Document:

EX-4.19

 Exhibit 4.19 

FORM 51-102F4 

BUSINESS ACQUISITION REPORT 
  

	ITEM 1.	 IDENTITY OF COMPANY 

 

	1.1.	 Name and Address of Company 

Canopy Growth Corporation (the “Company”) 

1 Hershey Drive 
 Smiths Falls,
Ontario K7A 0A8 
  

	1.2.	 Executive Officer 

The following executive officer of the Company is knowledgeable about the Arrangement (as defined below) and this report: 

Mr. Tim Saunders 
 Executive
Vice President & Chief Financial Officer 
 Telephone: (613) 706-2185 ext. 150 

 

	ITEM 2.	 DETAILS OF ACQUISITION 

 

	2.1.	 Nature of Business Acquired 

All amounts in this business acquisition report are stated in Canadian dollars. 

On July 10, 2018, the Company announced that it had entered into an arrangement agreement dated July 10, 2018 (the
“Arrangement Agreement”) with Hiku Brands Company Ltd. (“Hiku”), pursuant to which, and subject to the terms and conditions of the Arrangement Agreement, the Company acquired all of the issued and outstanding shares
of Hiku (the “Hiku Shares”) by way of a statutory plan of arrangement of Hiku under the Business Corporations Act (British Columbia) (the “Arrangement”). 

Pursuant to the terms of the Arrangement Agreement, holders of Hiku Shares (the “Hiku Shareholders”) received 0.046 of a
common share of the Company (each whole common share, a “Canopy Share”) for each Hiku Share held. 
 Hiku has built a
portfolio of engaging cannabis brands, immersive retail experiences and handcrafted cannabis production. Hiku’s wholly-owned subsidiary, DOJA Cannabis Ltd. (“DOJA Cannabis”), owns two production facilities in the heart of
British Columbia’s Okanagan Valley, one of which is federally licensed by Health Canada to cultivate and distribute cannabis. Hiku is focused on building a portfolio of cannabis brands, cannabis retail stores and bringing handcrafted cannabis
production to market. With a retail footprint led by TS Brandco Inc. (“Tokyo Smoke”), a wholly-owned subsidiary of Hiku, artisanal cannabis production through DOJA Cannabis’ licensed production facility, Van der Pop’s
female-focused educational platform and Maïtri’s focus on the Quebecois market, 

 
Hiku houses a portfolio of cannabis brands in Canada. Tokyo Smoke was awarded one of four initial master retail licenses for cannabis in the Province of Manitoba and has entered into supply
agreements with the British Columbia Liquor Distribution branch and the Ontario Cannabis Store. Hiku also operates a network of retail stores selling coffee, clothing and curated accessories in British Columbia, Alberta and Ontario. 

 

	2.2.	 Date of Acquisition 

September 5, 2018. 
  

	2.3.	 Consideration 

Pursuant to the terms of the Arrangement Agreement, the Hiku Shareholders received 0.046 of a Canopy Share for each Hiku Share (the
“Exchange Ratio”). The Exchange Ratio represents the equivalent of $3.14962 per Hiku Share, based on the closing price of the Canopy Shares on the date of closing of the Arrangement. 

All of Hiku’s restricted share units (the “Hiku RSUs”) vested at the effective time of the Arrangement in accordance with
the terms of the Arrangement Agreement and were exchanged on the basis of one Hiku Share per Hiku RSU. 
 All of Hiku’s outstanding
options (the “Hiku Options”) were exchanged for an equivalent option granted pursuant to Canopy’s omnibus incentive plan (each, a “Replacement Option”) to purchase Canopy Shares (rounded down to the nearest
whole Canopy Share) equal to: (i) the Exchange Ratio multiplied by (ii) the number of Hiku Shares subject to such Hiku Option. Each Replacement Option provides for an exercise price per Canopy Share (rounded up to the nearest whole cent)
equal to: (x) the exercise price per Hiku Share purchasable pursuant to such Hiku Option; divided by (y) the Exchange Ratio. 
 All of
Hiku’s outstanding warrants (the “Hiku Warrants”) continued to be governed by and subject to the terms of the original warrant agreements but upon exercise will be exercisable for a number of Canopy Shares equal to:
(i) the Exchange Ratio multiplied by (ii) the number of Hiku Shares subject to such Hiku Warrant. 
 All of Hiku’s outstanding
debentures (the “Hiku Debentures”) continued to be governed by and subject to the terms of the original debenture indentures, but upon conversion will be exercisable for a number of Canopy Shares equal to: (i) the Exchange
Ratio multiplied by (ii) the number of Hiku Shares subject to such Hiku Debenture. 
 In connection with the closing of the Arrangement,
Canopy issued an aggregate of 7,943,123 Canopy Shares to the former Hiku Shareholders (including former holders of Hiku RSUs). 
  

	2.4.	 Effect on Financial Position 

The expected effect of the acquisition on the Company’s financial position is outlined in the unaudited pro forma consolidated financial
statements of the Company included with this business acquisition report. 

  
 2 

 The Company does not currently have any plans or proposals for material changes in the
business acquired pursuant to the Arrangement which may have a significant impact on the financial performance and financial position of the Company, including any proposal to sell, lease or exchange all or a substantial part of the business
acquired pursuant to the Arrangement or to make any material changes to the Company’s business. 
 Upon completion of the Arrangement,
Hiku became a wholly-owned subsidiary of the Company. The business and operations of Hiku have been combined with those of the Company. 
  

	2.5.	 Prior Valuations 

To the knowledge of the Company, no valuation opinion was required by securities legislation or a Canadian exchange or market within the last
12 months to support the consideration paid by the Company pursuant to the Arrangement. 
  

	2.6.	 Parties to Transaction 

The Acquisition was not with an informed person (as that term is defined in section 1.1 of National Instrument
51-102 – Continuous Disclosure Obligations), associate or affiliate of the Company. 
  

	2.7.	 Date of Report 

November 12, 2018 
  

	ITEM 3.	 FINANCIAL STATEMENTS AND OTHER INFORMATION 

The following documents of Hiku are attached as Schedule “A” to this business acquisition report: 

 

	 	(a)	 the audited annual consolidated financial statements of Hiku, together with the notes thereto and the
auditor’s report thereon, as at and for the nine months ended December 31, 2017 and twelve months ended March 31, 2017; and 

  

	 	(b)	 the unaudited condensed interim consolidated financial statements of Hiku, together with the notes thereto, for
the three and six months ended June 30, 2018 and 2017. 

 The Company has not requested the consent of Hiku’s
auditors to include their auditor’s report in this business acquisition report; therefore, such consent has not been provided. 
 The
following pro-forma documents of the Company are attached as Schedule “B” to this business acquisition report: 
  

	 	(c)	 the unaudited pro-forma condensed interim consolidated statement
of financial position of the Company as at June 30, 2018; 

  
 3 

	 	(d)	 the unaudited pro-forma consolidated statement of operations of
the Company and pro-forma earnings per share for the year ended March 31, 2018; and 

  

	 	(e)	 the unaudited pro-forma condensed interim consolidated statement
of operations of the Company and pro-forma earnings per share for the three months ended June 30, 2018. 

  
 4 

 SCHEDULE A 

HIKU FINANCIAL STATEMENTS 

- see attached - 

 Hiku Brands Company Ltd. 

(Formerly DOJA Cannabis Company Limited) 

CONSOLIDATED FINANCIAL STATEMENTS 

Nine months ended December 31, 2017 and twelve months ended March 31, 2017 

(In Canadian Dollars) 

 Management’s Responsibility for Financial Reporting 

The accompanying consolidated financial statements of DOJA Cannabis Company Limited (the “Company”) have been approved by the Board of Directors and
have been prepared in accordance with International Financial Reporting Standards, which recognize the necessity of relying on some best estimates and informed judgements. The financial information contained in the management’s discussion and
analysis is consistent with the consolidated financial statements. The Company undertakes steps to ensure the information presented is accurate and conforms to applicable laws and standards, including: 

 

	•	 	 Management maintains accounting systems and related internal controls and supporting procedures to provide
reasonable assurance that assets are safeguarded, transactions are properly authorized, and complete and accurate financial records are maintained to provide reliable information for the preparation of the consolidated financial statements in a
timely manner. 

  

	•	 	 The Board of Directors oversees the management of the business and the affairs for the Company including ensuring
management fulfills its responsibility for financial reporting, and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board of Directors carries out this responsibility principally through its Audit
Committee. 

  

	•	 	 The Audit Committee of the Board of Directors, comprised of three members and chaired by an independent director,
has reviewed the consolidated financial statements with management and the external auditors. 

 MNP LLP Chartered Accountants, the
Company’s external auditors, who are appointed by the Company’s shareholders, audited the consolidated financial statements in accordance with Canadian generally accepted auditing standards to enable them to express to the shareholders
their opinion on the consolidated financial statements. Their report is set out on the following page. 
  

			
	“Signed”	  	“Signed”
		
	Jeff Barber	  	Alan Gertner
	CFO	  	CEO & Director

 April 30, 2017 

 

 
 Independent Auditors’ Report 

To the Shareholders of Hiku Brands Company Ltd. (formerly, DOJA Cannabis Company Ltd.): 

We have audited the accompanying consolidated financial statements of Hiku Brands Company Ltd. (formerly, DOJA Cannabis Company Ltd.), which comprise the
consolidated statements of financial position as at December 31, 2017 and March 31, 2017, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the nine-month period ending
December 31, 2017 and for the year ended March 31, 2017, and a summary of significant accounting policies and other explanatory information. 

Management’s Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. 
 Auditors’ Responsibility 

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. 
 We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion. 
 Opinion 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Hiku Brands Company Ltd. (formerly,
DOJA Cannabis Company Ltd.) as at December 31, 2017 and March 31, 2017 and its financial performance and its cash flows for the nine-month period ended December 31, 2017 and for the year ended March 31, 2017 in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. 
  
 

 
  

					
	 Toronto, Ontario
  

April 30, 2018
	  		  	 Chartered Professional Accountants
  

Licensed Public Accountants

  

			
	

	  	

 Hiku Brands Company Ltd. (Formerly DOJA Cannabis Company Limited.) 

 
 Statements of Financial Position 

(Expressed in Canadian Dollars) 
  

 

									
	 	  	As at December 31,
2017	 	 	As at March 31,
2017	 
	 Assets
	  			
	 Current assets
	  			
	 Cash
	  	$	16,908,526	 	 	$	1,897,664	 
	 Subscription receivable
	  	 	—  	 	 	 	347,500	 
	 Other receivables
	  	 	160,346	 	 	 	89,472	 
	 Prepaids
	  	 	31,838	 	 	 	—  	 
	 Inventory (note 5)
	  	 	244,141	 	 	 	—  	 
	 Biological assets (note 5)
	  	 	118,500	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	17,463,351	 	 	 	2,334,636	 
			
	 Property and equipment (note 6)
	  	 	5,430,720	 	 	 	2,448,212	 
		  	  
	  
	 	 	  
	  
	 
		  	$	22,894,071	 	 	$	4,782,848	 
		  	  
	  
	 	 	  
	  
	 
	 Liabilities 
	  				 			
	 Current liabilities
	  				 			
	 Accounts payable and accrued liabilities
	  	$	568,968	 	 	$	203,962	 
	 Current portion of mortgage payable (note 7)
	  	 	13,982	 	 	 	13,387	 
		  	  
	  
	 	 	  
	  
	 
		  	 	582,950	 	 	 	217,349	 
			
	 Mortgage payable (note 7)
	  	 	572,024	 	 	 	582,114	 
	 Convertible debentures (note 8)
	  	 	11,193,849	 	 	 	—  	 
	 Deferred tax liability (note 11)
	  	 	484,990	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	12,833,813	 	 	 	799,463	 
		  	  
	  
	 	 	  
	  
	 
	 Shareholders’ equity
	  				 			
	 Share capital (note 9)
	  	 	11,538,504	 	 	 	4,451,420	 
	 Contributed surplus (note 9)
	  	 	4,520,084	 	 	 	645,228	 
	 Warrant reserve (note 9)
	  	 	1,470,269	 	 	 	115,151	 
	 Deficit
	  	 	(7,468,599	) 	 	 	(1,228,414	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	10,060,258	 	 	 	3,983,385	 
		  	  
	  
	 	 	  
	  
	 
		  	$	22,894,071	 	 	$	4,782,848	 
		  	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these consolidated financial statements. 

Nature of operations (note 1) 
 Commitments
(note 14) 
 On behalf of the Board 
  

			
	“Signed”	  	“Signed”
		
	Trent Kitsch	  	Alan Gertner
	President & Director	  	CEO & Director

  
 1 

 Hiku Brands Company Ltd. (Formerly DOJA Cannabis Company Limited) 

 
 Statements of Loss and Comprehensive Loss 

(Expressed in Canadian Dollars) 
  

 

									
	 	  	Nine Months ended
Dec 31, 2017	 	 	Twelve Months ended
March 31, 2017	 
	 Revenue:
	  				 			
	 Production Sales
	  	$	—  	 	 	$	—  	 
	 Production cost of sales
	  	 	(509,501	) 	 	 	—  	 
	 Production amortization and depreciation (note 6)
	  	 	(21,854	) 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
	 Gross profit (loss) before fair value adjustments
	  	 	(531,355	) 	 	 	—  	 
	 Unrealized gain on change of fair value of biological assets (note 5)
	  	 	264,301	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
	 Gross loss
	  	 	(267,054	) 	 	 	—  	 
			
	 Expenses:
	  				 			
	 General and administrative
	  	 	887,254	 	 	 	425,902	 
	 Sales and marketing
	  	 	925,059	 	 	 	—  	 
	 Professional Fees
	  	 	274,532	 	 	 	80,208	 
	 Loss on change in fair value of derivative liability
	  	 	—  	 	 	 	492	 
	 Stock-based compensation (note 9)
	  	 	740,880	 	 	 	459,228	 
	 Amortization and depreciation (note 6)
	  	 	66,389	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	2,894,114	 	 	 	965,830	 
		  	  
	  
	 	 	  
	  
	 
	 Loss from operations before income taxes
	  	 	(3,161,168	) 	 	 	(965,830	) 
			
	 Listing costs (note 4)
	  	 	(3,925,311	) 	 	 	—  	 
	 Other income
	  	 	(1,477	) 	 	 	(1,542	) 
		  	  
	  
	 	 	  
	  
	 
	 Loss before income taxes
	  	 	(7,087,956	) 	 	 	(967,372	) 
			
	 Income tax recovery (note 11)
	  	 	847,771	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
	 Net loss and comprehensive loss
	  	$	(6,240,185	) 	 	$	(967,372	) 
		  	  
	  
	 	 	  
	  
	 
	 Net loss per share
	  				 			
	 Basic and diluted
	  	$	(0.11	) 	 	$	(0.07	) 
	 Weighted average shares outstanding
	  	 	55,036,867	 	 	 	14,113,290	 
		  	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these consolidated financial statements. 

  
 2 

 Hiku Brands Company Ltd. (Formerly DOJA Cannabis Company Limited) 

 
 Consolidated Statements of Changes in
Shareholders’ Equity 
 (Expressed in Canadian Dollars) (Audited) 

 
  

																					
	 	  	Share Capital	 	 	Contributed
Surplus	 	  	Warrant
Reserve	 	 	Deficit	 	 	Total Equity	 
	 Balance, March 31, 2017

Shares issued for cash, net of issuance costs
	  	$	4,451,420	 	 	$	645,228	 	  	$	115,151	 	 	$	(1,228,414	) 	 	$	3,983,385	 
	 (note 9)
	  	 	3,046,125	 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	3,046,125	 
	 Shares issued for services (note 9)
	  	 	718,679	 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	718,679	 
	 Stock based compensation (note 9)
	  	 	—  	 	 	 	740,880	 	  	 	—  	 	 	 	—  	 	 	 	740,880	 
	 Reverse takeover transaction (note 4)
	  	 	2,535,243	 	 	 	29,032	 	  	 	1,135,374	 	 	 	—  	 	 	 	3,699,649	 
	 Issuance of convertible debt (net of deferred tax) (note 8)
	  	 	—  	 	 	 	3,104,944	 	  	 	498,446	 	 	 	—  	 	 	 	3,603,390	 
	 Exercise of warrants (note 9)
	  	 	787,037	 	 	 	—  	 	  	 	(278,702	) 	 	 	—  	 	 	 	508,335	 
	 Net loss for the period
	  	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	(6,240,185	) 	 	 	(6,240,185	) 
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, December 31, 2017
	  	$	11,538,504	 	 	$	4,520,084	 	  	$	1,470,269	 	 	$	(7,468,599	) 	 	$	10,060,258	 
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2016
	  	$	12	 	 	$	—  	 	  	$	—  	 	 	$	(261,042	) 	 	$	(261,030	) 
	 Cancellation of shares
	  	 	(12	) 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	(12	) 
	 Subscription receivable
	  	 	3,943,623	 	 	 	—  	 	  	 	115,151	 	 	 	—  	 	 	 	4,058,774	 
	 Shares issued for services
	  	 	347,500	 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	347,500	 
	 Conversion of promissory notes
	  	 	62,797	 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	62,797	 
	 Exercise of preferrential participation rights
	  	 	97,500	 	 	 	186,000	 	  	 	—  	 	 	 	—  	 	 	 	283,500	 
	 Stock-based compensation
	  	 	—  	 	 	 	459,228	 	  	 	—  	 	 	 	—  	 	 	 	459,228	 
	 Net loss for the period
	  	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	(967,372	) 	 	 	(967,372	) 
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2017
	  	$	4,451,420	 	 	$	645,228	 	  	$	115,151	 	 	$	(1,228,414	) 	 	$	3,983,385	 
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these consolidated financial statements. 

  
 3 

 Hiku Brands Company Ltd. (Formerly DOJA Cannabis Company Limited) 

 
 Statements of Cash Flows 

(Expressed in Canadian Dollars) 

 
  

									
	 	  	Nine Months ended
Dec 31, 2017	 	 	Twelve Months ended
March 31, 2017	 
	 Cash flow from operating activities
	  				 			
	 Net loss
	  	$	(6,240,185	) 	 	$	(967,372	) 
	 Add (deduct) items not involving cash
	  				 			
	 Accretion and accrued interest
	  	 	—  	 	 	 	8,987	 
	 Loss of change in fair value of derivative liability
	  	 	—  	 	 	 	492	 
	 Stock-based compensation (note 9)
	  	 	740,880	 	 	 	459,228	 
	 Amortization and depreciation (note 6)
	  	 	88,243	 	 	 	—  	 
	 Shares issued for services (note 9)
	  	 	718,679	 	 	 	62,797	 
	 Change in fair value of biological assets (note 5)
	  	 	(264,301	) 	 	 	—  	 
	 Non-cash listing costs (note 4)
	  	 	3,699,648	 	 	 	—  	 
	 Deferred income tax expense (recovery) (note 11)
	  	 	(847,771	) 	 	 	—  	 
	 Change in non-cash working capital
	  				 			
	 Other receivables
	  	 	(70,874	) 	 	 	(76,116	) 
	 Prepaid expenses
	  	 	(31,838	) 	 	 	1,330	 
	 Inventory and biological assets (note 5)
	  	 	(98,340	) 	 	 	—  	 
	 Accounts payable and accrued liabilities
	  	 	365,006	 	 	 	190,330	 
		  	  
	  
	 	 	  
	  
	 
		  	 	(1,940,853	) 	 	 	(320,324	) 
	 Cash flow from financing activities
	  				 			
	 Private placement of shares, net of issuance costs (note 9)
	  	 	3,393,626	 	 	 	4,058,774	 
	 Issuance of convertible debentures, net of issuance costs (note 8)
	  	 	16,130,000	 	 	 	—  	 
	 Advances/repayment to related parties
	  	 	—  	 	 	 	(16,303	) 
	 Proceeds from mortgages payable, net of repayments (note 7)
	  	 	—  	 	 	 	595,501	 
	 Exercise of Warrants (note 9)
	  	 	508,335	 	 	 	—  	 
	 Repayment of mortgage payable (note 8)
	  	 	(30,042	) 	 	 	—  	 
	 Interest paid in cash
	  	 	20,547	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	20,022,466	 	 	 	4,637,972	 
	 Cash flow from investing activities
	  				 			
	 Investment in property and equipment (note 6)
	  	 	(3,070,751	) 	 	 	(2,448,212	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	(3,070,751	) 	 	 	(2,448,212	) 
	 Increase in cash
	  	 	15,010,862	 	 	 	1,869,436	 
	 Cash, beginning of period
	  	 	1,897,664	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
	 Cash, end of period
	  	$	16,908,526	 	 	$	1,869,436	 
		  	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these consolidated financial statements. 

  
 4 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
  

 Notes to the Consolidated Financial Statements 

For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	1.	 Nature of operations 

Hiku Brands Company Ltd. (“Hiku” or the “Company) (formerly DOJA Cannabis Company Limited (“DOJA”) and Northern Lights Marijuana
Company Limited “(NLMCL”)) was incorporated under the BC Business Corporations Act. The Company’s principal business activity is the cultivation of medical cannabis under the license issued by Health Canada to the Company’s
wholly owned subsidiary DOJA Cannabis Ltd (“DOJA Cannabis”). Subsequent to December 31, 2017 The Company received an amendment to its ACMPR to permit sales of medicinal cannabis. The Company has not yet earned any revenues from sales
of cannabis. 
 On August 3, 2017 SG Spirit Gold Inc. completed a reverse takeover transaction, pursuant to which, DOJA Cannabis amalgamated with a wholly
owned subsidiary of the company (note 4). As DOJA has been identified as the accounting acquirer, these financial statements are considered a continuation of DOJA and any comparative information provided prior to the reverse takeover are those of
DOJA. The company’s common shares resumed trading on the Canadian Securities Exchange (the “CSE”) under the symbol “DOJA” on August 4, 2017 

On January 30, 2018 subsequent to the acquisition of TS Brandco Holdings Inc (note 15), the Company renamed Hiku Brands Company Ltd and resumed trading on the
CSE as “HIKU”. 
 All prior year number of shares, options and warrants are posted consolidated and adjusted by 1.8 times for the reverse takeover
transaction in Note 4. 
  

	2.	 Basis of presentation 

 

	(a)	 Statement of compliance 

The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee (“IFRIC”). 

These audited consolidated financial statements were authorized for issue by the Company’s Board of Directors (the “Board”) on April 30,
2018. 
  

	(b)	 Basis of Measurement 

These financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value and
biological assets measured at fair value less cost to sell, as detailed in the Company’s accounting policies. These consolidated financial statements have been prepared using the accrual basis of accounting. 

 

	(c)	 Basis of Consolidation 

These consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries, DOJA Cannabis Ltd. And DOJA Café Ltd. All
significant intercompany transactions were eliminated on consolidation. 
  

	(d)	 Functional and presentation currency 

The Company and its subsidiaries’ functional currency, as determined by management, is the Canadian dollar. These financial statements are presented in
Canadian dollars. 
  

	(e)	 Change in year end 

Pursuant to the amalgamation (note 4) the Company was deemed to have changed its year end from Dec 31 to March 31, being the fiscal year end of the wholly
owned subsidiary DOJA Cannabis. The directors of the Company have determined that it is in the best interests of the Company to revert to a December 31st year end. The Company’s transition year will consist of a
9-month period ended December 31, 2017. 

  
 5 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	3.	 Significant accounting policies 

 

	(a)	 Cash and cash equivalents 

Cash and cash equivalents are comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities
of three months or less. 
  

	(b)	 Inventory 

Inventories of harvested finished goods and packing materials are valued at the lower of cost and net realizable value. Inventories of harvested cannabis are
transferred from biological assets at their fair value at harvest, which becomes the initial deemed cost. Any subsequent post-harvest costs are capitalized to inventory to the extent that cost is less than net realizable value. Net realizable value
is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the average cost basis. Products for resale and
supplies and consumables are valued at the lower of cost and net realizable value. 
  

	(c)	 Biological assets 

The Company measures biological assets consisting of medical cannabis plants at fair value less cost to sell up to the point of harvest, which becomes the
basis for the cost of finished goods inventories after harvest. Unrealized gains or losses arising from changes in fair value less cost to sell during the year are included in the results of operations of the related year. 

