Canopy Growth Corp. reiterated doubts about its ability to stay afloat when the Canadian cannabis producer reported its fiscal 2024 first-quarter results.
In a filing with the U.S. Securities and Exchange Commission, Canopy said it has 259.6 million Canadian dollars ($193 million) in required principal repayments to be settled in cash within the next 12 months.
“If we are unable to raise additional capital, it is possible that we will be unable to meet certain of our financial obligations,” Canopy disclosed in the filing.
“These matters, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern.”
Canopy first issued the going concern warning in June.
In a note to investors, Toronto-based BMO Capital Markets analyst Tamy Chen wrote that “the risk with the stock is that our model still requires the company to raise CA$200 million (in fiscal 2025) to continue operations. Failure to do so would result in a cease of its going concern status.”
In the quarter ended June 30, Canopy narrowed its loss to CA$42 million, an improvement compared with the company’s CA$2.1 billion loss in the first quarter last year.
However, Canadian cannabis sales fell.
Recreational marijuana revenue declined 9% to CA$24.2 million in the first quarter compared to last year.
Canopy said adult-use sales fell primarily because of lower sales volumes across its premium and value-priced product categories, which for the latter was largely the result of a strategy shift away from low-margin products.
Canadian medical cannabis sales improved 7% to CA$14.4 million in the April-June quarter.
International medical cannabis sales fell 25% to CA$10.2 million.
The Smiths Falls, Ontario-based company’s two bright spots, in terms of revenue, continued to be its Storz & Bickel and BioSteel units.
Canopy’s overall net revenue grew 3% year-over-year to CA$108.7 million, largely because of BioSteel.
Sales of its BioSteel athletic beverage grew 137% year-over-year to CA$32.5 million in the first quarter.
Despite BioSteel’s strong sales, analyst Chen noted that the unit continued to be a drag on the company’s overall losses, accounting for approximately 60% of the company’s negative adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Canopy also provided an update on the BioSteel accounting situation.
In May, Canopy disclosed plans to refile some of its financial statements for the fiscal year ended March 31, 2022 after identifying “material misstatements” related to BioSteel sales.
BioSteel continues to be the subject of an investigation by the SEC.
The Ontario Securities Commission (OSC), the regulatory agency that administers and enforces securities rules, is conducting an “informal inquiry.”
“While the Company is fully cooperating with the SEC and the OSC with respect to these inquiries, it cannot predict when such matters will be completed, the further timing of any other developments in connection with these matters, or the outcome and potential impact,” Canopy said in the filing.
“If the SEC or OSC initiates a civil enforcement proceeding against the Company for alleged violations of securities laws or regulations, (Canopy Growth) may face a variety of civil sanctions and penalties, including … financial penalties and awards, injunctive relief and compliance conditions, which may have a material adverse effect on the financial condition or results of operations.”
Class action lawsuits have been filed, Canopy also noted, alleging violations of securities laws after the company announced the plans to refile some financial statements.
“Substantial damages or other monetary remedies assessed against the Company could have a material adverse effect on our business, financial condition, results of operations and cash flows,” Canopy warned.
Canopy had cash and cash equivalents worth CA$53.3 million and debt of CA$1.05 billion as of June 30.