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Canopy Rivers Looks to Restructure TerrAscend Investment

Ryan Allway

October 10th, 2018

News

Canopy Rivers Inc. (the “Company”) (TSXV: RIV) is pleased to announce it has entered into an arrangement agreement (the “Arrangement Agreement”) through its wholly-owned subsidiary, Canopy Rivers Corporation (“Canopy Rivers”), with TerrAscend Corp. (“TerrAscend”) (CSE: TER) pursuant to which TerrAscend will restructure its share capital by way of a plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”).

TerrAscend wishes to pursue strategic transactions in the cannabis sector internationally, including select opportunities in the United States. To accommodate TerrAscend’s strategic pursuits, while also maintaining strict compliance with industry regulations and the policies of the various securities exchanges, Canopy Rivers has agreed to restructure its investment and waive certain restrictive covenants that were granted by TerrAscend in connection with the original investment by Canopy Rivers, Canopy Growth Corporation (TSX: WEED, NYSE: CGC), JW Opportunities Master Fund Ltd., JW Partners LP, and Pharmaceutical Opportunities Fund LP.

“We are excited for our partners at TerrAscend to extend their investment and operating strategy into new global markets” said Bruce Linton, Chairman and Acting CEO of Canopy Rivers, and co-CEO of Canopy Growth Corporation. “As TerrAscend pursues international growth, beginning in what is anticipated to be the largest cannabis economy in the world, we believe their team is well-positioned to take advantage of opportunities in regulated jurisdictions, and we are confident in their ability to leverage their pharmaceutical resources and strategic relationship networks to identify and execute compelling transactions.”

Canopy Rivers currently owns 11,285,456 common shares (the “Common Shares”) in the capital of TerrAscend and common share purchase warrants (the “Warrants”) entitling Canopy Rivers to acquire 9,545,456 Common Shares at a price of $1.10 per Common Share.

Pursuant to the Arrangement, Canopy Rivers will exercise its Warrants for no cash consideration, resulting in the net issuance of 8,159,456 Common Shares based on the five day volume weighted average trading price of the Common Shares of TerrAscend on the Canadian Securities Exchange (the “CSE”) for the period ending October 5, 2018, the last trading day prior to the date of the Arrangement Agreement. All Common Shares held by Canopy Rivers will thereafter be exchanged pursuant to the Arrangement for new, conditionally exchangeable shares in the capital of TerrAscend (the “Exchangeable Shares”).

The Exchangeable Shares will become convertible into Common Shares following changes in U.S. federal laws regarding the cultivation, distribution or possession of marijuana, the compliance of TerrAscend with such laws and the approval of the various securities exchanges upon which the holder’s securities are listed. The Exchangeable Shares are not transferrable or monetizable until exchanged into Common Shares. In the interim, each holder of Exchangeable Shares will not be entitled to voting rights, dividends or other rights upon dissolution of TerrAscend.

“We are optimistic regarding the continued evolution of global cannabis regulations,” said Linton. “The restructuring of our investment in TerrAscend is intended to create long-term value for our shareholders as it positions the Company with optionality and conditional future exposure to a significant new market in a manner that is compliant with the current policies of the exchanges and regulations that govern our industry.”

The Company does not engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff Notice 51-532. While the Company has an interest in TerrAscend, TerrAscend has not engaged in cannabis-related activities in the U.S. to date and will not do so until closing of the Arrangement. Cannabis remains a Schedule I drug under the United States Controlled Substances Act, making it illegal under federal law in the U.S. to cultivate, distribute or possess cannabis.

For TerrAscend, the Arrangement will require approval by 66 2/3 percent of the votes cast by its shareholders as well as a simple majority of disinterested shareholders voting at a special shareholder meeting. The Arrangement is also subject to all necessary regulatory approvals, including that of the CSE.

About Canopy Rivers Inc.

The Company is a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The Company works collaboratively with Canopy Growth (TSX:WEED, NYSE: CGC) to identify strategic counterparties seeking financial and/or operating support. The Company has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which the Company believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.

Forward-Looking Statements

This news release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding the business and operations of TerrAscend, U.S. cannabis regulatory reform, dividend payments and other distributions and expectations for other economic, business, and/or competitive factors.

Investors are cautioned that forward-looking information is not based on historical facts but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court and shareholder approvals; other expectations and assumptions concerning the Arrangement; changes in general economic, business and political conditions, including changes in the financial markets; the U.S. regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation; public opinion and perception of the cannabis industry; the actual operating and financial performance of TerrAscend; risks related to the U.S. cannabis industry generally; as well as the risk factors set out in the joint management information circular of Canopy Rivers and the Company dated August 8, 2018, filed with Canadian securities regulators and available on the Company’s issuer profile on SEDAR at www.sedar.com.

As cannabis remains illegal under federal law in the U.S., financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the U.S. may form the basis for prosecution under applicable U.S. federal money laundering legislation. Strict compliance with state laws does not absolve a company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding. Accordingly, future business activities of TerrAscend may violate U.S. federal law and may have a material adverse effect on the business, operations and financial condition of the Company as a result of various reputational, contractual and legal risks associated with the Company holding the Exchangeable Shares.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information, please contact:

Canopy Rivers Inc.

Karoline Hunter
Sr. Director, Investor Relations & Communications
E-mail: ir@canopyrivers.com

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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