the list
OVERVIEW OF CANOPY GROWTH CORPORATION
At September 30, 2017, there were 637 full-time employees in the Company as compared to 181 at
September 30, 2016.
Canopy Growth, an early mover in the Canadian market, is a multi-brand cannabis company that believes
its strong focus on and investment in brand, market and product differentiation, increased cannabis supply
through Company and partner 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.
As discussed above (SEE Legalization of Cannabis in International Jurisdictions), many countries around
the world are moving to provide their citizens with legal access to cannabis products produced by a
commercial regulated industry, similar to that pioneered in Canada.
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Eight Capital, “The Value Case for Investing in the Cannabis Sector”.
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BRANDS
PLATFORMED USER EXPERIENCE – TWEED MAIN STREET
The Company has established Tweed Main Street as the platform for its core customer experiences, both
online and physical “brick and mortar” locations.
With expected prominence of online sales during the initial rollout of the regulated recreational market and
the continuation of the existing ACMPR e-commerce-driven market for Canadian medical patients, Canopy
Growth has undertaken a number of initiatives in the first nine months of calendar 2017 to continue leading
the online cannabis space. These initiatives include the launch of the Tweed Main Street online store, a
single online platform that enables registered patients to purchase medicinal cannabis from multiple
producers across numerous brands.
Product availability in Tweed Main Street reached consistency as to selection and availability of strains and
formats during the second quarter as the company’s investments in production and the platform improved.
Further engagement between the Company’s brands and customers is facilitated by the Company’s
expanding network of Tweed Main Street Shops. These physical “brick and mortar” locations in Southern
Ontario (Barrie, Guelph, Hamilton and Toronto) provide an opportunity for interested individuals to learn
about medical cannabis in a helpful, supportive and consumer-friendly environment. The model could pivot
to allow cannabis sales if regulations provincial allow under recreational frameworks.
Tweed Main Street offers an income-tested Compassionate Pricing Promise whereby eligible patients may
obtain a 20% discount off regular prices.
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PRODUCTION BRANDS
The Company’s core production brands are:
Tweed
A key focus of the Company, since its inception, has been the development of its Tweed brand. From the
name, logo and design aesthetic, to the approachable tone and light-hearted copy, Tweed is branded and
positioned to be approachable Tweed deliberately chose to incorporate a sense of texture and
approachability that welcomes customers and encourages an intimate relationship with the brand. In
support of its brand, Tweed focuses heavily on its social media and earned media presence as an
engagement strategy. Tweed has emerged as the most dynamic brand in the industry with exceptionally
strong appeal and recognition in the medical cannabis industry.
Tweed is currently positioned as a diverse medicinal cannabis brand offering high-quality cannabis in
multiple product forms – dried, oil and easy-to-consume, soft gels. The Tweed brand will evolve towards
an adult lifestyle brand to best serve the needs of the future regulated recreational market in Canada.
Black Label
Black Label is Tweed’s premium sub-brand meant to carry innovative product types and delivery formats
in addition to certain dried strains that warrant a premium price point. On June 19, 2017, Tweed launched
the sale of the sector’s first encapsulated cannabis oil soft gels under the Black Label brand. Black Label
soft gels provide a very convenient delivery format that is easy to carry and easy to consume.
Spectrum Cannabis
On February 1, 2017, the Company acquired ACMPR licensed producer Mettrum. As part of the acquisition,
Canopy Growth acquired the trademarked Mettrum Spectrum, which simplifies the dialogue around
strength and dosage by categorizing medical cannabis using a straightforward colour-coded guide.
On June 19, 2017, Canopy Growth announced a new international medical brand that will serve as the
Company’s physician and patient-facing identity based on the Mettrum Spectrum. Spectrum Cannabis will
focus on physician interactions, stakeholder outreach, and patient education.
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Figure 3: Strain categorization by colour spectrum (and % of THC or CBD)
On September 18, 2017, the Company introduced Spectrum Cannabis to the medical market in Canada.
As part of the introduction of Spectrum Cannabis to the medical market in Canada, the Company is
rebranding Mettrum to Spectrum Cannabis. Current customers should expect to see the branding and name
change reflected in product packaging over the next number of months. The launch of Spectrum Cannabis
in Canada, and joining Spectrum Cannabis in Germany, Denmark and Chile ensures a consistent and
recognizable global brand across all federally legal jurisdictions where Canopy Growth operates.