 

	(d)	 Property, Plant and Equipment 

Plant, property and equipment is measured at cost less accumulated amortization and impairment losses. Amortization is provided using the following terms and
method: 
  

			
	Buildings & Improvements	  	Straight Line over 15 – 30 years
	Production Equipment	  	Straight Line over 3 – 30 years
	Furniture & Fixtures	  	Straight Line over 1 – 5 years
	Land	  	Not Amortized
	Assets Under Development	  	Not Amortized

 An asset’s residual value, useful life and amortization method are reviewed at each financial year end and adjusted if
appropriate. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of equipment. 

Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount of the equipment and are
recognized in profit or loss. 
 Asset under development is transferred to the related category when the area is Licensed by Health Canada for cultivation
and therefore available for use. 
  

	(e)	 Impairment of long lived assets 

Long-lived assets, including property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset exceeds its recoverable amount. 

  
 6 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	(f)	 Financial Instruments 

The Company classifies its financial assets and liabilities depending on the purpose for which the financial instruments were acquired, their characteristics,
and management intent. 
 Transaction Costs 
 Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to financial assets or liabilities at fair value through profit or loss are recognized immediately in profit or loss. 

Financial assets 
 The Company initially recognizes financial
assets at fair value on the date that they are acquired, adjusted for transaction costs, if applicable. All financial assets (including assets designated at fair value through profit or loss) are recognized initially on the date at which the Company
becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a
separate asset or liability. 
 The Company classifies its financial assets as financial assets at fair value through profit and loss, held to maturity,
available for sale or loans and receivables. A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair
value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s risk management or investment strategy. Financial assets at fair value through
profit or loss are measured at fair value, and changes therein are recognized in profit or loss. 
 Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are recognized initially at adjusted fair value, adjusted for applicable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized
cost using the effective interest method, less any impairment losses. The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest over the relevant period. The effective interest
rate is the rate that discounts estimated future cash payments through the expected life of the financial instrument, or, where appropriate, a shorter period. 

Financial liabilities 
 The Company initially recognizes
financial liabilities at fair value on the date that they are originated, and are adjusted for transaction costs, if applicable. All financial liabilities (including liabilities designated at fair value through profit or loss) are recognized
initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. 

The Company classifies its financial liabilities as either financial liabilities at fair value through profit and loss or other liabilities. Subsequent to
initial recognition other liabilities are measured at amortized cost using the effective interest method. Financial liabilities at fair value are stated at fair value with changes being recognized in profit or loss. 

  
 7 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 Impairment of financial assets 

Financial assets, other than those classified at fair value through profit and loss, are assessed for indicators of impairment at the end of the reporting
period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been negatively affected. 
 The amount of the impairment loss recognized is the difference between the carrying amount of the financial asset and the
present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. 
 The carrying amount of the
financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. 

 

	(g)	 Compound Financial Instruments 

Compound financial instruments issued by the Company comprise convertible debt that can be converted to share capital at the option of the holder. The
liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity convertible option. The equity component is recognized initially as the difference between the fair
value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

 Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest
rate method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest, dividends, losses and gains relating to the financial liability are recognized in profit or loss. 

 

	(h)	 Loss per share, basic and dilutive 

The Company presents basic and diluted loss per share data for its common shares. Basic earnings per share is calculated by dividing the profit or loss
attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to common shareholders and the
weighted average number of common shares outstanding, for the effects of all dilutive potential common shares, which comprise warrants and share options issued. Items with an anti-dilutive impact are excluded from the calculation. 

For the periods presented, all options and warrants are anti-dilutive. 
  

	(i)	 Share Based Compensation 

The Company has an employee stock option plan, performance warrant plan and an RSU plan. The Company measures equity settled share-based payments based on
their fair value at the grant date and recognizes compensation expense over the vesting period based on the Company’s estimate of equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and
subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. The impact of the revision of the original estimate is recognized in profit or loss such that the cumulative expense reflects the revised
estimate. 
 For stock options granted to non-employees the compensation expense is measured at the fair value of
the goods and services received except where the fair value cannot be estimated in which case it is measured at the fair value of the equity instruments granted. Consideration paid by employees or
non-employees on the exercise of stock options is recorded as share capital and the related share-based compensation is transferred from share-based reserve to share capital 

  
 8 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	(j)	 Income Taxes 

Income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss except to the extent that it relates
to items recognized directly in equity or other comprehensive income. 
 Current tax is recognized and measured at the amount expected to be recovered from
or payable to the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years. 

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and
the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized and the liability is settled. The effect
of a change in the enacted or substantively enacted tax rates is recognized in net earnings and comprehensive income or in equity depending on the item to which the adjustment relates. 

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that
it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered. 
  

	(k)	 Provisions 

A provision is recognized when the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. 
  

	(l)	 Borrowing Costs 

Borrowing costs, if any, directly attributable to the acquisition or construction of a qualifying asset are capitalized. Qualifying assets are those that
necessarily take a substantial period of time to prepare for their intended use. The capitalized borrowing cost is calculated by applying the weighted average borrowing rate, giving consideration first to any project specific borrowings or any
directly attributable general borrowings, to the accumulated average costs for the period, until the assets are substantially ready for their intended use. All other borrowing costs are recognized in finance costs in the consolidated statements of
loss and comprehensive loss. 
  

	(m)	 Use of estimates and judgments 

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the statement of financial position date,
that could result in a material adjustment to the carrying amounts of assets or 

  
 9 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 
liabilities in the event that actual results differ from the assumptions made, relate to, but are not limited to the following: 

 

	 	1.	 Biological Assets 

Management is required to make a number of estimates in calculating the fair value of biological assets and harvested cannabis inventory. These
estimates include a number of assumptions such as estimating the stage of completion, harvesting costs, sales prices and expected yields of cannabis plants. 

The Company measures biological assets consisting of cannabis plants at fair value less costs to sell up to the point of harvest, which becomes
the basis of the cost of finished goods inventories subsequent to harvest. Unrealized gains or losses arising from changes in fair value less cost to sell during the year are included in the results of operations of the related year. 

 

	 	2.	 Fair Value of Stock Options, Performance Warrants, Warrants and Restricted Share Units

 Determining the fair value of stock options on the grant date, including performance based warrants, requires judgement
related to the choice of a pricing model, the estimation of stock price volatility and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized to determine fair value could result in a significant impact on
the Company’s reported operating results, liabilities or components’ equity. The key estimates used by management are the stock price volatility, expected life of the options, share price, rate of forfeiture and expected timing of
performance criteria. 
  

	 	3.	 Convertible Debt 

The identification of convertible debentures components is based on interpretations of the substance of the contractual arrangement and
therefore requires judgment from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the
fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount rates and the presence of any derivative financial instruments. 

 

	 	4.	 Income Taxes 

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant
factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of
these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. 

 

	 	5.	 Depreciation and Amortization 

Depreciation and amortization of property, plant and equipment and intangible assets are dependent upon estimates of useful lives, which are
determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

  
 10 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	(n)	 New standards, amendments and interpretations not yet adopted 

These consolidated financial statements have been prepared following the same accounting policies used in the preparation of the audited financial statements
of the Company for the year ended December 31, 2017. 
 New standards, amendments and interpretations not yet adopted 

A number of new standards and amendments to standards and interpretations have been released and have not been applied in preparing these financial statements,
as set out below: 
  

	 	•	 	 IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model
and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. The basis of classification depends on the entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value
in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement except for the recognition of
changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The
Company does not expect this standard to have a significant impact on the Company’s financial statements at this time. 

  

	 	•	 	 IFRS 15, Revenue from Contracts with Customers, deals with revenue recognition and establishes principles for
reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of
goods or services and thus has the ability to direct the use and obtain the benefits from the goods or services. The standard replaces IAS 18, Revenue, and IAS 11, Construction Contracts, and related interpretations. The standard is effective for
annual periods beginning on or after January 1, 2018 and earlier application is permitted. The Company does not expect this standard to have a significant impact on the Company’s financial statements at this time. 

 

	 	•	 	 In January 2016, the IASB issued IFRS 16, Leases, which will replace IAS 17, Leases. Under IFRS 16, a contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Under IAS 17, lessees were required to make a distinction between a finance lease and an
operating lease. IFRS 16 now requires lessees to recognize a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts.
There is an optional exemption for certain short-term leases and leases of low value assets; however, this exemption can only be applied by lessees. The standard is effective for annual periods beginning on or after January 1, 2019, with
earlier application if IFRS 15 is also applied. The Company does not expect this standard to have a significant impact on the Company’s financial statements at this time. 

  
 11 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	4.	 Reverse Acquisition 

On August 3, 2017, the Company completed a three-cornered amalgamation among the Company, DOJA Cannabis and a wholly-owned subsidiary of the Company
incorporated solely for the purpose of completing the amalgamation, resulting in DOJA Cannabis becoming a direct, wholly-owned subsidiary of the Company. The amalgamation constituted a reverse acquisition of the Company by DOJA Cannabis, with the
Company (being the legal parent) as the accounting acquiree and DOJA Cannabis (being the legal subsidiary) as the accounting acquirer. In connection with the closing of the reverse acquisition, the Company changed its name to “DOJA Cannabis
Company Ltd.”. 
 In connection with the completion of the reverse acquisition, the Company completed a consolidation of the outstanding common shares
of the company on a 1-for-3 basis as consideration for completion of the Transaction. The holders of the DOJA Cannabis’ Class A common shares were issued 1.8
post-consolidated common shares of the Company, in exchange for every share of the Company they held. Existing dilutive securities of both the Company and DOJA Cannabis were also exchanged for dilutive securities on substantially the same terms, and
applying the same exchange ratios. 
 This transaction has been accounted for as a reverse acquisition that does not constitute a business combination. The
purchase price allocation for the assets acquired and liabilities assumed was determined as follows: 
  

					
	 Consideration Transferred:
	  			
	 5,070,486 shares (post-consolidation) at a price $0.50 per share
	  	$	2,535,243	 
	 3,400,000 warrants (post consolidation) at a value of $0.33 per warrant
	  	 	1,135,374	 
	 120,000 options (post consolidation) at a weighted average value of $0.24 per option
	  	 	29,032	 
		  	  
	  
	 
		  	$	3,699,649	 
		  	  
	  
	 
	 Net Assets Acquired:
	  			
	 Cash
	  	$	26,289	 
	 Accounts Receivable
	  	 	32,153	 
	 Accounts Payable
	  	 	(36,023	) 
		  	  
	  
	 
	 Net assets acquired
	  	 	22,419	 
	 Excess attributed to cost of listing:
	  	 	3,677,230	 
		  	  
	  
	 
		  	$	3,699,649	 
		  	  
	  
	 
	 Listing Cost:
	  			
	 Excess attributed to cost of listing
	  	$	3,677,230	 
	 Legal
	  	 	194,112	 
	 Consulting Fees
	  	 	53,969	 
		  	  
	  
	 
		  	$	3,925,311	 
		  	  
	  
	 

 For accounting purposes, these financial statements reflect a continuation of the financial position, operating results and
cash flows of the company’s legal subsidiary, DOJA Cannabis. 

  
 12 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

  

	5.	 Biological Assets and Inventories 

The Company’s biological assets consist of 2,888 cannabis plants as at December 31, 2017. The continuity of biological assets is as follows: 

 

					
	 Carrying amount, March 31, 2016
	  	$	—  	 
		  	  
	  
	 
	 Carrying amount, March 31, 2017
	  	$	—  	 
		  	  
	  
	 
	 Changes in FVless costs to sell due to biological transformation
	  	 	264,301	 
	 Transferred to inventory upon harvest
	  	 	(145,801	) 
		  	  
	  
	 
	 Carrying amount December 31, 2017
	  	$	18,500	 
		  	  
	  
	 

 All biological assets are considered current. The significant assumptions used in determining the fair value of the medicinal
plants are as follows: 
  

	 	i.	 Stage of completion; 

 

	 	ii.	 Yield by strain (actual yields used for these financial statements) 

 

	 	iii.	 Estimated selling prices and costs of harvest and completion 

 

	 	iv.	 Cost to compete the cannabis post-harvest and cost to sell; 

The Company expects that a 10% increase or decrease in the market price per gram of dried cannabis would increase or decrease the fair value of biological
assets by $27,000 and would increase or decrease the inventory value by $34,000. Additionally, an increase or decrease of 10% in the costs of production would increase or decrease the fair value of biological assets by $10,000 and would increase or
decrease the value of inventory by $12,000. 
 As at December 31, 2017, included in the carrying amount of inventory is 48,600 grams of dry cannabis
(March 2017 – nil) valued at $216,927 that has been quality assured and is awaiting release for sale. Inventory was comprised of the following items: 
  

									
	 	  	December 31, 2017	 	  	March 31, 2017	 
	 Harvested Cannabis
	  	 	216,927	 	  	 	—  	 
	 Supplies and Consumables
	  	 	27,214	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Carrying amount December 31, 2017
	  	$	244,141	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

  
 13 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

  

	6.	 Property and equipment 

 

																									
	 	  	Assets under
development	 	  	Furiture &
equipment	 	  	Building and
improvements	 	 	Production
equipment	 	  	Land	 	  	Total	 
	 Cost
	  				  				  				 				  				  			
	 At March 31, 2016
	  	$	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	—  	 	  	 	—  	 
	 Additions
	  	 	—  	 	  	 	46,385	 	  	 	2,401,827	 	 	 	—  	 	  	 	—  	 	  	 	2,448,212	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 At March 31, 2017
	  	$	—  	 	  	$	46,385	 	  	$	2,401,827	 	 	$	—  	 	  	$	—  	 	  	$	2,448,212	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Additions
	  	 	1,223,337	 	  	 	24,492	 	  	 	267,202	 	 	 	33,508	 	  	 	1,522,212	 	  	 	3,070,751	 
	 Reclassification
	  	 	—  	 	  	 	4,098	 	  	 	(940,913	) 	 	 	568,815	 	  	 	368,000	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 At December 31, 2017
	  	$	1,223,337	 	  	$	74,975	 	  	$	1,728,116	 	 	$	602,323	 	  	$	1,890,212	 	  	$	5,518,963	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accumulated Depreciation
	  				  				  				 				  				  			
	 At March 31, 2016
	  	$	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	—  	 	  	 	—  	 
	 Expense for the period
	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	—  	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 At March 31, 2017
	  	$	—  	 	  	$	—  	 	  	$	—  	 	 	$	—  	 	  	$	—  	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Expense for the period
	  	 	—  	 	  	 	9,891	 	  	 	56,498	 	 	 	21,854	 	  	 	—  	 	  	 	88,243	 
	 At December 31, 2017
	  	$	—  	 	  	$	9,891	 	  	$	56,498	 	 	$	21,854	 	  	$	—  	 	  	$	88,243	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book Value
	  				  				  				 				  				  			
	 At March 31, 2016
	  	$	—  	 	  	$	—  	 	  	$	—  	 	 	$	—  	 	  	$	—  	 	  	$	—  	 
	 At March 31, 2017
	  	$	—  	 	  	$	46,385	 	  	$	2,401,827	 	 	$	—  	 	  	$	—  	 	  	$	2,448,212	 
	 At December 31, 2017
	  	$	1,223,337	 	  	$	65,084	 	  	$	1,671,618	 	 	$	580,469	 	  	$	1,890,212	 	  	$	5,430,720	 

 Assets under construction include the development of cannabis production facilities in Kelowna, BC. Each phase of construction
is considered under development until such a time that it has been approved by Health Canada. Once Health Canada approval is granted, the asset is amortized and considered available for use. Included in Building and improvements as at
December 31, 2017 is $20,327 (2017 - $9,296) of capitalized interest. 
 Certain reclassifications of property and equipment were made from the March
31, 2017 financial statements to better reflect the attributes of these items. 
  

	7.	 Mortgage payable 

The mortgage bears interest at 4.5% per annum compounded monthly and is payable in monthly instalments of $3,338, and is due November 1, 2020. The
mortgage payable is secured by a first charge over certain specified properties. Interest expense on the mortgage payable was $20,547 for the nine months ended December 31, 2017 respectively (March 2017 - $9,296) which has been capitalized to
buildings & improvements. 
 As at December 31, 2017 the outstanding balance on the mortgage payable was $586,006 

  
 14 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

  

	8.	 Convertible Debentures 

On December 28, 2017, the Company completed a brokered private placement of unsecured convertible debenture units in the aggregate amount of $17,250,000.
Each convertible debenture unit consists of a $1,000 principal amount of unsecured convertible debentures and 403 share purchase warrants. 
 The debentures
bear interest at 8% per annum, payable semi-annually and mature within 36 months. The principal amount of the debentures will be convertible into common shares of the Company at a price of $1.24 per share, at the option of the holder. The fair value
of the debentures was recorded at its fair value of $11,193,849, discounted at a market interest rate of 18% and is net of debt issue costs. 
 The residual
value of the conversion feature was estimated at $1,143,452, net of issue costs and deferred tax using relative fair value allocation, based on the following assumptions: Share price – $1.87, Annualized volatility – 90%; Risk-free interest
rate – 1.64%; Dividend yield – 0%; and Expected life – 3 years. 
 Each warrant will be exercisable to acquire one common share at an
exercise price of $1.24 per share until December 27, 2020. The fair value of these warrants was estimated at $498,446, net of issuance cost and deferred tax, based on the following assumptions: Share price – $1.87, Annualized volatility
– 90%; Risk-free interest rate – 1.64%; Dividend yield – 0%; and Expected life – 3 years. 
 On closing, the Company paid the
underwriters (i) a commission of $1,035,000 representing 6% of the gross proceeds of the private placement; and (ii) 834,677 compensation warrant units. Each compensation warrant units entitles the holder to acquire a compensation unit which
consists of one common share of the Company, and one-half of one common share purchase warrant at an exercise price of $1.86 per share, expiring three years from the date of issuance. The compensation warrant
units were measured based on the fair value of the equity instruments granted as the fair value of services cannot be reliably measured. The estimated fair value of $1,961,492 was based on the following assumptions: common share purchase warrant
price – $3.11; Annualized volatility – 90%; Risk-free interest rate – 1.73%; Dividend yield – 0%; and Expected life – 3 years. 

In addition, the Company also paid legal fees of $85,000. 

Beginning on the date that is four months and one day following the closing date, the Company may force the conversion of the principal amount of the
convertible debentures and the expiry of date of the convertible debt warrants should the daily volume weighted average trading price of the Company’s common shares be greater than $1.86 for 10 consecutive trading days. 

 

					
	 	  	Convertible
Debenture	 
	 Balance as at March 31, 2017 
	  	 	—   	 
	 Face value of debt upon issuance

	  	 	17,250,000	 
	 Less: Allocation to warrants and conversion feature
	  	 	(4,936,151	) 
	 Less: Debt issue costs
	  	 	(1,120,000	) 
		  	  
	  
	 
	 Balance at December 31, 2017
	  	$	11,193,849	 
		  	  
	  
	 

  
 15 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	9.	 Shareholders’ equity 

Authorized share capital 
 The corporation has an unlimited
number of Common Shares authorized for issuance. The Common Shares entitle the holder to one vote for every share held. There are no fixed dividends payable on the Common Shares. 

All prior year number of shares, options and warrants are posted consolidated and adjusted by 1.8 times for the reverse takeover transaction in Note 4. 

Issued & Outstanding share capital 
  

									
	 	  	Number of Shares	 	  	Amount	 
	 Balance, March 31, 2016
	  	 	216	 	  	$	12	 
	 Cancellation of Shares
	  	 	(216	) 	  	 	(12	) 
	 Class A common shares issued for Cash, net of issuance costs
	  	 	50,265,617	 	  	 	3,943,916	 
	 Redemption and cancellation of Class A common shares
	  	 	(5,279,999	) 	  	 	(293	) 
	 Class A common shares issued for services
	  	 	356,819	 	  	 	62,797	 
	 Subscriptions receivable
	  	 	1,390,001	 	  	 	347,500	 
	 Conversion of promissory notes
	  	 	835,715	 	  	 	97,500	 
		  	  
	  
	 	  	  
	  
	 
	 Balance, March 31, 2017
	  	 	47,568,153	 	  	 	4,451,420	 
		  	  
	  
	 	  	  
	  
	 
	 Issued for cash, net of issuance costs
	  	 	6,114,325	 	  	 	3,046,125	 
	 Shares issued for services
	  	 	674,666	 	  	 	718,679	 
	 Reverse takeover transactions
	  	 	5,070,485	 	  	 	2,535,243	 
	 Exercise of warrants
	  	 	1,873,441	 	  	 	787,037	 
		  	  
	  
	 	  	  
	  
	 
	 Balance December 31, 2017
	  	 	61,301,070	 	  	$	11,538,504	 
		  	  
	  
	 	  	  
	  
	 

 Nine months ended December 31, 2017 

During the nine month period ended December 31, 2017 the Company issued 6,114,325 common shares at $0.50 per share for gross proceeds of $3,046,125 net of
issuance costs. 
 In August 2017, in conjunction with the reverse acquisition, 5,070,486 common shares were retained by SG Spirit Gold shareholders. These
shares were valued at $0.50 per share for total consideration of $2,535,243. 
 During the year ended December 31, 2017, 1,873,441 warrants were
exercised ranging in price from $0.25 to $0.30 for gross proceeds of $508,335. 
 During the year ended December 31, 2017, the Company issued 674,666
common shares to settle debts arising from services rendered that were valued at $718,679. 
 Year ended March 31, 2017 

During the year ended March 31, 2017, the Company issued 23,279,999 Class A common shares at $0.0001 per share, for gross proceeds of $1,293. In
conjunction with the share issuance, the original 120 Class A common shares outstanding were returned to treasury and subsequently cancelled. Of these Class A common shares issued, 5,279,999 were redeemed and cancelled at a price of
$0.0001 per share in October 2016. 
 In November 2016, the Company issued 11,910,025 Class A common shares for gross proceeds of $1,701,504. As part
of the issuance, $97,500 of the convertible promissory notes payable elected to be converted into shares and $186,000 was transferred to share capital as the fair value of the derivative liability, less $17,000 of share issuance costs. 

  
 16 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 In February 2017, the Company issued 10,697,589 units at $0.10 per unit, each consisting of one Class A
common share and one warrant exercisable at $0.25 per share for gross proceeds of $1,069,759. The warrants expire 24 months from the date of issuance and had a fair value of $115,151. 

In March 2017, the Company received gross proceeds $1,303,429 in cash and $347,500 in subscriptions receivable from the issuance of 6,603,719 Class A
common shares. 
 During the year ended March 31, 2017, the Company issued 356,783 Class A common shares to settle debts arising from services
rendered that were valued at $62,797, of which $22,797 were from a related party. 
 Warrants 

Each warrant entitles the holder to purchase a Class A common share at a set price and is exercisable at the option of the holder for a set period of
time. 
 The warrant details of the Company are as follows: 
  

									
	 	  	Number of
Warrants	 	  	Weighted Average
exercise price	 
	 Outstanding, March 31, 2016
	  	 	10,697,587	 	  	$	0.25	 
	 Outstanding, March 31, 2017
	  	 	10,697,587	 	  	 	0.25	 
	 Issued
	  	 	11,603,766	 	  	 	1.35	 
	 Exercise of warrants
	  	 	(1,873,441	) 	  	 	0.27	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding December 31, 2017
	  	 	20,427,912	 	  	$	0.84	 
		  	  
	  
	 	  	  
	  
	 

 In conjunction with the closing of the closing of the reverse acquisition (note 4), the Company issued 3,400,000 warrants
exercisable at $0.30 for Class A common shares post resulting in consideration transferred to warrant holders of the company. The fair value of these warrants was $1,135,374. As at December 31, 2017, these warrants had a remaining life of
3.1 years. 
 On December 28, 2017 the Company issued 6,951,750 warrants as part of the convertible debenture financing for gross proceeds of
$17,250,000. These warrants are exercisable at $1.86 for Class A common shares of the Company with an expiry of 3 years from the date of grant, subject to accelerated expiry in some circumstances. As at December 31, 2017, these warrants
had a remaining life of 3.0 years. In addition, 834,677 compensation warrant units were issued to underwriters. Each compensation warrant entitles the holder to acquire a compensation unit which consists of one common share of the Company, and one-half of one common share purchase warrant at an exercise price of $1.86 per share, expiring three years from the date of issuance. The estimated fair value of the compensation warrant units were $1,961,491. 

