares could be adversely affected. We may hedge or enter into forward sales, which involves inherent risks.
Without protection for the intellectual property we have licensed, other companies might be able to offer substantially similar products for sale, or utilize substantially similar processes or publicity and marketing rights, any of which could have a material adverse effect on our business, financial condition and results of operations.
Without protection for the intellectual property we have licensed, other companies might be able to offer substantially similar products for sale, or utilize substantially similar processes or publicity and marketing rights, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Any required divestiture or an actual or perceived violation of applicable laws or regulations by us could have a material adverse effect on us, including on our reputation and ability to conduct business, the listing of our common shares on the TSX and Nasdaq, our financial position, operating results, profitability or liquidity or the market price of our common shares.
Any required divestiture or an actual or perceived violation of applicable laws or regulations by us could have a material adverse effect on us, including on our reputation and ability to conduct business, the listing of the Canopy Shares on the TSX and Nasdaq, our financial position, operating results, profitability or liquidity or the market price of the Canopy Shares.
Sales of substantial amounts of our securities by our shareholders, including the CBI Group, or the availability of such securities for sale, could adversely affect the prevailing market prices for the securities and dilute investors’ earnings per share. Exercises of presently outstanding share options or warrants may also result in dilution to security holders.
Sales of substantial amounts of our securities by our shareholders, including the CBI Group and the Institutional Investor, or the availability of such securities for sale, could adversely affect the prevailing market prices for the securities and dilute investors’ earnings per share. Exercises of presently outstanding share options or warrants may also result in dilution to security holders.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control 37 systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization will be detected.
Social media permits user-generated content to be distributed to a broad audience which can respond or react, in near real time, with comments that are often not filtered or checked for accuracy. In many cases, we do not have the ability to filter such comments or verify their accuracy.
Social media permits user-generated content to be distributed to a broad audience which can respond or react, in near real time, with comments that are often not filtered or checked for accuracy. In most cases, we do not have the ability to filter such comments or verify their accuracy.
Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating, adversely affect the market price for our common shares and require the use of significant resources. Even to the extent we ultimately prevail in litigation, litigation can consume and redirect significant resources.
Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating, adversely affect the market price for the Canopy Shares and require the use of significant resources. Even to the extent we ultimately prevail in litigation, litigation can consume and redirect significant resources.
In accordance with applicable laws and regulations, our directors are required to act honestly, in good faith and in our best interests. Future sales of our common shares by the CBI Group could cause the market price for our common shares to fall. The CBI Group is not contractually committed to maintaining an equity stake in us.
In accordance with applicable laws and regulations, our directors are required to act honestly, in good faith and in our best interests. Future sales of the Canopy Shares by the CBI Group could cause the market price for the Canopy Shares to fall. The CBI Group is not contractually committed to maintaining an equity stake in us.
We currently have, and may in the future enter into, additional acquisitions, strategic alliances or investments with third parties that we believe will complement or augment our existing business. Our ability to complete acquisitions or strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital.
We have entered into, and may in the future enter into additional acquisitions, strategic alliances or investments with third parties that we believe will complement or augment our existing business. Our ability to complete acquisitions, strategic alliances or investments is dependent upon, and may be limited by, the availability of suitable candidates and capital.
We also face competition in each jurisdiction outside of Canada and the United States where we have subsidiaries, investments, joint ventures and strategic alliances with local companies that have more experience, more in-depth knowledge of local markets or applicable laws, regulations and guidelines or longer operating histories in such jurisdictions.
We also face competition in each jurisdiction outside of Canada and the United States where we have subsidiaries, investments and strategic alliances with local companies that have more experience, more in-depth knowledge of local markets or applicable laws, regulations and guidelines or longer operating histories in such jurisdictions.
To the extent that we are unable to offset such cost inflation through higher prices of our offerings or other cost savings, there could be a negative impact on the our business, sales and margin performance, net income, cash flows and the trading price of our common shares.
To the extent that we are unable to offset such cost inflation through higher prices of our offerings or other cost savings, there could be a negative impact on our business, sales and margin performance, net income, cash flows and the trading price of the Canopy Shares.
If successful, this could result in our loss of the right to use applicable licensed intellectual property, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition and results of operations.
If successful, this could result in our loss of the right to use applicable licensed intellectual property, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition, results of operations and growth prospects.
General Risks We are dependent on our senior management. Our success is dependent upon the ability, expertise, judgment, discretion and good faith of our senior management. Our future success depends on our continuing ability to attract, develop, motivate and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them.
Our success is dependent upon the ability, expertise, judgment, discretion and good faith of our senior management. Our future success depends on our continuing ability to attract, develop, motivate and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them.
Laws, regulations and guidelines, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services, as well as on our personnel (including management and our board of directors).
Laws, regulations and guidelines, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services, as well as on our personnel (including management and the Board).
In the United States, cannabis is regulated at both the federal and state levels. To our knowledge, there are to date a total of 37 states, and the District of Columbia, that have now legalized cannabis in some form, including California, Nevada, New York, New Jersey, Washington and Florida.
In the United States, cannabis is regulated at both the federal and state levels. To our knowledge, there are to date a total of 38 states, and the District of Columbia, that have now legalized cannabis in some form, including California, Nevada, New York, New Jersey, Washington and Florida.
In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
As a manufacturer and distributor of products designed to be topically applied, ingested or inhaled by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury.
We may be subject to product liability claims. As a manufacturer and distributor of products designed to be topically applied, ingested or inhaled by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury.
If we were to incur substantial liability claims and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, financial condition and results of operations may be adversely affected.
If we were to incur substantial liability claims and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, financial condition, results of operations and growth prospects may be adversely affected.
Such licenses may not be available on terms acceptable to us, or at all, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition and results of operations.
Such licenses may not be available on terms acceptable to us, or at all, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, to the extent that other large companies within our industries experience declines in their stock price, the share price of our common shares may decline as well. Moreover, if the market price of our common shares drops significantly, shareholders may institute securities class action lawsuits against us.
In addition, to the extent that other large companies within our industries experience declines in their stock price, the share price of the Canopy Shares may decline as well. Moreover, if the market price of the Canopy Shares drops significantly, shareholders may institute securities class action lawsuits against us.
A corporation that is not a resident of the U.S. for U.S. federal income tax purposes will be considered a passive foreign investment company (“PFIC”) for any taxable year in which (i) 75% or more of its gross income is "passive income" or (ii) 50% or more of the average quarterly value of its assets produce (or are held for the production of) "passive income." For this purpose, "passive income" generally includes interest, dividends, rents, royalties and certain gains.
A corporation that is not a resident of the U.S. for U.S. federal income tax purposes will be considered a passive foreign investment company (“PFIC”) for any taxable year in which (i) 75% or more of its gross income is “passive income” or (ii) 50% or more of the average quarterly value of its assets produce (or are held for the production of) “passive income.” For this purpose, “passive income” generally includes interest, dividends, rents, royalties and certain gains.
In addition, these initiatives could present unforeseen obstacles, lead to operating inefficiencies and negatively disrupt our corporate culture, which could lead to further employee attrition, any of which would have a material adverse effect on our business, financial condition and results of operations.
In addition, these initiatives could present unforeseen obstacles, lead to operating inefficiencies and negatively disrupt our corporate culture, which could lead to further employee attrition, any of which would have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We may from time to time be subject to litigation, claims, other legal and regulatory proceedings and disputes arising in the ordinary course of our manufacturing, marketing, distribution and sale of our products, some of which may adversely affect our business, financial condition and results of operations.
We may from time to time be subject to litigation, claims, other legal and regulatory proceedings and disputes arising in the ordinary course of our manufacturing, marketing, distribution and sale of our products, some of which may adversely affect our business, financial condition, results of operations and growth prospects.
It is also possible that the final costs of the major equipment contemplated by our capital expenditure programs may be significantly greater than anticipated or available, in which circumstance there could be a materially adverse effect on our financial results.
It is also possible that the final costs of the major equipment contemplated by our capital expenditure programs may be significantly greater than anticipated or available, in which circumstance there could be a material adverse effect on our financial results.
Investors in the United States may have difficulty bringing actions and enforcing judgments against us and others based on securities law civil liability provisions. We are incorporated under the laws of the Province of Ontario and our head office is located in the Province of Ontario.
Investors in the United States may have difficulty bringing actions and enforcing judgments against us and others based on securities law civil liability provisions. We are incorporated under the federal laws of Canada and our head office is located in the Province of Ontario.
Controlled substance and other legislation and treaties may restrict or limit our ability to research, manufacture and develop a commercial market for our products outside of the jurisdictions in which we currently operate and our expansion into such jurisdictions is subject to risks.
Controlled substance and other legislation and treaties may restrict or limit our ability to research, manufacture and develop a commercial market for our products outside of the jurisdictions in which we currently operate and our expansion into additional jurisdictions is subject to risks.
A product liability claim or regulatory action against us could result in increased costs to us, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our business, financial condition and results of operations.
A product liability claim or regulatory action against us could result in increased costs to us, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Moreover, our listing on both the TSX and Nasdaq may increase price volatility due to various factors, including the ability to buy or sell common shares, different market conditions in different capital markets and different trading volumes. In addition, low trading volume may increase the price volatility of the common shares.
Moreover, our listing on both the TSX and Nasdaq may increase price volatility due to various factors, including the ability to buy or sell Canopy Shares, different market conditions in different capital markets and different trading volumes. In addition, low trading volume may increase the price volatility of the Canopy Shares.
Additionally, the CBI Group’s significant voting interest in us may discourage transactions involving a change of control of us, including transactions in which an investor, as a shareholder, might otherwise receive a premium for its common shares over the then-current market price.
Additionally, the CBI Group’s significant voting interest in us may discourage transactions involving a change of control of us, including transactions in which an investor, as a shareholder, might otherwise receive a premium for its Canopy Shares over the then-current market price.
