CGC: Canopy Growth Corporation (TSXV:WEED ) Analysis and Research Report

2018-08-06 - by Asif , Contributing Analyst - 2351 views

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Canopy Growth, formerly Tweed Marijuana Inc., is Canada’s first publicly traded medical marijuana company and the first geographically diversified medical marijuana producer with its licences under the ACMPR. Canopy Growth operates eleven production facilities in Canada and currently distributes marijuana across the country to Canadian patients managing a host of medical conditions.

Canopy Growth was incorporated pursuant to the provisions of the Canada Business Corporations Act on August 5, 2009 under the name “LW Capital Pool Inc.” The company changed its name to Tweed Marijuana Inc. on March 26, 2014 and later to Canopy Growth Corporation on September 17, 2015. Prior to completing its qualifying transaction on April 3, 2014, Canopy Growth was a “capital pool company” under Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual. As a capital pool company, Canopy Growth had no assets other than cash and did not carry on any operations. On September 17, 2015, the Corporation changed its name from Tweed Marijuana Inc. to Canopy Growth Corporation and made a corresponding change to its trading symbol on the TSX Venture Exchange (“TSXV”) from “TWD” to “CGC”. On July 26, 2016, the Corporation graduated to the TSX. On February 1, 2017, the Corporation’s trading symbol was changed to “WEED” and on March 10, 2017, the Corporation was the first cannabis company to be added to the S&P/TSX Composite Index. On May 24, 2018, the Corporation was the first Canadian cannabis producer to be listed on the New York Stock Exchange (“NYSE”) with the trading symbol “CGC.”

As of March 31, 2018, there were 1,033 full-time employees in the Corporation as compared to 546 full-time employees at March 31, 2017.

The company conduct its business through its various subsidiaries. The following chart illustrates, as at the date of this Annual Information Form, its material subsidiaries, including their respective jurisdiction of incorporation and percentage of voting securities of each that are held by Canopy Growth either directly or indirectly:

** Controlled or Jointly Controlled Subsidiaries**

Company NameOwnership Interest by CanopyClassification (Subsidiary, associate, other)Jurisdiction of Incorporation
Canadian operations
Tweed Inc.1SubsidiaryCanada
Tweed Farms Inc.1SubsidiaryCanada
Bedrocan Canada Inc.1SubsidiaryOntario
Bedrocan Canada (106) Inc.1SubsidiaryOntario
Spectrum Health Corp.1SubsidiaryOntario
2344823 Ontario Inc. d/b/a Bodystream1SubsidiaryOntario
Apollo Applied Research Inc.1SubsidiaryCanada
Apollo CRO Inc.1SubsidiaryCanada
Mettrum Hempworks Inc.1SubsidiaryOntario
Tweed Grasslands Cannabis Inc.1SubsidiarySaskatchewan
Groupe H.E.M.P.CA/H.E.M.P.CA0.75SubsidiaryQuebec
Vert Cannabis Inc.1SubsidiaryCanada
Spot Therapeutics Inc.1SubsidiaryNew Brunswick
Canopy Rivers Corporation89.1% Voting 31.5% EconomicSubsidiaryCanada
Canopy Hemp Corporation1SubsidiaryCanada
Les Serres Vert Cannabis0.667SubsidiaryQuebec
BC Tweed Joint Venture Inc.0.667Joint OperationCanada
10007705 Manitoba Ltd.0.5SubsidiaryManitoba
10252832 Canada Inc.1SubsidiaryCanada
80694 Newfoundland and Labrador Inc.1SubsidiaryNewfoundland
10663824 Canada Inc.1SubsidiaryCanada
9388036 Canada Inc.1SubsidiaryCanada
2532461 Ontario Inc.1SubsidiaryOntario
International operations
Spektrum Cannabis GmbH1SubsidiaryGermany
Spectrum Chile SpA0.85SubsidiaryChile
Spectrum Cannabis Australia PTY Ltd.1SubsidiaryAustralia
Spectrum Cannabis Italia srl1SubsidiaryItaly
Spectrum Cannabis Netherlands BV1SubsidiaryNetherlands
Grow House JA Limited0.49SubsidiaryJamaica
Spectrum Cannabis Denmark Aps0.62SubsidiaryDenmark
Spectrum Polska Sp. Z 0.0.1SubsidiaryPoland
7218737 Delaware Inc.1SubsidiaryDelaware, USA
Spectrum Southern Africa (Pty) Ltd.1SubsidiarySouth Africa
Daddy Cann (Lesotho) (Pty) Ltd.1SubsidiaryLesotho, South Africa
Annabis Medical s.r.o.1SubsidiaryCzech Republic
Canopy LATAM Corporation1SubsidiaryCanada


Fiscal 2016 (April 1, 2015 to March 31, 2016)

During Fiscal 2016, the Corporation completed two acquisitions (Bedrocan and MedCannAccess) and issued a total of 7,012,700 Common Shares for aggregate gross proceeds of approximately $14 million pursuant to an offering on a bought deal basis.

In addition,

Tweed received authorization from Health Canada to begin the production of cannabis extracts Tweed and DNA Genetics announced a partnership to enable Tweed to begin its own breeding program Tweed entered into a license agreement with LBC Holdings, Inc. (“LBC”), a Corporation related to the artist known as Snoop Dogg Health Canada granted Tweed its licence to sell cannabis oil products

Fiscal 2017 (April 1, 2016 to March 31, 2017)

During Fiscal 2017, the Corporation completed three acquisitions (MedCann GmbH, Spectrum and Vert) and issued a total of 20,117,500 Common Shares for aggregate gross proceeds of approximately $106,026,400 million pursuant to an offering on a bought deal basis.

In addition,

Health Canada granted Bedrocan its licence to sell cannabis oil products Bedrocan Canada, Bedrocan International BV (“Bedrocan International”) and local Brazilian partners entered into a partnership to create a new company called Bedrocan Brasil Tweed received necessary approvals in Canada and Germany to begin export of medical cannabis for sale to German pharmacies
Canopy Growth closed a $5.5 million financing with a commercial lending institution Tweed and Snoop Dogg announced that Leafs By Snoop would be available in Canada, exclusively to customers registered with Tweed Canopy Growth acquired ownership of Vert Médical Canopy Growth entered into a Memorandum of Understanding with the Goldman Group to expand Canopy Growth’s cannabis production capacity and geographic footprint Canopy Growth announced the formation of the cannabis research incubator, Canopy Health Innovations Inc. (“Canopy Health”) Tweed received its Dealers Licence pursuant to the provisions of the CDSA Canopy Growth acquired the property at 1 Hershey Drive in Smiths Falls, Ontario that currently houses Canopy Growth’s headquarters and Tweed production facilities Canopy Growth issued a statement regarding possible Class Action related to the Mettrum Ltd. recall. (see “Legal Proceedings”) Canopy Growth issued a total of 2,500,000 Common Shares for aggregate gross proceeds of approximately $24,250,000 million pursuant to a private placement with a single investor

Fiscal 2018 (April 1, 2017 to March 31, 2018)

During Fiscal 2018, the Corporation completed two acquisitions (Tweed Grasslands and Spot Therapeutics Inc.) and issued a total of 5,800,000 Common Shares for aggregate gross proceeds of approximately $175,076,000 million pursuant to an offering on a bought deal basis.