During the year ended March 31, 2017, the Company issued 10,697,587 warrants as part of a private placement offering. The warrants are exercisable at
$0.45 for Class A common shares, with an expiry of 2 years from the date of issuance. The fair value of these warrants was $115,151. 
 The fair value
of the warrants on the date granted was estimated using the Black-Scholes valuation model. The following assumptions were used: 
  

									
	 	  	31-Dec-17	 	 	31-Mar-17	 
	 Volatility
	  	 	70% - 90	% 	 	 	70	% 
	 Risk -free interest rate
	  	 	0.73% - 1.64	% 	 	 	0.73	% 
	 Expected life (years)
	  	 	2.0 - 3.52	 	 	 	2.00	 
	 Dividend yield
	  	 	n/a	 	 	 	n/a	 
	 Forfeiture rate
	  	 	0	% 	 	 	0	% 
	 Share price
	  	$	0.16 - $1.87	 	 	$	0.16	 

  
 17 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 Performance Warrants & Stock Options 

The Company has stock based compensation arrangements consisting of Performance Warrants, Stock Options and RSUs to encourage ownership of the Company’s
common shares by its officers, directors, employees and certain non- employees. The maximum number of stock options and performance warrants granted, vesting period and contractual life of the options under
these arrangements shall be determined from time to time by the Board. The exercise price on each option shall be determined by the Board based on the fair market value of the shares on the date of grant as estimated in accordance with a valuation
model approved by the Board. 
 During the year ended March 31, 2017 and additionally in the nine months ended December 31, 2017, the Company issued
share based awards to management and certain employees. Performance warrants are exercisable at prices ranging from $0.00006 to $0.17 for Class A common shares, with an expiry of three to five years from the date of issuance. Vesting conditions
are based on the Company achieving certain milestones, such as obtaining certain licenses from Health Canada and cumulative sales volume. 
 During the nine
months ended December 31, 2017 the company issued 963,333 stock options, exercisable for common shares at a weighted average price of $0.97 per share fully vested upon the grant. The options expire 5 years from the date of the grant. 

During the nine months ended December 31, 2017 the company issued 486,000 performance warrants, exercisable for common shares at a weighted average price of
$0.38 per share fully vested upon the grant. The performance warrants expire 5 years from the date of the grant. 
 Additionally, in October 2017 the
company issued 20,000 RSUs, exercisable for common shares vesting 1 year from the grant. 
 The Company recognized $740,880 for the nine months ended
December 31, 2017 (March 2017 - $458,362) in stock- based compensation with respect to share based awards. 
 The Following table summarizes the stock
option and performance warrant activity: 
  

									
	 	  	Number of Performance
Warrants and Options	 	  	Weighted Average
exercise price	 
	 Outstanding, March 31, 2016
	  	 	—  	 	  	$	—  	 
	 Granted
	  	 	7,616,399	 	  	 	0.03	 
	 Outstanding, March 31, 2017
	  	 	7,616,399	 	  	 	0.03	 
	 Granted pursuant to reverse acquisition
	  	 	120,001	 	  	 	0.65	 
	 Granted
	  	 	1,416,000	 	  	 	0.76	 
	 Cancelled
	  	 	(550,000	) 	  	 	0.25	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding December 31, 2017
	  	 	8,602,400	 	  	$	0.15	 
		  	  
	  
	 	  	  
	  
	 

 The fair value of each group of performance warrants and stock options on the date granted was estimated using the
Black-Scholes valuation model. The following assumptions were used: 
  

									
	 	  	31-Dec-17	 	 	31-Mar-17	 
	 Volatility
	  	 	70% - 90	% 	 	 	70	% 
	 Risk -free interest rate
	  	 	0.58% - 1.77	% 	 	 	0.56% - 0.76	% 
	 Expected life (years)
	  	 	1.0 - 5.0	 	 	 	3.0	 
	 Dividend yield
	  	 	Nil	 	 	 	n/a	 
	 Forfeiture rate
	  	 	10	% 	 	 	0	% 
	 Share price
	  	$	0.30 - $1.12	 	 	$	0.0001 - $0.3	

  
 18 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 The following table presents information related to performance warrants and stock options as at
December 31, 2017: 
  

													
	
Weighted Average Exercise Price
	  	Options and Performance
Warants Outstanding	 	  	Weighted average remaining
life (years)	 	  	Vested	 
	
$                 
             0.00006
	  	 	5,366,400	 	  	 	1.75	 	  	 	2,639,997	 
	 0.10
	  	 	1,800,000	 	  	 	2.00	 	  	 	900,000	 
	 0.25
	  	 	243,000	 	  	 	4.33	 	  	 	81,000	 
	 0.42
	  	 	266,667	 	  	 	4.21	 	  	 	266,667	 
	 0.50
	  	 	243,000	 	  	 	4.42	 	  	 	81,000	 
	 0.75
	  	 	100,000	 	  	 	4.76	 	  	 	—  	 
	 0.95
	  	 	300,000	 	  	 	4.89	 	  	 	—  	 
	 1.26
	  	 	33,333	 	  	 	0.58	 	  	 	33,333	 
	 1.45
	  	 	250,000	 	  	 	4.97	 	  	 	250,000	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance at December 31, 2017
	  	 	8,602,400	 	  	 	2.34	 	  	 	4,251,997	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 RSUs 
 The Company’s
long term incentive plan allows for the reservation of a number of common shares under the Stock Option and RSU plan not to exceed 10% of the Company’s issued and outstanding common shares on a undiluted basis less the number of common shares
reserved under the Company’s stock option plan. The Company may grant restricted stock units (“RSUs”) to directors, officers, employees, and consultants. 

During the nine months ended December 31, 2017, the Company granted 20,000 (March 2017 – nil) RSUs. The RSUs vest over a period of one year. The weighted
average fair value of the RSUs granted in the year ended December 31, 2017 was $0.51 per RSU (March 2017 – nil). The Company estimates the fair value of RSUs based on the market price of the underlying stock on the date of grant and
recorded. For the year ended December 31, 2017 the company recognized $2,343 charged to stock based compensation with respect to the restricted stock awards. 

The Following table summarizes the stock option and performance warrant activity: 
  

									
	 	  	Number of Restricted
Stock Units	 	  	Weighted Average
grant date fair value	 
	 Outstanding, March 31, 2016
	  	 	—  	 	  	$	—  	 
	 Granted
	  	 	—  	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Outstanding, March 31, 2017
	  	 	—  	 	  	 	—  	 
	 Granted pursuant to reverse acquisition
	  	 	20,000	 	  	 	0.51	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding December 31, 2017
	  	 	20,000	 	  	$	0.51	 
		  	  
	  
	 	  	  
	  
	 

  
 19 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	10.	 Related Parties 

Key management personnel of the Group consist of its executive management and Board of Directors (as the Directors are considered to have control of the
Company). In addition to the salaries and fees paid to key management, the Group also provides compensation to both groups under its share-based compensation plans. Compensation expenses paid to key management personnel were as follows: 

 

									
	 	  	December 31, 2017	 	  	March 31, 2017	 
	 Short-term benefits
	  	 	374,038	 	  	 	120,371	 
	 Share based awards
	  	 	411,054	 	  	 	442,955	 
		  	  
	  
	 	  	  
	  
	 
	 Key Management personnel compensation
	  	$	785,092	 	  	$	563,326	 
		  	  
	  
	 	  	  
	  
	 

 Related party transactions 

The Company engaged construction services from a related company for which entities share a common director. The Services totaled $18,622 for the year ended
December 31, 2017 and all transactions are considered at arm’s length. 
  

	11.	 Income Taxes 

Income tax (recovery) expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates of 26.0% (2016 -
26.5%) to earnings before taxes. These differences result from the following items: 
  

									
	 	  	2017	 	  	2016	 
	 Net Income (Loss) before recovery of income taxes
	  	$	(7,087,956	) 	  	$	(967,372	) 
	 Expected income taxrecovery
	  	 	(1,842,869	) 	  	 	(251,517	) 
	 Taxrate changes and other adjustments
	  	 	(5,401	) 	  	 	1,303	 
	 Non-deductible expenses
	  	 	1,152,731	 	  	 	125,483	 
	 Amounts booked directly into equity
	  				  	 	43,940	 
	 Change in taxbenefits not recognized
	  	 	(152,232	) 	  	 	80,791	 
		  	  
	  
	 	  	  
	  
	 
	 Income tax (recovery) expense
	  	$	(847,771	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 

 The Company’s income tax (recovery) is allocated as follows: 

 

									
	 	  	2017	 	  	2016	 
	 Current tax (recovery) expense
	  	$	—  	 	  	$	—  	 
	 Deferred tax (recovery) expense
	  	 	(847,771	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
		  	$	(847,771	) 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

  
 20 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 Deferred tax 

The following table summarizes the components of deferred tax: 
  

									
	 	  	2017	 	  	2016	 
	 Deferred Tax Assets
	  				  			
	 Property, plant and equipment
	  	$	63,810	 	  	$	—  	 
	 Share issuance costs
	  	 	244,670	 	  	 	—  	 
	 Non-capital losses carried forward
	  	 	913,050	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Deferred Tax Liabilities
	  				  			
	 Inventory
	  	$	(39,370	) 	  	$	—  	 
	 Biological Assets
	  	 	(31,990	) 	  	 	—  	 
	 Convertible debenture
	  	 	(1,635,160	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Net deferred tax Asset
	  	$	(484,990	) 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

 Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority
and the Company has the legal right and intent to offset. 
 Movement in net deferred taxliabilities: 

 

									
	 	  	2017	 	  	2016	 
	 Balance at the beginning of the year
	  	$	—  	 	  	$	—  	 
	 Recognized in profit/loss
	  	 	847,771	 	  	 	—  	 
	 Recognized in equity
	  	 	(1,332,761	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Balance at the end of the year
	  	$	(484,990	) 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

 Unrecognized deferred tax assets 

Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of
assets and liabilities. Deferred tax assets have not been recognized in respect of the following deductible temporary differences: 
  

									
	 	  	2017	 	  	2016	 
	 Share issuance costs
	  	$	—  	 	  	$	13,600	 
	 Non-capital losses carried forward
	  	$	—  	 	  	$	571,908	 

  
 21 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	12.	 Capital management 

The Company’s objective in managing capital is to ensure a sufficient liquidity position to safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders. The Company defines capital as net equity and debt, comprised of issued share capital and accumulated deficit, as well as mortgages payable and due to related
parties. 
 The Company’s objective with respect to its capital management is to ensure it has sufficient cash resources to complete the construction
of the medical marijuana production facility in Kelowna, British Columbia, to obtain its permit to sell medical marijuana under the ACMPR and to initiate production at the facility. Since inception, the Company has primarily financed its liquidity
needs through issuance of shares, convertible promissory notes payable and loans. 
 There have been no changes to the Company’s objectives and what it
manages as capital since the prior fiscal year. The Company is not subject to externally imposed capital requirements. 
  

	13.	 Financial instruments and risk management 

The Company has classified its cash and derivative liability as fair value through profit and loss (“FVTPL”), accounts receivable and other
receivables as loans and receivables, and accounts payable and accrued liabilities, due to related parties, convertible promissory notes payable and mortgage payable as other financial liabilities. 

The carrying values of cash, accounts receivable, other receivables, due to related parties, accounts payable and accrued liabilities and convertible
debentures approximate their fair values due to their short periods to maturity. 
 Fair value hierarchy 

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the
measurements. The hierarchy is summarized as follows: 
 Level 1 – quoted prices (unadjusted) in active markets for identical assets and
liabilities 
 Level 2 – inputs that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from
observable market data 
 Level 3 – inputs for assets and liabilities not based upon observable market data 

Cash is classified as Level 1 financial instruments. 

Financial risk factors 
 The Company’s risk exposure
and the impact on the Company’s financial instruments are summarized below: 
  

	(a)	 Credit risk 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The
Company’s cash is held at a major Canadian bank. The Company regularly monitors the credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss. 

  
 22 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

	(b)	 Liquidity risk 

The Company is exposed to liquidity risk or the risk of not meeting its financial obligations as they come due. The Company constantly monitors and manages its
cash flows to assess the liquidity necessary to fund operations (see note 12). All of the Company’s financial liabilities are due within one year except for the mortgage payable. 

 

	(c)	 Interest rate risk 

The Company is subject to interest rate risk from its convertible promissory notes payable and mortgage payable, which are all currently fixed rate
instruments. 
  

	14.	 Commitments 

The Company has property and marketing commitments as at Dec 31, 2017 as follows: 
  

																					
	 	  	Current	 	  	1-2 years	 	  	3-5 years	 	  	> 5 years	 	  	Total	 
	 Property & Rent
	  	 	91,956	 	  	 	101,737	 	  	 	563,720	 	  	 	—  	 	  	 	757,413	 
	 Marketing
	  	 	126,582	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	126,582	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	 	218,538	 	  	 	101,737	 	  	 	563,720	 	  	 	—  	 	  	 	883,995	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	15.	 Subsequent events 

TS Brandco Holdings (“Tokyo Smoke”) Merger 

On January 30, 2018 the Company and Tokyo Smoke completed a business combination agreement pursuant to which DOJA agreed to acquire all of the issued and
outstanding securities of Tokyo Smoke for gross consideration of 55,971,058 DOJA shares. Concurrently with the business combination the combined entity closed a strategic investment from Aphria Inc. and Uji Capital Inc. issuing 8,992,805 shares at
$1.39 per share for gross proceeds of $12.5 million. An additional 8,992,805 warrants were issued with an exercise price of $2.10 per warrant in conjunction with the strategic investment. The warrants have a 2 year life from the date of grant
and subject to accelerated expiry in some circumstances. 
 Upon completion of the Amalgamation, DOJA changed its name to “Hiku Brands Company
Ltd.” And resumed trading on the CSE under the symbol “HIKU” on Jan 31, 2018. 
 Matri Acquisition 

On Feb 1, 2018 the Company signed a binding LOI with Maïtri Group Inc, a Quebec based cannabis accessory and design brand, to acquire 100% if the issued
and outstanding shares. Pursuant to the LOI, shareholders of Maïtri will receive upfront consideration of $550,000 in a combination of cash and Hiku shares and up to $1.2 million in earn out payments based on performance milestones being
met. Completion of the proposed acquisition of Maïtri remains subject to conditions, including the entering into of a definitive agreement. 

Manitoba Cannabis Retail License 
 On Feb 5, 2018
the Company’s wholly owned subsidiary, Tokyo Smoke, with participation by with BOBHQ, was conditionally awarded one of four master retail licenses in Manitoba’s Request for Proposal (“RFP”) process for the right to operate retail
cannabis stores. The License gives Tokyo Smoke the ability to operate legal retail cannabis stores and an online cannabis sales platform in Manitoba. 

  
 23 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 Kaya Inc. Strategic Investment 

On Feb 21, 2018 the Company entered into a LOI with Kaya Inc, the first licensed medical cannabis producer and dispensary operator in Jamaica, to launch a
strategic alliance to pursue medical and adult-use cannabis branding, genetics, and retail opportunities in Jamaica and Canada. Under the terms of the LOI the Company made an initial investment of $250,000
cash with an option to increase ownership through a secondary placement concurrent with future financings to increase the Company’s’ ownership in Kaya Inc. to up to 10% on a fully diluted basis post financing. 

Acquisition of TS Prairie Retail Corp 
 On
March 6, 2017 Hiku acquired all of the issued and outstanding shares of TS Prairie Retail Corp., an entity that previously held exclusive rights to establish Tokyo Smoke branded stores in Alberta, Manitoba, and Saskatchewan under a license
agreement dated August 15, 2017, pursuant to a share purchase agreement in exchange for 4.2 million common shares in the capital of Hiku 

License to sell dried cannabis 
 Effective April 6,
2018 the Company’s wholly owned subsidiary DOJA Cannabis received an amendment to its sales license from Health Canada to include the sales of dried cannabis, cannabis plants and seeds. 

WeedMD Inc. Merger 
 On April 19, 2018, the Company
entered into a definitive agreement to merge with WeedMD Inc by way of a plan of arrangement of WeedMD under the Business Corporations Act (Ontario), pursuant to which WeedMD shareholders will receive 1.4185 Hiku common shares (each, a “Hiku
Share”) in exchange (the “Exchange Ratio”) for each WeedMD common share. In addition, each outstanding option and warrant to purchase a WeedMD Share will be exchanged for an option or warrant, as applicable, to purchase a Hiku Share,
based upon the Exchange Ratio. Upon completion of the Transaction, existing Hiku and WeedMD shareholders will own approximately 51.75% and 48.25% of the combined company, respectively, on a fully-diluted basis. Upon closing of the Transaction, it is
anticipated that the common shares of the pro forma resulting entity will be listed on the TSX Venture Exchange (“TSX-V”), subject to regulatory approvals. 

Executive and Management Team Expansion 

Subsequent to the period ended December 31, 2017 the Company hired additional executive team memebers though the acquisition of Tokyo Smoke and the
addition of Lacey Norton (Lululemon, Kit and Ace) as Vice President of Retail, Will Stewart (Navigator) as Vice President, Corporate Communications and Joe Mimram (Dragons’ Den, Joe Fresh, Club Monaco) as the first appointment to the
Company’s newly formed Board of Advisors. On the close of the transaction with Tokyo Smoke, Alan Gertner was appointed CEO of Hiku and Trent Kitsch as President. 

Movements in Share Capital Subsequent to period end 
  

																																					
	 	  	As at
December
31, 2017	 	  	Pursuant to	 	  	Granted
Acquisition	 	  	Transferred	 	 	Exercised	 	 	Cancelled	 	 	As at April
30, 2018	 	  	WA Ex
Price	 	  	WA Term
Remaining –
Years	 
	 Common Shares
	  	 	61,301,070	 	  	 	55,971,058	 	  	 	14,289,437	 	  	 	—  	 	 	 	9,391,224	 	 	 	—  	 	 	 	140,952,789	 	  	 	As at April 30, 2018	 
	 Dilutive Securities
	  				  				  				  				 				 				 				  			
	 Warrants
	  	 	20,427,912	 	  	 	—  	 	  	 	8,992,805	 	  	 	—  	 	 	 	(8,639,248	) 	 	 	—  	 	 	 	20,781,469	 	  	$	1.67	 	  	 	2.21	 
	 RSUs
	  	 	20,000	 	  	 	—  	 	  	 	—  	 	  	 	1,646,972	 	 	 	(197,340	) 	 	 	—  	 	 	 	1,469,632	 	  	 	n/a	 	  	 	1.27	 
	 Stock Options
	  	 	950,001	 	  	 	11,820,038	 	  	 	139,222	 	  	 	(1,646,972	) 	 	 	(391,409	) 	 	 	(195,419	) 	 	 	10,675,461	 	  	$	0.29	 	  	 	4.06	 
	 Performance Warrants
	  	 	7,652,399	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	(248,400	) 	 	 	—  	 	 	 	7,403,999	 	  	$	0.04	 	  	 	1.68	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  				  			
	 Dilutive Securities
	  	 	29,050,312	 	  				  				  				 				 				 	 	40,330,561	 	  				  			
		  	  
	  
	 	  				  				  				 				 				 	  
	  
	 	  				  			
	 Subtotal
	  	 	90,351,382	 	  				  				  				 				 				 	 	181,283,350	 	  				  			
	 Outstanding Convertible Debentures
	  	 	13,911,290	 	  				  				  				 				 				 	 	13,911,290	 	  	$	1.24	 	  	 	2.66	 
		  	  
	  
	 	  				  				  				 				 				 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Fully diluted
	  	 	104,262,672	 	  				  				  				 				 				 	 	195,194,640	 	  				  			
		  	  
	  
	 	  				  				  				 				 				 	  
	  
	 	  				  			

  
 24 

 Hiku Brands Company Ltd. (DOJA Cannabis Company Limited) 

 
 Notes to the Consolidated Financial Statements

 For the Nine and Twelve months ended December 31, 2017 and March 31, 2017 respectively 

 
  

 Common Shares Issued: 
  

	 	•	 	 On March 15, 2018, the Company issued 151,724 Common Shares as consideration for services for deemed value of
$220,000. 

  

	 	•	 	 On Jan 30, 2018 the Company issued 55,971,058 Common Shares pursuant to the close of the Tokyo Smoke merger. In
connection with the Merger the Company also absorbed 11,820,038 stock options. Concurrent with the close of the Tokyo Smoke merger the company issued a total of 9,792,168 Common Shares for the concurrent private placement of $12.5 million and
subscription fees. 

  

	 	•	 	 On March 6, 2018 the Company issued 4,200,000 Common Shares pursuant to the closing of the acquisition of Prairie
Co. 

  

	 	•	 	 On March 15, 2018, the Company issued 145,545 Common Shares as consideration for services for deemed value
of $400,000. 

 Warrants Exercised 
  

	 	•	 	 Subsequent to the period ended Dec 31, 2017 a total of 8,639,248 warrants were exercised for gross proceeds of
$2,203,877. 

 RSUs Granted 
  

	 	•	 	 On March 20, 2018 options for an employee were cancelled and issued as restricted stock. On March 20,
2018 197,340 RSUs vested and were issued to the employee on a net of tax basis. 

 Stock Options 

 

	 	•	 	 On Feb 21, 2018 a total of 139,222 options were granted to employees at a weighted average price of $2.76 per
share. Additionally in Feb 2018, a total of 195,419 options were cancelled for terminated employees. 

 Performance Warrants and
Options Exercised 
  

	 	•	 	 On March 30, 2018 248,400 performance warrants were exercised for gross proceeds of $40,505

  

	 	•	 	 Subsequent to the period ended December 31, 2017 a total of 391,409 Stock Options were exercised for gross
proceeds of $114,703. 

  
 25 

 Hiku Brands Company Ltd. 

UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

For the three months and six months ended June 30, 2018 and 2017 

(In Canadian Dollars) 

 Notice for National Instrument 51-102 

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed interim financial statements; they
must be accompanied by a notice indicating that the condensed interim financial statements have not been reviewed by an auditor. 
 The accompanying
unaudited condensed interim financial statements of Hiku Brands Company Ltd. (the “Company”) have been prepared and are the responsibility of the Company’s management. 

The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with standards established by
the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor. 

 Hiku Brands Company Ltd. 

 
 Statements of Financial Position 

(Expressed in Canadian Dollars) 
  

 

									
	 	  	As at June 30, 2018
(Unaudited)	 	 	As at December 31, 2017
(Audited)	 
	 Assets
	  				 			
	 Current assets
	  				 			
	 Cash and cash equivalents (note 4)
	  	$	19,017,257	 	 	$	16,908,526	 
	 Trade & other receivables
	  	 	1,365,501	 	 	 	160,346	 
	 Prepaids
	  	 	597,690	 	 	 	31,838	 
	 Inventory (note 7)
	  	 	938,993	 	 	 	244,141	 
	 Biological assets (note 7)
	  	 	737,821	 	 	 	118,500	 
		  	  
	  
	 	 	  
	  
	 
		  	 	22,657,262	 	 	 	17,463,351	 
	 Property and equipment (note 8)
	  	 	13,753,882	 	 	 	5,430,720	 
	 Intangible assets (note 6 and 9)
	  	 	987,803	 	 	 	—  	 
	 Longterm investments (note 10)
	  	 	904,192	 	 	 	—  	 
	 Goodwill (note 5)
	  	 	178,956,538	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	$	217,259,677	 	 	$	22,894,071	 
		  	  
	  
	 	 	  
	  
	 
	 Liabilities 
	  				 			
	 Current liabilities
	  				 			
	 Accounts payable and accrued liabilities
	  	$	2,797,363	 	 	$	568,968	 
	 Current portion of long term debt (note 11)
	  	 	46,994	 	 	 	13,982	 
	 Current portion of deferred revenue (note 10)
	  	 	38,780	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	2,883,137	 	 	 	582,950	 
	 Long term debt (note 11)
	  	 	601,968	 	 	 	572,024	 
	 Convertible debentures (note 12)
	  	 	1,271,390	 	 	 	11,193,849	 
	 Deferred revenue (note 10)
	  	 	175,151	 	 	 	—  	 
	 Deferred tax liability
	  	 	484,990	 	 	 	484,990	 
		  	  
	  
	 	 	  
	  
	 
		  	 	5,416,636	 	 	 	12,833,813	 
		  	  
	  
	 	 	  
	  
	 
	 Shareholders’ equity 
	  	 	213,620,532	 	 	 	11,538,504	 
	 Share capital (note 13)
	  				 			
	 Contributed surplus (note 13)
	  	 	11,566,500	 	 	 	4,520,084	 
	 Warrant reserve (note 13)
	  	 	8,675,399	 	 	 	1,470,269	 
	 Accumulated other comprehensive income
	  	 	(13,759	) 	 	 	—  	 
	 Deficit
	  	 	(22,005,631	) 	 	 	(7,468,599	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	211,843,041	 	 	 	10,060,258	 
		  	  
	  
	 	 	  
	  
	 
		  	$	217,259,677	 	 	$	22,894,071	 
		  	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

 On behalf of the Board 
  

					
	“Trent Kitsch”	  	 	“Alan Gertner”	 
		
	Director	  	 	Director	 

  
 1 

 Hiku Brands Company Ltd. 