Bedrocan Canada
The Bedrocan brand has been associated with standardized cannabis to medical patients in the
Netherlands for more than 20 years. The Company acquired the Bedrocan Canada brand in 2015 to
strengthen the Company’s position in the Canadian medical cannabis market. The Company intends for
Bedrocan to remain solely focused on the medical market, even when a legalized regulated recreational
market is implemented in Canada.
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AFFILIATED BRANDS
Leafs By Snoop
Tweed has partnered with Snoop Dogg, a renowned cannabis connoisseur and business pioneer in the
Cannabis sector. Snoop and business partner Ted Chung recently launched online media platform MERRY
JANE, the definitive cultural destination for news and original content.
Tweed and Snoop Dogg have partnered to bring the Leafs By Snoop offering of diverse whole-flower
strains, including a high CBD option and mid to high-range THC options, to Canada and exclusively
available to Tweed patients.
DNA-Certified
DNA Genetics, world-renowned Cannabis breeders, have won awards in every category in the Cannabis
Cup, the world’s preeminent cannabis competition. In October 2015, Tweed and DNA Genetics announced
an exclusive partnership that would see Tweed leverage DNA's expertise in cannabis breeding to bring
new, exclusive DNA Certified strains to Tweed patients. With an official certification on select strains, DNA
is adding a stamp of approval. DNA Certified cannabis has been personally bred, phenotyped and inspected
by DNA Genetics.
On October 23, 2017, the Tweed and DNA Genetics announce the renewal and expansion of their
partnership through to October 2022. As part of the expansion, Tweed and DNA Genetics have expanded
their exclusive licensing relationship into Jamaica, where, so long as federally legal, Tweed and DNA will
work similarly in the medical market to cultivate the best possible cannabis genetics.
CraftGrow
Tweed’s curated CraftGrow collection brings even more variety to registered patients by bringing otherwise
unaffiliated partner’s products into the store. It’s a win-win model that increases the SKU count available
through the Tweed Main Street platform while in turn providing partner’s customizable access to the
Company’s platform including rigorous product Quality Assurance program, online market place, award
winning customer care and call centre capabilities as well as Tweed’s large and growing customer base.
CANNABIS PRODUCTION – COMPANY OWNED FACILITIES
Through its wholly-owned subsidiaries, Canopy Growth operates numerous state-of-the-art production
facilities with over half a million sq. ft. of licensed indoor and greenhouse production capacity. The Company
has eight licenses to cultivate and sell cannabis under the ACMPR program. The Company’s subsidiaries
are licensed to produce and sell annually, 21,100 kilograms of dried cannabis and 9,800 kilograms of
cannabis oil and has a combined licensed vault monetary capacity of $437,500.
As it relates to future production needs, Canopy Growth is a diversified cannabis producer. It will continue
to place the highest priority on meeting the needs of medical patients, expanding internationally as federal
laws permit, and increasing its capacity to serve regulated recreational customers across Canada in the
future. With that in mind, widespread capacity expansion totaling over 2.4 million sq. ft. of production space
announced as of November 13, 2017
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The Company’s wholly-owned subsidiaries operate licensed cannabis production facilities in locations
across Canada as described below.
Smiths Falls, Ontario
The licence for this facility covers 168,000 sq. ft, and covers 24 completed grow rooms and related
vegetation, nutrient delivery and post-production infrastructure. On June 19, 2017, the Company
announced that its Smiths Falls facility received a certificate of Good Manufacturing Practices (GMP) as
issued by the German authority, Regierungspräsidium Tübingen.
The Smiths Falls facility also includes an in-house laboratory and R&D area, cannabis oil extraction
infrastructure, a high-level security vault and a breeding facility that features several breeding rooms,
phenotyping rooms, as well as male and female plant rooms.
Tweed received a Dealer’s Licence pursuant to the provisions of the Controlled Drugs and Substances Act
and its Regulations and will now begin operating this purpose-built area, built to Good Manufacturing
Practice (“GMP”) specifications, within the Smiths Falls facility. As a licensed dealer, Tweed will be able 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.
The total footprint of the existing Smiths Falls facility, at 472,000 sq. ft. can support a significant increase
in production, processing and order fulfillment capacity. Canopy Growth has begun construction in the
remaining unlicensed portion, approximately 300,000 sq. ft. Smiths Falls is corporate headquarters and will
act as a strategic post-production hub where, in addition to production, value-added brand differentiation
functions occur.
The 42-acre site at 1 Hershey Drive could house hundreds of thousands of square feet of additional
production and processing space.