In addition,

Canopy Growth announced the launch of Tweed's curated CraftGrow line (see “Other Initiatives - Craft Grow”) Canopy Growth committed $20 million in seed capital funding for Canopy Rivers Corporation (“Canopy Rivers”), a joint venture that will provide financial support to ACMPR applicants and existing Licensed Producers Canopy Growth issued a total of 3,105,590 Common Shares for aggregate gross proceeds of approximately $24,999,999.50 million pursuant to a private placement with a single investor Tweed Farms purchased of a parcel of land adjacent to its current facility in Niagara-on-the-Lake, ON Canopy Growth and the Province of New Brunswick entered into a Memorandum of Understanding (MOU) for a two-year supply agreement Canopy Growth entered into a joint venture with Danish Cannabis ApS (“Danish Cannabis”) called Spectrum Denmark ApS (“Spectrum Denmark”) Canopy Growth entered into a definitive agreement to form a new company, BC Tweed Joint Venture Inc. together with a large-scale greenhouse operator to develop 1.3 million square feet of greenhouse growing capacity in British Columbia Canopy Growth completed the transaction with Constellation Brands whereby Constellation Brands invested CDN $245 million in exchange for 9.9% equity upon the issuance of 18,876,901 Common Shares and 18,876,901 warrants to an affiliate of Constellation Brands, Greenstar Holdings (see “Strategic Relationship with Greenstar Holdings”) Canopy Growth and Canopy Rivers, along with funds advised by JW Asset Management LLC (collectively referred to as the “Investors”) entered into subscription agreements with TerrAscend Corp. (“TerrAscend”) pursuant to which the Investors will acquire 47,727,273 units of TerrAscend Canopy Growth, through a joint venture with Green House Holdings North America Inc. (“Green House Seeds”), its affiliate in the Netherlands, GHSC Trading B.V., National Concessions Group Inc. (“Organa Brands”), allocated 40% and 20%, respectively, of ownership in ACMPR licensed Agripharm Corp. (previously Spectrum Health Corp.) (“Agripharm”) Canopy Growth entered into a supply agreement with the Province of Newfoundland and Labrador Canopy Growth and Canopy Rivers formed a new company, Les Serres Vert Cannabis Inc. ("Vert Mirabel"), together with Les Serres Stéphane Bertrand Inc. ("Bertrand") Canopy Growth and the Province of Prince Edward Island entered a supply Memorandum of Understanding Spectrum Denmark’s facility was issued a cannabis production licence by Denmark’s Medicines Agency Canopy Growth acquired certain intellectual property assets and know-how for total proceeds of $5,325,250 of which $3,132,500 was paid on closing by issuing 117,253 Common Shares and the remaining consideration of $2,192,750 will be paid over a series of milestones in Common Shares Canopy Growth signed a letter of intent with the Société des alcools du Québec to provide the Quebec market with 12,000 kilograms of cannabis annually Canopy Growth announced that it had been conditionally selected by the Government of Manitoba to operate cannabis retail stores in the province, along with its partner Delta 9 Cannabis Inc

Following the end of Fiscal 2018, on June 20, 2018, the Corporation closed its offering of C$500 million aggregate principal amount of its 4.25% convertible senior notes due 2023 (the "Initial Notes"). The initial conversion rate for the Initial Notes is 20.7577 Common Shares per C$1,000 principal amount of the Initial Notes, equivalent to an initial conversion price of approximately C$48.18 per share. On June 22, 2018, the Corporation closed an additional C$100 million aggregate principal amount of its Initial Notes (the "Over-Allotment Notes" and collectively with the Initial Notes, the “Notes”) pursuant to the exercise in full of the over-allotment option granted to the initial purchasers. The Over-Allotment Notes have the same terms as the Initial Notes. The Corporation intends to use the net proceeds from the sale of the Notes for supporting expansion initiatives and general corporate purposes.

Anticipated Changes for Fiscal 2019

On June 18, 2018, the Federal Government of Canada passed legislation legalizing the recreational use of cannabis in Canada (see “Summary of the Cannabis Act and the Proposed Regulations”), with an opening of the legal recreational cannabis market set for October 17, 2018. In anticipation of this, the Corporation will continue efforts to increase its inventory of finished cannabis ready for sale as well as complete the development and licensing of expanded cannabis cultivation, processing and distribution infrastructure. The Corporation expects to have the majority of its planned 5.6 million square feet operations licensed by the end of calendar 2018.

In Fiscal 2019 (April 1, 2018 to March 31, 2019), the Corporation expects that it will export increasing amounts of cannabis to Germany and that it could begin exporting cannabis to additional countries around the world (see “Activities Outside of Canada”). The Corporation believes that it will continue to enter into business partnerships or acquire businesses as a means of establishing operations in additional countries.

In addition, the federal government has indicated that the sale of value-added recreational cannabis products will be permitted within one year of the start of the recreational cannabis market in Canada. The Corporation will continue to conduct product research, development and marketing activities and submit products for approval to Health Canada to prepare for this market.

Summary Description of the Business

Canopy Growth was an early mover in the Canadian medical cannabis market and is a multi-brand cannabis company. The company believe that its strong focus on, and investment in, brand, market and product differentiation, increased cannabis supply through its cannabis production platforms and education, to help citizens safely, effectively and responsibly use cannabis, will create a dominant global business with the potential to generate a significant and sustained return on invested capital over the long-term.

In Canada, through its Licensed Producers as outlined below, Canopy Growth is in the business of producing and selling medical cannabis in accordance with the ACMPR. The company operate eleven cannabis production facilities, three pursuant to joint ventures, seven of which are authorized to produce and sell cannabis and one of which is solely authorized to produce cannabis. In accordance with the ACMPR, customers with a medical document from an authorized healthcare practitioner can register with it. Customers can order cannabis directly from it, including over the phone or via the Tweed Main Street online platform, and the company then ship products directly to its customers. The company also operate medical cannabis patient assistance networks and offer in-person client services through a network of Tweed Main Street Community Engagement Centers (see “Other Initiatives – Tweed Main Street”).

Licensed Producers

The following table lists its Licensed Producers and the material terms of each licence held:

EntityInitial LicensingDate of RenewalLicensed ProductionProvinceFacilityDetailsLicense Type (Plants/ Dried)License Type (Fresh/ Oil)
Agripharm Corp.419844381215,000 square feetONIndoorUp to $31,250,000 worth of productCultivation and SaleProduction and Sale
Bedrocan Canada Inc.4162443802N/AONIndoorSales licence limited to the sale of bulk product to other Licensed Producers.SaleN/A
Bedrocan Canada Inc. (second site)420524387950,000 square feetONIndoorUp to $31,250,000 worth of product.Cultivation and SaleProduction and Sale
BC Tweed Joint Venture Inc.4314744243840,000 square feetBCGHSales licence limited to the sale of bulk product to other Licensed ProducersCultivationN/A
BC Tweed Joint Venture Inc. (second site)4320344299900,000 square feetBCGHSales licence limited to the sale of bulk product to other Licensed ProducersCultivationN/A
Spectrum Cannabis Canada Ltd.423544377075,000 square feetONIndoorUp to $31,250,000 worth of product.Cultivation and SaleProduction and Sale
Tweed Farms Inc.4185943844350,000 square feetONGHSales licence limited to the sale of bulk product to other Licensed Producers.Cultivation and SaleN/A
Tweed Grasslands Cannabis Inc.429024399860,000 square feetSKIndoorSales licence limited to the sale of bulk product to other Licensed Producers.Cultivation and SaleN/A
Tweed Inc. (Commercial)4159643850168,000 square feetONIndoorUp to $150,000,000 worth of product.Cultivation and SaleProduction and Sale
Tweed Inc. (Dealer)4271343465N/AONIndoorDealers Licence limited to testing, research and development related to cannabisN/AN/A
Vert Cannabis Inc.430904418610,000 square feetQCIndoorSales licence limited to the sale of bulk product to other Licensed ProducersCultivationN/A
Vert Mirabel432454434170,000 square feetQCGHSales licence limited to the sale of bulk product to other Licensed ProducersCultivationN/A

At the end of each term of their respective licences, each of Agripharm, BC Tweed Joint Venture Inc. (“BC Tweed”), Bedrocan, Tweed Grasslands, Spectrum, Tweed, Tweed Farms and Vert must submit an application for renewal to Health Canada containing information prescribed by the ACMPR. Further details with respect to each Licensed Producer and their respective facilities and business developments are set out below.


The company's wholly-owned subsidiary Tweed is based in Smiths Falls, Ontario, and has a present built-out GMP- certified production capacity of 168,000 square feet consisting of climate controlled indoor growing rooms and the related vegetation, nutrient delivery and production infrastructure as is required to support the 24-room configuration and cannabis inputs from other production facilities in a hub and spoke model. Additionally, an in-house laboratory and R&D area, cannabis oil extraction infrastructure, breeding facility and a high-level security vault exist within the Smiths Falls facility.

On December 9, 2016, Tweed was issued the Dealers Licence by Health Canada pursuant to the CDSA and began operating the area built to GMP specifications at the facility in Smiths Falls, Ontario. Licensed activities occur in a distinct area of the facility focused on strategic projects beyond Tweed’s operational scope. The licence allows Tweed to conduct research and possess cannabis and cannabis derivatives in forms that are not currently covered by the ACMPR. Tweed can also begin development of innovative products for future market opportunities, and with necessary approvals undertake the export of non-dried form of cannabis to other jurisdictions.

