Bruce Linton - Chairman and Chief Executive Officer Tim Saunders - Senior Vice President and Chief Financial Officer.

Martin Landry - GMP Securities Vivien Azer - Cowan and Company Jason Zandberg - PI Financial Vahan Ajamian - Beacon Securities Mason Brown - MPartners Daniel Pearlstein - Eight Capital Alan Brochstein - 420 Investor Brandon Yankes - Tanco Mike Kowalski - Shareholder Chris Damas - BCMI Research Rob Jay - Private Investor Immanuel Athesa - Stockholder.

Good morning and welcome to Canopy Growth's Third Quarter Fiscal 2017 Financial Results Conference Call. Earlier this morning Canopy Growth issued a news release announcing its financial results for the third quarter of fiscal year 2017 ended December 31, 2016. This news release will be available on Canopy Growth's website and will be filed on SEDAR.

On this morning's call we have Bruce Linton, Canopy Growth's Chairman and Chief Executive Officer, and Tim Saunders, Canopy Growth's Chief Financial Officer. At this time all participants are in listen-only mode. Certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements.

Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the Company's annual information form and other public filings that are made available on SEDAR. During this conference call Canopy Growth will refer to adjusted product contribution and adjusted EBITDA.

Adjusted product contribution and adjusted EBITDA do not have any standardized meanings prescribed by IFRS. Adjusted product contribution and adjusted EBITDA are defined in the press release issued earlier today as well as in this period's management's discussion and analysis document that will be filed on SEDAR.

Please note that all financial information is provided in Canadian dollars unless otherwise specified. Following prepared remarks by Mr. Linton and Mr. Saunders, the Company will conduct a question-and-answer session during which questions will be taken from analysts and investors.

[Operator Instructions] I would now like to turn the meeting over to Bruce Linton. Bruce, please go ahead..

Thank you. Good morning all, I think many of you follow us on social media.

So you would have - you'd appreciate that we spent a lot of time communicating, mainly our communication is to our patient count, and over the last quarter whether it was our morning high or Twitter feed, active Facebook you will see in a lot of communications keeping our patients up to date with you know what's going on with products selection ones more and varied products coming in how we are doing with the harvest at the farm and things like that.

And we communicated because frankly we were often in a situation where we would have one oil and you know a small handful of strains and weren't always exactly what everyone wanted, but it seems communicating was good, because we filled the store on February 1st, and the effect was for the first time in our company, and I think probably the sector we had a single day transactions that was more than a million dollars.

And I want to give you context it was less than two years ago that we are having a whole quarter that was a million dollars, and it was sort of like in Q3 last year where you know a million dollars was in a month.

And so you know as we build up this company, and build up its capacity to both grow product, extract product, ship product a million dollar day is a pretty substantial scale point. And when you can handle that I can tell you the next day wasn’t a million dollar day, but you can start to think about how you can have a scale company.

And that was well in the quarter we're kind of usually busy doing a few things like making the acquisition of our German distribution partner.

And we did that because we think Europe's going to be an interesting market and we need to have boots on the ground in order to successfully focus, and frankly weren't that interested in doing it in some kind of a joint venture mode, we really want to do it with our focus and methods.

We brought the Quebec entity into the fold and have been working kind of feverishly on both the employment of business there as well as the license application for the entity there.

We've got Canopy Health which has been established as a separate company, and I'll just explain it briefly on the call where the idea was that Canopy would provide the cannabis in formats which could be distinct medical ingredients into Canopy Health, Canopy Health would run formulations and programs to create intellectual property seek trials and validate outcomes against syndication on that intellectual property and then back over to Canopy to commercialize on a reasonable rate of royalty.

And I think that works well in that it was a model intended to attract leading researchers, so that they would feel there's some level of independence from a particular specific marijuana company and we don't announcement to that end.

But also it was intended to give shareholders the opportunity to see the return on IP without having to necessarily put all the capital at risk of long term trials and instead use different types of funders and private funders for that.

So those activities along with getting the Mettrum deal to the point we had our announcement and worked through the due diligence made for a fairly full quarter. The result was continued growth. I think we're clear in the press release if we had a bit more product in a bit more diverse product we expected a bigger number.

But the good news is the harvest from the farm and the ongoing now built a platform, I think we can sustain growth in a world where right now the process is essentially there are more people becoming patients than there are necessarily capable suppliers, and so we wish to keep trying to be the most capable suppliers of the most patients will select us.

And I think we're doing a reasonable job at that. So with that sort of preface in a setup, I'd like to ask Tim Saunders our CFO to walk through some specific details and then we can move to questions. Tim..

Thank you Bruce, and good morning everybody. Revenues in a third quarter were CAD9.8 million representing sequential quarter-over-quarter increase of 15% and greater than 180% increase over the same quarter last year. Revenues in the nine month year-to-date period totaled CAD25.2 million compared to CAD7.7 million the same period last year.

The total grams sold during the third quarter was 245 kilos and kilogram equivalents and an average price of 736 per gram up from 1169 kilograms and kilogram equivalents at an average price of CAD7.01per gram in the second quarter of fiscal 2017 this year and also up from 462 kilograms sold during the three month period ended December 31 last year at an average price of CAD7.34 per gram.

Year-to-date the Company sold approximately 3400 kilos and kilogram equivalent at an average price of CAD7.12 per gram compared to just under a 1000 kilograms at an average price of CAD7.49 cents per gram in the same nine month period last year. Next, I’ll briefly discuss the gross margin for the quarter.

Gross margin over this period inclusive of the IFRS non-cash gain of biological assets was CAD16.9 million or 174% of revenue. Now this is the IFRS fair value accounting included. In a comparative period last year the gross margin same basis was CAD2.8 million or 79% of revenue.

Now turning for a moment to the supplemental non-gap measures that we call adjusted product contribution, just remind you what we do with this, we take the reported gross margin we will be move these fair value measurements required by address.

And instead measure the weighted average cost per grams produced against the actual gram sold in the period, and on this basis the adjusted product contribution in the third quarter was CAD6.7 million or 68% of revenue and the comparative period last year the adjusted product contribution is CAD2.4 million or 70% of revenue.

Year-to-date the adjusted product contribution was CAD16.3 million or 65% of revenue and in comparison the adjusted product contribution for the year-to-date period last year is CAD5 million or 65% of revenue.