Niagara-on-the-Lake, Ontario
The production facility in Niagara-on-the-Lake, Ontario (“Niagara”) is comprised of a greenhouse facility
that is 375,000 sq. ft., of which 350,000 sq. ft. represents the greenhouse and 25,000 sq. ft. is used for
post-harvest processing storage, shipping and offices. Currently, all dried cannabis produced in the Niagara
greenhouse is transferred in bulk to the Company’s facility in Smiths Falls for final processing and sale. All
350,000 sq. ft. of the greenhouse is utilized to produce medical cannabis.
On June 19, 2017, the Company announced that its Niagara facility received a certificate of Good
Manufacturing Practices (GMP) as issued by the German authority, Regierungspraesidium Tübingen.
With the ability to grow high-quality strains that support premium price points, in a low-cost greenhouse
environment, the Company can be expected to generate higher margins on the premium strains cultivated
in the Niagara greenhouse facility.
Upon completion of the announced expansion, Tweed Farms will be home to over 1,000,000 sq. ft. of
greenhouse space under glass, plus post-harvest facilities including a recently renovated 10,000 sq. ft, of
updated space for new drying rooms and an upgraded laboratory.
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Toronto, Ontario
Canopy Growth’s indoor facility in the Greater Toronto Area leverages over two decades of indoor
standardized cannabis growing experience of Netherlands-based Bedrocan International BV (“Bedrocan
International”). This 52,000 sq. ft. production facility is licensed, and includes 34 vegetative and growing
rooms. The Toronto facility exclusively cultivates Bedrocan Canada strains.
The Company acquired its facility in Toronto on August 28, 2015 as part of the acquisition of Bedrocan
Canada pursuant to a definitive plan of arrangement, in which the Company acquired all of the issued and
outstanding securities of Bedrocan Canada.
Bowmanville South, Ontario
The Bowmanville South facility’s current licence allows for the production, sale or provision, possession,
shipping, transportation, delivery and destruction of dried marijuana and marijuana plants or seeds. The
license covers 60,000 sq. ft. and includes 13 growing rooms as well as necessary vegetation, nutrient
delivery and plant destruction infrastructure.
The Bowmanville South facility sits on a 7-acre site which provides the opportunity for future expansion.
The Company is currently planning the expansion of this location, by up to 100,000 sq. ft. of growing
capacity, as the market for legal cannabis develops. In addition, on October 6, 2017, the Company acquired
a parcel of land next to the Bowmanville South location to add approximately 33 acres for future expansion.
Yorkton, Saskatchewan
The Yorkton facility operates as Tweed Grasslands. Tweed Grasslands will operate a 90,000 sq. ft. facility,
of which approximately 15,000 sq. ft. is currently licensed, with the capacity to expand operations to over
300,000 sq. ft. on the parcel of land if necessary.
Saint-Lucien, Quebec
On November 2016, the Company acquired a pre-license applicant, Vert Cannabis (formerly Vert Medical),
and the lease on a relatively small production facility in Drummondville, Quebec. Since being acquired by
Canopy Growth, the Company has fully upgraded the site’s 7,000 sq. ft. facility to the Company’s standards.
The Company also has the right to purchase the 90 acres of leased land and building located in
Saint-Lucien, Québec.
Given the Company’s knowledge of and experience applying the ACMPR regulations as well as its
business, operational and capital markets experience, the Company is able to conduct detailed business,
finance and operational reviews of potential acquisition targets. Moving forward the company may continue
expansion efforts through a variety of means including by acquiring existing licensed or applicant-stage
businesses.
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CANNABIS PRODUCTION – PARTNER OR JOINT VENTURE OWNED FACILITIES
The Company may enter into agreements with select partners for the development of additional facilities in
Canada and other international jurisdictions where cannabis is federally legal. For joint venture partners,
the Company will look for partners that can bring specific capabilities, expertise and financial resources to
the venture.
Edmonton, Alberta
Canopy Growth announced on June 24, 2017 that it will expand its footprint into Edmonton, Alberta with a
160,000 sq. ft. facility that will be leased to Canopy Growth by the Goldman Group, a related party, with an
option to purchase the facility at the end of each 5-year quarter of the 20-year lease. The transaction closed
in August 2017 with the existing tenants vacating October 1, 2017 so that expansion construction could
begin. The agreement and licensing are contingent upon Health Canada and municipal approvals.
Fredericton, New Brunswick
On June 24, 2017, Canopy Growth announced it entered into an agreement to acquire a 100,000 sq. ft.
facility in Fredericton, New Brunswick with the intention of launching a Tweed facility for indoor production
and distribution.