On January 15, 2017, Tweed acquired the property at 1 Hershey Drive, in Smiths Falls, Ontario, thereby terminating the lease agreement dated December 27, 2013 between Tweed and the landlord, Tweed Hershey Drive Inc. (the “Tweed Lease Agreement”). The facility was acquired for $6.6 million, of which $823,980 was settled with the issuance of 94,397 Common Shares of the Corporation, with the remainder paid in cash on closing. Bruce Linton, as an officer, director, and shareholder of Tweed Hershey Drive Inc. received 70,800 of the 94,397 shares issued, which were subject to a 4-month lockup. The acquisition was considered a “related party transaction” within the meaning of Multilateral Instrument 61-101 — Protection of Minority Security Holders in Special Transactions (“MI 61-101”) because Bruce Linton, a director and officer of Canopy Growth is also a shareholder of the vendor Tweed Hershey Drive Inc. Canopy Growth relied on an exemption available pursuant to MI 61-101 from the formal valuation and minority approval requirements since neither the fair market value of the property acquired, nor the fair market value of the purchase price for the acquisition of the property exceeded 25% of Canopy Growth’s market capitalization at the time of the transaction. This 42-acre site at 1 Hershey Drive has the potential to house hundreds of thousands of square feet of additional production and processing space.

In fiscal 2018, the Corporation began construction of new infrastructure in the approximately 300,000 square feet unlicensed portion of the original 472,000 square feet building. New facilities being constructed include additional indoor growing rooms, post-harvest processing, security vault and a visitors centre. In addition, the Corporation also began the construction of new building footprints and the redevelopment of existing buildings that together will add over 300,000 square feet to the Smiths Falls facility. The additional footprint will include storage, an advanced manufacturing building built to GMP specifications and a dedicated distribution centre. The distribution centre has been designed to significantly increase the capability and flexibility of the Corporation’s fulfillment resources in an effort to better and more efficiently serve the demands of the Canadian medicinal cannabis market, expected demands of the Canadian recreational cannabis market and anticipated increase in cannabis exports to federally legal markets around the world. Construction is expected to be completed in calendar 2018.

A key focus of Tweed, since its inception, has been the development of its brand. From the name, logo and design aesthetic, to the approachable tone and light-hearted copy, unlike industry participants that have positioned themselves as pharmaceutical companies, Tweed is positioned to attract strong appeal and recognition across value and premium product segments in the medical marijuana market and upcoming recreational market in Canada. Tweed is intent on using creative marketing strategies to further increase public awareness of the Tweed brand. The objective is to make the Tweed brand top-of-mind as medical patients and future recreational users consider making their first legal marijuana purchase, while still ensuring Canopy Growth is onside all regulatory requirements with respect to promotion.

Partner Brands

Tweed has entered into partnership agreements with certain third parties in connection with the production and distribution of its products, including the following:

In October 2015, Tweed and DNA Holding LLC (“DNA Genetics” or “DNA”) announced a partnership that would see Tweed leverage DNA's expertise in cannabis breeding to bring exclusive DNA certified strains to Tweed customers. Working with DNA, Tweed breeds new strains for customers that have been personally bred, phenotyped & inspected by DNA Genetics. On September 15, 2016, Tweed launched Lemon Skunk, the first strain certified by DNA Genetics and selected through phenotyping by DNA Genetics.

On February 11, 2016 Tweed entered into a license agreement with LBC Holdings, Inc. (“LBC”), a Corporation related to the artist known as Snoop Dogg. Under the LBC License Agreement, Snoop Dogg, through LBC, and Tweed have partnered on curated content and brand strategy exclusively in Canada. On October 27, 2016, Tweed began selling three Leafs By Snoop varieties.

On April 20, 2017, Tweed and Praxis Holdings Inc., a Corporation related to the cannabis product line known as Foria, announced a partnership that would expand Tweed’s product offerings with the inclusion of a proprietary blend of Foria specifically for Tweed customers.

Tweed Farms

Canopy Growth acquired Tweed Farms in Niagara-on-the-Lake, Ontario, Canada on June 18, 2014 when Tweed Farms was in the process of obtaining its licence to produce under the MMPR. The company estimate that, when in full production, the existing 350,000 square foot greenhouse can support the production of up to 15,000 kilograms of cannabis per year. Following completion of the previously announced expansion, Tweed Farms will be home to over 1,000,000 square feet of greenhouse space, including the recently acquired and adjacent greenhouse property, plus post-harvest facilities including 10,000 square feet of recently renovated space for new drying rooms and an upgraded laboratory.

On September 8, 2017, the Corporation announced that Tweed Farms had finalized the purchase of a parcel of land adjacent to its current facility in Niagara-on-the-Lake, ON including an operational 458,000 square feet greenhouse. In addition to the newly acquired asset, the Company announced that construction had commenced on an additional 212,000 square feet of state-of-the-art greenhouse to be located on the current Tweed Farms property.


The Corporation acquired Spectrum Health Corp. (formerly Mettrum Health Corp.), including its subsidiaries 2344823 Ontario Inc. d/b/a Bodystream, Apollo Applied Research Inc. (and its subsidiary, Apollo CRO Inc.), Spectrum Hempworks Inc., Spectrum (and its subsidiary, Agripharm, of which Spectrum owns 40%) (collectively with Spectrum, the “Spectrum Canada Group”), on January 31, 2017 pursuant to an arrangement agreement dated November 30, 2016, as amended, for which Spectrum Canada Group shareholders received 0.7132 Common Shares for each Spectrum Canada Group common share held immediately prior to the closing.

Spectrum was incorporated on March 29, 2011 under the name Cinaport Acquisition Corp. and completed its initial public offering as a capital pool Corporation on October 24, 2011 (the “Offering”). The Offering consisted of 2,260,000 common shares of Spectrum (“Spectrum Common Shares”) at a price of $0.10 per Common Share for gross proceeds of $226,000. The Spectrum Common Shares began trading on the TSXV as a capital pool Corporation on November 1, 2011 under the symbol “CPQ.P”. Spectrum completed its qualifying transaction on September 30, 2014 (the “Spectrum Qualifying Transaction”). As part of the Spectrum Qualifying Transaction, Spectrum consolidated its shares on a 14.5625 to 1 basis.

Prior to Spectrum’s acquisition by the Corporation, Spectrum acquired Apollo Applied Research Inc., and Apollo CRO Inc. (together “Apollo”) and 2344823 Ontario Inc., operating as Bodystream (“Bodystream”) in two separate transactions. Under the provisions of the respective share purchase agreements, additional Spectrum shares would have been issued to former shareholders of Apollo and Bodystream over the five years following the acquisition if certain performance targets were met and the shareholders remained as employees. As a result of the acquisition of Spectrum, the obligation for this share-based compensation was assumed by the Corporation. The maximum number of Canopy Growth shares that would be issued with respect to the Apollo and Bodystream agreements is 1,111,702 and 1,073,595 shares, respectively.

Spectrum is a Toronto-based company and began production of medical cannabis at its first production facility in Bowmanville, Ontario. The licence covers approximately 75,000 square feet and includes 13 growing rooms as well as necessary vegetation, nutrient delivery and plant destruction infrastructure. The facility sits on a 7-acre site and Canopy Growth is currently planning a 100,000 square foot expansion of this location. In addition, on October 6, 2017, the company acquired an adjacent parcel of land to add approximately 33 acres for future expansion.

Prior to December 1, 2017 Agripharm was a wholly owned subsidiary of the Corporation. On December 1, 2017, its interest in Agripharm was diluted from 100% to 40% under a collaborative agreement whereby in exchange for the issuance of shares, Green House Seeds and Organa Brands provided an exclusive, royalty-free license in Canada to certain proprietary technology, trademarks, genetics, know-how and other intellectual property. Green House Seeds oversees day-to-day operations, bringing their own expertise into cultivation, while Organa Brands implements world-class extraction functions as new and novel value-add products become part of the regulatory environment.

On September 20, 2016, Spectrum announced that it entered into an agreement with Cannabis Care Canada Inc. (“CCC”) to sell its facility and associated licence known as Spectrum Bennett North, which closed on September 14, 2017. As per the terms of the agreement, CCC paid $7 million in cash to acquire Spectrum Bennett North and entered into a three-year Supply Agreement that is expected to generate up to $40 million in revenue for Spectrum over the next three years. As part of the transaction, CCC will also assume all outstanding obligations associated with Spectrum Bennett North.


Bedrocan was formed in February 2012 (under its predecessor name, 2318171 Ontario Inc.) by its founding shareholders for the purpose of entering into an exclusive licensing arrangement with Bedrocan International and making an application to Health Canada to become a Licensed Producer under the MMPR framework.

On December 16, 2013, Bedrocan received its initial licence to operate as a Licensed Producer of medical marijuana under the MMPR, with the authority to import, package and sell medical marijuana. On February 21, 2014, Bedrocan entered into an exclusive license agreement with Bedrocan International, for an indefinite term, to use certain Bedrocan International intellectual property for the cultivation, processing, marketing, sale and other commercialization of cannabis in Canada (the “BV License Agreement”). Material terms of the BV License Agreement include a performance guarantee and certain specified standards in respect of the licensed product, the payment of an annual license fee based on product sales and certain assignment and confidentiality restrictions.