Next turning for a moment to the operating expenses in the quarter, sales and marketing expenses in Q3 were at CAD3.8 million or 39% of revenue compared of CAD1.4 million and also 39% of revenue in the same period last year.

Sales and marketing expenses for the year-to-date period were at CAD8.9 million or 35% of revenue compared to CAD3.3 million last year or 43% of revenue.

Year-to-date sales marking expenses in fiscal 2017 include non-cash share based compensation and the amount of CAD1 million and this relates to previously issued shares which are fair valued and we measured each period and higher patient support payments in the amount of CAD1.3 million which are directly attributable to patient growth.

Also included in the higher sales and marketing expenses in the - this is a year-to-date period, our higher staff levels cost associated with the company’s medical outreach program, branding programs, and expanding the client care center for the increased volumes.

So we believe that our sales and marketing expenses as a percentage of revenue will decline over time. In the three month period general and admin expenses were CAD4 million or 42% of revenue compared to CAD2 million 56% of revenue in the same period last year.

G&A for the year-to-date period was CAD10.9 million or 43% of revenue and compares to CAD5.6 million or 73% in the same period last year.

The increase in G&A over the year-to-date period last year is due in part to the addition of the operations Bedrocan Canada for full nine months amounted to an increase of CAD1.5 million over the same period last year.

Also CAD400,000 and fees related to our graduation to the TSX and higher audit professional services fees above 300K the higher finance charges related to credit card processing payment fees and the like. G&A over the year-to-date period also increased due to - somewhat growing higher staff levels as we support the business.

And also some onetime severance costs are also included in that. Legal and advisory services and other professional services were also included in G&A. We also do believe the G&A overtime as percentage revenue will continue to decline marginally.

Our stock-based comp and depreciation, both non-cash expenses were CAD4.3 million and CAD2.7 million respectively in the quarter and as a result of all the above in the third quarter of fiscal 2017.

We recorded income from operations at CAD4.7 million and after income tax expense a company reported net income of CAD3 million or CAD0.03 per basic share. This comparison net loss of CAD3.3 million of course basic share in the comparison period last year.

Year-to-date we've recorded an income from operations of CAD6.8 million and after income tax expense and other expenses the company reported net income of CAD4.5 million or CAD0.04 per basic share. And this comparison net income of CAD1.6 million or CAD0.02 per basic share in the same period last year.

The net income just a reminder under IFRS as inclusive of the accounting for the fair value biological assets that we discussed earlier.

This is - we've also introduced this quarter another non-GAAP measure which we call adjusted EBITDA and this is really meant to put a focus on the cash basis of the earnings, which removes non-cash expenses which are also inclusive of the non-cash effects accounting for the biological assets and inventory.

And so we've defined adjusted EBITDA in the press release and also in the MD&A as the earnings from operations as reported before interest and tax and adjusted for these non-cash items which includes stock comp depreciation and other non-cash impacts in the non-cash effects of the biological assets and inventory.

So we feel this is a useful metric, I hope the analysts and the investors like also find it helpful, and there's a schedule to that in the press release. So adjusted EBITDA in the third quarter amounted to loss of CAD4.6 million compared to a loss of CAD3.6 million in the same period last year.

And in year-to-date period the loss - the adjusted EBITDA loss would be CAD11.7 million as compared to a loss of CAD9.7 million last year.

Now just turning quickly to the balance sheet and cash flows, at the end of the quarter the company's cash was comprised - was CAD92.5 million representing an increase of CAD77 million from the end of the last fiscal year, and the increase is really due to the proceeds were received in the April, August and December bought deals whether the common share issues and also to the exercise of options and warrants and the like.

Investments in the facilities are continuing primarily here at Smiths Falls it’s a lot of construction activity will probably talk about this shortly adding capacity within the Smiths Falls facility itself.

And also expanding the cannabis oil extraction production capacity including the production of capsules and when they will be available for sale after Health Canada approvals. Assets on our balance sheet include inventory valid CAD50.6 million up to CAD22 million at the end of last year.

Biological assets at the end of the quarter was CAD5.3 million at December 31, the company held 8275 kilos of dry cannabis and 2683 kilos asset leaders of cannabis oils.

But it's important we’ll talk about this and calls well, but the profile that inventory in that at the end of the quarter and through the most of the quarter we had about between 700 kilos of actually available for sale very strains and the like.

3800 kilos was in the process of being approved for sale and which we saw evidence of that in this quarter the fourth quarter, and 3800 kilos set aside to be processed into oil.

That the extract set aside for production and oil be set will be able to convert fairly quickly with once the new AES industrial capacity equipment is fully commission and cash approved for sale by Health Canada. So this concludes the review of the financials for the Q3 and year-to-date period for December 31. And Bruce, I’ll turn back to you..

Thanks, Tim. Just before open up for questions, I just want people if you’re trying to get a sense of what products obviously you can actually see on the various store fronts whether Tweed, now Mettrum or Bedrocan, and for the people who don’t want to quickly jump over.

Today we have about 10 products in Tweed, five dry cannabis, five oils we have in Mettrum, four products two dried and two oils in Bedrocan we have about 10 products, five dried and five oils.

So that the cupboard is reasonably full as I transition from where Tim was describing the inventory, you can’t have that number of products in any or each of the stores when you only have the limited quantity which is ready for lease of say 750 kilograms. So I hope that fills a few gaps, and we look forward to answering some questions..

[Operator Instructions] Your first question comes from Martin Landry from GMP Securities. Your line is open..

Hi, good morning, Bruce and Tim. First question, I can understand a little bit that you seem to have had not the full mix of products available during the quarter and it was you were little bit capacity constrained.

How long did you go without a full inventory during the quarter in it, and how much you think that impacted your sales?.

So first that the products that we had tended to be low-to-mid THC, and so that is a segment which there is a market for, but as you have the like this morning we just released a product which is I think 26%, 27% THC. We didn’t have that kind of offering to the quarter almost at all.

And in the case of oils we tended to have one oil and so I, Tim commented whether these things come and go occasionally might have a small release, but for the most part the quarter ran fairly light on high THC and constrained on oils..

Yeah, that’s correct Bruce, it’s the really the variety in price points that were available and that’s were constrained oils..

And that was where we had a lot of our messaging to the customer base was we get up, we were doing a couple of things, we did a whole phenotyping exercise that concluded in Q2, but that left us with a bunch of little lots, because we had to grow out a variety of plans, so you could get to the final phenocycle.