We have and will continue to incur costs to implement these initiatives, and we could be subject to litigation risks and expenses.
We have incurred and will continue to incur costs to implement these initiatives, and we could be subject to litigation risks and expenses.
If the DEA takes action against us or other participants in the U.S. hemp industry, this could have a material and adverse effect on our business, financial condition, operating results, liquidity, cash flow and operational performance.
If the DEA takes action against us or other participants in the U.S. hemp industry, it could have a material and adverse effect on our business, financial condition, operating results, liquidity, cash flow and operational performance.
Litigation may also create a negative perception of us and our brands, which could have an adverse effect on our business, financial condition and results of operations. Securities litigation could also result in substantial costs and damages and divert management’s attention and resources.
Litigation may also create a negative perception of us and our brands, which could have an adverse effect on our business, financial condition, results of operations and growth prospects. Securities litigation could also result in substantial costs and damages and divert management’s attention and resources.
Certain Canadian provinces and territories have announced certain restrictions that are more stringent than the federal rules or regulations such as retail sale and marketing restrictions, bans on certain types of cannabis products, raising minimum age of purchase and flavour restrictions.
Certain Canadian provinces and territories have announced certain restrictions that are more stringent than the federal rules or regulations such as retail sale and marketing restrictions, bans on certain types of cannabis products, raising minimum age of purchase and flavor restrictions.
To the extent such permits, and approvals are required and not obtained, we may be prevented from operating and/or expanding our business, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, U.S. hemp plants can be vulnerable to various pathogens including bacteria, fungi, viruses and other miscellaneous pathogens.
To the extent such permits, licenses and approvals are required and not obtained, we may be prevented from operating and/or expanding our business, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Additionally, U.S. hemp plants can be vulnerable to various pathogens, including bacteria, fungi, viruses and other miscellaneous pathogens.
Although we believe that the existing public scientific literature generally supports our beliefs regarding the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, U.S. hemp and cannabinoids, future research and clinical trials may cast doubt or disprove such beliefs, or could raise or heighten concerns regarding, and perceptions relating to, cannabis, U.S. hemp and cannabinoids, which could have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on our business, financial condition and results of operations.
Although we believe that the existing public scientific literature generally supports our beliefs regarding the benefits, commercial viability, safety, efficacy, dosing and social acceptance of 37 cannabis, U.S. hemp and cannabinoids, future research and clinical trials may cast doubt or disprove such beliefs, or could raise or heighten concerns regarding, and perceptions relating to, cannabis, U.S. hemp and cannabinoids, which could have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on business, financial condition, results of operations and growth prospects.
Additional issuances of our securities may involve the issuance of a significant number of common shares at prices less than the current market price for our common shares. Issuances of a substantial number of common shares, or the perception that such issuances could occur, may adversely affect prevailing market prices of our common shares.
Additional issuances of our securities may involve the issuance of a significant number of Canopy Shares at prices less than the current market price for the Canopy Shares. Issuances of a substantial number of Canopy Shares, or the perception that such issuances could occur, may adversely affect prevailing market prices of the Canopy Shares.
We may also enter into other arrangements with the CBI Group, and as a result, we may be dependent on the CBI Group, which could have a material adverse effect on our business, financial condition and results of operations.
We may also enter into other arrangements with the CBI Group, and as a result, we may be dependent on the CBI Group, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

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Item 2. Properties

Properties — owned and leased real estate

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Within our global cannabis and other consumer products segments, we have adequate capacity to meet our needs for the foreseeable future. 56 During the year ended March 31, 2022, we reorganized our operations and consolidated or wound down some of our properties.
Within our global cannabis and other consumer products segments, we have adequate capacity to meet our needs for the foreseeable future. 64 During the year ended March 31, 2023, we reorganized our operations and consolidated or wound down some of our properties.
A s of March 31, 2022 , our material owned or leased properties now consist of the following: Facility Location Type Segment Property Owned/Leased Utilization (Full or Partial) CANADA Smiths Falls, Ontario Production, Manufacturing, Distribution, R&D, Corporate Global Cannabis Owned, subject to mortgage in favour of Wilmington Trust, National Association, in connection with the Credit Facility Partial Kincardine, Ontario Production Global Cannabis Owned, subject to mortgage in favour of Wilmington Trust, National Association, in connection with the Credit Facility Full Mirabel, Quebec Production Global Cannabis Leased Full UNITED STATES Modesto, California Production Global Cannabis Owned, subject to mortgage in favour of Wilmington Trust, National Association, in connection with the Credit Facility Partial EUROPE Tuttlingen, Germany Manufacturing (Storz & Bickel) Consumer Products Owned Full Frankfurt, Germany Production, Corporate Global Cannabis Leased Full
As of March 31, 2023, our material owned or leased properties consisted of the following: Facility Location Type Segment Property Owned/Leased Utilization (Full or Partial) CANADA Smiths Falls, Ontario Production, Manufacturing, Distribution, R&D, Corporate Canada Cannabis Owned, subject to mortgage in favor of Wilmington Trust, National Association, in connection with the Credit Facility Partial Kincardine, Ontario Production Canada Cannabis Owned, subject to mortgage in favor of Wilmington Trust, National Association, in connection with the Credit Facility Full Kelowna, British Columbia Production Canada Cannabis Owned Full UNITED STATES Verona, Virginia Manufacturing (BioSteel) BioSteel Leased Full EUROPE Tuttlingen, Germany Manufacturing (Storz & Bickel) Storz & Bickel Owned Full
Outside Canada and the United States, in addition to our material properties described below, we maintain corporate office space in several other countries. We believe that our facilities, taken as a whole, are in good condition and working order.
Online, Canopy Growth CBD products are purchased by consumers on marthastrewartcbd.com which ship direct to consumers in all CBD permissible U.S. states. Outside Canada and the United States, in addition to our material properties described below, we maintain corporate office space in Germany. We believe that our facilities, taken as a whole, are in good condition and working order.
Item 2. Properties. Our cor porate headquarters is located in Smiths Falls, Ontario, Canada. We have various other corporate offices, stores and facilities across Canada including locations in the provinces of Ontario, Quebec, Manitoba, Saskatchewan, Alberta, British Columbia and Newfoundland and Labrador. Our operations in the United States include locations in the states of California, Colorado, New York, and Illinois.
Item 2. Properties. Our corporate headquarters is located in Smiths Falls, Ontario, Canada. Our primarily cultivation facilities are located in Ontario and British Columbia. Our operations in the United States include a location in the state of Virginia and our CBD and wellness products are distributed via third-party distributor partners in many states.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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The claim alleges the following causes of action indiscriminately against all of the defendants: breach of contract and breach of consumer protection legislation, including the various Sale of Goods Acts and Consumer Protection Acts; common law and statutory misrepresentation; negligence in product labelling; 57 breach of the duty to warn; unjust enrichment; waiver of tort.
The claim alleges the following causes of action indiscriminately against all of the defendants: breach of contract and breach of consumer protection legislation, including the various Sale of Goods Acts and Consumer Protection Acts; common law and statutory misrepresentation; negligence in product labelling; breach of the duty to warn; unjust enrichment; waiver of tort.
The plaintiffs allege that the defendants, including Canopy Growth, marketed and sold medicinal and recreational cannabis products with an advertised content of THC and CBD and that the amount of THC and/or CBD as contained on the label was wrong and outside the permissible variability limits.
The plaintiffs allege that the defendants, including Canopy Growth, marketed and sold medicinal and adult-use cannabis products with an advertised content of THC and CBD and that the amount of THC and/or CBD as contained on the label was wrong and outside the permissible variability limits.
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 this Annual Report for further discussion.
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.
The claim seeks an aggregate of $505 million in damages as against all of the defendants ) and $5 ,000,000 in punitive damages against each defendant plus an accounting of revenues from each defendant.
The claim seeks an aggregate of $505 million in damages as against all of the defendants) and $5,000,000 in punitive damages against each defendant plus an accounting of revenues from each defendant. On May 23, 2023, a shareholder filed a putative class action against the Company and two of its officers in the U.S.
As of May 26, 2022, releases have been exchanged and the parties await formal discontinuation of the action. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
Removed
In November 2019, the Company and certain of its current and former executives were named as defendants in a purported class action lawsuit filed in the U.S. District Court for the District of New Jersey (the “Court") captioned Ortiz v. Canopy Growth Corporation et al., No. 2:19-cv-20543-KM-ESK.
Added
District Court for the Southern District of New York on behalf of those who purchased or otherwise acquired our securities between May 31, 2022 and May 10, 2023, Turpel v. Canopy Growth Corporation, et al. , No. 1:23-cv-0423.
Removed
The plaintiffs alleged that the defendants made false and/or misleading statements and/or failed to disclose material adverse facts, regarding Canopy Growth’s receivables, business, operations and prospects relating to, among other things, the demand for its softgel and oil products.
Added
The lawsuit alleges that the defendants violated federal securities laws by allegedly overstating revenue recognized from sales of its BioSteel business unit and allegedly failing to disclose material weaknesses in internal controls over accounting and financial reporting, among other allegations related to disclosure, and that disclosure of the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis, among other allegations.
Removed
Pursuant to documents filed with the Court on February 4, 2022, the Company has reached an agreement to settle the class action. The agreement does not constitute any admission of liability or wrongdoing by the Company or its executives. The agreement expressly provides that the Company denies any misconduct or wrongdoing.
Added
The plaintiff seeks an unspecified amount of damages, attorneys’ fees and costs, and other relief.
Removed
The agreement is subject to approval by the Court and other terms. On February 7, 2022, Judge McNulty granted an order preliminarily approving the settlement. The Court will hear the plaintiff’s motion for final approval of the settlement on June 7, 2022.