On August 28, 2015, the Corporation acquired Bedrocan Cannabis Inc. (“Bedrocan Cannabis”) pursuant to a definitive plan of arrangement, in which the Corporation acquired all of the issued and outstanding securities of Bedrocan Cannabis. The transaction closed on August 28, 2015 following approval by Bedrocan Cannabis shareholders and the TSX Venture Exchange and completion of conditions precedent to closing. In connection with the Arrangement, Bedrocan and Bedrocan International entered into a second amended and restated license and distribution agreement on August 28, 2015 (the “SARLD Agreement”). The effect of the Arrangement is that Bedrocan Cannabis continued as a wholly-owned subsidiary of Canopy, and Bedrocan was a wholly-owned subsidiary of Bedrocan Cannabis, Bedrocan Cannabis and Bedrocan later amalgamated. Under the terms of the Arrangement, Bedrocan Cannabis shareholders received 0.4650 Common Shares for each common share of Bedrocan held. The Corporation issued a total of 35,202,818 Common Shares on closing of the Arrangement.

Bedrocan’s 52,000 square feet production facility in Toronto, Ontario is fully-licensed, and includes 34 vegetative and growing rooms, three dispensing rooms, the building’s two-floor high security level vault, and the ability to dispose of cannabis refuse via composting. This site is leased from a related company of Murray Goldman, a director of Canopy Growth. On August 28, 2015, Bedrocan amended its existing lease agreements with its landlord to extend the initial term, ending August 31, 2024, to August 31, 2029 (the “Amended Bedrocan 16 Upton Lease”).

On June 7, 2018, the Corporation and Bedrocan International reached an agreement in the previously announced arbitration proceedings with respect to the SARLD that were commenced in July 2017. Under the terms of the agreement, Bedrocan will decrease, and then end, the production and sale of Bedrocan products within the calendar year. The Corporation will retain the licensed production facility (“16 Upton Road”), licensed sales facility (“43 Upton Road”), and all associated licences owned and operated by Bedrocan. Management will redeploy these facilities, free of the current royalty structure and fixed production practices, to develop new premium branded cannabis offerings.

Tweed Grasslands

On May 1, 2017, the Corporation acquired rTrees Producers Limited ("Tweed Grasslands"), a late-stage ACMPR applicant based in Yorkton, Saskatchewan. Tweed Grasslands brings a 90,000 square feet indoor growing facility that is presently 20% built-out. It is estimated that the Tweed Grasslands facility can expand to over 300,000 square feet in the future. On June 16, 2017, Tweed Grasslands received its cultivation licence from Health Canada. Upon closing of the acquisition, the Corporation issued 698,901 Common Shares and up to another 2,795,604 Common Shares will be issued if, and when, specific licensing and capacity expansion related milestones are achieved.


On November 1, 2016, Canopy Growth acquired Vert Médical, a Quebec-based ACMPR applicant. Canopy Growth has also acquired the lease and the right to acquire 90 acres of land and a 7,000 square foot indoor growing and office facility located in Saint-Lucien, Quebec. On December 21, 2017, Vert received its licence from Health Canada. In consideration for the acquired shares in Vert, Canopy Growth issued debt of approximately $500,000. In addition, Canopy Growth will issue up to 294,900 Common Shares, if and when specific licensing and capacity expansion related milestones are achieved, except for 58,978 Common Shares which were issued on closing.

On December 17, 2017, the Corporation entered into a joint venture, Vert Mirabel, with Bertrand. Bertrand currently produces tomatoes and other vegetables under 700,000 square feet of modern greenhouse, a portion of which is certified for organic production and most of which was built in 2015.

The entire greenhouse is expected to be upgraded and retrofitted for cannabis production. Under the terms of the joint venture, Vert Mirabel leases the greenhouse facility from Bertrand with an option to acquire the property. On May 25, 2018, Vert Mirabel received its cultivation licence from Health Canada, licensing a portion of the total production facility.

In conjunction with the Vert acquisition, Canopy Growth acquired majority ownership of Quebec-based Groupe H.E.M.P.CA Inc. ("Groupe Hemp"). Groupe Hemp is licensed by Health Canada to cultivate hemp and extract oil from hemp seeds. Groupe Hemp has developed a variety of brands, digital properties, and industrial hemp products, ranging from skincare to pet care. In consideration for the acquired shares in Groupe Hemp, Canopy Growth issued 258,037 Common Shares of which 50% were issued on closing and the remainder released on April 1, 2017. In addition, the Corporation paid $300,000 on closing and assumed debt of approximately $276,000 which was due on April 1, 2017.

BC Tweed

Canopy Growth entered into a definitive joint venture agreement on October 11, 2017, to form a new company, BC Tweed, together with a large-scale greenhouse operator to develop a greenhouse in Aldergrove, British Columbia (the “Aldergrove Site”), with an exclusive option to develop a further 1.7 million square feet of existing greenhouse infrastructure at a second location in British Columbia (the “Delta Site”). The Aldergrove Site includes the first and second stage licensing of 840,000 square feet of growing space, allowing vegetative growth so that the mature plants can be spread into the full 1.3 million square feet for flowering and harvesting. The Aldergrove Site received its licence from Health Canada on February 16, 2018. The Delta Site, which the company believe to be the largest federally licensed cannabis site anywhere in the world, includes the initial licensing of 900,000 square feet of growing space, granted on April 13, 2018, allowing vegetative growth so that the mature plants can be spread into the full 1.7 million square feet for flowering and harvesting.

On May 14, 2018, Canopy Growth announced that it entered into a non-binding agreement to purchase, subject to certain conditions, the remaining 33% stake of BC Tweed currently owned by a large-scale greenhouse operator. Upon closing of the transaction, the Corporation will issue up to $374 million Common Shares, subject to the satisfaction of certain conditions, to the minority shareholders of BC Tweed (the “Operators”), over the next four years. The Operators will continue to manage BC Tweed operations for a period of five years.

Licence Applications

In addition to the Licensed Producers above, Canopy Growth has applied for licences under the ACMPR for two additional cannabis production facilities in the Provinces of Alberta and New Brunswick.

Canopy Growth has submitted an ACMPR application, through its wholly-owned subsidiary, 10252832 Canada Inc., for a producer’s licence in Edmonton, Alberta. In addition, on August 28, 2017, the company announced that the company acquired Spot Therapeutics Inc. (“Spot”), an ACMPR applicant based in Fredericton, New Brunswick. Additionally, Canopy Rivers (see “Other Initiatives - Canopy Rivers”) purchased the industrial building and property where its Fredericton-based production and distribution platform is being established and is leasing the facility to Spot with an option, in favor of Spot, to acquire the property.

Industrial Hemp-Based Products

Canopy Growth has taken steps to diversify its cannabis-related business into the development, production and sale of industrial hemp-based medical, regulated adult-use and industrial products. Hemp and cannabis come from the cannabis sativa L specie, but are genetically distinct and are further distinguished by use, chemical makeup and cultivation methods. Industrial hemp is a renewable raw material used in thousands of products including health foods, body care, clothing, construction materials, biofuels and plastic composites. The company believe that entry into the regulated industrial hemp market, whose regulations allow for more robust consumer-facing brand marketing, advertising and retail channels, will serve to strengthen its consumer facing brands in the future.

On November 27, 2017, the company announced a definitive agreement to acquire Green Hemp Industries Ltd.’s (“Green Hemp”) farm operations and associated assets, equipment, genetic stock, and other property in Saskatchewan (the “Green Transaction”). On January 25, 2018, the company closed the Green Transaction. Should the regulations change in accordance with Health Canada’s Proposed Approach to the Regulation of Cannabis discussion paper, material collected at Green could be processed for cannabinoid extraction at the Tweed Grasslands facility in Saskatchewan. Management believes by building the amount of CBD under its operations, the company will be able to expand its offering of cannabinoid-based product offerings.

Additional Initiatives

CraftGrow Collection

CraftGrow is the brand developed for the Corporation’s partner program that gives Licensed Producers access to the Corporation’s platform including the quality assurance program, online market place, customer care and call centre capabilities, as well as customer base. Access to the Corporation’s platform can be expected to significantly reduce the resources that new entrants are required to invest to enter the market and help get them to market much faster to the benefit of all medical cannabis patients. The CraftGrow program benefits its customers by bringing a variety of cannabis cultivated by different Licensed Producers to the Corporation’s online marketplace.