And now we’re doing all of that in our breathing room, so it no longer touches our production platform, and we’re messaging about the farms harvest is great, but when you have several thousands of kilograms harvested in the lots are gigantic the release process and the QA process was more burdensome than we’ve even prepared for..

Okay.

And did you slow down your patient on boarding during Q4 or Q3 in the quarters?.

We didn’t push us hard, but we still on boarded as soon as we were getting into at the end of January we’ve been pushing hard again, because we know where we are with inventory and the message to our clients was your first and as others join, we’re happy to have them, but we weren’t - we weren’t putting it as a full press, and we also knew we’re acquiring Mettrum.

And with Mettrum, we knew where the clients, where we knew that they’d had an absence of product and when we combine the two numbers and we do the analysis of overlap there is a very, very small number of common patients, and so we obviously end up having a substantial number of patients that need products.

So we can see that had to sort of merge together as of Feb 1..

Okay.

And so just so that we’re clear you feel that the of the store like you said only in February, so does that mean that January was little light on revenues as well?.

Yeah, January felt like a continuation of Q3. It wasn’t - obviously growing 15% quarter-over-quarter, and then break we did, isn’t a - it’s a pretty nice growth rate.

But it wasn’t the rocket fuel wasn’t there, and we certainly what our test was on February 1, when the store is open, have you done a good job of messaging to the community, so that they’ve been patient and loyal or what’s going on.

And when you turn the transactions past a million in a day, it sort of answered our question, and now it feels like we’re back to the rate of growth that we kind of expect for the Canopy Growth..

Okay.

And just last question on Mettrum, we haven’t seen results from Mettrum since September, I was wondering if you could talk a little bit about their revenue levels for the December quarter and then also their EBITDA and patient count if possible?.

Yes. So our touch patient count, and Tim will describe how and when information will be disseminated us to their quarter, because we took over after the quarter.

The key thing for us was to see the patient count whether or not they were around and saying around and it looks like they have been and we’re doing some messaging or work to bring them through the fact that Canopy has produced the most cannabis of anybody in the sector and what have not experienced a recall, and the reason we haven’t is it’s the QAQC process that’s pretty good and gets a little better each day, and so it looks like on a combined basis.

The number they were reporting and the number we’re reporting gets use sort of up in the high 40’s, low 50’s range, it’s not a specific number yet, but you’re seeing a substantial congregation of customers, and we want to give them a range of product, but the numbers as they were - you would expect to add together from what they had don’t appear to fallen off.

And Tim maybe you can comment on the filing of the bar and all that good stuff..

Sure. Yeah, so effect to February 1, Mettrum seems to be reporting issue or normally with that file their Q3 financials, but being a material acquisition to Canopy will be filing a business acquisition report which will be inclusive of their Q3 numbers, and also subject to review by the arch fund.

So they are in the midst of compiling those counts and we expect we’ll file the bar on an accelerated basis normally wouldn’t be file to April, but hopefully we’ll file within the next two weeks then and you’ll be able to see what the Q3 numbers up there..

Perfect. Thank you very much..

Okay, thanks, Martin..

Your next question comes from Vivien Azer from Cowan and Company. Your line is open..

Hi, good morning. Congrats on a good quarter..

Thank you, Vivien..

So, I just wanted to follow-up on the initial question that you just got which was can you specifically quantify on how much you think you left on the table from a revenue perspective given the supply constraints that you felt in the quarter?.

Yeah, I don’t want to put exact number on it, but you can imagine customers who like a variety in oils and a mid to higher THC probably make up a third or more of our total customer base and we had a limited offering for them.

And so it feels like when we put the stuff in the store on February 1, people are watching the store, and I got to get some people on this call credit their social media and store analysis is pretty amazing.

But we had a fairly substantial amount of some reasonably price and high THC products that were enough [ph] and we’ve back filled again with another wave and we have a number of waves behind.

But it really feels like about a third or more of the customer base that as a primary driver that if you have a CAD6 to CAD9 moderate to high THC that sells and we really didn’t have that in the quarter almost ever..

That’s really helpful. Thank you.

So given kind of composition of consumer demand it doesn’t seem like that’s going to change at all in terms of preference for a higher THC, do you feel like you have adequately adjusted your production to really satisfy that demand?.

Yes. So it’s a few things, one is we’ve locked down the pheno, so a highlight of the product release today is 27% THC measured on a hydrous basis.

This is pretty amazing product and we’ve been able to over the last year and a half lock down the genetics, make sure that we’re comfortable we’ve got everything in terms of the - what they want as far as the feeding and caring, and we’ve got that figured out for the greenhouse and in our shop here.

Now what you have to have is platform, so the greenhouse is up and running, we’ve got the platform to keep turning that over. Folks who’ve been watching will know that we’re just finished or finishing adding almost 50% more grow rooms in Smiths Falls, so you walk through they look just like ready to go rooms they just don’t have any plants.

So when we get the approval from Health Canada, we have the next wave of infrastructure to go almost 50% more production in flowering, more than just that we’ve taken all of our phenotyping, and all of our breeding now no longer happens in the commercial delivery platform we had approved a few months ago our breeding rooms.

So they are specific separated areas where all of the work that we used to have to do in the production platform now no longer happens there.

So I feel like we’re good for some time, let’s talk again for four quarters because the one thing that seems constancies there is growth, and there’s acceleration in terms of expectation of the market and so everything we’re doing now will cover it for that time.

It's what we do over the balance of this year that will mean that we don't have the same call again in about a year..

That's very helpful.

Last question for me, do have any updates from the government as they assess the task force report and contemplate the rollout of it?.

Doing up here, I would offer is that the provinces I varying level seem to be quite actively engaged, and so we're it's always been a federal agenda and the task force put the report and I presume the legislation is ready to be cable probably in the next month or so.

What we're starting to see is and have been seen for some time is real active engagement from a few of the provinces as they set up their own level of how to implement. And I would say I think that there's going to be a very nice fit for emerge system for a while which will be register with us as a patient or as a customer and we can ship it to you.

Physical location that will fit in overtime, and probably by province be different, but I feel like there's going to be a texture to a system, so they can meet their start date and the provinces and the feds at least within a few provinces seem to actively be working on the file.