Added
We deny the alleged misconduct and liability for all claims asserted, believe we have meritorious defenses to the lawsuit and expect to defend it vigorously, although we cannot predict when or how it will be resolved or estimate what the potential loss or range of loss would be, if any. 65 On May 26, 2023, an ostensible shareholder commenced a putative class action (Twidale v.
Removed
In February 2021, Canopy Growth was named as a defendant, together with RIV Capital, RIV Capital Corporation (formerly Canopy Rivers Corporation) (“RCC”), TerrAscend, TerrAscend Canada Inc. and Olivier Dufourmantelle, in an action commenced by 2615975 Ontario Inc. in the Ontario Superior Court of Justice, sitting at Windsor, Ontario.
Added
Canopy Growth Corporation et al., Court File No. CV-23-00700135-00CP) against the Company and eight of its directors and officers in the Ontario Superior Court of Justice on behalf of securityholders who suffered losses when certain alleged misrepresentations were publicly disclosed.
Removed
The claim seeks, amongst other things, damages in the amount of $500 million for bad faith, fraud, civil conspiracy, breach of the duty of honesty and good faith in contractual relations and breach of fiduciary duty. In December 2021, counsel for the plaintiffs advised that the plaintiffs wished to discontinue the action on a without costs basis.
Added
The lawsuit alleges that the Company’s disclosures contained misrepresentations with the meaning of the Securities Act (Ontario), that certain directors and 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.
Removed
Item 4. Mine Safety Disclosures. Not applicable. 58 PART II
Added
The plaintiff seeks an unspecified amount of damages, interest, legal fees, and the costs of administering a plan of distribution of the recovery.
Added
The Company denies the alleged misconduct and liability for all claims asserted, believes that the defendants have meritorious defenses to the lawsuit, and expects to vigorously defend the claims, although the Company cannot predict when or how it will be resolved or estimate what the potential loss or range of loss would be, if any.
Added
On June 15, 2023, an ostensible shareholder commenced a putative class action (Asmaro v. Canopy Growth Corporation et al., Court File No.
Added
VLC-S-S-234351) against the Company and two of its officers in the Supreme Court of British Columbia on behalf of all persons and entities who purchased or otherwise acquired securities of the Company between August 6, 2021 and May 10, 2023.
Added
The lawsuit alleges that between August 6, 2021 and February 9, 2023 the Company published core and non-core documents containing misrepresentations that were publicly corrected on May 10, 2023 and claims that the defendants are liable to the class for damages resulting from those misrepresentations under the Securities Act (British Columbia) and at common law.
Added
The plaintiff seeks an unspecified amount of damages.
Added
The Company denies the alleged misconduct and liability for all claims asserted, believes that the defendants have meritorious defenses to the lawsuit, and expects to vigorously defend the claims, although the Company cannot predict when or how it will be resolved or estimate what the potential loss or range of loss would be, if any.
Added
In May 2023, in connection with the BioSteel Review, the Company voluntarily self-reported to the SEC that the timing and amount of revenue recognition in the BioSteel 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.
Added
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.
Added
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.
Added
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 this Comprehensive Form 10-K.
Added
Please refer to “Risk Factors” under Item 1A of this Comprehensive Form 10-K for further discussion. Item 4. Mine Safety Disclosures. Not applicable. 66 PART II Ite m 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
The Canopy Shares are traded on Nasdaq under the symbol “CGC” and the TSX under the symbol “WEED.” Holders As of June 20, 2023, there were approximately 734 holders of record of Canopy Shares.
Added
This number of holders of record does not represent the actual number of beneficial owners of Canopy Shares because shares are frequently held in “street name” by securities dealers and others for the benefit of individual owners who have the right to vote their shares.
Added
Dividends As of the date of this Comprehensive Form 10-K, we have not declared any dividends or made any distributions on the Canopy Shares. Furthermore, we have no current intention to declare dividends on the Canopy Shares in the foreseeable future.
Added
Any decision to pay dividends on the Canopy Shares in the future will be at the discretion of our board of directors and will depend on, among other things, our results of operations, current and anticipated cash requirements and surplus, financial condition, any contractual restrictions and financing agreement covenants, our ability to meet solvency tests imposed by corporate law and other factors that our board of directors may deem relevant.
Added
Recent Sales of Unregistered Securities Not applicable. Purchases of Equity Securities by the Issuer and Affiliated Persons We did not purchase any of the Canopy Shares during the three months ended March 31, 2023. Item 6 . Reserved. Not applicable. 67

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Our 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.
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.
Acquisition-related costs were $11.1 million in fiscal 2022, as compared to $13.5 million in fiscal 2021. In fiscal 2022, costs were incurred primarily in relation to (i) entering into the Wana Agreements; (ii) the acquisitions of Supreme Cannabis and Ace Valley; and (iii) evaluating other potential acquisition opportunities.
Acquisition-related costs in fiscal 2022 were $11.1 million, as compared to $13.5 million in fiscal 2021. In fiscal 2022, costs were incurred primarily in relation to: (i) entering into the Wana Agreements; (ii) the acquisitions of Supreme Cannabis and Ace Valley; and (iii) evaluating other potential acquisition opportunities.
These decreases were partially offset by an increase in depreciation expense associated with the build-out of our production infrastructure in the United States, and our acquisition of Supreme Cannabis in the first quarter of fiscal 2022. Share-based compensation expense Share-based compensation expense was $39.5 million in fiscal 2022, as compared to $83.0 million in fiscal 2021.
These decreases were partially offset by an increase in depreciation expense associated with the build-out of our production infrastructure in the United States, and our acquisition of Supreme Cannabis in the first quarter of fiscal 2022. Share-based compensation expense Share-based compensation was $39.5 million in fiscal 2022, as compared to $83.0 million in fiscal 2021.
Financing activities The cash used in financing activities totaled $45.5 million in fiscal 2022, as we made repayments of long-term debt in the amount of $50.8 million, primarily related to the term loan assumed upon the completion of the acquisition of Supreme Cannabis on June 22, 2021. The cash provided by financing activities totaled $1.3 billion in fiscal 2021.
The cash used in financing activities totaled $45.5 million in fiscal 2022, as we made repayments of long-term debt in the amount of $50.8 million, primarily related to the term loan assumed upon the completion of the acquisition of Supreme Cannabis on June 22, 2021. The cash provided by financing activities totaled $1.3 billion in fiscal 2021.
The year-over-year decrease is primarily attributable to (i) operational changes announced in December 2020, which were part of the previously-noted restructuring actions and which resulted in the abandonment or impairment of certain of our Canadian production facilities and intangible assets; (ii) the impairment of certain intangible assets in fiscal 2021 associated with the rationalization of our research and development activities; and (iii) the completion of the C 3 Divestiture in the fourth quarter of fiscal 2022, resulting in two fewer months of depreciation and amortization expense recorded relative to fiscal 2021.
The year-over-year decrease is primarily attributable to: (i) operational changes announced in December 2020, which were part of the previously-noted restructuring actions and which resulted in the abandonment or impairment of certain of our Canadian production facilities and intangible assets; (ii) the impairment of certain intangible assets in fiscal 2021 associated with the rationalization of our research and development activities; and (iii) the completion of the divestiture of our interest in C 3 in the fourth quarter of fiscal 2022, resulting in two fewer months of depreciation and amortization expense recorded relative to fiscal 2021.
A more optimistic outlook on future demand can result in lower expected returns and reduced likelihood of price adjustments necessary to sell the product. This outlook will reduce the provision against revenue. Stock-based compensation Critical estimates. We use the Black-Scholes option pricing model to calculate our share-based compensation expense. Assumptions and judgment.
A more optimistic outlook on future demand can result in lower expected returns and reduced likelihood of price adjustments necessary to sell the product. This outlook will reduce the provision against revenue. 155 Stock-based compensation Critical estimates. We use the Black-Scholes option pricing model to calculate our share-based compensation expense. Assumptions and judgment.
The year-over-year change is primarily due to the decrease of approximately 77% in our share price during fiscal 2022 relative to the increase in our share price of approximately 97% during fiscal 2021, and year-over-year changes in credit spreads. 70 • Change of $791.2 million related to non-cash fair value changes on our other financial assets, from an income amount of $435.1 million in fiscal 2021 to an expense amount of $356.1 million in fiscal 2022.
The year-over-year change is primarily due to the decrease of approximately 77% in our share price during fiscal 2022 relative to the increase in our share price of approximately 97% during fiscal 2021, and year-over-year changes in credit spreads. • Change of $791.2 million related to non-cash fair value changes on our other financial assets, from an income amount of $435.1 million in fiscal 2021 to an expense amount of $356.1 million in fiscal 2022.
When determining whether there is excess, slow-moving or obsolete inventory, management makes assumptions around future demand and production forecasts, which are then compared to current inventory levels. Management also makes assumptions around future pricing, and considers historical experience and the application of the specific identification method for identifying obsolete inventory. Impact if actual results differ from assumptions.
When determining whether there is excess, slow-moving or obsolete inventory, management makes assumptions around future demand and production forecasts, which are then compared to current inventory levels. Management also 151 makes assumptions around future pricing, and considers historical experience and the application of the specific identification method for identifying obsolete inventory. Impact if actual results differ from assumptions.
This compares to charges of $1.5 million in fiscal 2021, which were associated with fiscal 2020 business combinations. Our gross margin in fiscal 2022 benefited from payroll subsidies in the amount of $24.4 million received from the Canadian government, pursuant to a COVID-19 relief program. This compares to subsidies received of $5.7 million in fiscal 2021.
This compares to charges of $1.5 million in fiscal 2021, which were associated with fiscal 2020 business combinations. Our gross margin in fiscal 2022 benefited from payroll subsidies in the amount of $24.4 million received from the Canadian government, pursuant to a COVID-19 relief program.