Tweed Main Street

On October 1, 2015 Canopy Growth acquired all of the issued and outstanding shares of several companies, which collectively operated as “MedCannAccess” (“MCA”), by way of an amalgamation with 9421653 Canada Inc., a wholly-owned subsidiary of Canopy Growth, pursuant to an amalgamation agreement dated September 3, 2015 (the “MCA Amalgamation Agreement”). MCA operations were re-branded in the first quarter of fiscal 2017, as Tweed Main Street. Tweed offers in-person client services through Tweed Main Street’s network of community engagement centres in Ontario, making Tweed the first Licensed Producer in Canada to offer in-person services in the medical marijuana industry.

The Corporation has established Tweed Main Street as the brand for its core customer engagement vehicles, both online and physical locations. Through the Tweed Main Street online market place, registered customers can purchase all dried, oil and soft gel cannabis products available from the Corporation including varieties from Tweed, Tweed Farms, Bedrocan, Spectrum, DNA Genetics and Leafs By Snoop. Tweed Main Street provides tools and information to help patients search for cannabis products based on cannabinoids, form and time of use. In addition, Tweed Main Street provides a “Spectrum” tool, originally developed by Spectrum, that allows customers to categorize strains according to THC potency, as well as CBD levels, using a straight forward colour code system. Product availability in Tweed Main Street is subject to multiple factors including customer demand, cultivation schedule and the time required for post-harvest processing, quality assurance testing and regulatory approval.

Further engagement between the Tweed brand and customers is facilitated by the Corporation’s expanding network of Tweed Main Street Community Engagement Centers. These physical locations throughout Ontario provide an opportunity for individuals to learn about medical cannabis in a helpful, supportive and consumer-friendly environment. The Corporation is actively seeking partners to expand the network of Tweed Main Street locations, through licensing partnerships, to strategic locations across Canada.

Canopy Rivers

On April 27, 2017, Canopy Growth announced the commitment of $20 million in seed capital funding for a complementary but distinct Corporation that will provide financial and strategic support to ACMPR applicants and existing Licensed Producers. Specifically, Canopy Rivers operates as a joint venture with Canopy Growth. Each potential partner will be evaluated separately, and individual streaming and support service contracts entered by Canopy Rivers will be priced and structured consistently with the risks, value proposition, and requirements of its counterparties. Capital invested in each partner may involve an upfront payment, may include additional license or production-based milestones payments, and may also involve equity or and/or equity linked securities. This strategic agreement provides Canopy Growth with a secure and predictable source of incremental cannabis supply and increased diversification of its products available for sale.

On June 16, 2017, Canopy Rivers closed an offering to raise aggregate gross proceeds of $36,230,484.60. On January 10, 2018, Canopy Rivers closed a second offering to raise gross proceeds of approximately $26,000,000.00, to which Canopy Growth subscribed for 4,673,938 Class B common shares for $5,141,331.80. These offerings increased the cash resources available for Canopy Rivers to provide growth capital and strategic support within the regulated cannabis industry.

On May 30, 2018, Canopy Rivers and AIM2 Ventures Inc. (“AIM2”) entered into a binding letter of intent, which outlines the terms and conditions pursuant to which AIM2 and Canopy Rivers will complete a transaction that will result in a reverse take-over of AIM2 by Canopy Rivers, which will constitute AIM2’s Qualifying Transaction. In addition, Canopy Rivers entered into an engagement letter with CIBC Capital Markets and GMP Securities L.P., as joint book runners and together with Eight Capital as co-lead agents, on behalf of a syndicate of agents pursuant to which Canopy Rivers proposes to issue and sell, on a private placement basis, subscription receipts (the “Subscription Receipts”) at a price of $3.50 per Subscription Receipt (the “Issue Price”) for aggregate gross proceeds of up to $104,125,000.00 (the “Offering”). The Offering is expected to close on or about July 5, 2018.

Canopy Health

The Corporation established the cannabis research incubator, Canopy Health, to develop and research clinically ready cannabis drug formulations and dose delivery systems. Canopy Growth is the preferred commercialization partner for intellectual property (“IP”) developed by Canopy Health. On December 9, 2016, Canopy Growth announced the closing of an offering of Canopy Health shares for aggregate gross proceeds of approximately $7,000,000.00 to reduce Canopy Growth’s interest to 46.15% of Canopy Health common shares.

Canopy Health operates as a research incubator and focuses on creating an IP portfolio that can be built into commercial opportunities for the Corporation. Pursuant to agreements entered into between Canopy Health and Canopy Growth, Canopy Growth will act as a primary supplier of cannabis products for clinical research through its subsidiary Tweed. The Dealers Licence will allow it to, among other things, possess cannabis and cannabis by-products for the purposes of analytical testing, and in the commercialization of IP created by Canopy Health.

On September 27, 2017, Canopy Health announced that it has filed nine provisional patents pertaining to the applications of cannabis and cannabinoid-based therapeutics in sleep and related nervous system disorders. Canopy Health announced that it had closed additional funding through sales of common shares bringing total funds raised to date for Canopy Health to over CDN $15.8 million. Capital was secured through new and existing shareholders, including $4 million from Canopy Growth.

On May 15, 2018, Canopy Growth and Canopy Health announced, along with Canopy Health’s subsidiary Canopy Animal Health Inc. (“Canopy Animal Health”), they entered into a definitive arrangement agreement pursuant to which Canopy Growth will acquire all of its unowned interest in Canopy Health and Canopy Animal Health. Pursuant to the arrangement agreement, shareholders of Canopy Health, other than Canopy Growth, will receive 0.3790 Common Shares for each common share of Canopy Health held. In addition, Canopy Growth will issue options to purchase Common Shares in exchange for options previously issued by Canopy Health and Canopy Animal Health. In aggregate, the Corporation will issue 3,037,771 Common Shares, having a value of $91,573,637, along with options having the aggregate “in the money” value of $9,688,193. The transaction is anticipated to close on or before July 31, 2018.

Strategic Relationship with Greenstar Holdings

On November 2, 2017, the Corporation entered into a strategic relationship with an affiliate of Constellation Brands Inc. (“Greenstar Holdings”). As part of the strategic relationship (the “Constellation Transaction”), the Corporation issued 18,876,901 common shares to Greenstar Holdings at a price per common share of $12.9783 for aggregate gross proceeds of approximately $245 million, representing approximately 9.9% of the issued and outstanding common shares. In addition, the Corporation issued 18,876,901 warrants to Greenstar Holdings, subject to certain restrictions, expiring 30 months from November 2, 2017. The warrants are exercisable at an exercise price per common share of $12.9783 in two equal tranches, with the first exercisable tranche date being August 1, 2018 and the second exercisable tranche date being February 1, 2019. Pursuant to the Constellation Transaction, Greenstar Holdings will provide the Corporation with broad support in the areas of consumer analytics, market trending, marketing and brand development. In addition, the company and Greenstar Holdings intend to collaborate to develop and market cannabis-based beverages that can be marketed as regulated recreational products in markets where and when such products are federally legal.

As part of the Constellation Transaction, the company and Greenstar Holdings entered into an investor rights agreement (the “Investor Rights Agreement”) whereby the company granted certain pre-emptive rights to Greenstar Holdings to maintain its pro rata ownership in it, subject to certain exceptions, which is currently approximately 9.81%.

Activities Outside Canada

The company only conduct business in jurisdictions outside of Canada where such operations are legally permissible in accordance with all of the laws of the foreign jurisdiction, the laws of Canada and its regulatory obligations with the TSX and NYSE. The legal and regulatory requirements in the foreign countries in which the company operate with respect to the cultivation and sale of cannabis, as well as local business culture and practices are different from those in Canada. Prior to commencing operations in a new country, in partnership with its local legal counsel, consultants and partners, the company conduct legal and commercial due diligence in order to ensure that the company and its officers and directors gain a sufficient understanding of the legal, political and commercial framework and specific risks associated with operating in such jurisdiction. Where possible, the company seek to work with respected and experienced local partners who can help it to understand and navigate the local business and operating environment, language and cultural differences. In consultation with its advisors, the company take steps the company deem appropriate in light of the level of activity and investment the company expect to have in each country to ensure the management of risks and the implementation of necessary internal controls.


As of March 2017, the German government enacted the “cannabis as medicine” law, which allows for the medical use of the cannabis plant, Cannabis sativa. In Germany, the Federal Institute for Drugs and Medical Devices (the “BfArM”) has oversight over the prescription, distribution and import of medical cannabis. The BfArM issues permits for the import of medical cannabis for distribution through pharmacies. With the legalization of cannabis, the BfArM established a cannabis agency to organize and control the cultivation of cannabis for medical use.