I don't think we're going to see uniform start in every province on the same day..

Terrific. Thanks very much..

Okay..

Your next question comes from Jason Zandberg from PI Financial. Your line is open..

Hi good morning guys. Anybody called you PI Financial before..

Yeah, all the time..

Okay.

Yeah, I just wanted to see if you could break out the production from a Tweed Farms during the quarter?.

Yeah, Tim you can, not by dollar value - not by cost base, but we can certainly give you a bit of a break in terms of kilograms..

So the total kilos in that harvest includes all locations that is Bedrocan, Tweed Farms and Tweed, so I think it was 5200 kilos about 3700 kilos that came out of the farm, that is definitely hard..

Okay so Bruce mentioned that you can't break out the adjusted product contribution from each individual location, but I guess would you expect that this initial harvest given the size and the fact - you’ve heard that size you may see some significant improvement in costs in subsequent harvests?.

Yeah, I mean I think that you know we saw some of little bit of that too even in this quarter just to reducing the weighted average cost per gram that even went to the farm, there will be smaller harvests and winter session that certainly now that this greenhouse really 100% use we should see the bank on what we adjusted margin..

Yeah, and maybe I'll just add to that, we used we occupied 100% percent of the building, but we didn't put the plants towards the maximum density what we were doing wise as we try to do everywhere is get traction and accelerate.

And we were very happy with the crop, we’re happy with the yield, took a bit longer to process through them we would have expected. But I think that there is room for increasing the yield per cycle not just being satisfied that that set - that is the sort of the starting point a yield that you would get when you occupied the whole place..

That makes sense.

Can you disclose the range of product streams that were harvested at the farm?.

There was 10 different strains, so that were at last, yeah..

What I will say is that many people might not mind correlate growing it in a greenhouse with you know nor humidity controlled et cetera as not necessarily premium product that is not correct.

So there are a great number of six dollar products that come out of there, but we also have some much higher price high quality product, and I think that that fits well with the model because it's not just about the cost base, but if you can grow a really well received endorsed product in the green house that is where your margin starts to come up because you've got a top selling price and a nice low cost base..

Absolutely.

Just wanted to turn over to Germany, can you comment in terms of - I guess the sales levels to Germany in the third quarter and sort of what's your outlook going forward given that I'm sure it's small numbers today, but given the outlook and what's happening in Germany, what's your expectation moving forward?.

Yes, so we've been pretty busy on Germany for about a year and a half, and as people may recall we were the first company out of the North America to ship to Germany and second in the world and we've done have some subsequent orders to go in. We've also been able to structure if we need genetics that they can come from Germany.

So we’ve got that - so working there's only a thousand dish patients in our product is in you know a good number of pharmacies, but it's the stretching exercise and what's changed isn't that people want cannabis in Germany it's that the legislative access method has changed.

And I think you'll see in March maybe even yet late February further announcements to the changes of the regulatory framework of access, and how it's becoming implemented in the operation of government.

And so what will happen is instead of being like a last line you've tried everything this can become a normal course of medicine, and we expect that to be the driver on the market.

I would think that the German government is going to start to diminish the inputs it takes from foreign jurisdictions and expect domestic production and so over the next month or two, I’d be kind of surprised if they didn't begin to have a process by which companies could make application to become a license producer.

Now I would think if you've already been meeting the standard of the German government to ship to there, that's not a disadvantage and if you have people on the ground who are Ph.D.

researchers and licensed knowledgeable people it should be an advantage no certainty, but I think Germany is it's an important, but not critical, because Europe will open up country by country I just think each country is going to have a reason they will have domestic supply and we'd like to be in there..

Yeah now that’s sounds great. Okay just one last question, last quarter you had mentioned that you've had a great response from during same day delivery in the GTA area.

Did that trend continue into Q3?.

What I saw in Q3 is a continued support for what I'll call our two product groups Bedrocan and Tweed and part of it was the fact we had visibility, so when you can't advertise, but the media picks you up because you do a scrum about why this is a better option than using a dispensary, really I think it was that front of mind.

We've continued to push education and so the two brands had great support from different markets. You know I think we're - the reason I like match from is think of Tweed as having pretty good legs for future markets and so strong and recreation and medical, Bedrocan purely medical.

Feels like to me Mettrum fits kind of like the vitamin space in the middle and so what we really wanted to have is a third brands that fit there with the Mettrum spectrum and then be able to take that and use it for both GTA push, but also has some pretty good application I think in foreign markets where you need a brand that kind of fits right in the middle.

And so we did have a good response Bedrocan did well again this quarter, it's just sort of like a quiet little study one and it's a combination of things not just the shipping policy..

Okay, great thanks very much guys..

Your next question comes from Vahan Ajamian from Beacon Securities. Your line is open..

Hi guys. Just couple of questions, so regarding the February 1, level of CAD1 million obviously the first day post Mettrum and it looks like you had some new products that hit the stores that day.

How unique was the sales on that day or one timers or subsequent to see you said they were less than a million, but is that even remotely representative of the day since?.

Well, people did buy marijuana certainly not in those quantities, but just put in context the number like Q5 in our world which was the first calendar quarter of two years ago we did a million in the corner. And then in the Q3 was a big deal to do a month.

I think what it's indicative as the market grows the ability to scale into doing a million dollars, so you say what you got sort of million dollars a day, and then that translates and then the ability to ship it. It translates into the process of inventory management habit and balancing it out.

So I think what it does is it gives an indication of the ability of the company to scale into being the company that we expect to be you know over the next quarter and years and it's more like that rather than each day is a million dollars, now that is not where we are now, but it doesn't take too much to think that could be..

Gotcha, okay. On the adjusted cost per gram Tweed Farms was harvested, but not really sold this quarter and obviously layering on Mettrum going to part way through the quarter.

Can you remind me in terms of the accounting or the - I guess the non-GAAP measures here, is the entire kind of impact of getting lower cost Tweed Farms harvested, is that in this current quarter and going forward you know given that you're also layering on Mettrum should we expect that adjusted cost per gram to take lower next quarter, take higher, stay flat..

Tim here. Yeah, so when we look at the weighted average cost per gram, we look at all of the costs in terms of through the growing operations and production, the post-harvest costs and all the shipping fulfillment costs to from all locations to come up with weighted average cost per gram.