CBD business, and higher third-party shipping, distribution and warehousing costs across North America which primarily impacted BioSteel; • A shift in the business mix resulting from a decrease in the proportionate revenue contribution from C 3 relative to fiscal 2021; • A year-over-year decline in C 3 ’s gross margins due primarily to (i) the decrease in revenue, and the associated impact on C 3 ’s cost leverage; and (ii) price compression for synthetic cannabinoid products resulting from increased competition; and • Charges totaling $11.8 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis in the first quarter of fiscal 2022.
CBD business, and higher shipping, distribution and warehousing costs across North America which primarily impacted BioSteel; • A shift in the business mix resulting from a decrease in the proportionate revenue contribution from C 3 relative to fiscal 2021; • A year-over-year decline in C 3 ’s gross margins due primarily to: (i) the decrease in revenue, and the associated impact on C 3 ’s cost leverage; and (ii) price compression for synthetic cannabinoid products resulting from increased competition; and • Charges totaling $11.8 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis in the first quarter of fiscal 2022.
Comparatively, in fiscal 2021, the income amount was primarily attributable to fair value increases relating to our investments in the TerrAscend Exchangeable Shares ( $338.0 million) and the TerrAscend Canada secured debentures and TerrAscend Warrants (totaling $149.9 m illion), driven largely by (i) an increase of approximately 414% in TerrAscend’s share price during fiscal 2021; and (ii) a re-assessment of the probability and timing of changes in federal laws in the United States regarding the permissibility of the cultivation, distribution or possession of marijuana. • Increase in interest expense of $95.5 million, from $8.5 million in fiscal 2021 to $103.9 million in fiscal 2022.
Comparatively, in fiscal 2021, the income amount was primarily attributable to fair value increases relating to our investments in the TerrAscend Exchangeable Shares ($338.0 million) and the TerrAscend Canada secured debentures and TerrAscend Warrants (totaling $149.9 million), driven largely by: (i) an increase of approximately 414% in TerrAscend’s share price during fiscal 2021; and (ii) a re-assessment of the probability and timing of changes in federal laws in the United States regarding the permissibility of the cultivation, distribution or possession of marijuana. • Increase in interest expense of $95.5 million, from $8.5 million in fiscal 2021 to $103.9 million in fiscal 2022.
John’s, Newfoundland and Labrador; Fredericton, New Brunswick; Edmonton, Alberta; Bowmanville, Ontario; our outdoor grow operations in Saskatchewan; and the abandonment or impairment of certain of its production facilities and intangible assets and a reduction of approximately 220 full-time positions; • Completing the sale of our production facilities in Aldergrove and Delta, British Columbia in December 2020 and January 2021, respectively for combined proceeds of $40.7 million, the resulting adjustments to the net book value of these production facilities from March 31, 2020 to reflect their selling prices, and costs associated with the remediation of damages caused by the fire at the Delta facility in November, the closure of the facilities, and their sale; • Completing certain of the restructuring actions that we commenced in the fourth quarter of fiscal 2020, including the exit of our operations in South Africa and Lesotho and our strategy shift in Latin America, and recording final adjustments related to changes in certain estimates recorded at March 31, 2020; • Costs related to rationalizing our marketing organization and certain research and development activities in the first and second quarters of fiscal 2021, respectively; and • Costs associated with rationalizing certain licensing arrangements, including (i) the impairment of our equity method investment in More Life; (ii) the difference between the termination payment made by us to More Life and the remaining minimum royalty obligations owing to More Life that were derecognized; and (iii) charges associated with terminating a licensing agreement with a third party.
John’s, Newfoundland and Labrador; Fredericton, New Brunswick; Edmonton, Alberta; Bowmanville, Ontario; our outdoor grow operations in Saskatchewan; and the abandonment or impairment of certain of its production facilities and intangible assets and a reduction of approximately 220 full-time positions; • Completing the sale of our production facilities in Aldergrove and Delta, British Columbia in December 2020 and January 2021, respectively for combined proceeds of $40.7 million, the resulting adjustments to the net book value of these production facilities from March 31, 2020 to reflect their selling prices, and costs associated with the remediation of damages caused by the fire at the Delta facility in November, the closure of the facilities, and their sale; • Completing certain of the restructuring actions that we commenced in the fourth quarter of fiscal 2020, including the exit of our operations in South Africa and Lesotho and our strategy shift in Latin America, and recording final adjustments related to changes in certain estimates recorded at March 31, 2020; • Costs related to rationalizing our marketing organization and certain research and development activities in the first and second quarters of fiscal 2021, respectively; and • Costs associated with rationalizing certain licensing arrangements, including: (i) the impairment of our equity method investment in More Life Growth Company (“More Life”); (ii) the difference between the termination payment made by us to More Life and the remaining minimum royalty obligations owing to More Life that were derecognized; and (iii) charges associated with terminating a licensing agreement with a third party.
When performing a qualitative assessment, judgment is required when considering relevant events and circumstances that could affect the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is 88 assigned .
When performing a qualitative assessment, judgment is required when considering relevant events and circumstances that could affect the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned.
Accordingly, goodwill was reassigned to the KeyLeaf reporting unit from the cannabis operations reporting unit, using the relative fair value allocation approach. At March 31, 2022, we performed our annual goodwill impairment analysis using the quantitative assessment.
Accordingly, goodwill was reassigned to the KeyLeaf reporting unit from the cannabis operations reporting unit, using the relative fair value allocation approach. 152 At March 31, 2022, we performed our annual goodwill impairment analysis using the quantitative assessment.
On a quarterly basis, we determine the fair value of the liability arising from the Acreage Arrangement using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement.
On a quarterly basis, we determine the fair value of the liability arising from the Acreage Arrangement using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Arrangement.
Goodwill – we changed the structure of our internal management reporting in the fourth quarter of fiscal 2021, and accordingly, identified two operating and reportable segments: (i) global cannabis; and (ii) other consumer products.
Goodwill Fiscal 2022 We changed the structure of our internal management reporting in the fourth quarter of fiscal 2021, and accordingly, identified two operating and reportable segments: (i) global cannabis; and (ii) other consumer products.
In fiscal 2022, the income tax recovery consisted of a deferred income tax recovery of $6.6 million (compared to a recovery of $34.5 million in fiscal 2021) and current income tax recovery of $2.4 million (compared to an expense of $21.4 million in fiscal 2021).
In fiscal 2022, income tax recovery consisted of deferred income tax recovery of $6.6 million (compared to a recovery of $34.5 million in fiscal 2021) and current income tax recovery of $2.4 million (compared to an expense of $21.4 million in fiscal 2021).
Additionally, on October 14, 2021, we entered into definitive agreements (the “Wana Agreements”) with Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, “Wana”) providing us with the right, upon occurrence or waiver (at our discretion) of the Triggering Event, to acquire 100% of the outstanding membership interests of Wana.
On October 14, 2021, we entered into definitive option agreements (the “Wana Agreements”) with Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, “Wana”) providing us with the right, upon the occurrence or waiver (at our discretion) of the Triggering Event, to acquire 100% of the outstanding membership interests of Wana.
These charges are described below in “Restructuring, Asset Impairment and Related Costs”; and • Inventory write-downs recorded in the second and fourth quarters of fiscal 2022 primarily related to excess Canadian cannabis inventory, resulting from underperformance relative to forecast as well as declines in expected near-term demand.
These charges are described above in “Restructuring, Asset Impairment and Related Costs”; and • Inventory write-downs recorded in the second and fourth quarters of fiscal 2022 primarily related to excess Canadian cannabis inventory, resulting from underperformance relative to forecast as well as declines in expected near-term demand.
This compares to charges of $1.5 million in fiscal 2021, which were associated with fiscal 2020 business combinations. 66 Our gross margin in fiscal 2022 benefited from payroll subsidies in the amount of $24.4 million received from the Canadian government, pursuant to a COVID-19 relief program. This compares to subsidies received of $5.7 million in fiscal 2021.
This compares to charges of $1.5 million in fiscal 2021, which were associated with fiscal 2020 business combinations. Our gross margin in fiscal 2022 benefited from payroll subsidies in the amount of $24.4 million received from the Canadian government, pursuant to a COVID-19 relief program.
General and administrative expense was $128.9 million in fiscal 2022, as compared to $238.3 million in fiscal 2021. The year-over-year decrease is due primarily to: • A reduction in costs attributable to the restructuring actions that were initiated in the fourth quarter of fiscal 2020 and continued through fiscal 2021 and fiscal 2022.
General and administrative expense in fiscal 2022 was $128.9 million, as compared to $238.3 million in fiscal 2021. The year-over-year decrease is primarily attributable to: 95 • A reduction in costs attributable to the restructuring actions that were initiated in the fourth quarter of fiscal 2020 and continued through fiscal 2021 and fiscal 2022.
The year-over-year change of $1.1 billion, from an expense amount to an income amount, is primarily attributable to: • Increase in non-cash income of $952.8 million related to fair value changes on the liability arising from the Acreage Arrangement, from an expense amount of $399.8 million in fiscal 2021 to an income amount of $553.0 million in fiscal 2022.
The year-over-year change of $1.1 billion, from an expense amount to an income amount, was primarily attributable to: • Increase in non-cash income of $952.8 million related to fair value changes on the liability arising from the Acreage Arrangement, from an expense amount of $399.8 million in fiscal 2021 to an income amount of $553.0 million in fiscal 2022.
The increase in the cash used in operating activities is primarily due to (i) the year-over-year decrease in our gross margin; and (ii) an increase in interest paid associated with the US$750.0 million debt financing that occurred in the fourth quarter of fiscal 2021.
The increase in the cash used in operating activities was primarily due to: (i) the year-over-year decrease in our gross margin; and (ii) an increase in interest paid associated with the US$750.0 million debt financing that occurred in the fourth quarter of fiscal 2021.
In connection with certain deferred tax assets, mainly in respect to losses for tax purposes, where the accounting criteria for recognition of an asset has yet to be satisfied and it was not probable that they will be used, the deferred tax asset has not been recognized.