 
  

 Statements of Loss and Comprehensive Loss 

(Expressed in Canadian Dollars) (unaudited) 

 
  

																	
	 	 	Three Months ended
June 30, 2018	 	 	Three Months ended
June 30, 2017	 	 	Six Months ended June 30,
2018	 	 	Six Months ended June 30,
2017	 
	 Revenue:
	 				 				 				 			
	 Retail sales
	 	$	317,288	 	 	$	—  	 	 	$	563,431	 	 	$	—  	 
	 Retail cost of sales
	 	 	(233,126	) 	 	 	—  	 	 	 	(435,557	) 	 	 	—  	 
	 Production sales
	 	 	3,894	 	 	 	—  	 	 	 	3,894	 	 	 	—  	 
	 Production cost of sales
	 	 	(55,518	) 	 	 	(69,845	) 	 	 	(70,439	) 	 	 	(69,845	) 
	 Production amortization and depreciation (note 8)
	 	 	(37,634	) 	 	 	—  	 	 	 	(50,871	) 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross profit (loss) before fair value adjustments
	 	 	(5,096	) 	 	 	(69,845	) 	 	 	10,458	 	 	 	(69,845	) 
	 Unrealized gain on change of fair value of biological assets (note 7)
	 	 	71,294	 	 	 	—  	 	 	 	466,926	 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross profit (loss)
	 	 	66,198	 	 	 	(69,845	) 	 	 	477,384	 	 	 	(69,845	) 
					
	 Expenses:
	 				 				 				 			
	 General and administrative
	 	 	1,555,476	 	 	 	230,805	 	 	 	4,344,824	 	 	 	347,527	 
	 Sales and marketing
	 	 	1,081,228	 	 	 	48,000	 	 	 	1,730,174	 	 	 	48,000	 
	 Consulting
	 	 	707,012	 	 				 	 	1,184,012	 	 			
	 Professional Fees
	 	 	701,547	 	 	 	—  	 	 	 	1,172,684	 	 	 	—  	 
	 Investor relations
	 	 	153,832	 	 				 	 	153,832	 	 			
	 Loss on change in fair value of derivative liability
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	492	 
	 Stock-based compensation (note 13)
	 	 	1,006,781	 	 	 	353,098	 	 	 	4,009,394	 	 	 	812,326	 
	 Accretion on convertible debentures (note 12)
	 	 	189,702	 	 	 	—  	 	 	 	600,455	 	 	 	—  	 
	 Amortization and depreciation (note 8)
	 	 	398,160	 	 	 	—  	 	 	 	444,362	 	 	 	—  	 
	 Impairment of fixed assets (note 8)
	 	 	463,793	 	 				 	 	463,793	 	 			
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		 	 	6,257,531	 	 	 	631,903	 	 	 	14,103,530	 	 	 	1,208,345	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Loss from operations
	 	 	(6,191,333	) 	 	 	(701,748	) 	 	 	(13,626,146	) 	 	 	(1,278,190	) 
					
	 Other income, net
	 	 	3,332	 	 	 	(657	) 	 	 	18,144	 	 	 	104,343	 
	 Interest income
	 	 	80,885	 	 				 	 	138,889	 	 			
	 Interest expense
	 	 	(584,169	) 	 	 	1,852	 	 	 	(592,918	) 	 	 	1,706	 
	 Unrealized gain (loss) on investments (note 10)
	 	 	(237,048	) 	 	 	—  	 	 	 	(475,001	) 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Loss before income taxes and comprehensive loss
	 	 	(6,928,333	) 	 	 	(700,553	) 	 	 	(14,537,032	) 	 	 	(1,172,141	) 
					
	 Other comprehensive loss
	 	 	(13,759	) 	 				 	 	(13,759	) 	 			
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net loss and comprehensive loss
	 	$	(6,942,092	) 	 	$	(700,553	) 	 	$	(14,550,791	) 	 	$	(1,172,141	) 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net loss per share
	 				 				 				 			
	 Basic and diluted
	 	$	(0.05	) 	 	$	(0.03	) 	 	$	(0.10	) 	 	$	(0.03	) 
	 Weighted average shares outstanding
	 	 	147,637,765	 	 	 	26,897,954	 	 	 	144,159,556	 	 	 	37,233,036	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

  
 2 

 Hiku Brands Company Ltd. 

 
  

 Statements of Changes in Shareholders’ Equity 

(Expressed in Canadian Dollars) (uaudited) 
  

 

																									
	 	 	Share Capital	 	 	Contributed
Surplus	 	 	Warrant Reserve	 	 	Deficit	 	 	Accumulated OCI	 	 	Total Equity	 
	 Balance, March 31, 2018
	 	$	193,929,764	 	 	$	20,968,371	 	 	$	6,181,504	 	 	$	15,077,298	 	 	$	—  	 	 	$	206,002,340	 
	 Shares issued for services
	 	 	100,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	100,000	 
	 Acquisition of Maitri (note 6)
	 	 	461,783	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	461,783	 
	 Exercise of Warrants (note 13)
	 	 	1,237,578	 	 	 	—  	 	 	 	(692,578	) 	 	 	—  	 	 	 	—  	 	 	 	545,000	 
	 Exercise of Stock Options (note 13)
	 	 	163,776	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	163,776	 
	 Exercise of RSUs (note 13)
	 	 	101,111	 	 	 	(101,111	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Conversion of debentures
	 	 	17,626,520	 	 	 	(10,307,539	) 	 	 	3,186,473	 	 	 	—  	 	 	 	—  	 	 	 	10,505,454	 
	 Stock based compensation
	 	 	—  	 	 	 	1,006,780	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,006,780	 
	 Net loss before taxes and OCI
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(6,928,333	) 	 	 	—  	 	 	 	(6,928,333	) 
	 Other comprehensive loss
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(13,759	) 	 	 	(13,759	) 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, June 30, 2018
	 	$	213,620,532	 	 	$	11,566,501	 	 	$	8,675,399	 	 	$	(22,005,631	) 	 	$	(13,759	) 	 	$	211,843,041	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, December 31, 2017
	 	$	11,538,504	 	 	$	4,520,085	 	 	$	1,470,269	 	 	$	(7,468,599	) 	 	$	—  	 	 	$	10,060,259	 
	 Shares issued for services
	 	 	620,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	620,000	 
	 Acquisition of TS Prairie Co Ltd. (note 5)
	 	 	9,660,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	9,660,000	 
	 Acquisition of TS Brandco Holdings Ltd. (note 5)
	 	 	161,756,358	 	 	 	13,708,349	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	175,464,707	 
	 Non-brokered private placement
	 	 	7,396,451	 	 	 	—  	 	 	 	5,103,550	 	 	 	—  	 	 	 	—  	 	 	 	12,500,001	 
	 Exercise of Warrants (note 13)
	 	 	2,597,092	 	 	 	—  	 	 	 	(392,315	) 	 	 	—  	 	 	 	—  	 	 	 	2,204,777	 
	 Exercise of Stock Options (note 13)
	 	 	98,683	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	98,683	 
	 Exercise of RSUs (note 13)
	 	 	262,676	 	 	 	(262,676	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Stock based compensation
	 	 	—  	 	 	 	3,002,613	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,002,613	 
	 Net loss for the period
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(7,608,699	) 	 	 	—  	 	 	 	(7,608,699	) 
	 Balance, March 31, 2018
	 	$	193,929,764	 	 	$	20,968,371	 	 	$	6,181,504	 	 	$	(15,077,298	) 	 	$	—  	 	 	$	206,002,341	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2017
	 	$	4,451,420	 	 	$	645,228	 	 	$	115,151	 	 	$	(1,228,414	) 	 	$	—  	 	 	 	3,983,385	 
	 Shares issued for cash, net of issuance costs
	 	 	3,046,125	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,046,125	 
	 Shares issued for services
	 	 	718,679	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	718,679	 
	 Stock based compensation
	 	 	—  	 	 	 	740,880	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	740,880	 
	 Reverse takeover transaction
	 	 	2,535,243	 	 	 	29,032	 	 	 	1,135,374	 	 	 	—  	 	 	 	—  	 	 	 	3,699,649	 
	 Issuance of convertible debt (net of deferred tax)
	 	 	—  	 	 	 	3,104,944	 	 	 	498,446	 	 	 	—  	 	 	 	—  	 	 	 	3,603,390	 
	 Exercise of Warrants
	 	 	787,037	 	 	 	—  	 	 	 	(278,702	) 	 	 	—  	 	 	 	—  	 	 	 	508,335	 
	 Net loss for the period
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(6,240,185	) 	 	 	—  	 	 	 	(6,240,185	) 
	 Balance, December 31, 2017
	 	$	11,538,504	 	 	$	4,520,084	 	 	$	1,470,269	 	 	$	(7,468,599	) 	 	$	—  	 	 	$	10,060,258	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

  
 3 

 Hiku Brands Company Ltd. 

 
  

									
	 Net Income/(loss)
	  	$	(14,537,032	) 	 	$	(1,172,141	) 
	 Add (deduct) items not involving cash
	  				 			
	 Accretion and accrued interest
	  	 	600,455	 	 	 	17,998	 
	 Loss of change in fair value of derivative liability
	  	 	—  	 	 	 	492	 
	 Stock-based compensation (note 13)
	  	 	4,009,394	 	 	 	812,326	 
	 Amortization and depreciation (notes 8)
	  	 	495,233	 	 	 	—  	 
	 Impairment of fixed assets (notes 8)
	  	 	463,793	 	 	 	—  	 
	 Shares issued for services (note 13)
	  	 	720,000	 	 	 	40,000	 
	 Change in fair value of biological assets (note 7)
	  	 	(58,926	) 	 	 	—  	 
	 Unrealized (gain) loss on investments
	  	 	475,001	 	 	 	—  	 
	 Change in non-cash working capital
	  				 			
	 Trade and other receivables
	  	 	(1,205,155	) 	 	 	(22,497	) 
	 Prepaid expenses
	  	 	(565,852	) 	 	 	4,519	 
	 Inventory and biological assets (note 7)
	  	 	(1,314,173	) 	 	 	—  	 
	 Deferred revenue
	  	 	213,931	 	 	 	—  	 
	 Long term investments (notes 10)
	  	 	(904,192	) 	 	 	—  	 
	 Accounts payable and accrued liabilities
	  	 	2,228,395	 	 	 	100,923	 
		  	  
	  
	 	 	  
	  
	 
		  	 	(9,379,128	) 	 	 	(218,380	) 
	 Cash flow from financing activities
	  				 			
	 Private placement of shares, net of issuance costs (note 13)
	  	 	12,500,001	 	 	 	4,932,213	 
	 Conversion of debenture (note 12)
	  	 	582,994	 	 	 	—  	 
	 Exercise of Warrants
	  	 	2,749,777	 	 	 	—  	 
	 Exercise of Options
	  	 	262,459	 	 	 	—  	 
	 Repayment of mortgage and loans payable (note 8)
	  	 	(20,028	) 	 	 	—  	 
	 Cash acquired from business combinations and asset purchases (notes 5 and 6)
	  	 	2,414,924	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	18,490,127	 	 	 	4,932,213	 
	 Cash flow from investing activities
	  				 			
	 Investment in property and equipment (note 8)
	  	 	(6,895,250	) 	 	 	(131,143	) 
	 Investment in Intangible assets (note 9)
	  	 	(57,018	) 	 	 	—  	 
	 Acquisition of Maitri Group Inc. (note 6)
	  	 	(50,000	) 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	(7,002,268	) 	 	 	(131,143	) 
	 Increase (decrease) in cash
	  	 	2,108,731	 	 	 	4,582,690	 
	 Cash, beginning of period
	  	 	16,908,526	 	 	 	16,800	 
		  	  
	  
	 	 	  
	  
	 
	 Cash, end of period
	  	$	19,017,257	 	 	$	4,599,490	 
		  	  
	  
	 	 	  
	  
	 
	
check               
             
	  	 	—  	 	 	$	—  	 

 Refer to Hiku FS and MD&A Tables Q2 (Aug 23) - Cashflow Worksheet for details 

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 

  
 4 

 Hiku Brands Company Ltd. 

 
  

 Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

For the three and six months ended June 30, 2018 and 2017 

 
  

	1.	 Nature of Operations 

Hiku Brands Company Ltd. (“Hiku” or the “Company”) (Formerly DOJA Cannabis Company Limited) is a publicly traded corporation incorporated
in the province of British Columbia. The address of the Company’s registered head office is 6-2322 Dominion Road, West Kelowna, V1Z 2W8. On January 30, 2018, the Company completed an acquisition (the “Tokyo Smoke Merger”) of TS
Brandco Holdings Inc. (“Tokyo Smoke”) (Note 5). Following the Tokyo Smoke Merger, the Company’s common shares (the “Common Shares”) resumed trading on the Canadian Securities Exchange (the “CSE”) under the symbol
“HIKU” on January 31, 2018. 
 The Company’s principal business activities are focused on building a portfolio of iconic, engaging
cannabis brands, immersive retail experiences and handcrafted cannabis production with a national retail footprint led by Tokyo Smoke and craft cannabis cultivation through the Access to Cannabis for Medical Purposes Regulations (“ACMPR”)
licensed production facility of DOJA Cannabis Ltd. (“DOJA Cannabis”), a wholly- owned subsidiary of the Company. During the three-month period ended June 30, 2018, the Company earned its first revenues from the sale of cannabis. 

The condensed interim consolidated financial statements as at and for the three months and six months ended June 30, 2018, and 2017, include Hiku and its
subsidiaries (together referred to as the “Company”) and the Company’s interests in affiliated companies. 
  

	2.	 Basis of Presentation 

 

	(a)	 Statement of Compliance 

The Company’s condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standards
(“IAS”) 34, “Interim Financial Reporting”. These financial statements do not include all notes of the type normally included within the annual financial report and should be read in conjunction with the audited financial
statements of the Company for the year ended December 31, 2017, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”) and Interpretations of the IFRS Interpretations Committee (“IFRIC”). 
 These unaudited condensed interim consolidated
financial statements were authorized for issue by the Company’s Board of Directors (the “Board”) on August 29, 2018. 
  

	(b)	 Basis of Measurement 

These condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are
measured at fair value and biological assets measured at fair value less cost to sell, as detailed in the Company’s accounting policies. These consolidated financial statements have been prepared using the accrual basis of accounting except for
cash flow information. 
  

	(c)	 Basis of Consolidation 

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All subsidiaries are wholly owned subsidiaries
in which the Company has control, directly or indirectly, where control is defined as the power to govern the financial operating policies of an enterprise so as to obtain benefits from its activities. All significant intercompany balances and
transactions are eliminated on consolidation. 

  
 5 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and
2017 
  
  

	(d)	 Functional and Presentation Currency 

The Company and its subsidiaries’ functional currency, as determined by management, is the Canadian dollar except for GRRBWA LLC and GRRBWA Coffee Inc.
which have US dollar functional currency. These financial statements are presented in Canadian dollars. 
  

	3.	 Significant Accounting Policies 

The accounting policies of the Company are set out in detail in Note 3 to the Company’s audited consolidated financial statements for the year ended
December 31, 2017. Such policies have been applied consistently by the Company and to all periods presented in the Company’s subsequent interim consolidated financial statements. 

 

	(a)	 Adoption of IFRS 5 – Revenue from Contracts with Customers 

The Company has adopted IFRS 15 – Revenue from Contracts with Customers with effect from January 1, 2018. There were no material changes with the
adoption of IFRS 15 on these condensed interim consolidated financial statements. 
 IFRS 15 introduced a single model for recognizing revenue from
contracts with customers. This standard applies to all contracts with customers, with only some exceptions, including certain contracts accounted for under other IFRS’s. The standard requires revenue to be recognized in a manner that depicts
the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. This is achieved by applying the following five steps: i)
identify the contract with a customer; ii) identify the performance obligations in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligations in the contract; and v) recognize revenue when
(or as) the entity satisfies a performance obligation 
  

	(b)	 Inventory 

For inventories consisting of food, beverage and merchandise, cost is determined using specific identification for merchandise and average cost for food and
beverage inventory. Products are valued at the lower of cost and net realizable value. 
  

	(c)	 Impairment of Long Lived Assets 

Long-lived assets, including property, plant and equipment, intangible assets and goodwill are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. 
  

	(d)	 Adoption of IFRS 9 – Financial Instruments 

Effective January 1, 2018, the Company adopted IFRS 9. 

IFRS 9 introduces new requirements for the classification and measurement of financial assets. IFRS 9 requires all recognized financial assets to be measured
at amortized cost or fair value in subsequent accounting periods following initial recognition. IFRS 9 also amends the requirements around hedge accounting, and introduces a single, forward-looking expected loss impairment model. 

The Company has elected to apply the limited exemption in IFRS 9 paragraph 7.2.15 relating to transition for classification and measurement and impairment,
and accordingly has not restated comparative periods in the year of initial application. The adoption of IFRS 9 had no impact on the Company’s consolidated financial statements on the date of initial application. There was no change in the
carrying amounts on the basis of allocation from original measurement categories under IAS 39 Financial Instruments: Recognition and Measurement to the new measurement categories under IFRS 9. 

  
 6 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and
2017 
  
  

 Classification 

The Company classifies its financial assets and financial liabilities in the following measurement categories i) those to be measured subsequently at fair
value through profit or loss (FVTPL); ii) those to be measured subsequently at fair value through other comprehensive income (FVOCI); and iii) those to be measured at amortized cost. The classification of financial assets depends on the business
model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at FVTPL (irrevocable
election at the time of recognition). For assets and liabilities measured at fair value, gains and losses are either recorded in profit or loss or other comprehensive income. 

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

 Financial assets at fair value through comprehensive income 

Equity instruments that are not held-for-trading can be irrevocably designated to have their change in fair value recognized through comprehensive income
instead of through profit or loss. This election can be made on individual instruments and is not required to be made for the entire class of instruments. Attributable transaction costs are included in the carrying value of the instruments.
Financial assets at fair value through other comprehensive income are initially measured at fair value and changes therein are recognized in other comprehensive income. 

Measurement 
 All financial instruments are required to be
measured at fair value on initial recognition, plus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability.
Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Financial assets and financial liabilities with embedded derivatives are considered in their entirety when determining whether their
cash flows are solely payment of principal and interest. 
 Financial assets that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other
financial assets including equity investments are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or other comprehensive income (irrevocable election at the time of
recognition). For financial liabilities measured subsequently at FVTPL, changes in fair value due to credit risk are recorded in other comprehensive income. 

Impairment 
 The Company assesses all information
available, including on a forward-looking basis the expected credit loss associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess
whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and
reasonable and supportive forward-looking information. For trade receivables only, the Company applies the simplified approach as permitted by IFRS 9. The simplified approach to the recognition of expected losses does not require the Company to
track the changes in credit risk; rather, the Company recognizes a loss allowance based on lifetime expected credit losses at each reporting date from the date of the trade receivable. 

  
 7 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 Evidence of impairment may include indications that the counterparty debtor or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Receivables are reviewed qualitatively on a case-by- case basis to determine whether they need to be written off. 

Expected credit losses are measured as the difference in the present value of the contractual cash flows that are due to the Company under the contract, and
the cash flows that the Company expects to receive. The Company assesses all information available, including past due status, credit ratings, the existence of third-party insurance, and forward looking macro-economic factors in the measurement of
the expected credit losses associated with its assets carried at amortized cost. 
 The Company measures expected credit loss by considering the risk of
default over the contract period and incorporates forward-looking information into its measurement. 
 Summary of the Company’s classification and
measurements of financial assets and liabilities 
  

									
	 	  	 IFRS 9
	  	 IAS 39

	 	  	 Classification
	  	 Measurement
	  	 Classification
	  	 Measurement

	Cash and cash equivalents	  	FVTPL	  	Fair value	  	Loans and receivables	  	Fair Value
	Trade & other receivables	  	Amortized cost	  	Amortized cost	  	Loans and receivables	  	Amortized cost
	Marketable securities (Long term investments)	  	FVTPL	  	Fair value	  	Loans and receivables	  	Fair Value
	Accounts payable and accrued liabilities	  	Amortized cost	  	Amortized cost	  	Other liabilities	  	Amortized cost
	Long term debt	  	Amortized cost	  	Amortized cost	  	Other liabilities	  	Amortized cost
	Convertible debentures	  	Amortized cost	  	Amortized cost	  	Other liabilities	  	Amortized cost

  

	(e)	 Goodwill 

Goodwill represents the excess of the price paid for the acquisition of an entity over the fair value of the net identifiable tangible and intangible assets
and liabilities acquired. Goodwill is allocated to the cash generating unit (the “CGU”) or CGUs to which it relates. 
 Goodwill, intangible
assets with an indefinite useful life and intangible assets not yet in use are measured at historical cost and are evaluated for impairment annually in the fourth quarter, or more often if events or circumstances indicate there may be an impairment.
Impairment is determined by assessing if the carrying value of a CGU, including the allocated goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs of disposal and the value in use. Impairment
losses recognized in respect of a CGU are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the CGU. Any goodwill impairment is recorded in income in the period in which the impairment
is identified. Impairment losses on goodwill are not subsequently reversed. 

  
 8 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and
2017 
  
  

	(f)	 Use of Estimates and Judgments 

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates below are additional estimates which were not included
on the December 31, 2017 audited financial statements: 
  

	i)	 Impairment assessment of indefinite life intangible assets, intangible assets not yet in use and goodwill

 The carrying value of goodwill, indefinite life intangible assets and intangible assets not yet in use are subject to annual impairment
assessment in the fourth quarter. The Company’s impairment tests for goodwill and intangible assets are based on the greater of value in use calculations that use a discounted cash flow model over a five-year period and estimated fair value
less cost to sell. 
  

	ii)	 Business combinations and asset acquisitions 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In determining the allocation of the purchase price
in a business combination or asset acquisition, including any acquisition related contingent consideration, estimates, including market based and appraisal values, are used. The current business combinations and asset acquisitions are currently
unfinalized as at June 30, 2018. 
  

	4.	 Cash and Cash Equivalents 

In addition to cash deposits in major Canadian banks, cash and cash equivalents consist of $15 million in guaranteed investment certificates, plus $96,000 of
accrued interest earned, with maturity dates between July 1, 2018 and Feb 4, 2019 with annual interest rates of 1.6%. The guaranteed investment certificates can be cashed at any time prior to maturity. 