So, yeah the - certainly the factoring in the production costs within the quarter from Tweed Farms was part of that. But it is as Bruce said, to which is using the now we have the sun-lit greenhouse, but also being able to improve the mix is not just low to our dollar mix that higher margin product.

So we should - I think that will incrementally overtime we reducing at weighted average cost downward and as we continue for usage of the greenhouse..

Gotcha, okay. The inventory and in the quarter was CAD51 million.

Can you give an order of magnitude as to how much you would have picked up from Mettrum upon acquisition?.

Well, that number does not include Mettrum at all..

Right..

So Mettrum will be included at the March balance sheet date, their inventory levels are conservative level in terms of dollar amount so they had less product available in the store and they may have - may or may not to buy some product or sell.

So any of that I don’t think it will be it sounds like times too it will just be an incremental to record inventory levels..

Okay. Thank you..

Your next question comes from Mason Brown from MPartners. Your line is open..

Hey, guys.

Just on the Mettrum acquisition process keep going on provide some color on the cost of integration any potential cost savings of the next few years that you’re expecting and maybe where they’re coming from?.

Sure. I’ll give a bit of a swap and Tim make turn him in. So what we learn by I really know this is acquisition X, I should probably know exactly how many but I don’t, what we’ve learned is that under the acquisition these are not standalone vertical companies it become immediately integrated.

So there is no president of Mettrum there is an operating group which is reporting different areas as of Feb 1, QAQC report into a line here which throughput in we put a site manager in place, so immediately you no longer have a President or CEO on the transitional basis we use a terrific guy there who’s helping put together the final financial system as Tim regard mentioned in the bar in a few things for their yearend.

So you start to see those marketing becomes integrated, they have a thing called Mettrum originals and we had this thing called Hemp, those things will be integrated together become a single platform and that platform will begin the focus on a story in place that I think is where Hemp is going.

And I do think you want to have exposure because CBD produce from Hemp is essentially a legislative tend stroke away from being a possible way to get the CBD components we need, so you kind of want to have your play on that.

So those pieces all round in, they have a number of construction projects one specific that’s now at completion and so we think that the platform there will be able to produce more, but clearly when someone asked about inventory we’re pretty careful, like there’s nothing in that place that we don’t want in that place and we like our process and our product.

And what will come out of that place going for will be under our washing methods. And so we had already begun a process of testing everything in the growing cycle there. So how Canada offering that we should test that again we agree, because we’re testing everything they have all the way through, and so the synergies are on that basis.

But I think that the growth opportunity is quite substantial when everyone sees with confidence how it’s run..

Okay.

And just on to the back about an update on the Health Canada recall process maybe what stage at that? What the product has been written off, what types of scenarios we’re looking at here at Mettrum?.

Yes. So we worked carefully over their shoulder, while they work through the process and Trevor and crew were very diligent about it. Where we got to on the 28 or 29, January was that the - it was a wrap and the final communication was issued and approved and then went on to the site at the Health Canada.

Tim will comment there were some products written-off to get rid of it before we came in. But it’s - they didn’t have as much production as they would have liked and they expect therefore of what you write-off is not huge.

So from our perspective, it’s drive forward we’ve got some messaging to patients and really it’s about confidence, because at the end of the day this is a supply chain is supposed to follow the rules and you should feel good as a person buying it from a legal supplier and getting what you paid for.

And I think that we can probably communicate in that and carry it as well as anybody in the sector. Tim, if you want to comment on the some of the write-off? Yes. So we worked carefully over their shoulder, while they work through the process and Trevor and crew were very diligent about it.

Where we got to on the 28 or 29, January was that the - it was a wrap and the final communication was issued and approved and then went on to the site at the Health Canada. Tim will comment there were some products written-off to get rid of it before we came in.

But it’s - they didn’t have as much production as they would have liked and they expect therefore of what you write-off is not huge.

So from our perspective, it’s drive forward we’ve got some messaging to patients and really it’s about confidence, because at the end of the day this is a supply chain is supposed to follow the rules and you should feel good as a person buying it from a legal supplier and getting what you paid for.

And I think that we can probably communicate in that and carry it as well as anybody in the sector.

Tim, if you want to comment on the some of the write-off?.

Yes, sure..

As far as what they had with their product?.

Yes, right. In terms of the incremental costs associated with testing and like, but also be distraction of the recall product the total cost will be about 800K that will be reflected in the open balance sheet that is the write-off from our effect future earnings of Canopy, but before we accounted for in the acquisition balance sheet..

Okay. And just a one….

Well, remember Mason, we were I like these guys about the fourth time I tried to convince them that they’d be better with us in the price got better because of this recall, we were made aware of it in the negotiation process, because it kind of I think caught everybody off guard.

So we were able to make sure the deal reflected that new information before we went to definitive agreements..

And just one last follow-up on that are you able to provide any idea of how long you might think it will take to cover your cost of capital on the deal?.

They have two good locations, and they have two good brands what they didn’t have necessarily was the message that we think is best for growing. And I think that - I don’t know the exact number that they reported, I know the exact number of patients they have.

The rate of growth in the sector why wouldn’t we think that place kind of doubled the number of patients as we go through this year at least. And so is it worth that as you see the number of patients come off and potential brand value for international feeling better about it..

Great. Thanks..

Your next question comes from Daniel Pearlstein from Eight Capital. Your line is open..

Hey, good morning, guys. Thanks for taking my call..

First question, how do you say your company name now?.

Eight, like the number..

Jesus! I was calling a wire or something. Okay..

It’s all good.

On the capsulation equipment in the AES machine you talked a little bit about the delay of I guess how Canada bring it on line when might you expect that to be approved and signed off essentially when might you get it ready?.

Well, everybody on the call knows it the processes are you show drawing, you build the building area and you securitize it and then you making invitation and they turn up and they inspect and sometime after inspection usually weeks or days, you have the right to use it if everything’s been right. And so we’ve stepped through all of those spots.

And I think today I’ve been able to leave my office, we get to host some people who do those sorts of inspections.

And so we’re pretty close on the encapsulation equipment we’ve operated and made gel caps we’ve got the room as the GMP room it hasn’t been reviewed and approved the GMP, but it was designed built and so that one feels like it’s ready right now, the mega extractor and remember this is an investment we made, a process we started a year ago.

So that today we have the room ready and the machine in there, so that we can kind of 10X throughput of oil production.