In connection with certain deferred tax assets, mainly in respect to losses for tax purposes, where the accounting criteria for recognition of an asset has yet to be satisfied and it is not probable that they will be used, the deferred tax asset has not been recognized.
As a result, the model at March 31, 2022 reflects a lower estimated value of the Canopy Growth shares expected to be issued at the exchange ratio of 0.3048 upon a Triggering Event, relative to the estimated value of the Acreage shares expected to be acquired at that time (changes in our share price have a more significant impact on the model relative to changes in Acreage’s share price); this resulted in a reduction of the liability amount.
As a result, the probability-weighted expected return model at March 31, 2022 reflects a lower estimated value of the Canopy Growth shares expected to be issued at the exchange ratio of 0.3048 upon a Triggering Event, relative to the estimated value of the Acreage shares expected to be acquired at that time (changes in our share price have a more significant impact on the model relative to changes in Acreage’s share price); this resulted in a reduction of the liability amount.
It is organized as follows: • Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. • Part 2 - Results of Operations.
Our MD&A is organized as follows: • Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. • Part 2 - Results of Operations.
Sales and marketing expense was $239.3 million in fiscal 2022, as compared to $194.4 million in fiscal 2021. The year-over-year increase is primarily due to: • A return to more normal advertising and promotional spending in fiscal 2022.
Sales and marketing expense in fiscal 2022 was $239.3 million, as compared to $194.4 million in fiscal 2021. The year-over-year increase is primarily attributable to: • A return to more normal advertising and promotional spending in fiscal 2022.
The year-over-year decrease is primarily attributable to the continuing impacts of (i) an insufficient supply of in-demand dried flower products, driven by shifting consumer preferences for certain single strain and higher-potency dried flower products and smaller format pre-rolls; and (ii) price compression resulting from increased competition in both the value-priced and mainstream dried flower category of the recreational market.
The year-over-year decrease is primarily attributable to the continuing impacts of: (i) an insufficient supply of in-demand dried flower products, driven by shifting consumer preferences for certain single strain and higher-potency dried flower products and smaller format pre-rolls; and (ii) price compression resulting from increased competition in both the value-priced and mainstream dried flower category of the adult-use cannabis market.
Our gross margin in fiscal 2022 was also impacted by: • A year-over-year decrease in net revenue and continued price compression in our Canadian recreational cannabis channel, as described above in our analysis of revenue for fiscal 2022; • The impact of the under-absorption of costs for our U.S.
Our gross margin in fiscal 2022 was also impacted by: • A year-over-year decrease in net revenue and continued price compression in our Canadian adult-use cannabis channel, as described above in our analysis of revenue for fiscal 2022; • The impact of the under-absorption of costs for our U.S.
As a result of entering into the Wana Agreements, we recognized (i) the call option associated with the Wana Agreements (the “Wana Call Option”), which represents an option to purchase 100% of Wana for a payment equal to 15% of Wana’s fair market value at the time the option is exercised; and (ii) the Wana Deferred Payments, which are additional deferred payments that we expect to make in respect of Wana as of the 2.5- and 5-year anniversaries of October 14, 2021, computed based on a pre-determined contractual formula.
As a result of entering into the Wana Agreements, we recognized: (i) the call options associated with the Wana Agreements (the “Wana Options”), which represents options to purchase 100% of Wana for payments equal to 15% of Wana’s fair market value at the time the option is exercised; and (ii) the Wana Deferred Payments, which are additional deferred payments that we expect to make in respect of Wana as of the 2.5- and 5-year anniversaries of October 14, 2021, computed based on a pre-determined contractual formula.
Additional cash inflows related to (i) proceeds of $118.1 million from the sale of certain wholly-owned subsidiaries, most notably the completion of the C 3 Divestiture on January 31, 2022; and (ii) proceeds of $27.3 million from the sale of property, plant and equipment.
Additional cash inflows related to: (i) proceeds of $118.1 million from the sale of certain wholly-owned subsidiaries, most notably the completion of the divestiture of our interest in C 3 on January 31, 2022; and (ii) proceeds of $27.3 million from the sale of property, plant and equipment.
Finally, the fair value of our investment in the Wana financial instrument decreased $74.6 million from the date of investment (October 14, 2021) to March 31, 2022, due primarily to changes in expectations of the future cash flows to be generate d by Wana.
Finally, the fair value of our investment in the Wana financial instrument decreased $74.6 million from the date of investment (October 14, 2021) to March 31, 2022, due primarily to changes in expectations of the future cash flows to be generated by Wana.
Refer to Note 12 of our Financial Statements for further details. The Wana Call Option and Wana Deferred Payments are measured at fair value through net income (loss) using Level 3 inputs. Assumptions and judgment.
Refer to Note 12 of our Financial Statements for further details. The Wana Options and Wana Deferred Payments are measured at fair value through net income (loss) using Level 3 inputs. Assumptions and judgment.
In any case, if the final outcome is different from our estimate this will impact our income taxes and cash flow. 91
In any case, if the final outcome is different from our estimate this will impact our income taxes and cash flow. 156
Debt Since our formation, we have financed our cash requirements primarily through the issuance of capital stock, including the $5.1 billion investment by CBI in the third quarter of fiscal 2019, and debt. Total debt outstanding as of March 31, 2022 was $1.5 billion, as compared to $1.6 billion as of March 31, 2021.
Debt Since our formation, we have financed our cash requirements primarily through the issuance of capital stock, including the $5.1 billion investment by CBI in the third quarter of fiscal 2019, and debt. Total debt outstanding as of March 31, 2023 was $1.3 billion, as compared to $1.5 billion as of March 31, 2022.
CBD business, and our Tweed brand re-launch in Canada and campaigns for other Canadian brands; (iii) professional consulting fees associated with our selling, advertising and marketing strategies; (iv) higher digital advertising spending, particularly for BioSteel and This Works; and (v) increased sales and marketing costs associated with our acquisitions of Supreme Cannabis and Ace Valley in the first quarter of fiscal 2022. • The above increases in sales and marketing expense were partially offset by cost reductions attributable to the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022, resulting in lower compensation costs as compared to fiscal 2021. 68 Research and development expense was $32.3 million in fiscal 2022, as compared to $57.6 million in fiscal 2021.
CBD business, and our Tweed brand re-launch in Canada and campaigns for other Canadian brands; (iii) professional consulting fees associated with our selling, advertising and marketing strategies; (iv) higher digital advertising spending, particularly for BioSteel and This Works; and (v) increased sales and marketing costs associated with our acquisitions of Supreme Cannabis and Ace Valley in the first quarter of fiscal 2022. • The above increases in sales and marketing expense were partially offset by cost reductions attributable to the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022, resulting in lower compensation costs as compared to fiscal 2021.
Canadian recreational cannabis net revenue was $205.3 million in fiscal 2022, as compared to $229.6 million in fiscal 2021. • Net revenue from the business-to-business channel was $143.7 million in fiscal 2022, as compared to $163.6 million in fiscal 2021.
Canadian adult-use cannabis net revenue was $205.3 million in fiscal 2022, as compared to $229.6 million in fiscal 2021. • Net revenue from the business-to-business channel was $143.7 million in fiscal 2022, as compared to $163.6 million in fiscal 2021.
The valuation of the Wana Call Option is measured using a discounted cash flow model, which requires assumptions and judgment to determine the expected future cash flows associated with Wana.
The valuation of the Wana Options is measured using a discounted cash flow model, which requires assumptions and judgment to determine the expected future cash flows associated with Wana.
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 content and moderate levels of CBD.
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.
In the fourth quarter of fiscal 2022, we further changed the composition of our reporting units within the global cannabis segment as a result of (i) the completion of the C 3 Divestiture (see “Recent Developments” above); and (ii) a strategic shift in our KeyLeaf business to focus on non-cannabis extraction activities.
In the fourth quarter of fiscal 2022, we further changed the composition of our reporting units within the global cannabis segment as a result of: (i) the completion of the divestiture of our interest in C 3 ; and (ii) a strategic shift in our KeyLeaf business to focus on non-cannabis extraction activities.
In fiscal 2022, these costs included charges of $302.5 million related to restructuring actions and charges of $66.8 million related to other asset impairments. Comparatively, in fiscal 2021, these costs included charges of $527.8 million related to restructuring actions and charges of $6.6 million related to other asset impairments.
Comparatively, in fiscal 2022, these costs included charges of $302.5 million related to restructuring actions and charges of $66.8 million related to other asset impairments.
Net revenue was $520.3 million in fiscal 2022, as compared to $546.6 million in fiscal 2021.
Net revenue was $510.3 million in fiscal 2022, as compared to $546.6 million in fiscal 2021.
Comparatively, in fiscal 2021, our primary mergers and acquisitions activity related to (i) entering into, and implementing, the Acreage Amended Arrangement; and (ii) entering into the plan of arrangement (the “RIV Arrangement”) with RIV Capital, which was completed on February 23, 2021.
Comparatively, in fiscal 2021, our primary mergers and acquisitions activity related to: (i) entering into, and implementing, the Acreage Amended Arrangement; and (ii) entering into the plan of arrangement (the “RIV Arrangement”) with RIV Capital Inc. (formerly Canopy Rivers Inc.) (“RIV Capital”), which was completed on February 23, 2021.
The principal factors on which we compete with other Canadian license holders are the quality and variety of cannabis products, the speed with which our product offerings are brought to market, brand recognition, pricing, and product innovation.
The principal factors on which we compete are the quality and variety of cannabis products, the speed with which our product offerings are brought to market, brand recognition, pricing, and product innovation.
Our recreational cannabis products are predominantly sold to provincial and territorial agencies under a “business-to-business” wholesale model, with those provincial and territorial agencies then being responsible for the distribution of our products to brick-and-mortar stores and for online retail sales.