On August 28, 2017, the Company announced that it had acquired Spot Therapeutics Inc. (“Spot”), an
ACMPR applicant based in Fredericton, New Brunswick. Additionally, an affiliated entity of the Company
entered into a definitive agreement to complete the previously announced purchase of the industrial building
and property where the Company’s Fredericton-based production and distribution platform is being
established. The Company will lease the building from the affiliated entity. The facility will operate under
the Tweed brand and support the Company’s global operations with high quality, large scale cannabis
production capabilities. The existing building and infrastructure is in excellent condition and includes almost
40,000 sq. ft. of dedicated production space. The facility is anticipated to be ready for licensing and
production before the end of 2017. Once licensed, this initial footprint is anticipated to produce over 4,000
kg of dried cannabis annually. The property is suited for expansion to over 100,000 sq. ft.
Under the terms of the transaction, shareholders of Spot will receive up to $2,250 in total consideration,
less adjustments for all liabilities of Spot as of the closing date and certain payments to be made by Spot
between closing and the second tranche payment. At closing, and in satisfaction of the first tranche payment
of $1,000 Canopy issued 111,669 common shares to the shareholders of Spot. The second tranche
payment will be satisfied by the issuance of additional common shares, subject to completion of certain
licensing and operational milestones.
British Columbia
On October 11, 2017, the Company announced that it has entered into a definitive joint venture agreement
to form a new company, BC Tweed Joint Venture Inc. together with a large-scale greenhouse operator (“the
Partner”) to develop 1.3 million sq. ft. of greenhouse growing capacity in British Columbia with an exclusive
option to develop a further 1.7 million sq. ft. of existing greenhouse infrastructure at a second BC location.
Applications have been submitted for both sites and subject to Health Canada and other standard regulatory
approvals. Canopy Growth is hopeful that it will have product available from the Joint Venture as soon as
July 1, 2018. Under the terms of the agreement and subject to third-party approvals required by the Partner,
the Joint Venture has conditionally agreed to lease a 1.3 million sq. ft. (30- acre) greenhouse facility located
on a 55-acre parcel of land in BC from an affiliate of the Partner, with an option to acquire the property. The
Joint Venture significantly supplements the Company’s industry leading production portfolio and positions
Canopy Growth with production and distribution facilities from coast to coast across the country.
As consideration for entering into and operating the Joint Venture, Canopy Growth will, based upon various
milestones and subject to required regulatory and stock exchange approvals, issue the Partner 310,316
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common shares of Canopy Growth over two tranches and a further $2,750 of common shares in two
remaining tranches. Canopy Growth owns 66 2/3% of the Joint Venture.
To fund the development of the Joint Venture, Canopy Growth will contribute, in multiple tranches, an
aggregate of $20,000 in cash (of which approximately $1,000 was advanced at closing), in exchange for
Class A Preferred Shares with cumulative preferred dividends.
The BC Tweed Joint Venture Partner brings multi-generational knowledge of greenhouse operations and
efficiencies having managed and operated over 5.8 million sq. ft. of greenhouse infrastructure in various
climates throughout North America over the past 30 years. The Partner is an experienced large scale, low
cost, hydroponic greenhouse operator, with industry leading food safety, traceability and compliance
expertise and a deep focus on sustainable production practices and efficiencies. The Partner brings tier
one assets and an operations team with over 200 years of combined growing experience.
CANNABIS PRODUCTION – PARTNER CAPACITY UPTAKE
The Company has established a number of programs designed to help sector partners, both license
applicants and LPs, establish and/or grow their licensed operations and achieve greater success faster.
Through these programs, additional cannabis production capacity will be secured for sale to the Company’s
customers.
Tweed’s Curated CraftGrow Line
On April 19, 2017, Canopy Growth announced the launch of Tweed’s curated CraftGrow line, which brings
high quality cannabis grown by a diverse set of producers to Tweed Main Street’s customers. To date, six
distinct partners, AB Laboratories Inc., Canada’s Island Garden, JWC Ltd., PhyeinMed Inc., PUF Ventures
Inc. and Valens GroWorks, have joined CraftGrow, all with different growing styles and approaches to
cannabis. Cannabis grown by Canada’s Island Garden, located on Prince Edward Island, became available
for sale in Tweed Main Street on June 19, 2017.
Canopy Rivers
On April 27, 2017, Canopy Growth announced the commitment of $20,000 in seed capital funding for a
complementary but distinct company that will provide financial and strategic support to ACMPR applicants
and existing Licensed Producers. Specifically, the newly formed company, Canopy Rivers Corporation
(“Canopy Rivers”), will collaborate with Canopy Growth to foster and secure a diverse product supply of
high quality, safe cannabis for Canopy Growth’s customers.