  
 9 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and
2017 
  
  

	5.	 Acquisitions of Consolidated Entities 

The following table summarizes the balance sheet impact of the Company’s acquisitions of Tokyo Smoke and TS Prairie Retail Corp. (“TS Prairie”)
on the acquisition date of such transactions which occurred in the six-month period ended June 30, 2018: 
  

									
	 	  	Tokyo Smoke
(i)	 	  	TS Prairie Retail
Corp. (ii)	 
	 Cash and cash equivalents
	  	$	2,402,526	 	  	$	4,001	 
	 Marketable securities
	  	 	970,262	 	  	 	—  	 
	 Amounts receivable
	  	 	409,308	 	  	 	26,367	 
	 Inventory
	  	 	366,790	 	  	 	52,036	 
	 Prepaids and other assets
	  	 	127,511	 	  	 	43,330	 
	 Property, plant and equipment
	  	 	1,625,500	 	  	 	378,472	 
	 Intangible assets
	  	 	298,474	 	  	 	—  	 
	 Goodwill
	  	 	169,758,288	 	  	 	9,198,249	 
	 Accounts payable and accrued liabilities
	  	 	(301,178	) 	  	 	(42,455	) 
	 Deferred revenue
	  	 	(127,076	) 	  	 	—  	 
	 Long term debt
	  	 	(65,698	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Net assets acquired
	  	 	175,464,707	 	  	 	9,660,000	 
		  	  
	  
	 	  	  
	  
	 
	 Consideration paid in cash
	  	 	—  	 	  	 	—  	 
	 Consideration paid in shares
	  	 	161,756,358	 	  	 	9,660,000	 
	 Other considerations
	  	 	13,708,349	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Total considerations
	  	$	175,464,707	 	  	$	9,660,000	 
		  	  
	  
	 	  	  
	  
	 
	 Consideration paid in cash
	  	 	—  	 	  	 	—  	 
	 Less cash and cash equivalents acquired
	  	 	2,402,526	 	  	 	4,001	 
		  	  
	  
	 	  	  
	  
	 
	 Net cash (outflow) inflow
	  	$	2,402,526	 	  	$	4,001	 
		  	  
	  
	 	  	  
	  
	 

 The purchase price allocation relating to these acquisitions is not finalized and the allocation of the purchase price to the
various assets acquired is subject to change. 
 Goodwill arose in these acquisitions as a result of the cost of acquisition including a control premium. In
addition, the consideration paid for the combinations reflected the benefit of expected revenue growth and future market development. These benefits were not recognized separately from goodwill as they do not meet the recognition criteria for
identifiable assets. The allocation of the purchase price to goodwill for the Tokyo Smoke acquisition is $169,758,288 and for the TS Prairie acquisition is $9,198,249. 
  

	i.	 Tokyo Smoke 

On January 30, 2018, the Company purchased 100% of the issued and outstanding shares of TS Brandco Holdings Inc., a design focused cannabis lifestyle
brand and retailer based in Toronto, Ontario. 
 The transaction was accounted for as a business combination. The consideration for the transaction was
55,971,058 Common Shares issued at a value of $2.89 per share for consideration of $161,756,358 less cash and marketable securities acquired of $3,372,788. Other consideration included $13,708,349 of replacement options. Tokyo Smoke shares were
exchanged for Common Shares at a ratio of 0.0769 to 1. In connection with the closing of the acquisition, the Company changed its name to “Hiku Brands Company Ltd.”. 

  
 10 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 From the acquisition date of January 30, 2018 to June 30, 2018, Tokyo Smoke contributed a loss of
$6,090,081. 
  

	ii.	 TS Prairie Retail Corp. 

On March 6, 2018 Hiku acquired all of the issued and outstanding shares of TS Prairie, an entity that previously held exclusive rights to establish Tokyo
Smoke branded stores in Alberta, Manitoba, and Saskatchewan under a license agreement dated August 15, 2017. The transaction was completed by a share purchase agreement whereby 4.2 million Common Shares of the Company were issued at a
value of $2.30 per share for a total of $9,660,000 in exchange of all of the securities of TS Prairie., less cash acquired of $4,001. 
 From the
acquisition date of March 6, 2018 to June 30, 2018, TS Prairie contributed a loss of $151,832. 
  

	6.	 Purchase of Assets 

Maitri Group Inc. (“Maitri”), a Quebec based private company, was acquired by the Company through a share purchase transaction that closed
May 4, 2018. The Company concluded that the inputs and systems developed by Maitri are insufficient to constitute a business as defined under IFRS 3. As a result, the transaction has been accounted for as a purchase of assets. 

The purchase price is up to $1,750,000, payable in the form of: 
  

	 	i)	 $50,000 in cash that was paid upon closing 

 

	 	ii)	 the issue of $500,000 of Common Shares of the Company at time of closing, by way of the issue of 318,471 Common
Shares of the Company with an issue price of $1.57 per share, and 

  

	 	iii)	 the issue of $1.2 million of Common Shares of the Company, conditional upon the occurrence of certain future
events. 

 At the time of the purchase, Maitri had a nominal net tangible asset value. Since the transaction is recorded as a purchase of
assets, the majority of the purchase price has been recorded as intangible assets. Maitri is Quebec’s leading cannabis lifestyle brand with a strongly engaged and rapidly growing community. Intangible assets of $617,002 were recorded at the
time of the asset purchase. No conditional consideration has been recorded due to the uncertainty of the occurrence of the future events. The intangible assets recorded at time of purchase is calculated as: 

 

	 	i)	 $50,000 paid upon closing 

 

	 	ii)	 $461,783 of fair value of the 318,471 common shares issued 

 

	 	iii)	 $106,922 of capitalized legal costs related to the transaction, reduced by 

 

	 	iv)	 $1,703 of net identifiable assets. 

The net assets acquired through the purchase is shown below: 
  

					
	 Cash
	  	$	 8,397	 
	 Amounts receivable
	  	 	3,483	 
	 Inventory
	  	 	8,527	 
	 Property, plant and equipment
	  	 	1,163	 
	 Intangible assets
	  	 	38,300	 
	 Goodwill
	  	 	1	 
	 Accounts payable
	  	 	(58,168	) 
		  	  
	  
	 
	 Net identifiable assets
	  	$	1,703	 
		  	  
	  
	 

  
 11 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

	7.	 Biological Assets and Inventories 

The Company’s biological assets consist of 4,167 cannabis plants as at June 30, 2018 (2,888 plants as at December 31, 2017). The continuity of
biological assets is as follows: 
  

					
	 Carrying amount December 31, 2017
	  	$	118,500	 
		  	  
	  
	 
	 Purchase of clones and genetics
	  	 	117,272	 
	 Changes in fair value less costs to sell due to biological transformation
	  	 	466,926	 
	 Changes in estimates
	  	 	—  	 
	 Transferred to inventory upon harvest
	  	 	(352,393	) 
		  	  
	  
	 
	 Carrying amount June 30, 2018
	  	$	350,305	 
		  	  
	  
	 

 All biological assets are current. The significant assumptions used in determining the fair value of the cannabis plants are
as follows: 
  

	 	i.	 Stage of completion; 

 

	 	ii.	 Estimated production yield; 

 

	 	iii.	 Estimated selling prices and costs of harvest and completion; and 

 

	 	iv.	 Cost to compete the cannabis post-harvest and cost to sell. 

The Company expects that a 10% change in the market price per gram would change the fair value of biological assets by $43,000 and would change the inventory
value by $15,000. A 10% change in costs of production of dried cannabis would change the fair value of biological assets by $20,000 and would change the inventory value by $7,000. 

As at June 30, 2018, included in the carrying amount of inventory is 105,000 grams in dry cannabis (December 2017 – 48,600 grams). As at
June 30, 2018 inventory and biological assets were comprised of the following items: 
  

									
	 	  	June 30, 2018	 	  	December 31, 2017	 
	 Harvested Cannabis
	  	$	513,574	 	  	$	216,927	 
	 Merchandise
	  	 	288,929	 	  	 	—  	 
	 Warehouse Merchandise
	  	 	117,354	 	  	 	—  	 
	 Supplies and Consumables
	  	 	19,136	 	  	 	27,214	 
		  	  
	  
	 	  	  
	  
	 
	 Total Inventory
	  	$	938,993	 	  	$	244,141	 
		  	  
	  
	 	  	  
	  
	 
	 Work-in-process
	  	 	387,516	 	  	 	—  	 
	 Biological assets
	  	 	350,305	 	  	 	118,500	 
		  	  
	  
	 	  	  
	  
	 
	 Total Biological Assets
	  	$	737,821	 	  	$	118,500	 
		  	  
	  
	 	  	  
	  
	 

  
 12 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

	8.	 Property and Equipment 

 

																													
	 Cost
	  	Land	 	  	Assets under
development	 	  	Buildings and
improvements	 	  	Leasehold
improvements	 	  	Production
equipment	 	  	Furniture
&equipment	 	  	Total	 
	 At December 31, 2017
	  	$	1,890,212	 	  	$	1,223,337	 	  	$	1,606,283	 	  	$	121,833	 	  	$	602,323	 	  	$	74,975	 	  	$	5,518,963	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Additions/Disposals
	  	 	—  	 	  	 	6,490,331	 	  	 	378,451	 	  	 	202,683	 	  	 	79,739	 	  	 	—  	 	  	 	7,151,203	 
	 Acquisitions
	  	 	—  	 	  	 	50,000	 	  	 	—  	 	  	 	1,088,891	 	  	 	—  	 	  	 	866,245	 	  	 	2,005,135	 
	 At June 30, 2018
	  	$	1,890,212	 	  	$	7,763,668	 	  	$	1,984,734	 	  	$	1,413,407	 	  	$	682,062	 	  	$	941,220	 	  	$	14,675,302	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Impairment of fixed assets
	  				  				  				  				  				  				  			
	 At December 31, 2017
	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Expense for the period
	  	 	—  	 	  				  	 	—  	 	  	 	418,825	 	  	 	—  	 	  	 	44,968	 	  	 	463,793	 
		  	  
	  
	 	  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 At June 30, 2018
	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	418,825	 	  	$	—  	 	  	$	44,968	 	  	$	463,793	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accumulated Depreciation
	  				  				  				  				  				  				  			
	 At December 31, 2017
	  	$	—  	 	  	$	—  	 	  	$	29,610	 	  	$	26,888	 	  	$	21,854	 	  	$	9,891	 	  	$	88,243	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Expense for the period
	  	 	—  	 	  				  	 	35,859	 	  	 	163,570	 	  	 	50,871	 	  	 	119,084	 	  	 	369,383	 
		  	  
	  
	 	  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 At June 30, 2018
	  	$	—  	 	  	$	—  	 	  	$	65,469	 	  	$	190,458	 	  	$	72,725	 	  	$	128,975	 	  	$	457,626	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net Book Value
	  				  				  				  				  				  				  			
	 At December 31, 2017
	  	$	1,890,212	 	  	$	1,223,337	 	  	$	1,576,673	 	  	$	94,945	 	  	$	580,469	 	  	$	65,084	 	  	$	5,430,720	 
	 At June 30, 2018
	  	$	1,890,212	 	  	$	7,763,668	 	  	$	1,919,264	 	  	$	804,125	 	  	$	609,337	 	  	$	767,277	 	  	$	13,753,882	 

 Assets under development primarily consist of building of cannabis production facilities in Kelowna, British Columbia. Each
phase of construction is considered under development until such a time that it has been licensed by Health Canada. Once Health Canada issues the license, the asset is amortized and considered available for use. 

An impairment charge of $463,793 was taken in the three months ended June 30, 2018 to write down the leasehold improvement and furniture and equipment of
a store planned to be disposed to its net realizable value. 
 Certain reclassifications of property and equipment were made from the December 31, 2017
and June 30, 2017 financial statements to better reflect the classification of these items. 
  

	9.	 Intangible Assets 

Intangible assets are comprised of the following: 
  

																					
	 Balance
	  	Dec. 31, 2017	 	  	Additions	 	  	Acquistions	 	  	Amortization	 	  	30-Jun-18	 
	 Websites
	  	 	—  	 	  	 	105,472	 	  	 	38,300	 	  	 	10,263	 	  	 	133,509	 
	 Van der Pop web site and trade marks
	  	 	—  	 	  				  	 	302,008	 	  	 	64,716	 	  	 	237,292	 
	 Other intangibles (Note 6)
	  	 	—  	 	  				  	 	617,002	 	  	 	0	 	  	 	617,002	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	 	0	 	  	$	105,472	 	  	$	957,310	 	  	$	74,979	 	  	$	987,803	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 Intangible assets are considered to have finite lives and are being amortized on a straight-line basis over a period of 7 to
10 years. 

  
 13 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 The Maitri acquisition completed on May 4, 2018 provided the Company an intangible attributed to the
contact list. The Company is assessing the expected life of the contact list to determine the appropriate amortization period. 
  

	10.	 Long Term Investments 

 

									
	 Investment
	  	June 30, 2018	 	  	Dec 31, 2017	 
	 Aphria; 38,759 common shares
	  	$	460,069	 	  	 	—  	 
	 WeedMD; 57,692 common shares
	  	$	115,385	 	  	 	—  	 
	 Kaya Inc.
	  	$	328,738	 	  	 	—  	 
	 Total Long-Term Investments
	  	$	904,192	 	  	 	—  	 

 Included in long term investments are securities in associates that arose from licensing agreements as noted below; 

 

	 	i)	 On September 26, 2016, the Company’s wholly-owned subsidiary, Tokyo Smoke, entered into a supply
agreement with Aphria Inc. (“Aphria”). As part of the agreement, the Company received 38,759 common shares in Aphria on close which was recorded as deferred revenue and is being recorded in revenue over the 6-year life of the agreement.
During the six-month period ended June 30, 2018, the company recognized as revenue $10,820 (2017 - $nil) in the consolidated statement of loss and comprehensive loss as Other Income. Deferred revenue at the period end was $91,972 (2017 - nil).
The securities were revalued at June 30, 2018 resulting in a year-to-date unrealized loss of $243,946 recognized in the statement of comprehensive loss. 

  

	 	ii)	 On November 15, 2017, the Company’s wholly owned subsidiary, Tokyo Smoke, entered into a supply
agreement with WeedMD RX Inc. (“WeedMD RX”), pursuant to which WeedMD RX is authorized to produce, distribute and sell on behalf of the Company, the Van der Pop product line under a white label arrangement. On close, WeedMD RX issued
76,923 common shares of WeedMD Inc. (“WeedMD”), the parent company of WeedMD RX, to Tokyo Smoke at $1.30 per share. These shares were distributed in quarterly tranches with the first tranche distributed on the effective date of the
agreement, the second tranche distributed on February 15, 2018, the third on May 15, 2018 and the fourth on August 15, 2018. The first issuance was recorded as deferred revenue at year end and is being recorded in revenue over the
six-year life of the contract. Subsequent tranches have similarly been recorded as deferred revenue and are being recognized over the six-year period in Other Income. During the six-month period ended June 30, 2018, the Company recognized as
revenue $5,409 (2017 - $nil) in the consolidated statement of loss and comprehensive loss. Deferred revenue at year end was $121,959 (2017 - $nil). The marketable securities were revalued at June 30, 2018 resulting in a year-to-date unrealized
loss of $231,055 was recognized in the statement of comprehensive loss. 

 In addition to the items noted above, the Company has an
investment in Kaya Inc., a Jamaica based company involved in medical marijuana and research (note 14). 

  
 14 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

	11.	 Long Term Debt 

 

													
	 	 	Maturity Date	 	 	June 30,
2018	 	 	December 31,
2017	 
	 Mortgage payable with a five year term and amortization period of twenty years bearing an annual
interest of 4.5%
	 	 	November 1, 2021	 	 	$	578,545	 	 	$	586,006	 
	 Small business loan payable with a 12 month term and amortization period of 60 months, repayable
in equal monthly installments, bearing annual interest at prime plus 3.0%
	 	 	September 17, 2020	 	 	 	56,700	 	 	 	—  	 
	 Small business loan payable with a 42 month term payable in equal monthly installments, bearing
annual interest at prime plus 3.0%
	 	 	April 20, 2020	 	 	 	13,717	 	 	 	—  	 
		 				 	  
	  
	 	 	  
	  
	 
		 				 	 	648,962	 	 	 	586,006	 
	 Less: Current Portion
	 				 	 	(46,994	) 	 	 	(13,982	) 
		 				 	  
	  
	 	 	  
	  
	 
	 Long term portion
	 				 	$	601,968	 	 	$	572,024	 
		 				 	  
	  
	 	 	  
	  
	 

 The mortgage payable maturing November 1, 2021 is secured by a first charge over certain specified
properties. No financial covenants exist on long term debt outstanding. 
  

	 	12.	 Convertible Debt 

On December 28, 2017, the Company completed a brokered private placement of unsecured convertible debentures units in the aggregate amount
of $17,250,000. Each convertible debenture unit consists of a $1,000 principal amount of unsecured convertible debentures (“Debentures”) and 403 Common Share purchase warrants (the “Debenture Warrants”). 

The Debentures bear interest at 8% per annum, payable semi-annually and mature within 36 months. The principal amount of the Debentures is
convertible into Common Shares at a price of $1.24 per share, at the option of the holder. The fair value of the Debentures as at December 31, 2017, was recorded at its fair value of $11,193,849, discounted at a market interest rate of 18% and
is net of debt issue costs. 
 The residual value of the conversion feature was estimated at $1,143,452, net of issue costs and deferred tax
using relative fair value allocation, based on the following assumptions: Share price – $1.87. Annualized volatility – 90%; Risk-free interest rate – 1.64%; Dividend yield – 0%; and Expected life – 3 years. 

Each Debenture Warrant is exercisable to acquire one Common Share at an exercise price of $1.24 per share until December 27, 2020. The
fair value of the Debenture Warrants was estimated at $498,446, net of issuance cost and deferred tax, based on the following assumptions: Share price – $1.87. Annualized volatility – 90%; Risk-free interest rate – 1.64%; Dividend
yield – 0%; and Expected life – 3 years. 
 On closing, the Company paid the underwriters (i) a commission of $1,035,000
representing 6% of the gross proceeds of the private placement; and (ii) 834,677 compensation warrant units. Each compensation warrant units entitles the holder to acquire a compensation unit which consists of one Common Share, and one-half of
one Common Share purchase warrant at an exercise price of $1.86 per share, expiring three years from the date of issuance. The compensation warrant units were measured based on the fair value of the equity instruments granted as the fair value of
services cannot be reliably measured. The estimated fair value of $1,961,492 was based on the following assumptions: Common Share purchase warrant price – $3.11; Annualized volatility – 90%; Risk-free interest rate – 1.73%; Dividend
yield – 0%; and Expected life – 3 years. In addition, the Company also paid legal fees of $85,000 associated with the issuance of Debentures. 

  
 15 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 Beginning on the date that is four months and one day following the closing date, the Company
may force the conversion of the principal amount of the Debentures and the expiry of date of the Debenture Warrants should the daily volume weighted average trading price of the Common Shares be greater than $1.86 for 10 consecutive trading days.

 On May 16, 2018, the Company offered eligible debenture holders the opportunity to elect to convert their Debentures during the early
conversion exercise period (between May 17, 2018 and June 7, 2018) at the conversion price of $1.24 per share, and in return, receive an additional 250 Common Share purchase warrants of the Company (each, an “Early Conversion
Warrant”) per $1,000 of principal amount of Debentures converted, in addition to the Common Shares of the Company to be received in connection with such conversion. Each Early Conversion Warrant is exercisable into one Common Share until
May 16, 2021 at a price of $1.50 per Common Share. For this transaction, 3,720,000 warrants were issued. 
 During the quarter ended
June 30, 2018, $15,427,000 in Debentures were converted into 12,441,101 Common Shares at the deemed rate of $1.24 per share. 
  

					
	 	  	Convertible Debenture	 
	 Balance as at December 31, 2017
	  	$	11,193,849	 
		  	  
	  
	 
	 Accretion on liability
	  	 	600,455	 
	 Conversion of debentures
	  	 	(10,522,914	) 
		  	  
	  
	 
	 Balance as at June 30, 2018
	  	$	1,271,390	 
		  	  
	  
	 

  

	13.	 Shareholders’ Equity 

Authorized Share Capital 
 The corporation
has an unlimited number of Common Shares authorized for issuance. The Common Shares entitle the holder to one vote for every share held at meetings of the shareholders of the Company. There are no fixed dividends payable on the Common Shares. 

Issued & Outstanding Share Capital 
  

									
	 	  	Number of
Shares	 	  	Amount	 
	 Balance, March 31, 2018
	  	 	140,642,701	 	  	 	193,929,764	 
		  	  
	  
	 	  	  
	  
	 
	 Shares issued for services
	  	 	79,365	 	  	 	100,000	 
	 Shares issued pursuant to asset acquisitions
	  	 	318,471	 	  	 	461,783	 
	 Exercise of convertible debentures
	  	 	12,441,101	 	  	 	17,626,520	 
	 Exercise of RSUs
	  	 	67,407	 	  	 	101,111	 
	 Exercise of options
	  	 	368,599	 	  	 	163,776	 
	 Exercise of warrants
	  	 	2,068,400	 	  	 	1,237,578	 
		  	  
	  
	 	  	  
	  
	 
	 Balance June 30, 2018
	  	 	155,986,044	 	  	$	213,620,532	 
		  	  
	  
	 	  	  
	  
	 
	 Balance, December 31, 2017
	  	 	61,301,070	 	  	$	11,538,504	 
		  	  
	  
	 	  	  
	  
	 
	 Private Placement
	  	 	9,792,168	 	  	 	7,396,451	 
	 Shares issued for services
	  	 	297,269	 	  	 	620,000	 
	 Shares issued pursuant to acquisitions
	  	 	60,171,058	 	  	 	171,416,358	 
	 Exercise of RSUs
	  	 	92,167	 	  	 	262,676	 
	 Exercise of options
	  	 	329,721	 	  	 	98,683	 
	 Exercise of warrants
	  	 	8,659,248	 	  	 	2,597,092	 
		  	  
	  
	 	  	  
	  
	 
	 Balance March 31, 2018
	  	 	140,642,701	 	  	$	193,929,764	 
		  	  
	  
	 	  	  
	  
	 

  
 16 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 On January 30, 2018, the Company and Tokyo Smoke completed the Tokyo Smoke Merger,
pursuant to which the Company acquired all of the issued and outstanding securities of Tokyo Smoke in consideration of issuance of 55,971,058 Common Shares. 

Concurrently with the Tokyo Smoke Merger, the Company closed a strategic investment from Aphria and Koicha Partners LP and issued 8,992,805
units of Hiku (the “Units”) at $1.39 per Unit for gross proceeds of $12.5 million. Each Unit is comprised of one Common Share and one Common Share purchase warrant that entitles the holder to acquire one additional Common Share for a
period of two years from the closing date of the Tokyo Smoke Merger at an exercise price of $2.10 share. 
 During the quarter ended
March 31, 2018, the Company also completed the acquisition of TS Prairie in exchange for 4.2 million Common Shares. 
 During the
quarter ended June 30, 2018, the Company completed the acquisition of Maitri, in exchange for a $50,000 cash payment, 318,471 Common shares issued upon the closing of the acquisition and 764,329 Common Shares are to be issued upon the
attainment of certain time and performance-based milestones. 
 During the six-month period ending June 30, 2018, 698,320 stock options
were exercised ranging in price from $0.19 to $1.26, for gross proceeds of $262,459. 
 During the six-month period ending June 30,
2018, the Company issued 376,634 Common Shares to settle debts arising from services rendered that were valued at $720,000. 
 During the
six-month period ended Jun 30, 2018, 362,303 restricted share units (“RSUs”) vested, resulting in 168,974 Common Shares being issued to employees of the Company on a net of tax basis. 

Warrants 
 Each warrant of
the Company entitles the holder to purchase one Common Share at a set price and is exercisable at the option of the holder for a set period of time. 
 The
warrant details of the Company are as follows: 
  

									
	 	  	Number of Warrants	 	  	Weighted Average
exercise price	 
	 Outstanding, December 31, 2017
	  	 	20,427,912	 	  	 	0.88	 
	 Issued
	  	 	8,992,805	 	  	 	2.10	 
	 Exercise of warrants
	  	 	(8,659,248	) 	  	 	0.25	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding March 31, 2018
	  	 	20,761,469	 	  	$	1.67	 
		  	  
	  
	 	  	  
	  
	 
	 Issued (note 12)
	  	 	3,720,000	 	  	 	1.50	 
	 Exercise of warrants
	  	 	(1,820,000	) 	  	 	0.28	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding June 30, 2018
	  	 	22,661,469	 	  	$	1.75	 
		  	  
	  
	 	  	  
	  
	 

 During the six-month period ending June 30, 2018, 10,479,248 warrants were exercised at a weighted average
exercise price of $0.27 for gross proceeds of $2,749,777. 
 During the three-month period ended March 31, 2018, the Company issued
8,992,805 warrants as part of a strategic private placement financing led by Aphria. The warrants are each exercisable at $2.10 into one Common Share and expire two years from the date of issuance. The fair value of these warrants was $5,103,550. In
addition, 3,720,000 warrants were issued during the three-month period ended June 30, 2018 exerciseable at a weighted average price of $1.50 into one Common Share. 

