Understanding Canopy Rivers’ financials

As a venture capital firm specializing in cannabis, our objective is making investments in the global cannabis sector that generate returns in the form of dividends, interest, rent, royalties, or capital appreciation. As a result, we do not report financial metrics that are typical of Canadian LPs or U.S. MSOs, such as revenue or cost of goods sold. Instead, you will see items on our financial statements such as interest income, fair value changes, and others.

To help better understand how we account for our investments, we created a helpful infographic that provides clarity in how we classify our investments and how that translates in our financials.

We invite you to learn more about Canopy Rivers by visiting the investor section of our website.

Canopy Rivers’ investees, and the related financial instruments we used to invest in these investees, generally fall into one of three buckets for accounting purposes.

Equity Method Investees

The first bucket is equity method investees. Equity method investees generally have the following characteristics:

• Canopy Rivers’ ownership level is generally between 20% and 50%;
• We have board representation rights; and
• The instrument that we are invested in bears the risk and return profile of an equity position.

Our investments in equity method investees are initially recorded at cost, and the related financial statement balance is adjusted up or down each period based on our proportionate share of the income or loss generated by the investee.

As such, the values on our statement of financial position for equity method investees do not necessarily reflect how a market participant may fair value those assets. Our equity method investees include some of our larger investments, such as our investments in PharmHouse and Canapar common shares.

Financial Assets

The second bucket is financial assets. Financial asset investments generally have one of the following characteristics:

• The instrument is in the form of common or preferred shares representing less than 20% of the entity’s voting rights;
• The instrument is a derivative financial instrument, such as warrants or options; or
• The instrument is a non-equity item, such as a royalty interest or a debenture.

Our investments in financial assets are generally recorded at fair value each quarter. Changes in fair value from quarter to quarter will either flow through “profit or loss” or “P&L” or show up in what is called “other comprehensive income or loss” or “OCI”.

Those investments that flow through P&L are generally our yield-oriented investments – such as royalty instruments, debentures, or preferred shares with cumulative dividends – or are those financial assets that are required under the accounting standards to flow through P&L, such as derivative financial instruments. The instruments that flow through OCI are generally the common or preferred equity positions that are intended at inception to be long-term and strategic in nature. All of our equity investments in publicly traded companies would fall into this Fair Value Through through Other Comprehensive Income (FVTOCI) sub-category.

Other Financial Instruments

The third and final bucket is a generic category, which includes instruments that don’t fall into the other two buckets, such as our shareholder loan to PharmHouse and our finance lease with Tweed Tree Lot.

We may hold multiple financial instruments for our investees. For example, we hold convertible debentures and warrants in Greenhouse Juice. For Canapar, we own common shares as well as a call option on the shares that we don’t own.

The Bigger Picture

In total, we hold 29 different financial instruments across our 17 investees. Each individual instrument has its own unique accounting treatment. When you layer these 29 different financial instruments on top of 17 investees, the result is a somewhat complex set of financial statements. We strive to reduce that complexity by ensuring a robust level of disclosure in our financial statements and MD&A.

Despite the challenges associated with this complexity, we believe that our ability to create multi-faceted investment structures differentiates us in the venture capital arena. We offer a compelling value proposition to visionary investors looking to unlock the long-term value of the global cannabis industry. We are where the smart money goes.

This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.