Canopy Rivers plans to engage in strategic transactions with LPs and selected LP applicants. Canopy
Rivers’ relationship and joint venture agreement with Canopy Growth also provides partners with potential
access to the industry’s largest portfolio of patients and potential consumers via Canopy Growth's Tweed
Main Street and Craft Grow programs and platform.
For the Company, this strategic agreement with Canopy Rivers provides Canopy Growth with a secure,
and predictable source of incremental cannabis supply, increased diversification of its products available
for sale, and an ideal partner to generate referral and introduction opportunities for Tweed Main Street and
the Company’s Craft Grow programs and platforms.
On May 12, 2017, the Company advanced $20,000 in the form of a convertible debenture. On
June 16, 2017, Canopy Rivers closed an offering to raise aggregate gross proceeds of $36,230, at which
time the convertible debenture including interest was converted to equity. This offering increased the cash
resources available for Canopy Rivers to provide growth capital and strategic support within the regulated
cannabis industry to approximately $56,000.
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During the second quarter, Canopy Rivers entered into royalty agreements and issued financial instruments
to two ACMPR applicants, along with off-take agreements entered with Canopy Growth with the applicants
when they obtain their Health Canada licenses.
CANOPY GROWTH’S POSITIONING FOR THE CANADIAN REGULATED RECREATIONAL MARKET
When selecting Licensed Producers to supply cannabis for retail distribution, provincial governments and/or
their liquor control agencies, many factors, including production capacity, product quality, product variety,
product branding, and price are expected to influence product demand and supplier selection. With
renowned cannabis brands (Tweed, Leafs By Snoop & DNA Genetics), strong customer and online
communication, substantial product variety, management believes consumer demand for the Company’s
products will be strong. On the cannabis supply side, with the largest licensed platform in the sector, at over
650,000 sq. ft., and over 2,400,000 additional square feet under development, management believes the
Company is well positioned to supply a significant portion of the regulated recreational market in Canada.
With licensed cultivation and production operations in Ontario and Saskatchewan, a pre-license facility in
Quebec and announced development plans spanning British Columbia, Alberta and New Brunswick,
Canopy Growth has made meaningful commitments to invest in various provinces.
The Company’s CraftGrow program discussed elsewhere, which assists smaller local/regional Licensed
Producers in getting their product to market, provides additional value-added consideration should
provincial liquor control agencies seek the flexibility to showcase products of local/regional Licensed
Producers within a trusted supply agreement with a larger producer.
Management believes large scale Licensed Producers are well positioned to support the provinces in their
efforts to establish, oversee and implement physical and online cannabis retail. The Company, with
comprehensive standard operating procedures for secure cultivation, production, storage and
transportation of Cannabis and significant, highly secure vault storage capacity in place or under
development in multiple locations across the country, is well positioned to assist provincial agencies with
the provisioning of secure cannabis storage and transportation. With the largest customer base in the legal
Canadian cannabis market and broadest product portfolio in the sector, the Company can offer provincial
agencies/crown corporations/retailers with significant consumer product demand intelligence to assist with
product selection.
As highlighted earlier, Canopy Growth believes that, in certain provinces, it will take two years and possibly
longer to rollout the full network of regulated cannabis retail stores that is required to satisfy consumer
demand. As such, Canopy Growth believes that the majority of sales in the first two years of the regulated
recreational market will go through the online sales. With less than 12 months to establish a robust online
retail system and cannabis marketplace, management expects that certain, if not many, provinces could
benefit from leveraging the existing online ecommerce, customer demand data and transactional IT
systems that have been deployed by the Company. The Company’s Tweed Main Street online store (See
Overview of Canopy Growth Corporation, Tweed Main Street), a single online marketplace offering
cannabis for sale from multiple producers across numerous brands – delivering a shopping experience that
consumers expect, is uniquely suited to deliver the online retail experience that provincial agencies/crown
corporations/retailers will be expected to deliver.