The company's German subsidiary, renamed Spektrum Cannabis GmbH (formerly MedCann GmbH Pharma and Nutraceuticals (“Spektrum GmbH”) is licensed through BfArM to import and distribute cannabis and has distributed cannabis products to over 400 pharmacies across Germany.


As of January 1, 2018, the Danish government initiated a trial permitting doctors to prescribe medical cannabis to a defined patient group. The trial will continue for the next four years and is supported by federal funding. The Danish Medicines Agency issues licenses to import “primary” (starter) cannabis products and to cultivate and produce approved forms of medical cannabis for wholesale distribution within Denmark. All medical cannabis production facilities and products are subject to inspection by the Danish Medicines Agency. Regulations for the export of medical cannabis from Denmark remain to be developed.

Spectrum Denmark is its partnership with Danish Cannabis which will serve the needs of Danish medical cannabis patients, and potentially the Scandinavian market, with Spectrum Denmark’s products. A principal in Danish Cannabis, Moellerup Estate, has for years been one of the largest hemp producers in Europe. Moellerup Brands include a wide range of hemp food products from gin, beer, granola, oil, to flour, cosmetics and hemp for CBD oil production. As part of the arrangement, the company committed to an initial capital contribution of $10 million to be released in tranches. In addition, the company will issue up to 1,906,214 common shares, subject to meeting defined milestones. The company initially had a 65% ownership in Spectrum Denmark but now expect to own 100% of Spectrum Denmark once all milestones are completed. Spectrum Denmark holds a license for cannabis production issued by the Danish Medicines Agency.

Czech Republic

In 2013, the government of the Czech Republic amended the Penal Code to permit the legal purchase and use of medical cannabis for patients from licensed domestic sources. The amendments came into force in March 2014 and although no licenses for domestic production have been issued, the legislation permits the importation of medical cannabis from abroad.

On April 15, 2018, the company announced that the company acquired Annabis Medical s.r.o. (“Annabis Medical”), the leader in the Czech Republic’s medical cannabis industry. Annabis Medical has, through its affiliates, held licenses to import and distribute medical cannabis products pursuant to federal Czech licenses since 2014, with distribution commencing in 2015 through pharmacy channels across the Czech Republic.


The Cannabis Licensing Authority (the “CLA”) was established in Jamaica in 2015 under the Dangerous Drugs Act, with powers to make and oversee the implementation of regulations for licenses, permits and other authorizations for the cultivation, processing, distribution, sale and transportation of cannabis for medicinal, scientific and therapeutic purposes. Currently the regulations do not allow for the import or export of medical cannabis. Medical cannabis is available to patients with a prescription written by a medical practitioner registered with the Medical Council of Jamaica. Licenses, permits and other authorizations are required for the cultivation, processing, distribution, sale and transportation of medical cannabis. License applications are subjected to a rigorous review process and licensees are subject to pre- and post-license inspection and reporting requirements. Once an applicant completes its post production building, the CLA inspects for final and full license approval.

On October 25, 2017, the company announced that the company had launched a strategic partnership in the Jamaican cannabis market as part of its ongoing international expansion. Grow House JA Limited, to operate as Tweed Limited JA (“Tweed JA”), will serve the needs of the Jamaican medical cannabis market. The company hold 49% of the share capital of Tweed JA, which, with conditional license approvals already in place, has already begun construction of its facility. The company believe that the production and formulation model Canopy Growth has built in Canada, combined with the strength of the existing team in Jamaica, made up of experienced entrepreneurs with substantial cannabis cultivation experience, will drive the national conversation around cannabis forward, and promote Jamaica’s well-established and renowned ganja, oils and other cannabis products on a global level.


On March 18, 2016, the Brazilian Health Surveillance Agency, Agência Nacional de Vigilância Sanitária, (“ANVISA”), enacted Collegiate Board Resolution No. 66 (Resolução da Diretoria Colegiada – RDC No. 66 de 18 de Março, D.O.U. No. 54, de 21 de Março de 2016), which allows for the prescription and the import of products containing the substances CBD and THC in their formation. ANVISA has indicated that it is preparing regulations for the cultivation and limited sale of medical cannabis in Brazil. In the interim ANVISA has authorized a limited number of companies to conduct research and development of cannabis-based therapeutics using imported cannabis.

Canopy Growth has identified various Latin American markets as targets for expansion and are currently active in Chile and Brazil. The company own 85% of Spectrum Chile S.A. and are conducting research and development activities in Santiago. In Brazil, the company own approximately 39% of Bedrocan Brazil S.A., which facilitates the importation of cannabis into the Brazilian market, and approximately 38% of Entourage Partiçipaões, which is conducting research and development activities in Sao Paulo, Brazil.

South Africa

On May 30, 2018, the Corporation announced the acquisition of Daddy Cann Lesotho PTY Ltd., trading as Highlands (“Highlands”). Based in the Kingdom of Lesotho, Highlands holds a license to cultivate, manufacture, supply, hold, import, export, and transport cannabis and its resin. Under the terms of the agreement, the Corporation issued 666,362 Common Shares to the sole shareholder of Highlands on closing, and subject to meeting certain milestones, the Corporation will issue up to an additional 333,281 Common Shares to the sole shareholder of Highlands, for a total of 999,643 Common Shares at a price of $28.763.


On May 9, 2016, the Corporation announced a partnership with AusCann Group Holdings Ltd. (“AusCann”). Through this partnership, Canopy Growth will offer its expertise in a number of areas including production, quality assurance and operations, and provide strategic advisory services to AusCann in exchange for an 11% ownership stake in the Corporation, as well as further options. AusCann and Canopy Growth will also aim to work together in Australian and international markets in a preferential but nonexclusive arrangement, subject to regulatory approval.

On April 25, 2018, the Corporation along with the Victoria State Government, announced the launch of Spectrum Cannabis Australia (“Spectrum Australia”). The Corporation will invest up to $16 million Australian dollars in the State of Victoria over the next four years to establish Spectrum Australia’s headquarters and research and development facility.


On September 17, 2017, the Corporation, along with its wholly-owned subsidiary Spektrum GmbH announced a supply license agreement with Alcaliber, a leading player in the international pharmaceutical industry based in Spain. Alcaliber has been granted a license to cultivate, produce, manufacture, export, import, and commercialize cannabis for medical and scientific purposes by the Spanish Agency of Medicinal Products and Medical Devices. As a result of the agreement, Canopy Growth and Spektrum GmbH will grant Alcaliber a license to use certain strains and seeds to be grown and cultivated at Alcaliber's facilities for sale worldwide. On March 19, 2018, the Corporation completed a transfer of 1,500 cannabis clones to Alcaliber.

Restrictions on Business Activities Outside Canada

On January 4, 2018, U.S. Attorney General Jeff Sessions issued a memorandum to U.S. district attorneys which rescinded previous guidance from the U.S. Department of Justice specific to cannabis enforcement in the U.S., including the August 2013 memorandum authored by then Deputy Attorney General James Cole (the “Cole Memorandum”) indicating that the U.S. Department of Justice would not prioritize the prosecution of cannabis-related violations of U.S. federal law in jurisdictions that had enacted laws legalizing cannabis in some form and that had also implemented strong and effective regulatory and enforcement systems. With the Cole Memorandum rescinded, U.S. federal prosecutors can exercise their discretion in determining whether to prosecute cannabis-related violations of U.S. federal law.

In addition, on October 16, 2017, the TSX provided clarity regarding the application of Sections 306 (Minimum Listing Requirements) and 325 (Management) and Part VII (Halting of Trading, Suspension and Delisting of Securities) of the TSX Company Manual (collectively, the “Requirements”) to applicants and TSX-listed issuers with business activities in the cannabis sector. In TSX Staff Notice 2017-0009, the TSX notes that issuers with ongoing business activities that violate U.S. federal law regarding cannabis are not in compliance with the Requirements. These business activities may include (i) direct or indirect ownership of, or investment in, entities engaging in activities related to the cultivation, distribution or possession of cannabis in the U.S., (ii) commercial interests or arrangements with such entities, (iii) providing services or products specifically targeted to such entities, or (iv) commercial interests or arrangements with entities engaging in providing services or products to U.S. cannabis companies. The TSX reminded issuers that, among other things, should the TSX find that a listed issuer is engaging in activities contrary to the Requirements, the TSX has the discretion to initiate a delisting review.