In Canada, our adult-use cannabis products are predominantly sold to provincial and territorial agencies under a “business-to-business” wholesale model, with those provincial and territorial agencies then being responsible for the distribution of our products to brick-and-mortar stores and for online retail sales.
The following table presents Adjusted EBITDA for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change Net loss $ (320,485 ) $ (1,670,820 ) $ 1,350,335 81 % Income tax recovery (8,948 ) (13,141 ) 4,193 32 % Other (income) expense, net (753,341 ) 387,876 (1,141,217 ) (294 %) Loss on equity method investments 100 52,629 (52,529 ) (100 %) Share-based compensation 1 47,525 91,149 (43,624 ) (48 %) Acquisition-related costs 11,060 13,522 (2,462 ) (18 %) Depreciation and amortization 1 114,418 127,118 (12,700 ) (10 %) Asset impairment and restructuring costs 358,708 534,398 (175,690 ) (33 %) Expected credit losses on financial assets and related charges - 109,480 (109,480 ) (100 %) Restructuring costs recorded in cost of goods sold 123,669 25,985 97,684 376 % Charges related to the flow-through of inventory step-up on business combinations 11,847 1,494 10,353 693 % Adjusted EBITDA $ (415,447 ) $ (340,310 ) $ (75,137 ) (22 %) 1 From Statements of Cash Flows.
Adjusted EBITDA (Non-GAAP Measure) The following table presents Adjusted EBITDA for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change (As Restated) Net loss $ (330,567 ) $ (1,670,820 ) $ 1,340,253 80 % Income tax recovery (8,948 ) (13,141 ) 4,193 32 % Other (income) expense, net (753,341 ) 387,876 (1,141,217 ) (294 %) Loss on equity method investments 100 52,629 (52,529 ) (100 %) Share-based compensation 1 47,525 91,149 (43,624 ) (48 %) Acquisition-related costs 11,060 13,522 (2,462 ) (18 %) Depreciation and amortization 1 114,418 127,118 (12,700 ) (10 %) Asset impairment and restructuring costs 358,708 534,398 (175,690 ) (33 %) Expected credit losses on financial assets and related charges - 109,480 (109,480 ) (100 %) Restructuring costs recorded in cost of goods sold 123,669 25,985 97,684 376 % Charges related to the flow-through of inventory step-up on business combinations 11,847 1,494 10,353 693 % Adjusted EBITDA $ (425,529 ) $ (340,310 ) $ (85,219 ) (25 %) 1 From Statements of Cash Flows.
The acquisition of Acreage, if completed, will provide a pathway into cannabis markets in the United States; however, we and Acreage will continue to operate as independent companies until the acquisition of Acreage is completed.
The acquisition of Acreage, if completed through Canopy USA (as defined below), will provide a pathway into cannabis markets in the United States; however, we and Acreage will continue to operate as independent companies until the acquisition of Acreage is completed.
If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation technique and inputs used in determining fair values are disclosed in Note 24 of our Financial Statements. Wana financial instrument fair value measurement Critical estimates.
If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation technique and inputs used in determining fair values are disclosed in Note 24 of our Financial Statements. TerrAscend Exchangeable Shares and TerrAscend Warrants fair value measurement Critical estimates.
We realized reductions relative to fiscal 2021 primarily related to (i) compensation costs, including employee bonuses, for finance, information technology, legal and other administrative functions; (ii) third-party costs associated with administrative functions; (iii) professional consulting fees; and (iv) facilities costs; and • We received payroll subsidies in the amount of $42.9 million from the Canadian government in fiscal 2022, pursuant to a COVID-19 relief program; as compared to $11.0 million received in fiscal 2021. • The above cost reductions were partially offset by an increase in general and administrative expenses associated with the growth in our business, particularly in relation to our acquisitions of Supreme Cannabis in the first quarter of fiscal 2022.
These restructuring actions, resulting from an organizational and strategic review of our business, and the associated charges recognized in fiscal 2022, fiscal 2021 and fiscal 2020 are detailed above in “Restructuring, Asset Impairments and Related Costs.” We realized reductions relative to fiscal 2021 primarily related to: (i) compensation costs, including employee bonuses, for finance, information technology, legal and other administrative functions; (ii) third-party costs associated with administrative functions; (iii) professional consulting fees; and (iv) facilities costs; and • We received payroll subsidies in the amount of $42.9 million from the Canadian government in fiscal 2022, pursuant to a COVID-19 relief program; as compared to $11.0 million received in fiscal 2021. • The above cost reductions were partially offset by an increase in general and administrative expenses associated with the growth in our business, particularly in relation to our acquisitions of Supreme Cannabis in the first quarter of fiscal 2022.
Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part 1, Item 1A, “Risk Factors” in this Annual Report.
Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part 1, Item 1A, “Risk Factors” in this Comprehensive Form 10-K.
The valuation of the Wana Deferred Payments is based on a Monte Carlo simulation model, and we are required to use judgment and make assumptions on the key inputs, being the probability and timing of U.S. legalization and volatility. Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculation will be impacted.
The valuation of the Wana Deferred Payments is based on a Monte Carlo simulation model, and we are required to use judgment and make assumptions on the key inputs, being the probability and timing of U.S. legalization and the volatility of Wana equity. Impact if actual results differ from assumptions.
Other The following table presents loss from equity method investments, other income (expense), net, and income tax recovery (expense) for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change Loss from equity method investments $ (100 ) $ (52,629 ) $ 52,529 100 % Other income (expense), net 753,341 (387,876 ) 1,141,217 294 % Income tax recovery 8,948 13,141 (4,193 ) (32 %) Loss from equity method investments The loss from equity method investments was $0.1 million in fiscal 2022, as compared to $52.6 million in fiscal 2021.
These charges are detailed above under “Restructuring, Asset Impairments and Related Costs.” Other The following table presents loss from equity method investments, other income (expense), net, and income tax recovery for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change Loss from equity method investments $ (100 ) $ (52,629 ) $ 52,529 100 % Other income (expense), net 753,341 (387,876 ) 1,141,217 294 % Income tax recovery 8,948 13,141 (4,193 ) (32 %) Loss from equity method investments The loss from equity method investments in fiscal 2022 was $0.1 million, as compared to $52.6 million in fiscal 2021.
Our gross margin was $(193.1) million in fiscal 2022, or (37%) of net revenue, as compared to a gross margin of $67.0 million and gross margin percentage of 12% of net revenue in fiscal 2021.
Our gross margin in fiscal 2022 was $(203.1) million, or (40%) of net revenue, as compared to gross margin of $67.0 million and gross margin percentage of 12% of net revenue in fiscal 2021.
The Adjusted EBITDA loss in fiscal 2022 was $415.4 million, as compared to an Adjusted EBITDA loss of $340.3 million in fiscal 2021. The year-over-year increase in the Adjusted EBITDA loss is primarily attributable to the year-over-year decrease in our gross margin, partially offset by the reduction in our total selling, general and administrative expense.
The Adjusted EBITDA loss in fiscal 2022 was $425.5 million, as compared to an Adjusted EBITDA loss of $340.3 million in fiscal 2021. The year-over-year increase in the Adjusted EBITDA loss is primarily attributable to the year-over-year decrease in our gross margin, partially offset by the reduction in our total selling, general and administrative expense. These variances are described above.
A summary of the pre-tax charges recognized in fiscal 2022 in connection with our restructuring actions described above is as follows: Year ended March 31, 2022 Restructuring and other charges Other impairments Total Costs recorded in cost of goods sold: Inventory write-downs and other charges $ 123,669 $ - $ 123,669 Costs recorded in operating expenses: Impairment and abandonment of property, plant and equipment 224,726 - 224,726 Impairment and abandonment of intangible assets 41,404 26,065 67,469 Impairment of goodwill - 40,748 40,748 Contractual and other settlement obligations 6,610 - 6,610 Employee-related and other restructuring costs 29,786 - 29,786 Asset impairment and restructuring costs 302,526 66,813 369,339 Acceleration of share-based compensation expense related to acquisition milestones 3,615 - 3,615 Share-based compensation expense 3,615 - 3,615 Total restructuring, asset impairments and related costs $ 429,810 $ 66,813 $ 496,623 Fiscal 2021 Total restructuring, asset impairments and related costs of $570.7 million were recognized in fiscal 2021, comprised of property, plant and equipment and intangible asset impairment charges, asset abandonment costs, inventory write-downs, contractual and other settlement costs, employee-related costs and other restructuring costs, and impairment charges related to certain of our equity method investments totaling $564.0 million associated with: • The restructuring actions commenced in the third quarter of fiscal 2021 and continuing into the fourth quarter of fiscal 2021 as the partial outcome of an ongoing end-to-end strategic review of our operations designed to streamline our operations and further improve gross margins.
Impairment charges totaling $66.8 million were recognized in relation to impairment losses identified during our annual impairment testing process, and consisted of: (i) goodwill impairment losses totaling $40.7 million, of which $22.3 million relates to 87 our KeyLeaf Life Sciences (“KeyLeaf”) reporting unit and $18.4 million relates to our This Works reporting unit; and (ii) impairment charges of $26.1 million related to certain of our acquired brands and operating licenses. 88 A summary of the pre-tax charges recognized in fiscal 2022 in connection with our restructuring actions described above is as follows: Year ended March 31, 2022 Restructuring and other charges Other impairments Total Costs recorded in cost of goods sold: Inventory write-downs and other charges $ 123,669 $ - $ 123,669 Costs recorded in operating expenses: Impairment and abandonment of property, plant and equipment 224,726 - 224,726 Impairment and abandonment of intangible assets 41,404 26,065 67,469 Impairment of goodwill - 40,748 40,748 Contractual and other settlement obligations 6,610 - 6,610 Employee-related and other restructuring costs 29,786 - 29,786 Asset impairment and restructuring costs 302,526 66,813 369,339 Acceleration of share-based compensation expense related to acquisition milestones 3,615 - 3,615 Share-based compensation expense 3,615 - 3,615 Total restructuring, asset impairments and related costs $ 429,810 $ 66,813 $ 496,623 Fiscal 2021 Total restructuring, asset impairments and related costs of $570.7 million were recognized in fiscal 2021, comprised of property, plant and equipment and intangible asset impairment charges, asset abandonment costs, inventory write-downs, contractual and other settlement costs, employee-related costs and other restructuring costs, and impairment charges related to certain of our equity method investments totaling $564.0 million associated with: • The restructuring actions commenced in the third quarter of fiscal 2021 and continuing into the fourth quarter of fiscal 2021 as the partial outcome of an ongoing end-to-end strategic review of our operations designed to streamline our operations and further improve gross margins.