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CORPORATE DEVELOPMENT
Canopy Growth’s core focus is strengthening the Company’s market share position in federally legal
cannabis markets. To achieve this, the Company will continue making deliberate investments, including
via acquisition and entering into strategic partnerships to:
• Increase the strength and differentiation of the Company’s multiple brands;
• Increase awareness of the healthcare community as to the potential applications of medical
cannabis;
• Increase the efficiency and effectiveness of the Company’s customer engagement resources,
including online marketplace(s) and a telephone accessible customer care centre;
• Increase the diversity, quality and inventory of products, across value and premium cannabis
market segments, available to patients;
• Significantly increase the cannabis supply to Tweed Main Street, both through owned production
capacity, partner or joint venture owned capacity as well as partner capacity offtake;
• Drive production and yield efficiencies and focus on cost reduction efforts;
• Drive growth in international markets in which cannabis is federally legal;
• Expand the Company’s business into the development of value-added products in preparation for,
and the marketing, production and sale of value-added products as permitted by regulations; and
• Diversify the Company’s business in the distinct but complimentary legal cannabis markets.
INTERNATIONAL DEVELOPMENT
Management believes that a significant opportunity exists today to leverage the Company’s expertise,
financial strength and business model in federally legal cannabis markets around the world. In addition,
management believes future opportunities are likely to exist for the Company in jurisdictions where
governments are actively moving towards such a legal framework. Subject to regulatory approval, strategic
international business opportunities pursued by the Company could include:
• Providing advisory services to third-parties that are interested in establishing licensed cannabis
cultivation and sales operations;
• The export of medical cannabis in countries outside of Canada; and
• Ownership of cannabis cultivation and sales operations in countries outside of Canada, where it is
federally legal to do so.
Canopy Growth, with the assistance of international subsidiaries or partners, has secured the necessary
agreements to export medicinal cannabis to Australia, Brazil and Germany. Canopy Growth believes that
an opportunity will exist, for some time to come, to export medical cannabis to countries who wish to secure
a supply of medicinal cannabis but have yet to develop domestic production capabilities. To date, the
Company has announced subsidiaries, partnerships or business activities in Germany, Chile, Denmark,
Jamaica, Australia, Brazil and Spain as described below.
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Figure 4: International subsidiaries, partnerships or business activities
Spektrum Cannabis GmbH
Spektrum Cannabis GmbH (“Spektrum” and formerly MedCann GmbH Pharma and Nutraceuticals) is a
German-based pharmaceutical distributor that was acquired by the Company on December 12, 2016.
On July 25, 2016, the Corporation announced that Tweed had received necessary approvals in Canada
and Germany to begin export of medical cannabis for sale to German patients, and will be working with
Spektrum, a then privately held pharmaceutical importer and manufacturer in Germany. Since then,
Spektrum has placed Tweed-branded cannabis strains in hundreds of German pharmacies.
To date, Spektrum distributes cannabis products to over 400 pharmacies across Germany. Spektrum’s
processing facility is GMP certified by Regierungspraesidium Tübingen.
Spectrum Chile SpA
The Company announced on June 20, 2017 its complementary expansion into South America with
Spectrum Chile SpA (“Spectrum Chile”). Medical markets in Chile are emerging and the Company plans to
enter the market aggressively in order to position itself as a leader. Through a strategic partnership with a
domestic Chilean medical cannabis company, Spectrum Chile will work to ensure Chilean patients have
access to high-quality cannabis products.
Spectrum Denmark ApS
On September 21, 2017, the Company announced that it had established a binding strategic partnership in
the Danish market. Spectrum Denmark ApS (“Spectrum Denmark”) will be a joint venture between Canopy
Growth and Danish Cannabis ApS (“Danish Cannabis”) which will serve the needs of Danish medical
cannabis patients with Spectrum’s proven 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, Canopy Growth will provide an initial capital commitment of $10,000 to be released
in tranches. In addition, the Company will also issue up to 1,906,214 common shares in Canopy Growth
subject to meeting defined milestones.
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Tweed JA
On October 25, 2017, the Company announced that it 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. Canopy
Growth holds 49 per cent of the share capital of Tweed JA, which, with conditional license approvals already
in place, has already begun construction of its facility.
Canopy Growth believes that the production and formulation model it 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.
AusCann Group Holdings Ltd.
On May 20, 2016, the Company closed a minority stake with AusCann Group Holdings Ltd. (“AusCann”)
(ASX:AC8), in exchange for consultation in a number of areas including production, quality assurance and
operations, and strategic advisory services. In exchange for these services, the Company owns an 11.01%
interest and options in AusCann, including its pro rata participatory investment of $1,214 in AusCann’s
recent financing which closed in May 2017. At September 30, 2017, the AusCann investment was valued
at $13,411.
The expertise and advisory services offered or performed by Canopy Growth subsidiaries will be exclusively
carried out by Tweed Inc. and Tweed Farms Inc.
On September 13, 2017, the Company announced that it had entered into a supply agreement with
AusCann, whereby Canopy Growth will act as AusCann’s exclusive supplier of medical cannabis for the
Australian market, beginning with the transfer of a range of medicines for research and commercialization
in Australia.