  
 17 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 The fair value of the warrants on the date granted was estimated using the Black-Scholes valuation model. The
following assumptions were used: 
  

									
	 	  	30-Jun-18	 	 	31-Dec-17	 
	 Volatility
	  	 	100% - 124	% 	 	 	70% - 90	% 
	 Risk -free interest rate
	  	 	1.77% - 2.13	%	 	 	0.58% - 1.77	% 
	 Expected life (years)
	  	 	3.0 - 5.0	 	 	 	1.0 - 5.0	 
	 Dividend yield
	  	 	Nil	 	 	 	Nil	 
	 Forfeiture rate
	  	 	10	% 	 	 	10	%
	 Share price
	  	$	1.45	 	 	$	0.30 - $1.12	 

 Performance Warrants & Stock Options 

The Company has stock-based compensation arrangements consisting of performance warrants, stock options and RSUs to encourage ownership of the Company’s
Common Shares by its officers, directors, employees and certain non-employees. The number of stock options, performance warrants and RSUs granted, vesting period and contractual life of the securities under these arrangements shall be determined
from time to time by the Board. The exercise price of each option and performance warrant shall be determined by the Board based on the fair market value of the Common Shares on the date of grant as estimated in accordance with a valuation model
approved by the Board. 
 During the six-month period ended June 30, 2018, as part of the closing of the Tokyo Smoke Merger, the Company issued
11,820,036 options to acquire Common Shares to former holders of Tokyo Smoke options, with a weighted average exercise price of $0.18 per share and expiry dates that are five years from the date of the original issuance. 

During the three months ended March 31, 2018 the company issued 139,222 stock options, exercisable for Common Shares at a weighted average price of $2.76
per share and fully vested upon the grant. The options expire 5 years from the date of the grant. 
 The Company recognized $4,009,394 for the six-month
period ended June 30, 2018 (2017 - $ 812,326) in stock-based compensation with respect to share based awards. 
 The following table summarizes the
stock option and performance warrant activity of the Company during the six months ended June 30, 2018: 
  

									
	 	  	Number of
Performance Warrants
and Options	 	  	Weighted
Average exercise
price	 
	 Outstanding, December 31, 2017
	  	 	8,602,399	 	  	 	0.14	 
	 Granted pursuant to reverse acquisition
	  	 	11,820,036	 	  	 	0.18	 
	 Granted
	  	 	139,222	 	  	 	2.76	 
	 Exercised
	  	 	(329,721	) 	  	 	0.30	 
	 Forfeited and cancelled
	  	 	(1,842,386	) 	  	 	0.51	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding March 31, 2018
	  	 	18,389,549	 	  	$	0.19	 
		  	  
	  
	 	  	  
	  
	 
	 Granted
	  	 	407,348	 	  	 	1.44	 
	 Exercised
	  	 	(368,599	) 	  	 	0.25	 
	 Forfeited and cancelled
	  	 	(312,438	) 	  	 	0.39	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding Jun 30, 2018
	  	 	18,115,860	 	  	$	0.22	 
		  	  
	  
	 	  	  
	  
	 

  
 18 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 The fair value of each group of performance warrants and stock options on the date granted was estimated
using the Black-Scholes valuation model. The following assumptions were used: 
  

									
	 	  	30-Jun-18	 	 	31-Dec-17	 
	 Volatility
	  	 	100%- 124	% 	 	 	70%- 90	% 
	 Risk -free interest rate
	  	 	1.77% - 2.13	% 	 	 	0.58% - 1.77	% 
	 Expected life (years)
	  	 	3.0 - 5.0	 	 	 	1.0 - 5.0	 
	 Dividend yield
	  	 	Nil	 	 	 	Nil	 
	 Forfeiture rate
	  	 	10	% 	 	 	10	% 
	 Share price
	  	$	1.45	 	 	$	0.30 - $1.12	 

 RSUs 
 The Company’s
restricted share unit plan and stock option plan allow for the reservation of a number of Common Shares issuable pursuant to stock options and RSUs not to exceed, in the aggregate, 20% of the Company’s issued and outstanding Common Shares on a
undiluted basis, in addition to certain other restrictions as set out in the plans. 
 As at June 30, 2018, the Company had 1,504,667 RSUs issued and
outstanding (December 2017 – 20,000). The weighted average fair value of the 1,846,970 RSUs granted in the six-month period ended June 30, 2018 was $2.65 per RSU (December 2017 – $0.75). The Company estimates the fair value of RSUs
based on the market price of the underlying stock on the date of grant and recorded. For the six- month period ended June 30, 2018, the Company recognized $783,027, charged to stock-based compensation with respect to the restricted stock awards
and cancellations relate to issuance on a net of tax settlement basis. 
 The following table summarizes the stock option and performance warrant activity:

  

									
	 	  	Number of Restricted
Stock Units	 	  	Weighted
Average grant
date fair value	 
	 Outstanding, December 31, 2017
	  	 	20,000	 	  	 	0.75	 
	 Granted
	  	 	1,646,970	 	  	 	2.84	 
	 Exercised
	  	 	(92,167	) 	  	 	2.85	 
	 Forfeited and cancelled
	  	 	(105,173	) 	  	 	0.29	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding March 31, 2018
	  	 	1,469,630	 	  	$	2.81	 
		  	  
	  
	 	  	  
	  
	 
	 Granted
	  	 	200,000	 	  	 	1.44	 
	 Exercised
	  	 	(67,407	) 	  	 	2.57	 
	 Forfeited and cancelled
	  	 	(88,156	) 	  	 	2.58	 
		  	  
	  
	 	  	  
	  
	 
	 Oustanding Jun 30, 2018
	  	 	1,514,067	 	  	$	2.65	 
		  	  
	  
	 	  	  
	  
	 

  

	14.	 Related Parties 

Key management personnel of the Company consist of its executive management and Board of Directors (as the Directors are considered to have control of the
Company). In addition to the salaries and fees paid to key management, the Company also provides compensation to both groups under its share-based compensation plans. Compensation expenses paid to key management personnel were as follows: 

 

									
	 	  	Six months
ended
June 30, 2018	 	  	Twelve months
ended
December 31, 2017	 
	 Short-term benefits
	  	 	2,272,969	 	  	 	374,038	 
	 Share based awards
	  	 	1,500,803	 	  	 	411,054	 
		  	  
	  
	 	  	  
	  
	 
	 Key Management personnel compensation
	  	$	3,773,772	 	  	$	785,092	 
		  	  
	  
	 	  	  
	  
	 

  
 19 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 Related Party Transactions 

On January 5, 2018 Koicha Partners LP purchased 1,798,562 shares of the Company (then called DOJA Cannabis Company Limited) at a rate of $1.39 per share
for a total of $2,500,001. A director of the Company also holds a position as a general and limited partner of Koicha Partners LP. 
 On March 23,
2018, the Company made an investment in Kaya Inc. The Company and Kaya share a common member on their respective board of directors. Alan Gertner (chief executive officer and a director of the Company) and Lorne Gertner (a director of the Company)
are also shareholders of Kaya Inc (note 10). 
 On March 28, 2018, the Company entered into a letter of intent to establish a co-marketing, retail and
select distribution agreement with GSW Creative Corporation Inc. A director of the Company is the sole shareholder of Uji Capital LLC, which holds convertible debt of GSW Creative Corporation Inc. 

 

	15.	 Capital Management 

The Company’s objective in managing capital is to ensure there is sufficient liquidity to safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders. The Company defines capital as net equity and debt, comprised of issued share capital and accumulated deficit, as well as convertible debentures, loans and
mortgages payable. 
 The Company’s objective with respect to its capital management is to ensure it has sufficient cash resources to maintain its
ongoing operations and finance its research and development activities, corporate and administration expenses, working capital and overall capital expenditures. Since inception, the Company has primarily financed its liquidity needs through issuance
of shares, convertible promissory notes payable, convertible debentures and loans. 
 There have been no changes to the Company’s objectives and what
it manages as capital since the prior fiscal year. The Company is not subject to externally imposed capital requirements. 
  

	16.	 Financial Instruments and Risk Management 

The Company has classified its cash as fair value through profit and loss (“FVTPL”), accounts receivable and other receivables as loans and
receivables, and accounts payable and accrued liabilities, convertible debentures, loans and mortgage payable as other financial liabilities. 
 The carrying
values of cash, accounts receivable, other receivables, accounts payable and accrued liabilities approximate their fair values due to their short periods to maturity. Convertible debentures are recorded at the net present value of the obligation.

 Fair Value Hierarchy 
 Financial instruments recorded
at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The hierarchy is summarized as follows: 

Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities 

Level 2 – inputs that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from observable market data

 Level 3 – inputs for assets and liabilities not based upon observable market data 

Cash and cash equivalents, marketable securities, and mortgage payable are classified as Level 1 financial instruments. 

Convertible debentures and long-term investments are classified as Level 2 financial instruments. 

  
 20 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 The Company’s other financial instruments, including other receivable and accounts payable are carried
at cost which approximates fair value due to the relatively short maturity of those instruments. 
 Financial Risk Factors 

The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below: 

 

	(a)	 Credit Risk 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The
Company’s cash is held at a major Canadian bank. The Company regularly monitors the credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss. 

 

	(b)	 Liquidity Risk 

The Company is exposed to liquidity risk or the risk of not meeting its financial obligations as they come due. The Company constantly monitors and manages its
cash flows to assess the liquidity necessary to fund operations (see note 15). All of the Company’s financial liabilities are due within one year except for the mortgage payable, loan and convertible debentures. 

 

	(c)	 Interest Rate Risk 

The Company is subject to interest rate risk from its loans that have a variable interest rate, based on Royal Bank Prime plus 3%. A 1% increase or decrease in
the prime interest rate would result in an annual increase or decrease of interest expense of $704. 
 All other debt instruments, which include the
convertible debentures and mortgage payable, have fixed interest rates. 
  

	17.	 Commitments 

The Company has debt repayment, lease obligations and marketing commitments as at June 30, 2018 as follows: 

 

																					
	 	  	Current	 	  	1-2 Years	 	  	3-5 Years	 	  	>5 Years	 	  	Total	 
	 Convertible Debenture
	  	$	444,840	 	  	$	1,677,760	 	  	$	—  	 	  	$	—  	 	  	$	2,122,600	 
	 Mortgage payable
	  	 	40,056	 	  	 	80,112	 	  	 	543,692	 	  	 	—  	 	  	 	663,860	 
	 Loans payable
	  	 	32,681	 	  	 	35,634	 	  	 	—  	 	  	 	—  	 	  	 	68,315	 
	 Lease obligations
	  	 	237,546	 	  	 	471,796	 	  	 	468,392	 	  	 	379,196	 	  	 	1,556,930	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	755,123	 	  	$	2,265,302	 	  	$	1,012,084	 	  	$	379,196	 	  	$	4,411,704	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 In addition to the commitments noted above, the Company has entered into consulting agreements that will require payments of
$650,000 in cash and $300,000 in shares within the next nine months. 
  

	18.	 Events After the Reporting Period 

Canopy Growth Corporation Purchase and Sale Agreement 

On July 10, 2018, the Company entered into an arrangement agreement (the “Arrangement Agreement”) with Canopy Growth Corporation (“Canopy
Growth”), pursuant to which Canopy Growth has agreed to acquire all of the issued and outstanding Common Shares of the Company (the “Canopy Arrangement”). Under the Arrangement Agreement, shareholders of the Company will receive 0.046
of a common share of Canopy Growth for each Common Share of the Company held. 
 Completion of the Canopy Arrangement is subject to necessary court
approval, approval under the Competition Act (Canada), and stock exchange approvals of each of the TSX, NYSE and CSE, and 

  
 21 

 Hiku Brands Company Ltd. 

 
 Notes to the Unaudited Condensed Interim
Consolidated Financial Statements 
 For the three and six months ended June 30, 2018 and 2017 

 
  

 approval of not less than 662/3% of the votes cast by shareholders of the Company, present in person or
represented by proxy at a special meeting of shareholders scheduled to be held August 30, 2018. Subject to obtaining court and regulatory approval and satisfying other conditions to the Canopy Arrangement, including the approval of Hiku
shareholders, the transaction is expected to close on or about September 5, 2018. 
 Termination of WeedMD Inc. Arrangement Agreement

 On April 19, 2018, the Company entered into an arrangement agreement to merge with WeedMD (the “WeedMD Arrangement Agreement”)
by way of a plan of arrangement under the Business Corporations Act (Ontario), pursuant to which WeedMD shareholders would receive 1.4185 Common Shares of Hiku, in exchange for each common share of WeedMD held. 

As a result of an unsolicited offer from Canopy Growth in respect of the Canopy Arrangement described above, the Board of the Company, in conjunction with its
financial and legal advisors, determined that the Canopy Growth offer was superior to that of WeedMD. WeedMD waived its option to match Canopy Growth’s offer and consequently the WeedMD Arrangement Agreement was terminated and the Company paid
WeedMD a $10 million termination fee in accordance with the WeedMD Arrangement Agreement. Canopy Growth advanced the Company the funds to pay the termination fee pursuant to a promissory note. 

Supply Agreements 
 The Company recently
entered into supply agreements as follows; 
  

	 	i)	 On July 12, 2018, the Company completed a supply agreement with the British Columbia Liquor Distribution
branch. 

  

	 	ii)	 On August 20, 2018, the Company entered into a supply agreement with the Ontario Cannabis Store to supply
25 SKU’s of cannabis for online sale in Ontario starting October 17, 2018. 

  
 22 

 SCHEDULE B 

PRO-FORMA FINANCIAL STATEMENTS 

- see attached - 

 PRO FORMA CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

AS AT JUNE 30, 2018 
  

																			
	 UNAUDITED

(Expressed in CDN $000’s)
	  	Canopy
Growth	 	 	Hiku	 	 	Notes	 	Pro Forma
Adjustments	 	 	Pro Forma
Consolidated	 
	 Assets
	  				 				 		 				 			
	 Current assets
	  				 				 		 				 			
	 Cash and cash equivalents
	  	$	657,896	 	 	$	19,017	 	 	3a)	 	$	(11,994	) 	 	$	664,919	 
	 Amounts receivable
	  	 	27,746	 	 	 	1,365	 	 		 				 	 	29,111	 
	 Biological assets
	  	 	52,811	 	 	 	738	 	 		 				 	 	53,549	 
	 Inventory
	  	 	118,204	 	 	 	939	 	 		 				 	 	119,143	 
	 Prepaid expenses and other assets
	  	 	36,137	 	 	 	598	 	 		 				 	 	36,735	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
		  	 	892,794	 	 	 	22,657	 	 		 	 	(11,994	) 	 	 	903,457	 
	 Property, plant and equipment
	  	 	479,898	 	 	 	13,754	 	 		 				 	 	493,652	 
	 Other long-term assets
	  	 	26,973	 	 	 	—  	 	 		 				 	 	26,973	 
	 Investments in associates and joint ventures
	  	 	93,269	 	 	 	—  	 	 		 				 	 	93,269	 
	 Other financial assets
	  	 	177,282	 	 	 	904	 	 		 				 	 	178,186	 
	 Intangible assets
	  	 	101,723	 	 	 	988	 	 		 				 	 	102,711	 
	 Goodwill
	  	 	340,374	 	 	 	178,957	 	 	3a)	 	 	(178,957	) 	 	 	908,445	 
		  				 				 	3a)	 	 	568,071	 	 			
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
		  	$	2,112,313	 	 	$	217,260	 	 		 	$	377,120	 	 	$	2,706,693	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Liabilities 
	  				 				 		 				 			
	 Current liabilities
	  				 				 		 				 			
	 Accounts payable and accrued liabilities
	  	$	127,248	 	 	$	2,797	 	 	3b)	 	$	1,988	 	 	$	132,033	 
	 Deferred revenue
	  	 	767	 	 	 	39	 	 		 				 	 	806	 
	 Current portion of long-term debt
	  	 	2,539	 	 	 	47	 	 		 				 	 	2,586	 
		  	 	130,554	 	 	 	2,883	 	 		 	 	1,988	 	 	 	135,425	 
	 Long-term debt
	  	 	617,749	 	 	 	602	 	 		 				 	 	618,351	 
	 Deferred tax liability
	  	 	30,815	 	 	 	485	 	 		 				 	 	31,300	 
	 Long-term financial liabilities
	  	 	108,732	 	 	 	—  	 	 		 				 	 	108,732	 
	 Deferred revenue
	  	 	—  	 	 	 	176	 	 		 				 	 	176	 
	 Convertible debentures
	  	 	—  	 	 	 	1,271	 	 		 				 	 	1,271	 
		  	 	887,850	 	 	 	5,417	 	 		 	 	1,988	 	 	 	895,255	 
	 Shareholders’ equity
	  				 				 		 				 			
	 Share capital
	  	 	1,124,485	 	 	 	213,621	 	 	3a)	 	 	543,866	 	 	 	1,668,351	 
		  				 				 	3c)	 	 	(213,621	) 	 			
	 Other reserves
	  	 	145,564	 	 	 	11,567	 	 	3c)	 	 	(11,567	) 	 	 	160,050	 
		  				 				 	3a)	 	 	14,486	 	 			
	 Warrant reserve
	  	 	—  	 	 	 	8,675	 	 	3c)	 	 	(8,675	) 	 	 	30,611	 
		  				 				 	3a)	 	 	30,611	 	 			
	 Accumulated other comprehensive income
	  	 	39,280	 	 	 	(14	) 	 	3c)	 	 	14	 	 	 	39,280	 
						
		  				 				 	3c)	 	 	22,006	 	 			
						
	 Deficit
	  	 	(171,926	) 	 	 	(22,006	) 	 	3b)	 	 	(1,988	) 	 	 	(173,914	) 
	 Equity attributable to Canopy Growth Corporation
	  	 	1,137,403	 	 	 	211,843	 	 		 	 	375,132	 	 	 	1,724,378	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Non-controlling interests
	  	 	87,060	 	 	 	—  	 	 		 				 	 	87,060	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Total equity
	  	 	1,224,463	 	 	 	211,843	 	 		 	 	375,132	 	 	 	1,811,438	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
		  	$	2,112,313	 	 	$	217,260	 	 		 	$	377,120	 	 	$	2,706,693	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 

 PRO FORMA CONDENSED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS 

FOR THE THREE MONTHS ENDED JUNE 30, 2018 
 UNAUDITED 

(Expressed in CDN $000’s except share amounts) 
  

																			
	 	  	 	 	 	 	 	 	 	 	Pro Forma	 	 	Pro Forma	 
	 	  	Canopy Growth	 	 	Hiku	 	 	Notes	 	Adjustments	 	 	Consolidated	 
	 Revenue
	  	$	25,916	 	 	$	321	 	 		 				 	$	26,237	 
						
	 Inventory production costs expensed to cost of sales
	  	 	14,832	 	 	 	326	 	 		 				 	 	15,158	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Gross margin before the undernoted
	  	 	11,084	 	 	 	(5	) 	 		 	 	—  	 	 	 	11,079	 
						
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	26,388	 	 	 	—  	 	 		 				 	 	26,388	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(57,289	) 	 	 	(71	) 	 		 				 	 	(57,360	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Gross margin
	  	 	41,985	 	 	 	66	 	 		 	 	—  	 	 	 	42,051	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Sales and marketing
	  	 	17,266	 	 	 	1,081	 	 		 				 	 	18,347	 
	 Research and development
	  	 	756	 	 	 	—  	 	 		 				 	 	756	 
	 General and administration
	  	 	19,588	 	 	 	1,555	 	 		 				 	 	21,143	 
	 Professional Fees
	  				 	 	1,562	 	 		 				 	 	1,562	 
	 Acquisition-related costs
	  	 	1,884	 	 	 	—  	 	 		 				 	 	1,884	 
	 Share-based compensation expense
	  	 	23,072	 	 	 	1,007	 	 	4a)	 	 	(1,007	) 	 	 	23,425	 
		  				 				 	4a)	 	 	353	 	 			
	 Share-based compensation expense related to acquisition milestones
	  	 	7,095	 	 	 	—  	 	 		 				 	 	7,095	 
	 Accretion on convertible debentures
	  				 	 	190	 	 		 				 	 	190	 
	 Impairment of fixed assets
	  				 	 	464	 	 		 				 	 	464	 
	 Depreciation and amortization
	  	 	3,030	 	 	 	398	 	 	4b)	 				 	 	3,428	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Operating expenses
	  	 	72,691	 	 	 	6,257	 	 		 	 	(654	) 	 	 	78,294	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Loss from operations
	  	 	(30,706	) 	 	 	(6,191	) 	 		 	 	654	 	 	 	(36,243	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Share of loss on equity investments
	  	 	(2,569	) 	 	 	—  	 	 		 				 	 	(2,569	) 
	 Interest expense, net
	  				 	 	(503	) 	 		 				 	 	(503	) 
	 Unrealized gain (loss) on investments
	  				 	 	(237	) 	 		 				 	 	(237	) 
	 Other income (expense), net
	  	 	(60,426	) 	 	 	3	 	 		 				 	 	(60,423	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Total other expense, net
	  	 	(62,995	) 	 	 	(737	) 	 		 	 	—  	 	 	 	(63,732	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Loss before income taxes and other comprehensive loss
	  	 	(93,701	) 	 	 	(6,928	) 	 		 	 	654	 	 	 	(99,975	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  	 	2,723	 	 	 	—  	 	 		 				 	 	2,723	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Net loss
	  	$	(90,978	) 	 	$	(6,928	) 	 		 	$	654	 	 	$	(97,252	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Other comprehensive loss
	  				 	 	(14	) 	 		 				 	 	(14	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Total comprehensive Loss
	  	$	(90,978	) 	 	$	(6,942	) 	 		 	$	654	 	 	$	(97,266	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Comprehensive Income (Loss) attributable to:
	  				 				 		 				 			
	 Canopy Growth Corporation
	  	$	(80,277	) 	 	$	(6,942	) 	 	4a)	 	$	654	 	 	$	(86,565	) 
	 Non-controlling interests
	  	 	(10,701	) 	 	 	—  	 	 	—  	 	 	—  	 	 	 	(10,701	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
		  	$	(90,978	) 	 	$	(6,942	) 	 		 	$	654	 	 	$	(97,266	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Earnings per share, basic and diluted
	  				 				 		 				 			
	 Net loss per share:
	  	$	(0.40	) 	 				 		 				 	$	(0.42	) 
	 Weighted average number of outstanding common shares:
	  	 	200,160,740	 	 				 	3a)	 	 	7,943,123	 	 	 	208,103,863	 

 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 2018 
 UNAUDITED 

(Expressed in CDN $000’s except share amounts) 
  

																			
	 	  	 	 	 	 	 	 	 	 	Pro Forma	 	 	Pro Forma	 
	 	  	Canopy Growth	 	 	Hiku	 	 	Notes	 	Adjustments	 	 	Consolidated	 
	 	  	 	 	 	Note 6	 	 	 	 	 	 	 	 	 
	 Revenue
	  	$	77,948	 	 	$	761	 	 		 				 	$	78,709	 
						
	 Inventory production costs expensed to cost of sales
	  	 	37,790	 	 	 	1,123	 	 		 				 	 	38,913	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Gross margin before the undernoted
	  	 	40,158	 	 	 	(362	) 	 		 	 	—  	 	 	 	39,796	 
						