The year-over-year decrease in the gross margin percentage was primarily attributable to (i) the year-over-year increase in revenue from the lower-margin BioSteel business, and the resulting shift in the business mix; and (ii) higher third-party shipping, distribution and warehousing costs across North America which primarily impacted BioSteel. 67 Operating Expenses The following table presents operating expenses for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change Operating expenses General and administrative $ 128,883 $ 238,305 $ (109,422 ) (46 %) Sales and marketing 239,280 194,395 44,885 23 % Research and development 32,344 57,582 (25,238 ) (44 %) Acquisition-related costs 11,060 13,522 (2,462 ) (18 %) Depreciation and amortization 61,189 71,585 (10,396 ) (15 %) Selling, general and administrative expenses 472,756 575,389 (102,633 ) (18 %) Share-based compensation 39,534 83,013 (43,479 ) (52 %) Share-based compensation related to acquisition milestones 7,991 8,136 (145 ) (2 %) Share-based compensation expense 47,525 91,149 (43,624 ) (48 %) Expected credit losses on financial assets and related charges - 109,480 (109,480 ) (100 %) Asset impairment and restructuring costs 369,339 534,398 (165,059 ) (31 %) Total operating expenses $ 889,620 $ 1,310,416 $ (420,796 ) (32 %) Selling, general and administrative expenses Selling, general and administrative expenses were $472.8 million in fiscal 2022, as compared to $575.4 million in fiscal 2021.
Operating Expenses The following table presents operating expenses for the years ended March 31, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 $ Change % Change Operating expenses General and administrative $ 128,883 $ 238,305 $ (109,422 ) (46 %) Sales and marketing 239,280 194,395 44,885 23 % Research and development 32,344 57,582 (25,238 ) (44 %) Acquisition-related costs 11,060 13,522 (2,462 ) (18 %) Depreciation and amortization 61,189 71,585 (10,396 ) (15 %) Selling, general and administrative expenses 472,756 575,389 (102,633 ) (18 %) Share-based compensation 39,534 83,013 (43,479 ) (52 %) Share-based compensation related to acquisition milestones 7,991 8,136 (145 ) (2 %) Share-based compensation expense 47,525 91,149 (43,624 ) (48 %) Expected credit losses on financial assets and related charges - 109,480 (109,480 ) (100 %) Asset impairment and restructuring costs 369,339 534,398 (165,059 ) (31 %) Total operating expenses $ 889,620 $ 1,310,416 $ (420,796 ) (32 %) Selling, general and administrative expenses Selling, general and administrative expenses in fiscal 2022 were $472.8 million, as compared to $575.4 million in fiscal 2021.
Wana manufactures and sells gummies in the state of Colorado and licenses its intellectual property to partners, who manufacture, distribute, and sell Wana-branded gummies across the United States, including in California, Arizona, Illinois, Michigan and Florida, and across Canada.
Wana manufactures and sells gummies in the state of Colorado and licenses its intellectual property to partners, who manufacture, distribute, and sell Wana-branded gummies across the United States, including in California, Arizona, Illinois, Michigan and Florida, and across Canada. Additionally, on May 17, 2022, we and Lemurian, Inc.
Finally, other investing activities resulted in a cash outflow of $7.0 million, primarily related to payments for acquisition-related liabilities, partially offset by a recovery of certain amounts related to construction financing. The cash used in investing activities totaled $347.7 million in fiscal 2020.
Finally, other investing activities resulted in a cash outflow of $7.0 million, primarily related to payments for acquisition-related liabilities associated with the acquisition of ebbu in fiscal 2019, partially offset by a recovery of certain amounts related to construction financing.
The principal amount of the Accretion Debentures will amortize, or be paid, at 1.0% per month over the 24 months prior to maturity. 86 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.
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 fiscal 2021, we recognized impairment charges totaling $44.1 million, including charges of $32.4 million recognized in the second quarter of fiscal 2021 relating to PharmHouse (refer to our analysis of “Expected credit losses on financial assets and related charges” in our discussion of our fiscal 2022 results of operations above); charges of $10.3 million recognized in the fourth quarter of fiscal 2021 relating to More Life, which were associated with our previously-noted fiscal 2021 restructuring actions; and charges of $1.4 million related to Agripharm.
Comparatively, in fiscal 2021 we recognized impairment charges totaling $44.1 million, including charges of $32.4 million recognized in the second quarter of fiscal 2021 relating to PharmHouse (refer to our analysis of “Expected credit losses on financial assets and related charges” in our discussion of our fiscal 2022 results of operations above); charges of $10.3 million recognized in the fourth quarter of fiscal 2021 relating to More Life, which were associated with our previously-noted fiscal 2021 restructuring actions; and charges of $1.4 million related to Agripharm. 97 Other income (expense), net Other income (expense), net was an income amount of $753.3 million in fiscal 2022, as compared to an expense amount of $387.9 million in fiscal 2021.
We believe our focus on becoming a leading consumer insights, analytics and product development company that matches products and consumer preferences in the cannabis market, will enable us to provide better quality consumer products, grow our Canadian business and capture increased market share in Canada. 62 Product innovation .
We believe our focus on becoming a leading brand-focused, product development company that matches products and consumer preferences in the cannabis market, enables us to provide better quality consumer products, grow our Canadian business and capture increased market share in Canada.
Th is change in financial forecasts indic a ted it was more likely than not that the fair value of our indefinite lived intangible asset associated with the acquired brand might also be below its carrying value, and accordingly we performed a quantitative assessment for impairment.
This change in financial forecasts indicated it was more likely than not that the fair value of our indefinite lived intangible asset associated with the acquired brands might also be below their carrying values, and accordingly we performed a quantitative assessment for impairment.
Impairment charges totaling $6.6 million related to licensed brand intangible assets, which were identified during our annual impairment testing process. 72 A summary of the pre-tax charges recognized in fiscal 2021 in connection with our restructuring actions described above is as follows: Year ended March 31, 2021 Restructuring and other charges Other impairments Total Costs recorded in cost of goods sold: Inventory write-downs $ 25,985 $ - $ 25,985 Costs recorded in operating expenses: Impairment and abandonment of property, plant and equipment 426,748 - 426,748 Impairment and abandonment of intangible assets 54,511 6,634 61,145 Contractual and other settlement obligations 22,352 - 22,352 Employee-related and other restructuring costs 24,153 - 24,153 Asset impairment and restructuring costs 527,764 6,634 534,398 Costs recorded in loss from equity method investments: Impairment of equity method investments 10,300 - 10,300 Total restructuring, asset impairments and related costs $ 564,049 $ 6,634 $ 570,683 Fiscal 2020 Total restructuring, asset impairments and related costs of $843.3 million were recognized in fiscal 2020, comprised of: • Property, plant and equipment and intangible asset impairment charges, asset abandonment costs, inventory write-downs, contractual and other settlement costs, employee-related costs and other restructuring costs, share-based compensation expense, and impairment charges related to certain of our equity method investments totaling $742.9 million associated with the organizational and strategic review of our business that commenced in the fourth quarter of fiscal 2020.
Impairment charges totaling $6.6 million related to licensed brand intangible assets, which were identified during our annual impairment testing process. 89 A summary of the pre-tax charges recognized in fiscal 2021 in connection with our restructuring actions described above is as follows: Year ended March 31, 2021 Restructuring and other charges Other impairments Total Costs recorded in cost of goods sold: Inventory write-downs $ 25,985 $ - $ 25,985 Costs recorded in operating expenses: Impairment and abandonment of property, plant and equipment 426,748 - 426,748 Impairment and abandonment of intangible assets 54,511 6,634 61,145 Contractual and other settlement obligations 22,352 - 22,352 Employee-related and other restructuring costs 24,153 - 24,153 Asset impairment and restructuring costs 527,764 6,634 534,398 Costs recorded in loss from equity method investments: Impairment of equity method investments 10,300 - 10,300 Total restructuring, asset impairments and related costs $ 564,049 $ 6,634 $ 570,683 Net Loss The net loss in fiscal 2023 was $3.3 billion, as compared to a net loss of $330.6 million in fiscal 2022.
Asset impairment and restructuring costs Asset impairment and restructuring costs recorded in operating expenses in fiscal 2021 were $534.4 million, as compared to $623.3 million in fiscal 2020. In fiscal 2021 these costs included charges of $527.8 million related to restructuring actions and charges of $6.6 million related to other asset impairments.
Asset impairment and restructuring costs Asset impairment and restructuring costs recorded in operating expenses in fiscal 2022 were $369.3 million, as compared to $534.4 million in fiscal 2021. In fiscal 2022, these costs included charges of $302.5 million related to restructuring actions and charges of $66.8 million related to other asset impairments.