The company do not engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff Notice 51-352. The company only conduct business in jurisdictions outside of Canada where such operations are legally permissible in accordance with all of the laws of the foreign jurisdiction, the laws of Canada and its regulatory obligations with the TSX. While Canopy Growth has a number of partnerships with U.S.-based companies that may themselves participate in the U.S. cannabis market, these relationships are licensing relationships that see intellectual property developed in the U.S. brought into Canada, and in no manner, involve it in any U.S. activities respecting cannabis. Additionally, the market price of the common shares may be affected by regulatory changes and developments that affect the cannabis industry generally.

Sales and Distribution Strategy


The distribution model for medical cannabis is prescribed by the ACMPR. Currently, Licensed Producers are only able to distribute medical cannabis through the mail to registered customers. Through its e-commerce platform, Tweed Main Street (see “Other Initiatives – Tweed Main Street”), customers who have successfully registered with Tweed are able to purchase its products online and have them shipped directly to the address indicated on their registration document. Customers are subject to order limits for ever 30-day window as prescribed by the ACMPR. For the upcoming recreational market, additional distribution channels will be available to Licensed Producers (see “Summary of the Cannabis Act and the Proposed Regulations”).


As of the date of this Annual Information Form, Canopy Growth’s business is conducted entirely through its various subsidiaries. Substantially all of the Corporation’s revenue is derived from the sale of medical marijuana by Tweed, Tweed Farms, Bedrocan, Spectrum, BC Tweed, Tweed Grasslands and Vert. Tweed, Bedrocan, Spectrum, Tweed Grasslands and Vert grow marijuana indoors for the purposes of sale and distribution of finished product in accordance with the ACMPR, whereas Tweed Farms and BC Tweed grows marijuana in a greenhouse.

The facilities are required to be in compliance with the ACMPR and any directives issued by Health Canada, which includes, strict security measures, equipment required to manage production, HVAC systems, odour control systems and laboratory equipment or outsourcing arrangements to monitor and test product quality.

Health Canada conducts unscheduled site inspections of Licensed Producers. The company's Licensed Producers have experienced these inspections multiple times at their respective locations. While Health Canada routinely identifies aspects of the operations for improvement, its Licensed Producers respond to and comply with all requests from Health Canada within the time frames indicated in such requests and there are no outstanding inspection issues with Health Canada beyond the day-to-day adjustments that may occur in order to ensure ongoing compliance. As of the date of this Annual Information Form, only Mettrum Ltd., prior to being acquired by the Corporation, has voluntarily recalled distributed product. On November 2, 2016 Mettrum Ltd. conducted a Type III product recall, defined by Health Canada as a situation in which the use of, or exposure to, a product is not likely to cause any adverse health consequences. All patients who were potentially impacted were notified, corrective actions were put in place, and existing product and procedures re-tested and examined.

A primary specialized skill unique to the medical marijuana industry is with respect to the growing of product. While a background in the growing of marijuana specifically may be helpful, the nature of growing marijuana does not differ substantially from the nature of growing any other greenhouse product.

The Corporation also requires client care staff, which will grow as its business grows. Customer care staff is a skillset that is also generally available in the market.

Differentiation in the strains of medical marijuana is primarily achieved through the procurement of seeds. Obtaining seeds for growing medical marijuana must be done in accordance with the ACMPR. Seeds must be obtained from a legal source which includes seeds acquired from Health Canada, seeds imported from a jurisdiction allowed to export seeds or seeds acquired from another Licensed Producer. An authorization from Health Canada may be required to conduct such a transaction depending on its nature.

Equipment used is specialized but is readily available and not specific to the cultivation of medical marijuana. Subject to available funding, the Corporation does not anticipate any difficulty in obtaining equipment as needed.

In November 2013, Tweed received a notice from the Ontario Ministry of the Environment indicating that in order to be in compliance with the Environmental Protection Act and related regulations, Canopy Growth must obtain an Environmental Compliance Approval under Section 9 of the Environmental Protection Act for its Smiths Falls, Ontario facility. Canopy Growth filed an application for an Environmental Compliance Approval within the time required by the Ontario Ministry of the Environment. On May 8, 2017, Canopy Growth received notice that the Ministry has begun their technical review of the application and this review is still in progress as of the date of this Annual Information Form. At this time, it is unclear to the Corporation what requirements the Ministry will impose in connection with the Environmental Compliance Approval.


The Corporation sells cannabis in multiple formats, including dried, oil and softgel capsules.

On May 5, 2014, Tweed made its first shipment of products to customers. Tweed sells its dried cannabis at prices ranging from $6 per gram, for value strains, to up to $12 per gram for premium strains. Typically, growth time, strain yield and market comparatives determine a strain’s price. Very particular strains may be priced higher, but this would be the exception. Tweed does not offer volume discounts to end users, but has developed an income-tested Compassionate Pricing Promise whereby eligible low-income patients may obtain a 20% discount off regular prices

In 2016, Tweed began selling cannabis oil made with GMO-free, organic sunflower oil. Starting with popular offerings, as determined by Tweed’s prior sales, of Argyle, Princeton and Highlands, Tweed introduces new strain-specific cannabis oils on an ongoing basis. Each 10 ml of cannabis oil contains the equivalent of 1 gram of the corresponding Tweed dried-flower variety. Spectrum currently produces approximately sixteen strains, chosen from a genetic library of over sixty strains. These strains are incorporated into “The Spectrum”, a classification system designed to foster an easy to understand product selection discussion between clients, health care practitioners, and Spectrum. The company also offer additional dried cannabis and cannabis oil products through Bedrocan, its Partner Brands, and its CraftGrow collection.

In 2017, the Corporation launched the first-to-market easy to consume softgel capsules. In addition, in June 2018, the company launched Spectrum softgels, which combines the Spectrum classification system, which is based on the cannabinoid content of the strain with its easy to consume softgels.

Business Strategy

Market Plans and Strategies

The cornerstone of the Corporation’s market strategy is to create visibility and awareness in the nascent market for commercially grown medical marijuana. The Corporation believes that its success in this market will be achieved by offering a broad range of quality products at competitive prices and delivered through outstanding client service under a well identified brand. Each strain of medical marijuana is unique and the Corporation believes that carrying a wide variety of strains is essential to its long-term success. See below under the headings “Risk Factors – Unfavourable Publicity or Consumer Perception”, “Risk Factors – Change in Laws, Regulations and Guidelines” and “Risk Factors – Competition” for further information.

Licensed Producers are not allowed to advertise their products to the public. On June 30, 2014 Health Canada circulated an advertising bulletin to all Licensed Producers outlining their concerns regarding the use of promotional materials and advertisements. On November 25, 2014 Health Canada issued warning letters to 20 Licensed Producers regarding their advertising practices. Tweed and Bedrocan were among the Licensed Producers who received warning letters and came into compliance with the marketing restrictions by January 12, 2015 and November 30, 2014 respectively, both within the required date indicated by Health Canada in the warning letter. Tweed, Bedrocan and Spectrum worked closely with Health Canada to address their concerns and came into compliance with the marketing restriction. None of its Licensed Producers have not been subject to any sanctions or penalties in connection with the marketing restrictions.

Although the Corporation is not allowed to advertise its products to the public, it is able to promote its products to doctors. A key focus for the Corporation has been to develop a multifaceted approach to reach doctors through direct and indirect outreach. The Corporation has established a presence at certain major physician focused conferences, and an exclusive presence at certain accredited physician education events. The Corporation has established a medical advisory board with several key opinion leaders which acts as a valuable resource for the medical outreach team who will interface directly with physicians at a rate of approximately 15,000 office calls per year throughout Ontario annually.

In its effort at promoting brand recognition without advertising its products directly to the public, the Corporation continues to hold community events (to the extent allowable within its regulatory environment) in order to build relationships and visibility for the brand.

In a given year, the Corporation will continue to invest in attending and participating in events in the medical community, including medical conferences, and reaching approximately 2000 unique physicians. Additionally, the Corporation expects to invest in local continuing medical education events to identify key strategic patient organizations with which to align. The Corporation has a number of medical advisors in place and continues to seek leaders to join its Advisory Committee.

Protection of Intellectual Property

On December 18, 2014 Canopy Growth entered into a Cannabis Production Pilot Agreement (the “Pilot Agreement”) with Indoor Harvest Corp. (“Indoor Harvest”), pursuant to which the parties partnered in a pilot project to test the production of medical marijuana using an aeroponic system designed by Indoor Harvest. Upon completion of the pilot project, Tweed will have the right to jointly apply for patents with Indoor Harvest for any technology developed under the Pilot Agreement. Tweed will receive the exclusive right to use the technology developed under the Pilot Agreement to cultivate medical marijuana in Canada and any jurisdiction outside of the United States on a royalty free basis, including the right to assign or sublicense any such rights. The research and testing of the aeroponic system is almost complete and both parties are ready to move on to the commercialization stage.