And so the room’s ready, and I think we’ll get the green light on that, I think what you want to call it commissioning will probably take the balance of this month to get it fully going, but we need the room approved the final steps of commissioning can involve using cannabis in the extract or to confirm its functions..

All right. Okay, thanks.

And then how might Health Canada alleviate some of the concentration restrictions to accommodate new product farms and how soon?.

I think Health Canada, I think the government everybody for reasons and excuses would like us to be able to make vapens [ph]. And so on a medicinal basis being able to vaporize the product and have it in a dosage control for not make heck of a lot of sense.

And if you can actually confirm dosage accuracy and start collecting that data becoming, becomes almost import for observational trials. So I think that is something that would make a lot of sense for folks.

Selling vapens has a pretty good illegal business, and so I would be shocked and amazed if what comes out in the permissible products does not include vapens or vaporable products.

And so I think it could be a two-step, but for sure I see it happening, because it’s just it took a while to go from only selling dry cannabis to selling out of the camp evaped [ph] we’re pretty close I think for the next step..

Is that something that my line up with the tabling of legislation in the spring?.

I haven’t heard any rumors, but if I were doing at the number of calls that they’ve had about it is I would say here’s our pattern of past to recreational add excess and it doesn’t - there’s no parliamentary vote to allow us to have a vapens like the current rules on oils for everybody in the room it includes the fact they did find that there must be a liquid at room temperature and they went so far as to find room temperature and they went so far as to find these strength which we could make them.

It isn't there's no specific reason for that. And so the vapable ten product or vapable product could simply be a decision tomorrow to gets announced, and there's an awful lot of reasons and pressure for that to happen.

I don't know when it would happen, but it could make a lot of sense to do in the context of other announcements because of the demand, and because when you - if you're going to get a product which is the distillation and oil things that are on that plant if you have pesticides and fungicides get down and become stronger.

And so I think that there's a bunch of good reasons. I can't say when, but I could see it being sooner than all the other actions..

Great.

And then just lastly on the expansion are all your expansion plans on time and in terms of quantity, I guess of production capacity can you add a little bit more color there?.

Yeah it's getting to be a bit of a tracking exercise, so in Smiths Falls, I mentioned you know we've built out and finished the oils room. We've built out and finished the capsulation room. We've built out two or three other rooms that are related amenities.

We've built out I’ll call it six more grow rooms, so that would take us from our 12 plus or two side rooms add six more and then we built them is there a bit smarter in that - in the same footprint, we get to two floors, so what we're having inspected is the first floor that picture a concrete slab.

And that we've made a bunch of positive amendments toward the infrastructure works and then we can actually sneak a full second six rooms on top of the first, and the reason you care is I want to have a ceiling that's 31 feet to the beam if I get two rooms under there even now that we own the building it uses the envelop much better.

And so those six rooms everything has done that I just described and we have inspection going. We've been working feverishly down in Drummondville for the Quebec operation it's pretty darn close and we've got what we want to down in Niagara done the site at Bowmanville for Mettrum is essentially ready now for inspection for an expanded site area.

And then we have a terrific construction map for a lot more in Smiths Falls, a lot more in Bowmanville, and probably a bit more up in cream more. So we have a busy map ahead and the nice part is we're starting to attract methods to do this that don't necessarily have to be issuance of equity.

And so that was a big driver on buying the building in Smith Falls was that we could actually lever up the invested assets here, and we would expect to see some kind of that instruments that are pretty reasonable so that we can roll over the cash in here to build more without having to use more shares..

Got it. Okay, thanks very much guys..

Your next question comes from Alan Brochstein from 420 Investor. Your line is open..

Hey, good morning Bruce..

Good morning Alan..

I just had a quick one on - you mentioned earlier that the provinces are moving rapidly, and I'm just wondering if you could update us on your views of what distributions going to look like, and then also if you could let us know view that conversations with shoppers?.

Yes, so I would say the provinces aren't all you’re moving a uniform rate. But we're seeing three or four of them that are establishing the necessary infrastructure inside the provincial entity to do this.

So that would mean that they set up an office, that's responsible for the implementation of legalized access for recreational purposes, they staff that with people and those people start having canvassing input. And so we're starting to have that and have seen that forming over the last few months.

And so I'm feeling - I think in Canada what we're probably going to have is federally it's available. Maybe it's going to be such that people aren't a province where there's a system in place can connect to us by registering with us.

And in the provinces that have it - they'll have a slope of rollout that allows them to get data and we get to layer on top. As far as pharmacies without saying one, imagine I think every pharmacy and every pharmacist would like to have products they can sell, but I'm not sure that most pharmacists are that keen to be selling bags of wheat.

So I think what they're looking for is accounted to an earlier question as we have a capsulated product. So we can start to make sure that the strains that we've been capsulated in there and we can start to do some work at CHI towards which indication are the most effective against and get that data as observational and take it through other phases.

I think the pharmacies are really getting placeholders so that they can actually have topical creams, and gel capsules you know two three years from now medical cannabis is going to look like it does today.

And I think they're well positioned, and I bet they're talking to their colleagues and like Germany where part of the reason the Germans wanted us - the German pharmacist love the margin opportunity, and the positioning that they get to take with cannabis for the ones that are put on the shelf.

So I think that there's - there's going to be all cannabis, all pharmacists who look in Canada. I think are going to want to - our pharmacy companies are going to want to have a play, I don't think it's reserved just for one. There's one that's been most visible..

Have you had conversations with any pharmacies regarding this, or is this something have been relatively safe?.

No, no, no. Imagine that everybody who is a pharmacy in French or English in the country has questions. But really if had one that's been principally visible, which I think has been beneficial to the others because they didn't have to take any flack or questions over. But it's not that they're not doing things.

It's that they just they've chosen a less visible rate a route and it's probably wise on their part is not they don't need to offer it for the same outcome..

Got it, okay. Thanks and catch up soon. Thanks Bruce..

Yeah thanks..

Your next question comes from Brandon Yankes from Tanco. Your line is open..

Hey Bruce, Tim, congratulations on the quarter..

Thanks, good morning..

Just a quick question, I know that - I just want to congratulate you guys on your million dollar day there for February. My questions regards to like your higher percentage THC product, I know it clashes sale on website.