Alcaliber S.A.
On September 11, 2017, the Company and its wholly-owned subsidiary Spektrum announced a supply
license agreement with Spain’s Alcaliber, S.A. (“Alcaliber”). Per the supply license agreement, Canopy
Growth and Spektrum will grant Alcaliber a license to use certain strains and seeds to be grown and
cultivated at Alcaliber’s facilities for sale worldwide.
Alcaliber specializes in research and development, breeding and cultivation, and the extraction, purification
and preparation of Narcotic Raw Materials (“NRMs”) and Active Pharmaceutical Ingredients (“APIs”). Last
year, Alcaliber exported 125 tonnes of alkaloids to 40 countries around the world, representing a 20%
market share for NRMs. 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.
Bedrocan Brasil S.A. and Entourage Phytolab S.A.
On June 28, 2016, the Company announced an agreement with São Paulo, Brazil-based Entourage
Phytolab S.A. (“Entourage”). Under the agreement, wholly-owned subsidiary Bedrocan Canada,
Bedrocan International BV (formerly Bedrocan Beheer BV) and local Brazilian partners created a new
company called Bedrocan Brasil S.A. (“Bedrocan Brasil”), which will facilitate the importation of Bedrocan's
proprietary standardized cannabis varieties and know-how into the Brazilian market. Additionally, Canopy
Growth will partner with Entourage to develop cannabis-based pharmaceutical medical products for the
Brazilian and international markets and launch a clinical research plan.
Canopy Growth’s holding in Entourage is 38.462% and its holding in Bedrocan Brasil is 39.387%.
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CORPORATE POSITION ON CONDUCTING BUSINESS IN INTERNATIONAL JURISDICTIONS
WHERE CANNABIS IS FEDERALLY-ILLEGAL
Canopy Growth will only conduct business activities related to growing or processing cannabis, in
jurisdictions where it is federally legal to do so. The Company will not conduct business, related to growing
cannabis, in jurisdictions, such as the United States, in which cannabis is federally-illegal.
Canopy Growth believes that conducting activities which are federally-illegal, or investing in companies
which do, puts the company at risk of prosecution, puts at risk its ability to operate freely, and potentially
could jeopardize its listing on major exchanges now and in the future, limiting access to capital from
reputable US-based funds.
PRODUCT DIVERSIFICATION
Management also believes a significant potential future opportunity exists, within an appropriate regulatory
framework, to improve the Company’s profit margins by vertically integrating up the value chain towards
products that treat cannabis and cannabinoids as ingredients rather than the base product. This view
applies to the medical and regulated recreational cannabis/cannabinoid markets.
The Company’s ongoing investment in brand development, increased cannabis production capacity, global
expansion and product diversification is likely to delay when the Company’s business becomes cash flow
positive. Management believes the focus on growing the Company’s market share will drive significantly
higher cash earnings and shareholder returns over the long-term.
Cannabis-Based Medical Therapies
The Company established the cannabis research incubator, Canopy Health Innovations Inc. (“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.
To facilitate participation in Canopy Health research efforts by notable medical scientists and provide equity
ownership opportunities, the Company’s initial ownership in Canopy Health has been limited to a minority
position and is likely to be reduced over time. Canopy Health is a Canadian Controlled Private Corporation.
Canopy Health will operate as a research engine and will focus on creating an intellectual property (“IP”)
portfolio that can be built into commercial opportunities for the Company and its subsidiaries. Pursuant to
agreements entered into between Canopy Health and Canopy Growth, Canopy Growth and its subsidiaries
will work closely with Canopy Health whereby Canopy Growth will act as a primary supplier of cannabis
products for clinical research, as a research partner through its subsidiary Tweed. Tweed’s Controlled
Drugs and Substance Dealer’s Licence from Health Canada, 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.
In addition to a focus on human health, through Canopy Health’s subsidiary Canopy Animal Health is also
driving research efforts toward creating cannabis-based healthcare products for companion animals.
Canopy Health’s goal is to provide family pets with specialized cannabinoid medicines to maintain, improve
or extend their quality of life.
On September 27, 2017, Canopy Health announced that it had filed nine provisional patents pertaining to
the applications of cannabis and cannabinoid based therapeutics in sleep and related nervous system
disorders. To date, Canopy Health has filed 27 provisional patents with the USPTO.
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Also on September 27, 2017, 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 $15,800. Capital was
secured through new and existing shareholders, including $4,000 from the Company. The Company’s
interest in Canopy Health common shares is 43.9%.