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	66,268	 	 	 	—  	 	 		 				 	 	66,268	 
	 Unrealized gain on changes in fair value of biological
assets
	  	 	(100,302	) 	 	 	(660	) 	 		 				 	 	(100,962	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Gross margin
	  	 	74,192	 	 	 	298	 	 		 	 	—  	 	 	 	74,490	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Sales and marketing
	  	 	38,203	 	 	 	2,524	 	 		 				 	 	40,727	 
	 Research and development
	  	 	1,453	 	 				 		 				 	 	1,453	 
	 General and administration
	  	 	43,819	 	 	 	4,917	 	 		 				 	 	48,736	 
	 Professional Fees
	  	 	—  	 	 	 	1,783	 	 		 				 	 	1,783	 
	 Acquisition-related costs
	  	 	3,406	 	 	 	—  	 	 	3b)	 	 	1,988	 	 	 	5,394	 
	 Share-based compensation expense
	  	 	29,631	 	 	 	4,900	 	 	4a)	 	 	(4,900	) 	 	 	32,890	 
						
	 Share-based compensation expense related to acquisition milestones
	  	 	19,475	 	 	 	—  	 	 		 				 	 	19,475	 
	 Accretion on convertible debentures
	  	 	—  	 	 	 	411	 	 		 				 	 	411	 
	 Depreciation and amortization
	  	 	20,486	 	 	 	364	 	 	4b)	 				 	 	20,850	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Operating expenses
	  	 	156,473	 	 	 	14,899	 	 		 	 	347	 	 	 	171,719	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Loss from operations
	  	 	(82,281	) 	 	 	(14,601	) 	 		 	 	(347	) 	 	 	(97,229	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Listing costs
	  	 	—  	 	 	 	(3,925	) 	 		 				 	 	(3,925	) 
	 Share of loss on equity investments
	  	 	(1,473	) 	 	 	—  	 	 		 				 	 	(1,473	) 
	 Interest expense, net
	  				 	 	66	 	 		 				 	 	66	 
	 Unrealized gain (loss) on investments
	  				 	 	595	 	 		 				 	 	595	 
	 Realized gain (loss) on investments
	  				 	 	4	 	 		 				 	 	4	 
	 Other income (expense), net
	  	 	31,213	 	 	 	13	 	 		 				 	 	31,226	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Total other income, net
	  	 	29,740	 	 	 	(3,247	) 	 		 	 	—  	 	 	 	26,493	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Income (loss) before income taxes
	  	 	(52,541	) 	 	 	(17,848	) 	 		 	 	(347	) 	 	 	(70,736	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  	 	(1,593	) 	 	 	848	 	 		 				 	 	(745	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Net income (loss)
	  	$	(54,134	) 	 	$	(17,000	) 	 		 	$	(347	) 	 	$	(71,481	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Net income (loss) attributable to:
	  				 				 		 				 			
	 Canopy Growth Corporation
	  	$	(70,353	) 	 	$	(17,000	) 	 		 	$	(347	) 	 	$	(87,700	) 
	 Non-controlling interests
	  	 	16,219	 	 	 	—  	 	 	—  	 	 	—  	 	 	 	16,219	 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
		  	$	(54,134	) 	 	$	(17,000	) 	 		 	$	(347	) 	 	$	(71,481	) 
		  	  
	  
	 	 	  
	  
	 	 		 	  
	  
	 	 	  
	  
	 
	 Earnings per share, basic and diluted
	  				 				 		 				 			
	 Net loss per share:
	  	$	(0.40	) 	 				 		 				 	$	(0.47	) 
	 Weighted average number of outstanding common shares:
	  	 	177,301,767	 	 				 	3a)	 	 	7,943,123	 	 	 	185,244,890	 

 Canopy Growth Corporation 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 

(amounts in Canadian thousands of dollars unless noted otherwise, except for per share amounts) 

 

	1.	 BASIS OF PRESENTATION 

The unaudited pro forma condensed interim consolidated statement of financial position as at June 30, 2018, the unaudited pro forma condensed interim
consolidated statement of operations for the three months ended June 30, 2018 and the unaudited pro forma consolidated statement of operations for the year ended March 31, 2018 of Canopy Growth Corporation (“Canopy”) were
prepared for illustrative purposes only in compliance with National Instrument 51-102 – Continuous Disclosure Obligations. 
 The unaudited pro
forma condensed consolidated statement of financial position and the unaudited pro forma condensed consolidated statement of operations of Canopy Growth Corporation (“Canopy”) are comprised of information derived from: 

 

	 	•	 	 the unaudited condensed interim consolidated statement of financial position of Canopy as at June 30, 2018;

  

	 	•	 	 the unaudited condensed interim consolidated statement of financial position of Hiku Brands Company Ltd.
(“Hiku”) as at June 30, 2018; 

  

	 	•	 	 the unaudited condensed interim consolidated statement of operations of Canopy for the three months ended
June 30, 2018; 

  

	 	•	 	 the unaudited condensed interim consolidated statement of operations of Hiku for the three months ended
June 30, 2018; 

  

	 	•	 	 the audited consolidated statement of operations of Canopy for the year ended March 31, 2018;

  

	 	•	 	 the amended and restated unaudited interim condensed consolidated statement of loss of Hiku for the three months
ended March 31, 2018; 

  

	 	•	 	 the audited consolidated statement of loss of Hiku for the nine months ended December 31, 2017; and

  

	 	•	 	 the audited consolidated statement of loss of TS Brandco Holdings Inc. (“TS Brandco”) for the year
ended December 31, 2017 (see Note 6). 

 The unaudited pro forma condensed consolidated financial statements do not include all
of the disclosures required by International Financial Reporting Standards (“IFRS”) and should be read in conjunction with Canopy’s unaudited condensed interim consolidated financial statements for the three months ended June 30,
2018 and the audited consolidated financial statements of Canopy for the year ended March 31, 2018. 
 The unaudited pro forma consolidated financial
information gives effect to the Company’s acquisition of Hiku Brands Company Ltd. (“Hiku”) as if it had occurred as at June 30, 2018 for the purposes of the unaudited pro forma condensed interim consolidated statement of
financial position and as at April 1, 2017 for the purposes of the unaudited pro forma consolidated statement of operations for the year ended March 31, 2018 and for the purposes of the unaudited pro forma condensed interim consolidated
statement of operations for the three months ended June 30, 2018. 
 The accounting policies used in the preparation of the unaudited pro forma
condensed consolidated financial statements are consistent with those described in the consolidated financial statements of Canopy for the year ended March 31, 2018 except for the accounting policy with respect to production and fulfillment
related depreciation which was changed as of April 1, 2018, and the adoption of IFRS 9 and 15 on April 1, 2018. These changes were described in note 3 to the condensed interim consolidated financial statement for the three months ended
June 30, 2018. There was no change to the comparative periods or transitional adjustments arising from the adoption of IFRS 9 and 15 on April 1, 2018. 

The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results of operations that would have occurred had
the acquisition of Hiku been effected on the dates indicated, nor are the unaudited pro forma condensed consolidated financial statements indicative of the results of operation of future periods. Actual amounts recorded upon consummation of the
proposed acquisition will differ from such unaudited pro forma condensed consolidated financial statements. Since the pro forma condensed consolidated financial statements have been developed to retroactively show the effect of a transaction that is
expected to occur at a later date (even though this was accomplished by following generally accepted practice and using reasonable assumptions), there are limitations inherent in the very nature of such pro forma data. 

	2.	 DESCRIPTION OF TRANSACTION 

On September 5, 2018, Canopy acquired all issued and outstanding shares of Hiku, which are listed on the Canadian Securities Exchange (“CSE”) under
the symbol “HIKU”, on the basis that each Hiku shareholder will receive 0.046 of a common share of Canopy (the “exchange ratio”) for each Hiku share held (the “Acquisition”). 

All of Hiku’s outstanding options (“Hiku Options”) were exchanged for an equivalent option granted pursuant to Canopy’s stock option plan
(each, a “Replacement Option”) to purchase from Canopy the number of common shares (rounded down to the nearest whole share) equal to: (i) the exchange ratio multiplied by (ii) the number of Hiku shares subject to such Hiku Option. Each
such Replacement Option provides for an exercise price per common share (rounded up to the nearest whole cent) equal to: (x) the exercise price per Hiku share purchasable pursuant to such Hiku Option; divided by (y) the exchange ratio. 

All of Hiku’s outstanding warrants continued to be governed by and subject to the terms of the original warrant agreements but upon exercise will be
exercisable for an equivalent number of Canopy shares equal to: (i) the exchange ratio multiplied by (ii) the number of Hiku shares subject to such Hiku warrant. Each such warrant provides for an exercise price per common share equal to: (x) the
exercise price per Hiku share purchasable pursuant to such Hiku warrant; divided by (y) the exchange ratio. 
 All of Hiku’s restricted share units
(“Hiku RSUs”) vested immediately and were exchanged for one Hiku common share per Hiku RSU, which was then exchanged for common shares of Canopy at the exchange ratio pursuant to the Acquisition. 

The exchange ratio represents $3.15 per Hiku share and a premium of 42% based on the 20-day volume weighted average price of Hiku shares on the CSE
immediately preceding the acquisition date. 
  

	3.	 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL POSITION ASSUMPTIONS AND ADJUSTMENTS 

The unaudited pro forma condensed interim consolidated statement of financial position of Canopy as at June 30, 2018 has been adjusted to reflect the following
transactions as if the acquisition of the Acquisition had been completed on June 30, 2018: 
  

	 	(a)	 The Acquisition is expected to be accounted for as a business combination under IFRS 3 Business
Combinations. 

 The aggregate consideration for this transaction was $600,957, which includes: 

 

	 	•	 	 7,943,123 common shares with a fair value of $543,866, based on the Company’s share price on the date of the
transaction. 

  

	 	•	 	 $14,487 which is comprised of $13,537 related to the fair value of the replacement options relating to
pre-combination services and $949 allocated to the conversion feature of the convertible debenture. 

  

	 	•	 	 A $11,994 cash payment which includes an effective settlement of a $10,000 cash advance to Hiku which was used by
Hiku to pay the termination fee owed in connection with a previously announced transaction 

  

	 	•	 	 Replacement warrants with a fair value of $30,611 

 The net assets acquired and considered paid for 100% ownership in Hiku is preliminarily
allocated as follows: 
  

					
	 Cash and cash equivalents
	  	$	19,017	 
	 Amounts receivable
	  	 	1,365	 
	 Inventory and Biological Assets
	  	 	1,677	 
	 Prepaids and other assets
	  	 	598	 
	 Property, plant and equipment
	  	 	13,754	 
	 Other Financial Assets
	  	 	904	 
	 Intangible Assets
	  	 	988	 
		  	  
	  
	 
	 Total Assets
	  	$	38,303	 
		  	  
	  
	 
	 Accounts payable and accrued liabilities
	  	 	2,797	 
	 Debt and Other Liabilities
	  	 	864	 
	 Deferred tax liability
	  	 	485	 
	 Convertible Debenture
	  	 	1,271	 
		  	  
	  
	 
	 Total Liabilities
	  	$	5,417	 
		  	  
	  
	 
	 Net Assets Acquired
	  	$	32,886	 
		  	  
	  
	 
	 Consideration paid in cash
	  	$	11,994	 
	 Consideration paid in shares
	  	 	543,866	 
	 Replacement Options
	  	 	13,537	 
	 Replacement Warrants
	  	 	30,611	 
	 Other consideration
	  	 	949	 
		  	  
	  
	 
	 Total consideration
	  	$	600,957	 
		  	  
	  
	 
	 Goodwill
	  	$	568,071	 
		  	  
	  
	 

 The pro forma fair value adjustment of Canopy’s interest is subject to change based on finalization of
valuation adjustments and completion of management’s assessment of the fair values of the assets and liabilities of Hiku. Due to the timing of the announcement of the acquisition, Canopy has not yet obtained sufficient information to accurately
determine the fair market value of Hiku’s net assets by category and has therefore allocated the book values of the net assets acquired as a proxy of fair value as at June 30, 2018, except for the elimination of Hiku’s historical
goodwill of $178,957. Goodwill represents the amount by which the fair value adjustment exceeds the book value, being a proxy of fair value of the assets acquired and liabilities assumed. The final calculation and allocation of the fair value
adjustment will be based on the net assets purchased as of the closing date of the Transaction and other information available at that time; there may be material differences from this pro forma fair value allocation as a result of finalizing the
valuation. Based on management’s preliminary estimates, the goodwill may be allocated to other items such as: certain identified intangible assets, including licenses. 

If a portion of the goodwill is allocated to Hiku’s intangible assets a pro forma adjustment related to depreciation expense would be
required. For every $10,000 allocated to intangible assets in excess of book value, pro forma depreciation expense would increase on an annual basis by approximately $2,000 - $3,333 based on Canopy’s straight-line depreciation periods of 3
– 5 years as disclosed in their consolidated financial statements. The actual depreciation recorded will be subject to the determination of the useful lives and the allocated fair values and could materially differ from these estimates.
Additionally, there may be an income tax impact associated with these differences, however this impact is dependent on the nature of the asset class and tax depreciation classes, and the assigned fair values, which are unable to be reliably
estimated at this time. Due to the uncertainty of the amounts, no pro forma adjustments have been made in the pro forma financial statements for these items. 
  

	 	(b)	 Estimated acquisition related costs of approximately $1,988 (relating to investment banker, legal, regulatory
and accounting fees) have been recorded to the opening deficit of the pro forma consolidated statement of financial position of Canopy as at March 31, 2018 and reflected in the pro forma consolidated statement of operations of Canopy for the
year ended March 31, 2018 on the basis that these expenses are directly incremental to the Acquisition. The pro forma financial statements do not reflect a deferred tax asset that would otherwise result from tax effecting the acquisition
related costs due to the Company’s history of losses. 

  

	 	(c)	 The elimination of Hiku equity accounts 

	 	4.	 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND ADJUSTMENTS 

The unaudited pro forma condensed interim consolidated statements of operations of Canopy for the three months ended June 30, 2018 and the
unaudited pro forma condensed consolidated statements of operations of Canopy year ended March 31, 2018 have been adjusted to reflect the following transactions as if the Acquisition had been completed on April 1, 2017: 

 

	 	(a)	 As discussed in Note 3(a), consideration for the Acquisition includes 291,629 replacement options based on an
exchange ratio of 0.046 Canopy options to each Hiku option outstanding. Included in the share-based compensation expense is the impact of all remaining unvested options post acquisition using the Black Scholes option pricing model to establish the
fair value of options outstanding which amounts to $3,259 and $353 for the year ended March 31, 2018 and three month period ended June 30, 2018, respectively, offset by Hiku’s historical share-based compensation expense of $4,900 and
$1,007 for the year ended March 31, 2018 and three month period ended June 30, 2018, respectively. 

  

	 	(b)	 As discussed in Note 3(a), if a portion of the goodwill is allocated to intangible assets, a pro forma
adjustment related to depreciation expense would be required. For every $10,000 allocated to intangible assets in excess of book value, pro forma depreciation expense would increase on an annual basis by approximately $2,000 - $3,333 on an annual
basis based on Canopy’s straight-line depreciation periods of 3 - 5 years which represents the useful life of its intangible assets. Licenses are amortized over the useful life of its related facility. The actual depreciation recorded will be
subject to the determination of the useful lives allocated and the fair values and could materially differ from these estimates. Additionally, there may be an income tax impact associated with these differences, however this impact is dependent on
the nature of the asset class and tax depreciation classes, and the assigned fair values, which are unable to be reliably estimated at this time. Due to the uncertainty of the amounts, no pro forma adjustments have been made in the pro forma
financial statements for these items. 

  

	 	5.	 PRO FORMA NET LOSS PER SHARE 

The pro forma net loss per share for the three months ended June 30, 2018 and the year ended March 31, 2018 is as follows: 

FOR THE THREE MONTHS ENDED JUNE 30, 2018 

 

					
	 Pro forma net loss attributable to CGC
	  	 	(86,565	) 
		
	 Weighted average shares outstanding
	  	 	200,160,740	 
	 Pro forma shares issed for acquisition
	  	 	7,943,123	 
		  	  
	  
	 
	 Pro forma weighted average shares outstanding
	  	 	208,103,863	 
		  	  
	  
	 
	 Pro forma net loss per share
	  	 	(0.42	) 
		  	  
	  
	 
	 FOR THE YEAR ENDED MARCH 31, 2018
	  			
		
	 Pro forma net loss attributable to CGC
	  	 	(87,700	) 
		
	 Weighted average shares outstanding
	  	 	177,301,767	 
	 Pro forma shares issed for acquisition
	  	 	7,943,123	 
		  	  
	  
	 
	 Pro forma weighted average shares outstanding, basic
	  	 	185,244,890	 
		  	  
	  
	 
	 Pro forma net loss per share
	  	 	(0.47	) 
		  	  
	  
	 

	 	6.	 HIKU STATEMENT OF OPERATIONS 

Hiku changed its year end from March 31 to December 31 beginning on April 1, 2017. For purposes of the unaudited pro forma
statement of operations, the Hiku statement of operations for the 12 months ended March 31, 2018 have been constructed from the Hiku statement of loss for the 9 months ended December 31, 2017 and the Hiku statement of loss for the 3 months
ended March 31, 2018. Furthermore, Hiku completed the acquisition of TS Brandco on January 30, 2018 and, as a result, 12 months of operations for TS Brandco are required to be included in the unaudited pro forma statement of operations. TS
Brandco’s audited statement of loss for the 12 months ended December 31, 2017 has been added to Hiku’s and TS Brandco’s unaudited statement of loss for the period from acquisition to March 31, 2018 has been deducted from
Hiku’s in order to provide 12 months of TS Brandco’s results in the pro forma statement of operations. 

 The following summarizes the constructed statement of operations for Hiku: 

 

																					
	 	  	Hiku Brands Company Ltd.	 	 	TS Brandco Holdings Inc.	 	 	 	 
	 	  	3 months ended
March 31, 2018	 	 	9 months ended
December 31, 2017	 	 	12 months ended
December 31, 2017	 	 	Less: period from
January 31, 2018 to
March 31, 2018	 	 	Hiku
12 months ended
March 31, 2018	 
	 Retail sales
	  	$	246	 	 	$	—  	 	 	$	736	 	 	$	(246	) 	 	$	736	 
	 Retail cost of sales
	  	 	(202	) 	 	 	—  	 	 	 	(563	) 	 	 	202	 	 	 	(563	) 
	 Licensing
	  	 	—  	 	 	 	—  	 	 	 	25	 	 	 	—  	 	 	 	25	 
	 Production cost of sales
	  	 	(15	) 	 	 	(510	) 	 	 	—  	 	 	 	—  	 	 	 	(525	) 
	 Production amortization and depreciation
	  	 	(13	) 	 	 	(22	) 	 	 	—  	 	 	 	—  	 	 	 	(35	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross margin before the undernoted
	  	 	16	 	 	 	(532	) 	 	 	198	 	 	 	(44	) 	 	 	(362	) 
	 Unrealized gain on change of fair value in biological assets
	  	 	396	 	 	 	264	 	 	 	—  	 	 	 	—  	 	 	 	660	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross margin
	  	 	412	 	 	 	(268	) 	 	 	198	 	 	 	(44	) 	 	 	298	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Sales and marketing
	  	 	1,126	 	 	 	925	 	 	 	895	 	 	 	(422	) 	 	 	2,524	 
	 General and administration
	  	 	2,789	 	 	 	887	 	 	 	2,840	 	 	 	(1,599	) 	 	 	4,917	 
	 Professional fees
	  	 	471	 	 	 	275	 	 	 	1,320	 	 	 	(283	) 	 	 	1,783	 
	 Stock based compensation
	  	 	3,003	 	 	 	741	 	 	 	1,156	 	 	 	—  	 	 	 	4,900	 
	 Accretion on convertible debentures
	  	 	411	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	411	 
	 Depreciation and amortization
	  	 	46	 	 	 	66	 	 	 	260	 	 	 	(8	) 	 	 	364	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  	 	7,846	 	 	 	2,894	 	 	 	6,471	 	 	 	(2,311	) 	 	 	14,900	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Loss from operations
	  	 	(7,434	) 	 	 	(3,162	) 	 	 	(6,273	) 	 	 	2,267	 	 	 	(14,602	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Listing costs
	  	 	—  	 	 	 	(3,925	) 	 	 	—  	 	 	 	—  	 	 	 	(3,925	) 
	 Interest income (expense), net
	  	 	45	 	 	 	—  	 	 	 	(15	) 	 	 	36	 	 	 	66	 
	 Unrealized gain (loss) on investments
	  	 	(238	) 	 	 	—  	 	 	 	543	 	 	 	290	 	 	 	595	 
	 Realized gain (loss) on investments
	  	 	4	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	4	 
	 Other income, net
	  	 	15	 	 	 	(1	) 	 	 	(1	) 	 	 	—  	 	 	 	13	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Loss before income taxes
	  	$	(7,608	) 	 	$	(7,088	) 	 	$	(5,746	) 	 	$	2,594	 	 	$	(17,848	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  	 	—  	 	 	 	848	 	 	 	—  	 	 	 	—  	 	 	 	848	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net loss and comprehensive loss
	  	$	(7,608	) 	 	$	(6,240	) 	 	$	(5,746	) 	 	$	2,594	 	 	$	(17,000	)EX-4.20

 Exhibit 4.20 

EXPLANATORY NOTE 
 This amended and
restated business acquisition report (the “Amended and Restated BAR”) amends and restates and supersedes the business acquisition report of Canopy Growth Corporation (the “Company”) dated September 18, 2018
(the “Original BAR”). 
 This Amended and Restated BAR replaces (i) the unaudited
pro-forma condensed interim consolidated statement of financial position of the Company as at June 30, 2018; (ii) the unaudited pro-forma condensed
consolidated statement of operations of the Company and pro-forma earnings per share for the year ended March 31, 2018; and (iii) the unaudited
pro-forma condensed interim consolidated statement of operations of the Company and pro-forma earnings per share for the three months ended June 30,
2018 (the “Pro Forma Financial Statements”). In the Original BAR, the Company accounted for its 67% interest in BC Tweed Joint Venture Inc. (“BC Tweed”) as a joint operation, based on the conclusion that BC Tweed
was subject to joint control. During the second quarter of fiscal 2019, the Company revised this conclusion and concluded that BC Tweed was unilaterally controlled by the Company and accordingly the Pro Forma Financial Statements have been replaced
in the Amended and Restated BAR to address the change in accounting treatment. 
 This explanatory note does not form a part of, and is not incorporated by
reference in, the Amended and Restated BAR. 

 FORM 51-102F4 

AMENDED AND RESTATED BUSINESS ACQUISITION REPORT 
  

			
	ITEM 1.	  	IDENTITY OF COMPANY
		
	1.1.	  	Name and Address of Company
		
		  	Canopy Growth Corporation (the “Company”)
		  	1 Hershey Drive
		  	Smiths Falls, Ontario K7A 0A8
		
	1.2.	  	Executive Officer
		
		  	The following executive officer of the Company is knowledgeable about the Acquisition (as defined below) and this report:
		
		  	Mr. Tim Saunders
		  	Executive Vice President & Chief Financial Officer
		  	Telephone: (613) 706-2185 ext. 150
		
	ITEM 2.	  	DETAILS OF ACQUISITION
		
	2.1.	  	Nature of Business Acquired
		
		  	All amounts in this business acquisition report are stated in Canadian dollars unless stated otherwise.
		
		  	On May 14, 2018, the Company announced that it entered into a non-binding agreement to purchase the 33% interest in BC Tweed Joint Venture Inc. (“BC Tweed”) held by 1135012 B.C. Ltd. The Company held the
remaining 67% interest in BC Tweed.
		
		  	On July 5, 2018, the Company announced that it had completed the acquisition (the “Acquisition”) of the 33% interest in BC Tweed pursuant to a share purchase agreement dated July 4, 2018, as amended as of July 5,
2018 (the “Purchase Agreement”).
		
		  	BC Tweed was incorporated by the Company on September 12, 2017. On October 10, 2017, the Company entered into a definitive joint venture agreement with 1135024 B.C. Ltd. to develop a greenhouse growing facility in Aldergrove,
British Columbia, Canada with an exclusive option to develop a further 1.7 million square feet of existing greenhouse infrastructure at a second location in Delta, British Columbia, Canada. On December 1, 2017, BC Tweed entered into an agreement to
lease the second greenhouse growing facility in Delta, British Columbia, Canada.