So like you go to the storefront it's up for a date it’s gone, right, now are you finding your patient list is like the better veteran patients are getting a little wider and buying more bulk item of good product, or do you think it's just an abundance of you know marketing or whatnot?.

It's a combination of things. So part of the reason we put to fill all the stores on one day with everything so that people would make a bit more of a balance basket of purchases. But for sure when you put up a reasonably high too high THC at a moderate price it sells well. But you want to have behind that as wave after wave of that product.

And so it doesn't matter if X sells out as long as you have Y behind it.

And so it's much more for us now, but being able to put something else on the shelf, and you can imagine in our growing operations it's increasingly a proportion of our business as more and more of the products, but that product doesn't just happen right like to get the one out today with 27% measured hydrous THC that that's a bunch of genetic management and making sure that we've picked the great moms and so now we've got that locked in you just keep growing it..

Okay, I have one more quick one. Both you guys are pretty familiar rising up the M&A environment so far with some of these other LTs, now you if legislation is on the home and it does ramp up for an open market.

Do you find that you guys are going to grow our capacity that you have or do you think you're going to utilize the tool M&A due to further you’re reaching market share..

So we've been pretty active on M&A, and I think that there's now that we have this layer, I think that there's another M&A which is the folks near a license that we can help counsel through that process.

And that will get us more capacity to few more locations, but you know at Smith Falls as an example, we have around almost 500,000 square foot building here and if we asked the tenant we could probably add another 250,000 square feet out the back.

When I start looking at our handful of locations, it doesn't take too much to see several million square feet of production at the current campuses. And so there's a little bit more campus acquisition because from a shipping perspective if we have geographic this per city you can knock down shipping costs and so there's a bit of that.

But you know we look at everything all day. We have two guys do nothing, but look at M&A and its vertically integrated M&A now, it's we're looking at devices, we're looking at locations, we're looking at you know all fronts..

Beautiful, okay. Thanks congratulation again guys on a million dollar day and hopefully looking forward to many more of them..

Thanks..

Your next question comes from Luke Velone from THiC Enterprises. Your line is open. Luke your line is open. Your next question comes from Mike Kowalski from Shareholder. Your line is open..

Yes, good morning guys..

Good morning Mike..

Congrats on the good work there, CAD1 million as one day and that’s quite a deal..

Yeah you probably want to ship, we're kind of shipping department that day..

Okay, you had few hats on right.

So first question would be why - we had some - you guys have some heavy volume on the stock and sell for the past week, and of course with an increase in price is, was there any news in the background that sort of conjured this up? That I didn't see any news?.

Yeah, so I can't point to one thing, but we did do a small thing, which was go from CDC to this other ticker called WEED and there’s thing called social media and there’s a guy named Snoop.

And so when you put all of those things together, one of the indications I got was that our social media index which is apparently a thing that some folks noticed particularly so the borders and indication of growing opportunity are index was multiply, multiply higher in terms of our mentions.

To the point, where I had a board meeting for our Brazilian operations last Wednesday and one of the early comments was you guys change your ticker and it showed up in our principal financial newspaper in Brazil.

And so I’m not sure if there’s probably lots of other things going on, but something like that and I had a few people contact me to say I didn’t really like the change.

And my only point was well I think it caught us more information and visibility and if I didn’t take that ticker which was available to us it would be taken by somebody else would prefer that, and so I think there’s been a couple of drivers, but that one is maybe the most the specific and unique..

So there might be a lot of insist let’s say in the states in the regards to your company?.

What, when we started Tweed if the ticker WEED comes along. I just can’t let somebody else have that. What, when we started Tweed if the ticker WEED comes along. I just can’t let somebody else have that..

Yeah.

I remember Tweed, I got in when there was Tweed called Tweed?.

Yeah. Well they want somebody call us would you like the ticker WEED, you got to take it..

Just for the name initially anyway..

Yeah..

Okay. So second question, why isn’t these stock listed on it any newspaper TSC reports listings and other words..

It’s not on any, but it’s not consistent. So that you’ll see in the globe for trading volumes et cetera we show up, but when you change it to….

Go ahead..

And looking at the inventorial and….

Tim, entirely will make note of it. I can tell you when you change your Tweed ticker and it causes a whole bunch of funny business for both appears two weeks..

No, but it hasn’t appeared and because that or the Financial Post ever. So it’s not because of the ticker change. I’m looking at that rate now and you have published that you were second in volume yesterday, but in the actual list you don’t exist..

I am on it. We’re going to call them again today. It is there something to do with the feed and nonsense, but it took direct innovation intervention to the gentleman who was the business editor at the Globe to get us properly west of there when we moved out..

Okay. As I’m sure like if people look at the papers and they see that year in there might be more interest two more? So we’re talking about Snoop, has he shown any more insist in the company other than his initial investment or….

Oh, yeah. So we didn’t tell him. Please pleased with Tweed about WEED, we have some nice images of him visiting our site, I would say that he has become quite comfortable with how we run our business more than ever, because he’s been around our business now.

And so I felt I find his business team and he are very acceptable to us and we can map out some things on that. But the fall of tweeting out we of course had hoped to have about the bell ringing. What would be better than having Snoop show up to ring the bell at the TSX for the ticker WEED, but he was busy..

Okay..

And let’s take your question. And we’ve got to get somebody else..

Okay, last question. You stated that you had a second in the world to ship to Germany.

Can I ask you who is the first is?.

Yeah. So Bedrocan which we have the Canadian medicinal product rights, Bedrocan Holland had been supplying Germany prior to us..

Okay. Okay, that’s it folks. And….

Thanks..

Great work, guys. Keep it up..

Thank you..

Your next question comes from Mason Brown from MPartners. Your line is open..

Hey, just follow-up.

Could you guys provide an indication of what percentage of the product is still left the Tweed Farms’ product going through processing right now?.

Same deal with that your fingertips because each day it changes we move. It’s called a lot release process, and I think almost everything is out of it, but I can’t say for certain..

Yeah. I don’t have a figure to kick the point primary now, but we’re seeing as a new everyday a new release is into the store and some of these are coming out of what was harvest and produced at the farm. So certainly we’re going through it and we’ll see what else is coming along..

Yeah. I think we’re almost all through Mason in that. We wanted to make sure we got lots of it for each of the strains and so they’re now it’s in a normal course process even if there are some behind the curtain it’s not an exceptional process of trying to push it through..