Innovating Formats In-House and Through Strategic Partnerships
Canopy Growth believes regulations concerning product formats will evolve in the near term to allow for the
production and sale of cannabis related consumer products and a wider variety of medically focused
products. Canopy Growth is laying the foundation for both product categories through its own product
innovation and by partnering with other innovative entrepreneurs in the cannabis industry.
On July 20, 2017, Isodiol International Inc. (“Isodiol”) announced it had signed a licensing agreement with
the Company. Under this licensing agreement, Canopy Growth will have the right to manufacture and
distribute Isodiol’s "Pot-O-Coffee" and "Pot-O-Tea" branded cannabis infused single serve K-Cup products
in Canada and certain other markets internationally as federal regulations allow. Licensed products include
caffeinated and de-caffeinated product lines as well as Isodiol's single serve "Pot-O-Coco". In addition to
the Canadian rights, Canopy Growth shall have the right of first refusal to sell the "Pot-O" brand products
in any territory outside of the US, Mexico and Puerto Rico.
On September 28, 2017, the Company and Skinvisible Pharmaceuticals, Inc. ("Skinvisible"), a research
and development company with a patented drug delivery system, announced they have signed a definitive
license agreement for Skinvisible’s patented topical formulations. Per the agreement, Canopy Growth is
exclusively licensed to distribute Skinvisible’s topical products in Canada and shall have a first right of
refusal for all other countries, excluding China and the United States. The agreement covers two distinct
product lines made with Skinvisible’s Invisicare® technology. Skinvisible will first develop unique topical
hemp-based products that will be launched by Canopy Hemp Corporation in Canada. The agreement also
includes potential cannabis-based topical products using the Invisicare® technology, when and if federal
regulations permit CBD or THC infused topical products for sale in Canada.
On November 7, 2017, the Company announced it had signed a definitive licensing agreement with Farm
to Farma Inc. (“FTF”) for FTF’s innovative Trokie® lozenges. Under this licensing agreement, Canopy
Growth will have the exclusive right to manufacture and distribute FTF’s Trokie® lozenges through its
subsidiaries in Canada, as permitted by federal regulations, and shall have a first right of offer for all other
countries where federally legal, and excluding the United States.
HEMP-Based Products
The Company has taken steps to diversify its cannabis-related business into the development, production
and sale of hemp-based medical, regulated recreational 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. Hemp, which refers to the non-psychoactive (less than 1% THC) varieties
of Cannabis sativa L, is a renewable raw material used in thousands of products including health foods,
body care, clothing, construction materials, biofuels and plastic composites. The acquisition of whollyowned
subsidiary Mettrum and its Mettrum Originals brand of Hemp-based consumer food and skincare
products along with the acquisition of subsidiary Group H.E.M.P.CA, with its developing line of Hemp-based
products, give the Company entry into the growing hemp market. The Company believes that entry into the
regulated hemp market, whose regulations allow for more robust consumer-facing brand marketing,
advertising and retail channels, will serve to strengthen the Company’s consumer facing brands in the
future.
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STRATEGIC RELATIONSHIP AND INVESTMENT
On October 30, 2017, Canopy Growth announced that it had entered into a strategic relationship with the
leading total beverage alcohol supplier in the United States, Constellation Brands (“Constellation”) (NYSE:
STZ and STZ.B). Constellation is a leading international producer and marketer of a fast-growing, highperforming
portfolio of beer, wine and spirits brands.
The strategic relationship will see Constellation provide broad support in the areas of consumer analytics,
market trending, marketing and brand development to Canopy Growth. In addition, Canopy Growth and
Constellation 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 strategic relationship, an affiliate of Constellation invested approximately $245 million in
Canopy Growth in exchange for common shares that, following the transaction which closed on November
2, 2017, represents a 9.9% equity share in the Company.
In exchange for the investment, a total of 18,876,901 Canopy Growth common shares were issued on
November 2, 2017 at a price of $12.9783 per share based on a 5-day volume weighted average price
(VWAP) as of the close of markets on October 27, 2017. An equal number of common share purchase
warrants will be issued at the same price, subject to certain restrictions, expiring 30 months from the closing
date. The common shares and warrants will have a hold period of four months and one day from the closing
date, with the warrants being exercisable in two equal tranches, with the first exercisable tranche date being
August 1, 2018 and the second exercisable tranche date being February 1, 2019. The Company will
principally use the proceeds to fund the expansion of its growing platform and to support ongoing
investments in value-add processing and new product development and research.