			
		  	The Aldergrove site includes the first and second stage licensing of 840,000 square feet of growing space, allowing vegetative growth so that the mature plants can be spread into the full 1.3 million square feet for flowering and
harvesting. The Delta site includes the initial licensing of 900,000 square feet of growing space, allowing vegetative growth so that the mature plants can be spread into the full 1.7 million square feet for flowering and harvesting.
		
	2.2.	  	Date of Acquisition
		
		  	July 5, 2018.
		
	2.3.	  	Consideration
		
		  	Pursuant to the Purchase Agreement, the Company completed the Acquisition for initial cash consideration of $1 million and 12,619,148 common shares of the Company (the “Consideration Shares”) having a value on
the closing date of approximately $440,596,103. 8,202,446 Consideration Shares are subject to the terms of an escrow agreement, all of which will be released by no later than July 5, 2021.
		
		  	The Company also acquired a call option over certain entities that hold greenhouses and related property. The Company issued 674,821 common shares of the Company in exchange for the option, having a value on the closing date of
approximately $26,790,394.
		
	2.4.	  	Effect on Financial Position
		
		  	The Company does not currently have any plans or proposals for material changes in the business acquired pursuant to the Acquisition which may have a significant impact on the financial performance and financial position of the
Company, including any proposal to sell, lease or exchange all or a substantial part of the business acquired pursuant to the Acquisition or to make any material changes to the Company’s business.
		
	2.5.	  	Prior Valuations
		
		  	No valuation opinion was required by securities legislation or a Canadian exchange or market within the last 12 months to support the consideration paid by the Company pursuant to the Acquisition.

  
 3 

					
	2.6.	  	Parties to Transaction
		
		  	The Acquisition was not with an informed person (as that term is defined in section 1.1 of National Instrument 51-102 – Continuous Disclosure Obligations), associate or affiliate of the
Company.

		
	2.7.	  	Date of Report
		
		  	December 20, 2018
		
	ITEM 3.	  	FINANCIAL STATEMENTS AND OTHER INFORMATION
		
		  	The Acquisition constitutes a “step-by-step” acquisition. Accordingly, in reliance on section 8.11 of National Instrument 51-102, the Company is exempt from providing audited financial statements
of BC Tweed, as BC Tweed has been consolidated since October 10, 2017 in the Company’s most recent annual financial statements for the year ended March 31, 2018. The following pro-forma documents of the Company are attached as
Schedule “A” to this business acquisition report:

			
		  	    (a)	  	The unaudited pro-forma condensed interim consolidated statement of financial position of the Company as at June 30, 2018;
			
		  	    (b)	  	The unaudited pro-forma condensed consolidated statement of operations of the Company and pro-forma earnings per share for the year ended March 31, 2018; and
			
		  	    (c)	  	The unaudited pro-forma condensed interim consolidated statement of operations of the Company and pro-forma earnings per share for the three months ended June 30, 2018.

 Cautionary Note Regarding Forward Looking Statements 

This business acquisition report contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform
Act of 1995 and “forward-looking information” “ within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as
“plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such
words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements or information involve known
and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, BC Tweed or the Company’s subsidiaries or affiliates to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements or information contained in this business acquisition report. Examples of such statements include the satisfaction of certain conditions and the release of the
Consideration Shares from escrow. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by
such forward-looking information, including risks associated with changes in general economic, business and political conditions, including changes in the financial markets; changes in applicable laws; compliance with extensive government
regulation; diversion of management 

  
 4 

 
time on the integration of the business; and such risks contained in the Company’s annual information form dated June 27, 2018 and filed with Canadian securities regulators available on
the Company’s issuer profile on SEDAR at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this business acquisition report are
reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information and forward-looking statements included in this
business acquisition report are made as of the date of this business acquisition report and the Company does not undertake an obligation to publicly update such forward-looking statements or forward-looking information to reflect new information,
subsequent events or otherwise unless required by applicable securities laws. 

  
 5 

 SCHEDULE A 

PRO-FORMA FINANCIAL STATEMENTS 

CANOPY GROWTH CORPORATION 
 PRO FORMA CONDENSED
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION     
 AS AT JUNE 30, 2018 

UNAUDITED 
  

																	
	 (Expressed in CDN $000’s)
	  	Canopy
Growth	 	 	Pro Forma
Adjustments	 	 	Notes	 	  	Pro Forma
Consolidated	 
	 Assets
	  				 				 				  			
	 Current assets
	  				 				 				  			
	 Cash and cash equivalents
	  	$	657,896	 	 				 				  	$	657,896	 
	 Amounts receivable
	  	 	27,746	 	 				 				  	 	27,746	 
	 Biological assets
	  	 	52,811	 	 				 				  	 	52,811	 
	 Inventory
	  	 	118,204	 	 				 				  	 	118,204	 
	 Prepaid expenses and other assets
	  	 	36,137	 	 	 	(1,000	) 	 	 	3	 	  	 	35,137	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
		  	 	892,794	 	 	 	(1,000	) 	 				  	 	891,794	 
					
	 Property, plant and equipment
	  	 	479,898	 	 				 				  	 	479,898	 
	 Other long-term assets
	  	 	26,973	 	 				 				  	 	26,973	 
	 Investments in associates and joint ventures
	  	 	93,269	 	 				 				  	 	93,269	 
	 Other financial assets
	  	 	177,282	 	 				 				  	 	177,282	 
	 Intangible assets
	  	 	101,723	 	 				 				  	 	101,723	 
	 Goodwill
	  	 	340,374	 	 				 				  	 	340,374	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
		  	$	2,112,313	 	 	$	(1,000	) 	 				  	$	2,111,313	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
	 Liabilities
	  				 				 				  			
	 Current liabilities
	  				 				 				  			
	 Accounts payable and accrued liabilities
	  	$	127,248	 	 				 				  	$	127,248	 
	 Deferred revenue
	  	 	767	 	 				 				  	 	767	 
	 Current portion of long-term debt
	  	 	2,539	 	 				 				  	 	2,539	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
		  	 	130,554	 	 	 	—  	 	 				  	 	130,554	 
					
	 Long-term debt
	  	 	617,749	 	 				 				  	 	617,749	 
	 Deferred tax liability
	  	 	30,815	 	 				 				  	 	30,815	 
	 Long-term financial liabilities
	  	 	108,732	 	 	 	(72,600	) 	 	 	3)	 	  	 	63,132	 
		  				 	 	27,000	 	 	 	3)	 	  			
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
		  	 	887,850	 	 	 	(45,600	) 	 				  	 	842,250	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
	 Shareholders’ equity
	  				 				 				  			
	 Share capital
	  	 	1,124,485	 	 	 	202,133	 	 	 	3)	 	  	 	1,326,618	 
	 Other reserves
	  	 	145,564	 	 	 	265,253	 	 	 	3)	 	  	 	(11,015	) 
		  				 	 	(422,786	) 	 	 	3)	 	  			
		  				 	 	954	 	 	 	4b)	 	  			
	 Accumulated other comprehensive income
	  	 	39,280	 	 				 				  	 	39,280	 
	 Deficit
	  	 	(171,926	) 	 	 	(954	) 	 	 	4b)	 	  	 	(172,880	) 
					
	 Equity attributable to Canopy Growth Corporation
	  	 	1,137,403	 	 	 	44,600	 	 				  	 	1,182,003	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
	 Non-controlling interests
	  	 	87,060	 	 				 				  	 	87,060	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
	 Total equity
	  	 	1,224,463	 	 	 	44,600	 	 				  	 	1,269,063	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 
		  	$	2,112,313	 	 	$	(1,000	) 	 				  	$	2,111,313	 
		  	  
	  
	 	 	  
	  
	 	 				  	  
	  
	 

  
 6 

 CANOPY GROWTH CORPORATION 

PRO FORMA CONDENSED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS 

FOR THE THREE MONTHS ENDED JUNE 30, 2018 
 UNAUDITED

  

																	
	 (Expressed in CDN $000’s except share
amounts)
	  	Canopy
Growth	 	 	Pro Forma
Adjustments	 	  	Notes	 	 	Pro Forma
Consolidated	 
	 Revenue
	  	$	25,916	 	 				  				 	$	25,916	 
					
	 Inventory production costs expensed to cost of sales
	  	 	14,832	 	 				  				 	 	14,832	 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Gross margin before the undernoted
	  	 	11,084	 	 				  				 	 	11,084	 
					
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	26,388	 	 				  				 	 	26,388	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(57,289	) 	 				  				 	 	(57,289	) 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Gross margin
	  	 	41,985	 	 				  				 	 	41,985	 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Sales and marketing
	  	 	17,266	 	 				  				 	 	17,266	 
	 Research and development
	  	 	756	 	 				  				 	 	756	 
	 General and administration
	  	 	19,588	 	 				  				 	 	19,588	 
	 Acquisition-related costs
	  	 	1,884	 	 				  				 	 	1,884	 
	 Share-based compensation expense
	  	 	23,072	 	 				  				 	 	23,072	 
	 Share-based compensation expense related to acquisition milestones
	  	 	7,095	 	 				  				 	 	7,095	 
	 Depreciation and amortization
	  	 	3,030	 	 				  				 	 	3,030	 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Operating expenses
	  	 	72,691	 	 				  				 	 	72,691	 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Loss from operations
	  	 	(30,706	) 	 				  				 	 	(30,706	) 
		  	  
	  
	 	 				  				 	  
	  
	 
	 Share of loss on equity investments
	  	 	(2,569	) 	 				  				 	 	(2,569	) 
	 Other expense, net
	  	 	(60,426	) 	 	 	16,300	 	  	 	4a	) 	 	 	(44,126	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Total other expense, net
	  	 	(62,995	) 	 	 	16,300	 	  				 	 	(46,695	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Loss before income taxes
	  	 	(93,701	) 	 	 	16,300	 	  				 	 	(77,401	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Income tax (expense) recovery
	  	 	2,723	 	 				  				 	 	2,723	 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Net loss
	  	$	(90,978	) 	 	$	16,300	 	  				 	$	(74,678	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Net loss attributable to:
	  				 				  				 			
	 Canopy Growth Corporation
	  	$	(80,277	) 	 	$	16,300	 	  				 	$	(63,977	) 
	 Non-controlling interests
	  	 	(10,701	) 	 				  				 	 	(10,701	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
		  	$	(90,978	) 	 	$	16,300	 	  				 	$	(74,678	) 
		  	  
	  
	 	 	  
	  
	 	  				 	  
	  
	 
	 Earnings per share, basic and diluted
	  				 				  				 			
	 Net loss per share:
	  	$	(0.40	) 	 				  				 	$	(0.30	) 
	 Weighted average number of outstanding common shares:
	  	 	200,160,740	 	 	 	13,293,969	 	  				 	 	213,454,709	 

  
 7 

 CANOPY GROWTH CORPORATION 

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 
 FOR
THE YEAR ENDED MARCH 31, 2018 
 UNAUDITED 
  

																	
	 (Expressed in CDN $000’s except share
amounts)
	  	Canopy
Growth	 	 	Pro Forma
Adjustments	 	 	Notes	 	 	Pro Forma
Consolidated	 
	 Revenue
	  	$	77,948	 	 				 				 	$	77,948	 
					
	 Inventory production costs expensed to cost of sales
	  	 	37,790	 	 				 				 	 	37,790	 
		  	  
	  
	 	 				 				 	  
	  
	 
	 Gross margin before the undernoted
	  	 	40,158	 	 				 				 	 	40,158	 
					
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	66,268	 	 				 				 	 	66,268	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(100,302	) 	 				 				 	 	(100,302	) 
		  	  
	  
	 	 				 				 	  
	  
	 
	 Gross margin
	  	 	74,192	 	 				 				 	 	74,192	 
		  	  
	  
	 	 				 				 	  
	  
	 
	 Sales and marketing
	  	 	38,203	 	 				 				 	 	38,203	 
	 Research and development
	  	 	1,453	 	 				 				 	 	1,453	 
	 General and administration
	  	 	43,819	 	 				 				 	 	43,819	 
	 Acquisition-related costs
	  	 	3,406	 	 				 				 	 	3,406	 
	 Share-based compensation expense
	  	 	29,631	 	 				 				 	 	29,631	 
	 Share-based compensation expense related to acquisition milestones
	  	 	19,475	 	 	 	954	 	 	 	4b	) 	 	 	20,429	 
	 Depreciation and amortization
	  	 	20,486	 	 				 				 	 	20,486	 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Operating expenses
	  	 	156,473	 	 	 	954	 	 				 	 	157,427	 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Loss from operations
	  	 	(82,281	) 	 	 	(954	) 	 				 	 	(83,235	) 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Share of loss on equity investments
	  	 	(1,473	) 	 				 				 	 	(1,473	) 
	 Other income (expense), net
	  	 	31,213	 	 	 	19,900	 	 	 	4b	) 	 	 	56,108	 
		  				 	 	4,995	 	 	 	4c	) 	 			
		  				 	  
	  
	 	 				 	  
	  
	 
	 Total other income, net
	  	 	29,740	 	 	 	24,895	 	 				 	 	54,635	 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Income (loss) before income taxes
	  	 	(52,541	) 	 	 	23,941	 	 				 	 	(28,600	) 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Income tax (expense) recovery
	  	 	(1,593	) 	 				 				 	 	(1,593	) 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Net income (loss)
	  	$	(54,134	) 	 	$	23,941	 	 				 	$	(30,193	) 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Net income (loss) attributable to:
	  				 				 				 			
	 Canopy Growth Corporation
	  	$	(70,353	) 	 	$	23,941	 	 				 	$	(46,412	) 
	 Non-controlling interests
	  	 	16,219	 	 				 				 	 	16,219	 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
		  	$	(54,134	) 	 	$	23,941	 	 				 	$	(30,193	) 
		  	  
	  
	 	 	  
	  
	 	 				 	  
	  
	 
	 Earnings per share
	  				 				 				 			
	 Net income (loss) per share, basic:
	  	$	(0.40	) 	 				 				 	$	(0.24	) 
	 Weighted average number of outstanding common shares, basic:
	  	 	177,301,767	 	 	 	13,293,969	 	 				 	 	190,595,736	 

  
 8 

 Canopy Growth Corporation 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 

(amounts in Canadian thousands of dollars unless noted otherwise, except for per share amounts) 

1. BASIS OF PRESENTATION 
 The unaudited pro forma
condensed interim consolidated statement of financial position as at June 30, 2018, the unaudited pro forma condensed interim consolidated statement of operations for the three months ended June 30, 2018 and the unaudited pro forma
condensed consolidated statement of operations for the year ended March 31, 2018 of Canopy Growth Corporation (“Canopy”) were prepared for illustrative purposes only in compliance with National Instrument 51-102 – Continuous Disclosure Obligations. 
 The unaudited pro forma condensed consolidated statement of
financial position and the unaudited pro forma condensed consolidated statements of operations of Canopy are comprised of information derived from: 
  

	 	•	 	 the unaudited condensed interim consolidated statement of financial position of Canopy as at June 30, 2018;

  

	 	•	 	 the unaudited condensed interim consolidated statement of operations of Canopy for the three months ended
June 30, 2018; and 

  

	 	•	 	 the audited consolidated statement of operations of Canopy for the year ended March 31, 2018;

 The unaudited pro forma condensed consolidated financial statements do not include all of the disclosures required by International
Financial Reporting Standards (“IFRS”) and should be read in conjunction with Canopy’s unaudited condensed interim consolidated financial statements for the three months ended June 30, 2018 and the audited consolidated financial
statements of Canopy for the year ended March 31, 2018. 
 The unaudited pro forma consolidated financial information gives effect to the acquisition
of the minority shareholder’s (“Partner’s”) interest in BC Tweed as if it had occurred as at June 30, 2018, for the purposes of the unaudited pro forma condensed interim consolidated statement of financial position and as at
April 1, 2017 for the purposes of the unaudited pro forma consolidated statement of operations for the year ended March 31, 2018 and for the purposes of the unaudited pro forma condensed interim consolidated statement of operations for the
three months ended June 30, 2018. 
 The accounting policies used in the preparation of the unaudited pro forma condensed consolidated financial
statements are consistent with those described in the consolidated financial statements of Canopy for the year ended March 31, 2018 except for the accounting policy with respect to production and fulfillment related depreciation which was
changed as of April 1, 2018, and the adoption of IFRS 9 and 15 on April 1, 2018. These changes were described in note 3 to the condensed interim consolidated financial statement for the three months ended June 30, 2018. There was no
change to the comparative periods or transitional adjustments arising from the adoption of IFRS 9 and 15 on April 1, 2018. 
 The unaudited pro forma
condensed consolidated financial statements are not necessarily indicative of the results of operations that would have occurred had the acquisition of the Partner’s interest in BC Tweed been effected on the dates indicated, nor are the
unaudited pro forma condensed consolidated financial statements indicative of the results of operation of future periods. Actual amounts recorded upon consummation of the proposed acquisition will differ from such unaudited pro forma condensed
consolidated financial statements. Since the pro forma condensed consolidated financial statements have been developed to retroactively show the effect of a transaction that is expected to occur at a later date (even though this was accomplished by
following generally accepted practice and using reasonable assumptions), there are limitations inherent in the very nature of such pro forma data. 
 2.
DESCRIPTION OF TRANSACTION 
 On July 5, 2018 Canopy acquired the Partner’s 33% interest in BC Tweed Joint Venture Inc. (“BC Tweed”)
(the “Transaction”). 

  
 9 

 Background 

Prior to the second quarter of 2019, the Company accounted for its 67% interest in BC Tweed as a joint operation, based on the conclusion that BC Tweed was
subject to joint control. During the second quarter of 2019, the Company revised this conclusion and concluded that based on the shareholders’ agreements and the contractual terms of the offtake agreement, the significant relevant activities of
BC Tweed are unilaterally controlled by the Company. Since the Company had previously recognized the assets, liabilities, revenues and expenses of BC Tweed based on its proportionate share of BC Tweed’s output, being 100%, the conclusion that
BC Tweed should have been a consolidated subsidiary had no significant impact on the Company’s previously issued interim or annual financial statements. 

Under the terms of the original BC Tweed Shareholders’ Agreement, the Partner had the option to sell its interest in BC Tweed, in whole or in part, to
the Company. This resulted in a liability (the “BC Tweed Put Liability”) being recorded in Canopy’s financial statements at the present value of the expected redemption amount, with changes recorded in net income in the period in
which they arose. 
 As part of the original BC Tweed Shareholders’ agreement, BC Tweed had entered into a call option agreement with the Partner to
acquire all the limited partnership units of the limited partnerships which hold the greenhouses and related property that BC Tweed is currently leasing for consideration of $73,000. 

The Transaction 
 In consideration for acquiring the
Partner’s interest, the Company paid $1 million in cash and 13,293,969 shares of the Company of which 5,091,523 shares were released on closing and the remaining 8,202,446 shares were placed in escrow. The shares placed in escrow will be
released over a period of up to three years, with the exact timing of release dependent on the occurrence of specified events. 
 On closing of the
Transaction, the call option held by BC Tweed on the limited partnership units of the limited partnerships which hold the greenhouses and related property was amended to effectively increase the call option price by $27,000. This adjustment to the
purchase price represents contingent consideration, which has a fair value on the acquisition date of $27,000. 
 In conjunction with the acquisition of the
Partner’s interest the Company received an option to acquire the limited partnership units of another limited partnership currently owned by the Partner that holds greenhouse infrastructure in California. The option is exercisable for a
purchase price that is the greater of USD $92,000 and the maximum of $190,000 plus the undepreciated book value of the net assets of the partnership on the closing date. The option is exercisable 90 days after the date of US Federal legalization of
the growth, cultivation, production and sale of cannabis for medical purposes. The option expires on the earlier of 90 days after the date of US Federal legalization of the growth, cultivation, production and sale of cannabis for medical purposes
and July 5, 2023. The option is a derivative instrument that will be measured initially and subsequently at fair value. Given that the growth, cultivation, production and sale of cannabis is not currently federally legal in the US and there can
be no assurance that it will be legal, Management has estimated that this instrument has a nominal value at inception. 
 On closing of the Transaction,
Canopy amended the terms of a share-based compensation arrangement with the Partner to accelerate the vesting of 155,158 shares previously issued to the Partner, and to cancel the remaining tranches of the compensation arrangement. As a result, the
unamortized balance of the grant date fair value of the shared-based compensation of $954 was expensed immediately. 

  
 10 

 3. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL POSITION ASSUMPTIONS AND ADJUSTMENTS 

The unaudited pro forma condensed interim consolidated statement of financial position of Canopy as at June 30, 2018 has been adjusted to reflect the
following transactions as if the acquisition of the Partner’s interest in BC Tweed had been completed on June 30, 2018: 
 The Transaction has
been accounted for as the acquisition of a non-controlling shareholder’s interest. The consideration paid for the Partner’s interest was estimated to be $495,386. The consideration was comprised of:

  

	 	•	 	 $1,000 cash deposit paid prior to June 30, 2018 

 

	 	•	 	 5,091,523 shares issued on closing with a fair value of $202,133 based on a share price of $39.70

  

	 	•	 	 8,202,446 shares in escrow with a fair value of $265,253 estimated using a put option pricing model discounted to
reflect management’s best estimate of the expected dates of release 

  

	 	•	 	 $27,000 representing the fair value of the contingent consideration. 

The total consideration paid to acquire the Partner’s 33% interest has been recorded as a charge to Equity of $422,786, which represents the excess
consideration paid over the fair value of the put liability of the transaction date of $72,600. 
 4. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND
ADJUSTMENTS 
 The unaudited pro forma condensed interim consolidated statements of operations of Canopy for the three months ended June 30, 2018
and the unaudited pro forma condensed consolidated statements of operations of Canopy year ended March 31, 2018 have been adjusted to reflect the following transactions as if the acquisition of BC Tweed had been completed on April 1, 2017:

  

	 	(a)	 For the three-month period ended June 30, 2018 and for the year ended March 31, 2018, Canopy recorded
a loss in the amount of $16,300 and $19,900, respectively, related to changes in the fair value of the put liability. As a result of the pro forma effect of the Transaction, these fair value changes would not have occurred, and a pro forma
adjustment has been recorded to remove this contributed loss. 

  

	 	(b)	 As a result of the Transaction, share-based compensation expense of $954 will be incurred due to the
acceleration of the vesting of 155,158 shares and the cancellation of the remaining tranches and is recorded as a pro forma adjustment. 

  

	 	(c)	 For the year ended March 31, 2018 Canopy recorded a Partner expense of $4,995 which represented a
distribution to the Partner. As a result of the pro forma effect of the Transaction, this distribution would not have occurred and a pro forma adjustment has been recorded to remove this expense. 

 

	 	(d)	 It has been assumed that there has been no change in fair value of the option to acquire infrastructure and
therefore there is no gain or loss on this option for the year ended March 31, 2018 and the three months ended June 30, 2018 and therefore no pro forma adjustment is required. 

5. PRO FORMA NET INCOME (LOSS) PER SHARE 
 The pro forma
net income (loss) per share for the three months ended June 30, 2018 and the year ended March 31, 2018 is as follows: 

FOR THE THREE MONTHS ENDED JUNE 30, 2018 
  

					
	 Pro forma net loss attributable to CGC
	  	 	(63,977	) 
		
	 Weighted average shares outstanding
	  	 	200,160,740	 
	 Pro forma shares issued for acquisition
	  	 	13,293,969	 
		  	  
	  
	 
	 Pro forma weighted average shares outstanding
	  	 	213,454,709	 
		  	  
	  
	 
	 Pro forma net loss per share
	  	 	(0.30	) 
		  	  
	  
	 

  
 11 

 FOR THE YEAR ENDED MARCH 31, 2018 

 

					
	 Pro forma net loss attributable to CGC
	  	 	(46,412	) 
	 Weighted average shares outstanding
	  	 	177,301,767	 
	 Pro forma shares issued for acquisition
	  	 	13,293,969	 
		  	  
	  
	 
	 Pro forma weighted average shares outstanding, basic
	  	 	190,595,736	 
		  	  
	  
	 
	 Pro forma net loss per share
	  	 	(0.24	) 
		  	  
	  
	 

  
 12

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