With the build-out of the retail store network across Canada, customers are now offered greater availability and convenience in shopping for cannabis products. 65 International and other cannabis revenue was $79.3 million in fiscal 2022, as compared to $93.6 million in fiscal 2021. • C 3 contributed revenue of $36.1 million in fiscal 2022, a year-over-year decrease of $26.2 million driven by (i) the completion of the C 3 Divestiture on January 31, 2022, as described in “Recent Developments” above; (ii) increased competition in the synthetic cannabinoid market in Germany, and price compression for C 3 ’s products; and (iii) a limitation on sales activities associated with COVID-19 restrictions, particularly in the first and third quarters of fiscal 2022. • Other cannabis revenue was $43.2 million in fiscal 2022, a year-over-year increase of $11.9 million primarily attributable to (i) the growth in our U.S.
Rest-of-world cannabis Rest-of-world cannabis revenue was $79.3 million in fiscal 2022, as compared to $93.6 million in fiscal 2021. • C 3 contributed revenue of $36.1 million in fiscal 2022, a year-over-year decrease of $26.2 million driven by: (i) the completion of the divestiture of our interest in C 3 on January 31, 2022; (ii) increased competition in the synthetic cannabinoid market in Germany, and price compression for C 3 ’s products; and (iii) a limitation on sales activities associated with COVID-19 restrictions, particularly in the first and third quarters of fiscal 2022. • Other rest-of-world cannabis revenue was $43.2 million in fiscal 2022, a year-over-year increase of $11.9 million primarily attributable to: (i) the growth in our U.S.
Income tax recovery Income tax recovery in fiscal 2022 was $8.9 million, as compared to an income tax recovery of $13.1 million in fiscal 2021.
Income tax recovery Income tax recovery in fiscal 2023 was $4.8 million, as compared to an income tax recovery of $8.9 million in fiscal 2022.
We determine the fair value of the liability arising from the Acreage Arrangement using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement.
On a quarterly basis, we determine the fair value of the Acreage call option using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement.
Introduction This Management’s Discussion and Analysis (“MD&A”), which should be read in conjunction with our consolidated financial statements and the notes thereto as at and for the year ended March 31, 2022 included in Item 8 of this Annual Report (the “Financial Statements”), provides additional information on our business, current developments, financial condition, cash flows and results of operations.
Introduction This Management’s Discussion and Analysis of our financial condition and results of operations (“MD&A”), which should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this Comprehensive Form 10-K (the “Financial Statements”), provides additional information on our business, current developments, financial condition, cash flows and results of operations.
Other income (expense), net Other income (expense), net, was an income amount of $753.3 million in fiscal 2022, as compared to an expense amount of $387.9 million in fiscal 2021.
Other income (expense), net Other income (expense), net, was an expense amount of $466.0 million in fiscal 2023, as compared to an income amount of $753.3 million in fiscal 2022.
The year-over-year decrease is primarily attributable to: • The completion of vesting, prior to fiscal 2022, of a significant number of stock options that were granted in previous fiscal years; and • The impact of the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022, which resulted in 8.2 million stock option forfeitures in fiscal 2021 and 3.2 million stock option forfeitures in fiscal 2022.
The year-over-year decrease was primarily attributable to: • The completion of vesting, prior to fiscal 2022, of a significant number of stock options that were granted in previous fiscal years; and • The impact of the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022, which resulted in 8.2 million stock option forfeitures in fiscal 2021 and 3.2 million stock option forfeitures in fiscal 2022. 96 Share-based compensation related to acquisition milestones was $8.0 million in fiscal 2022, relatively consistent with the amount of $8.1 million recognized in fiscal 2021.
Spectrum Therapeutics produces and distributes a diverse portfolio of medical cannabis products to healthcare practitioners and medical customers in Canada, and in several other countries where it is federally permissible to do so.
Spectrum Therapeutics produces and distributes a diverse portfolio of medical cannabis products to medical patients in Canada, and in several other countries where it is federally permissible to do so. Subsequent to the passage of the U.S.
Information on the valuation techniques and inputs used in determining fair valued are disclosed in Note 24 of our Financial Statements. 90 Other f air value measurements Critical estimates. Some of our assets and liabilities are measured at fair value.
If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation techniques and inputs used in determining fair valued are disclosed in Note 24 of our Financial Statements. Other fair value measurements Critical estimates. Some of our assets and liabilities are measured at fair value.
The year-over-year change of $612.2 million from an income amount to an expense amount was primarily attributable to: • Change of $1.1 billion related to fair value changes on the warrant derivative liability associated with the Tranche B Warrants held by CBI, from an income amount of $795.1 million in fiscal 2020 to an expense amount of $293.1 million in fiscal 2021.
The year-over-year change of $1.2 billion, from an income amount to an expense amount, is primarily attributable to: • Decrease in non-cash income of $551.8 million related to fair value changes on the warrant derivative liability associated with the Tranche B Warrants held by CBI.
The year-over-year decrease is primarily attributable to a reduction in costs attributable to the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022.
Research and development expense in fiscal 2022 was $32.3 million, as compared to $57.6 million in fiscal 2021. The year-over-year decrease is primarily attributable to a reduction in costs attributable to the previously-noted restructuring actions beginning in the fourth quarter of fiscal 2020 and continuing through fiscal 2021 and fiscal 2022.
Amounts include interest related to operating and finance leases of $1.7 million and $3.1 million, respectively. 2 Refer to Note 18 of our Financial Statements for further information on our other liabilities. 3 Includes future minimum royalty obligations, sponsorship agreements, and other commitments. Transactions with Related Parties Year ended March 31, 2022 None.
Amounts include interest related to operating and finance leases of $8.4 million and $4.9 million, respectively. 2 Refer to Note 18 of our Financial Statements for further information on our other liabilities. 3 Includes future minimum royalty obligations, sponsorship agreements, and other commitments.
CBI owns $200.0 million of the Canopy Notes. Convertible debentures and accretion debentures On October 19, 2018, Supreme Cannabis issued 6.0% senior unsecured convertible debentures (the “Supreme Debentures”) for gross proceeds of $100.0 million.
As a result, Greenstar no longer holds any Canopy Notes. Supreme Convertible Debentures and Accretion Debentures On October 19, 2018, Supreme Cannabis issued 6.0% senior unsecured convertible debentures (the “Supreme Debentures”) for gross proceeds of $100.0 million.
These changes, contributing to a decrease in the net loss, were partially offset by the year-over-year decrease in our gross margin. 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.
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.
GAAP and may not be comparable to similar measures presented by other companies. Management believes that free cash 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.
Management believes that free cash 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 table below presents free cash flows for the years ended March 31, 2022, 2021 and 2020: Years ended March 31, (in thousands of Canadian dollars) 2022 2021 2020 Net cash used in operating activities $ (545,811 ) $ (465,729 ) $ (772,635 ) Purchases of and deposits on property, plant and equipment (36,684 ) (164,502 ) (704,944 ) Free cash flow 1 $ (582,495 ) $ (630,231 ) $ (1,477,579 ) 1 Free 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.
The table below presents free cash flows for the years ended March 31, 2023, 2022 and 2021: Years ended March 31, (in thousands of Canadian dollars) 2023 2022 2021 Net cash used in operating activities $ (557,546 ) $ (545,811 ) $ (465,729 ) Purchases of and deposits on property, plant and equipment (9,217 ) (36,684 ) (164,502 ) Free cash flow 1 $ (566,763 ) $ (582,495 ) $ (630,231 ) 1 Free 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. 148 Free cash flow in fiscal 2023 was an outflow of $566.8 million, as compared to an outflow of $582.5 million in fiscal 2022.
Part 1 - Business Overview Canopy Growth is a world-leading cannabis CPG company which produces, distributes, and sells a diverse range of cannabis, hemp, and CPG products.
Part 1 - Business Overview We are a world-leading cannabis and consumer packaged goods (“CPG”) company which produces, distributes, and sells a diverse range of cannabis, hemp, and CPG products.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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An increase in our share price typically results in a fair value increase of the liability. 92 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 24 of the Financial Statements.
An increase in our share price typically results in a fair value increase of the liability. 157 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 24 of the Financial Statements.
As at March 31, 2022, our cash and cash equivalents, and short-term investments, consisted of $0.9 billion, as compared to $1.9 billion at March 31, 2021, in interest rate sensitive instruments. Our financial liabilities consist of long-term fixed rate debt and floating-rate debt.
As at March 31, 2023, our cash and cash equivalents, and short-term investments, consisted of $0.3 billion, as compared to $0.9 billion at March 31, 2022, in interest rate sensitive instruments. Our financial liabilities consist of long-term fixed rate debt and floating-rate debt.
A hypothetical 10% change in the U.S. dollar against the Canadian dollar compared to the exchange rate at March 31, 2022, would affect the carrying value of net assets by approximately $33.5 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss.
A hypothetical 10% change in the U.S. dollar against the Canadian dollar compared to the exchange rate at March 31, 2023, would affect the carrying value of net assets by approximately $14.8 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss.
A hypothetical 10% change in the euro against the Canadian dollar compared to the exchange rate at March 31, 2022, would affect the carrying value of net assets by approximately $46.6 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss.
A hypothetical 10% change in the euro against the Canadian dollar compared to the exchange rate at March 31, 2023, would affect the carrying value of net assets by approximately $25.3 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss.
Aggregate Notional Value Fair Value Decrease in Fair Value - Hypothetical 1% Rate Increase March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021 Convertible senior notes $ 600,000 $ 600,000 $ 563,958 $ 687,414 $ (6,600 ) $ (8,010 ) Fixed interest rate debt 43,386 3,872 N/A N/A N/A N/A Variable interest rate debt 893,647 891,677 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).
Aggregate Notional Value Fair Value Decrease in Fair Value - Hypothetical 1% Rate Increase March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022 Unsecured senior notes $ 337,380 $ 600,000 $ 331,250 $ 563,958 $ (1,552 ) $ (6,600 ) Fixed interest rate debt 135,573 43,386 N/A N/A N/A N/A Variable interest rate debt 840,058 893,647 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).

Other CGC 10-K year-over-year comparisons