Right. Sure. Okay, and I’m just on the Germany case speak out towards MedCann’s positioning in the German market and what kind of competitive advantages you guys have compared to current importers such as new house as well as the potential new entrants that will also want to play in the game..

Hey, listen. Everybody should want to be there, and I don’t know that we have any advantage over anybody other than the fact that somehow we were the first ones picked and somehow we acquired a competent group there and somehow we hosted key German officials as they were looking at Canadian legislation.

So there’s no one thing you do it’s an accumulated decision. But ultimately if you’re going to succeed there you can’t say what we did this and that’s it’s comes down to, I think it’ll come down to the quality of the application.

I would be quite surprised if the government of Germany should do what the government of Canada couldn’t do which is to have a financial covenant on the issuance of a license. And because we have a strong balance sheet I think that will help us versus people who say I like marijuana I want to grow in Germany.

It won’t be the only thing having a SOPs that meet German standards. There’s a bunch of pieces, but I think they’ll be enough licenses for a variety people to get them, and then it’ll be a question after that do the German customers want to come to the company and that comes back again some of the stuff we do okay..

Great. Thanks..

Okay..

Your next question comes from Chris Damas from BCMI Research. Your line is open..

Hey, great quarter, and I think Martha Stewart would be a very good catch for Canopy Growth as a spokesperson and most recipes, I just to know these general..

Well, I think the two of them together have one of the more popular shows, so I….

Absolutely..

I’m hearing..

But seriously, with all the expansions on the books Bruce and everyone going through extractions and hopefully probably edibles and pharmaceuticals. Isn’t there a drive to the bottom in terms of capacity of all the experiences on the books are actually come to provision would be - I would say 250 tons of easy right now..

Yeah..

And therefore the price is going to come down.

Can you guys do something like the potash companies I’m afraid international cartel can protect that name is taken, but maybe if you do something?.

It could be happen. So I think it’s funny because the excitement everybody has about growing cannabis to me is how in two or three years not going to be so different and excitement about growing other inputs to a commercial process.

And so there will be some folks who specialize and over the next two or three or four years it’s going to need to be necessary that you vertically integrate if you want to create the value.

So that the DNA of Canopy and Tweed is we’re climbing up the stack and where the margin ends up is if you have branded product which people actually have a preference for over others you will get a premium. And so in the recreational market, there’s ways to do that and I think you’re seeing we have probably a pretty competent skill set.

In the medical market, that’s why we started CHI.

If I can give you an indication and a medicinal outcome that has many of doesn’t have many of the negatives that the other choices do that product will have a very nice margin and if you move it through a process that it becomes government paid, you can imagine that even is a little better, and so it not going to be above growing it’s going to be both vertically integrating and creating brands and indications of success..

Well, listen. I was a pharmaceutical chemist and I would just say two things of patents based on the novel compound I’m afraid THC is not one..

Not one..

Whereas to be a derivative..

Yeah..

Secondly, the very complex basket of molecules it would take years to split them up.

And so there has to be either a patent in use or a patent for novel compound?.

Or an outcome..

As for as that if I made a bunch of these last night, so I mean I’m not going to pay premium to buy someone else’s cookies because my senses are great..

Well. So I think what you’ll find those cookies are more linear thing, but you start moving this into integrated beverages or you move it into integrated our call delivery systems whether the strips or inhalation processes. You start getting into a process that’s a little harder than some chocolate chips and oats.

But I think what you’ll find on medical is that if I can give you a combination of cannabinoids and terpenes in a differentiated ratio than occurs in a plant in a gel capsule and it triggers a positive response across wide enough group against an indication, I can actually now file a provisional patent against that.

And then it becomes almost like biotech for dummies right, we know the indication, we know the response. Now we have to look at it and finalize it through a variety of trial steps. Why did it work.

And so I think that there’s an intellectual property play there and it doesn’t exist as easily in other countries because even they don't have the number of federally legal patients or it’s a federally illegal and therefore getting a federal patent using THC hard.

Because it won't be just THC, it'll be all the other cannabinoids, so it’s not easy, but I think we have big advantages in Canada..

I wish you luck and I'm looking forward to seeing the gel caps come out..

Yeah..

So we don’t like the oil on my time..

No. I think you'll find the gel caps are just going to be a very easy way, because you get exactly the same milligrams per milliliter, it will be very uniform, and when our reps go see doctors it's a hell of a lot easier to convince a physician that this looks like medicine, when it looks like medicine..

Great, thanks very much Bruce. All the best..

Enjoy the cookies man..

You bet..

Okay..

[Operator Instructions] And we have a question from Rob Jay, private investor. Your line is open..

Congratulations on the quarter.

I was wondered you guys are going to get in the listing on the NASDAQ?.

Always thing about a lot of things, yeah, I certainly I’m not thinking about doing any of those funny pink sheet OTC kind of stuff, because I think your - the company you keep may not be the company you want. But we haven't got any action in place right now, it would be the only sensible location.

And I believe there's not a basis by which we could or should be rejected unlike U.S. companies that may or may not be breaking federal law or not..

Okay thanks a lot..

Okay..

The next question comes from Immanuel Athesa, stockholder. Your line is open..

Hello Bruce, good morning, congratulations on the quarter.

I just wanted to get a little more information on the expansion on Brazil if you can just shoot a little on that?.

Yes, so I think it was square feet, well I have to cover the percentages at Smith Falls in square feet each rooms approximately 2000 square feet, so we have six more those coming on, and then we can stack six more on top which are already under construction while the ones below can be approved.

At the Mettrum sites they had been doing a substantial build out which well call it double their capacity, but what I liked about it is they thought a bit more about long term as well in terms of the cost program and so they have a geothermal capacity that's been constructed which would enable its use across a bigger platform.

And so you know it'll double their platform, but I think it will cut their costs when they get the geothermal cranking up. And then we have room to expand at all of our other sites including this one and we haven't announced any path. So one of the things I try to do with Canopy is tell you more when we're done than what we're going to do.

And so I I'd like to stick largely that pattern and I'm telling you about the rooms here, because they're built. But there's a big path of construction that we can do, and you can imagine we have some pretty cool looking floor plans that we've been working through and how do you make everything work together..

Got it. Thank you sir..

Okay..

There are no more questions. This concludes the call..

Thank you..

Thank you..

And it concludes today’s conference call. You may now disconnect..