The proprietary nature of, and protection for, the Corporation’s products, technologies, processes, and know-how are a key aspect to its business. To establish and protect its intellectual property in Canada, Canopy Growth has made various trademark and patent applications. The company rely on a combination of patents, trademarks and contractual restrictions to establish and protect its IP. Canopy Growth has established and continue to build proprietary positions in all key aspects of its business. The Corporation has retained legal counsel to analyze its unregistered intellectual property, and continually seeks out new opportunities for enhancing its intellectual property portfolio.


Set out below are the names, committee memberships (as at the date hereof), province or state and Country of residence, principal occupations and periods of service of the directors and executive officers of the Corporation.

Bruce Linton

Mr. Linton is the founder of Canopy Growth Corporation (CGC) and co-founder of Tweed Marijuana Incorporated and has been the Chief Executive Officer since 2014. Canopy Growth was the first cannabis producing Corporation in North America to be listed on a major stock exchange (TSX, July 2016), included on a major stock index (S&P/TSX Composite Index, March 2017) and to be listed on the NYSE (May 2018). Bruce’s primary focus has been to position cannabis brands in a competitive market and to raise the capital necessary to fund such operations. Bruce’s experience as a founder, CEO, and Board member across a wide variety of enterprises has influenced the positive start of Canopy Growth, which to date has enjoyed market support for capital raises of over $200 million. Bruce has led six M&A transactions valued over $500 million total since founding CGC.

In addition to his leadership responsibility at Canopy Growth, since 2007 Bruce has been the President of HBAM Holdings Inc. and since 2013, Bruce has been the CEO of communications company Martello Technologies. After beginning his career at Newbridge Networks Corporation, he has since held positions that include General Manager and Re-Founder of, President and Co-Founder of webHancer Corp, and part of the establishing team at CrossKeys Systems Corporation. He was also part of the leadership team for the NASDAQ/TSX initial public offering at CrossKeys. He is the past Chairman of the Ottawa Community Loan Foundation, past Board Member on World Bank Water and Sanitation Program Council, past Board Member and Treasurer of Canada World Youth, past Board of Governor for Carleton University, past President of the Nepean Skating Club, and past President of Carleton University Students Association.

John K. Bell, FCA, FCPA, ICD.D

Mr. Bell founded Shred-Tech and grew it into a global giant in the mobile document shredding and recycling industry. After selling Shred-Tech in 1995, he purchased Polymer Technologies and grew it from a local plastics manufacturer to a global auto parts company before exiting in 2007. John also served as interim CEO and director of ATS Automation (TSX), which operates 24 global manufacturing facilities, has 4,000 employees and $700 million in sales during a time of management and board renewal in 2007. John was the lead investor and Chairman of BSM Wireless (TSX-V). First investing in 2006, he led board and management renewal leading to substantial and profitable growth before successfully exiting in 2014. John sits on the Board of Strongco Corp, traded on the Toronto Stock Exchange as SQP and DelMar Pharmaceuticals, which is traded on NASDAQ as DMPI and since 2009, has been on the Board of The Royal Canadian Mint, a $3 Billion Crown Corporation. Since 2005, Mr. Bell has acted as the Chairman and CEO Onbelay Capital Inc. an investment management and holding corporation.

Chris Schnarr, ICD.D

Mr. Schnarr is the Managing Director of Lorian Group Inc., a capital markets consultancy. Mr. Schnarr has over 25 years of experience founding, managing, and advising growth companies, including strategy, corporate finance, capital markets, corporate development, M&A, financial reporting, and governance. His functional experience across executive positions spans Treasurer, Executive Vice President, Chief Financial Officer, President, and Chief Executive Officer. From May 2014 to November 2016, Mr. Schnarr acted as President and CFO of Delivra Inc. a Corporation involved in the development and sale of transdermal products and technologies and from August 2011 to August 2013, he acted as CEO and Director of BioExx Specialty Proteins Ltd. His broad industry experience includes technology (hardware, software, and services), communications, agriculture, food processing and food ingredients, financial services, health care, and sustainability. Mr. Schnarr has over 20 years of public Corporation Board experience across TSX:V and TSX listed companies, as well as extensive committee experience. He is also a Director and Chair of the Compensation & Governance Committee and a member of the Audit Committee of VitalHub Corp. (TSX:V).

Mr. Schnarr holds a Masters in Business Administration (finance) from University of British Columbia (1990), and a Bachelor of Business Administration degree with a Minor in Economics, from Wilfrid Laurier University (1989). He is a member of the Institute of Corporate Directors, a graduate of the Directors Education Program at the Rotman School of Business at the University of Toronto, and holds the ICD.D designation.

Murray Goldman

Mr. Goldman, is the former Chairman of Bedrocan Canada Inc. and joined the Board of Directors when Bedrocan was successfully acquired by Canopy Growth. Mr. Goldman is the founder and Chairman of The Goldman Group, a fully integrated real estate development Corporation that has developed and built in Canada, the United States and Israel for over 50 years. The Corporation has a history of innovative and original mixed-use developments that have established precedent- setting neighbourhoods in the Greater Toronto Area. In 2010, Mr. Goldman received the NAIOP lifetime achievement award acknowledging his leadership in this field. Mr. Goldman continues to serve as a director of a number of prominent organizations and is a major investor and founder of a number of innovative medical and scientific research companies.

Peter Stringham

Mr. Peter E. Stringham retired in 2016 as Chairman and Chief Executive Officer of The Young & Rubicam Group Of Companies. Mr. Stringham served as the Chief Executive Officer of Young & Rubicam Brands at Young & Rubicam, Inc. since March 2, 2007. Mr. Stringham served as Group General Manager of Marketing of HSBC Holdings PLC. and HSBC Bank plc. since 2001. He served as Head of Global Marketing for HSBC Holdings plc. until March 2007. He joined HSBC in 2001 and served for 6 years, where he was instrumental in positioning it as the 'world's local bank' in a series of local advertising and marketing campaigns, and has helped build HSBC into one of the world's most recognized brands. He consolidated HSBC's advertising and marketing duties with a single lead worldwide marketing services group. He served with WPP Group to cover HSBC's operations in 76 countries and territories.

Mark Zekulin

Since 2015, Mark has been the President of Canopy Growth, previously acting as the President of Tweed, Officer, Vice President and General Counsel of Canopy Growth. He ensures that patients and healthcare practitioners choose Canopy Growth, through its subsidiaries as Licensed Producers, as their trusted supplier of marijuana for medical purposes. This includes overseeing the Corporation’s medical and patient outreach strategy, driving operations and advancing the Corporation’s market strategy.

A graduate from the University of Waterloo in Mathematics, the University of Ottawa in Law, and the University of Cambridge in International Law, Mark has previously provided legal, political and strategic advice to high-profile local and international corporate clients, most recently as Counsel at the Ottawa-Washington international trade law firm of Cassidy Levy Kent. Previously, Mark has also served as a Senior Advisor to the Honourable Dwight Duncan, the Ontario Minister of Finance, and has worked internationally at the Business and Industry Advisory Committee to the Organization for Economic Co-operation and Development (OECD) as Acting Senior Policy Manager.

Tim Saunders

Tim has been the Chief Financial Officer of Canopy Growth since 2005. Tim is a finance executive experienced with large international public companies and private equity-backed start-ups, having worked both in Canada and Europe. His leadership style focuses on business transformation and forward thinking to advance business capability and the business model. Tim joined Canopy Growth in summer 2015 after gaining executive and leadership experience across a number of sectors including mobile, telecom, semiconductors, manufacturing and clean tech. Tim most recently led Black Canvas Consulting with assignments such as Strategic Advisor to the President's Office of Export Development Canada. Tim was previously a senior finance executive with Vodafone, Oskar Mobil, Mitel and Zarlink Semiconductor and CFO at Plasco Energy Group where he was instrumental in raising $360 million in capital during the early start-up of the Corporation until 2013.

Tim earned his CPA, CA with PricewaterhouseCoopers and is a graduate of Bishop’s University (Quebec) where he obtained his BBA. Tim also earned an executive certificate from the Ivey School of Business at the University of Western Ontario.

Deborah Weinstein

Deborah Weinstein is the Secretary of Canopy Growth. Ms. Weinstein does not work full time for the Corporation, but devotes such time as is required in connection with her duties. Ms. Weinstein currently serves as a director of OpenText Corporation and Dynex Power Inc., as well as secretary of Thermal Energy International Inc. Ms. Weinstein holds a law degree from Osgoode Hall Law School at York University. Ms. Weinstein is called to the bar of Ontario as a member of the Law Society of Upper Canada.


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