Document:

EX-4.15

 Exhibit 4.15 

CANOPY GROWTH CORPORATION 
 CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS 
 (UNAUDITED) 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

(IN CANADIAN DOLLARS) 

 CANOPY GROWTH CORPORATION 

TABLE OF CONTENTS 
  

					
	
Condensed interim consolidated statements of financial position
	  	 	1	 
		
	 Condensed interim consolidated statements of operations
	  	 	2	 
		
	 Condensed interim consolidated statements of comprehensive income and loss
	  	 	3	 
		
	 Condensed interim consolidated statements of changes in shareholders’
equity
	  	 	4-5	 
		
	 Condensed interim consolidated statements of cash flows
	  	 	6	 
		
	 Notes to the consolidated financial statements
	  	 	7-42	 

 CANOPY GROWTH CORPORATION 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 

UNAUDITED 
  

											
	 	  	 	  	December 31,	 	 	March 31,	 
	 (Expressed in CDN $000’s)
	  	 Notes
	  	2018	 	 	2018	 
	 Assets
	  		  				 			
	 Current assets
	  		  				 			
	 Cash and cash equivalents
	  	23	  	$	4,115,870	 	 	$	322,560	 
	 Marketable securities
	  	5	  	 	799,418	 	 	 	—  	 
	 Amounts receivable
	  	6	  	 	95,476	 	 	 	21,425	 
	 Biological assets
	  	7	  	 	31,013	 	 	 	16,348	 
	 Inventory
	  	8	  	 	184,961	 	 	 	101,607	 
	 Prepaid expenses and other assets
	  	9(a)	  	 	50,439	 	 	 	19,837	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	5,277,177	 	 	 	481,777	 
	 Property, plant and equipment
	  	10	  	 	960,158	 	 	 	303,682	 
	 Other long-term assets
	  	9(b)	  	 	32,919	 	 	 	8,340	 
	 Investments in associates and joint ventures
	  	15	  	 	103,773	 	 	 	63,106	 
	 Other financial assets
	  	16	  	 	281,928	 	 	 	163,463	 
	 Intangible assets
	  	12	  	 	168,536	 	 	 	101,526	 
	 Goodwill
	  	12	  	 	1,815,624	 	 	 	314,923	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	$	8,640,115	 	 	$	1,436,817	 
		  		  	  
	  
	 	 	  
	  
	 
	 Liabilities
	  		  				 			
	 Current liabilities
	  		  				 			
	 Accounts payable and accrued liabilities
	  	17	  	$	215,612	 	 	$	89,571	 
	 Deferred revenue
	  		  	 	263	 	 	 	900	 
	 Current portion of long-term debt
	  	18(a)	  	 	18,447	 	 	 	1,557	 
	 Other current liabilities
	  	18(b)	  	 	61,357	 	 	 	—  	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	295,679	 	 	 	92,028	 
	 Long-term debt
	  	18(a)	  	 	773,049	 	 	 	6,865	 
	 Deferred tax liability
	  		  	 	25,703	 	 	 	33,536	 
	 Other long-term liabilities
	  	18(b)	  	 	122,006	 	 	 	61,150	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	1,216,437	 	 	 	193,579	 
		  		  	  
	  
	 	 	  
	  
	 
	 Commitments and contingencies
	  	22	  				 			
				
	 Shareholders’ equity
	  		  				 			
	 Share capital
	  	19	  	 	5,947,715	 	 	 	1,076,838	 
	 Other reserves
	  	19	  	 	1,645,441	 	 	 	127,418	 
	 Accumulated other comprehensive income
	  		  	 	76,584	 	 	 	46,166	 
	 Deficit
	  		  	 	(441,480	) 	 	 	(91,649	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Equity attributable to Canopy Growth Corporation
	  		  	 	7,228,260	 	 	 	1,158,773	 
		  		  	  
	  
	 	 	  
	  
	 
	 Non-controlling interests
	  	14	  	 	195,418	 	 	 	84,465	 
		  		  	  
	  
	 	 	  
	  
	 
	 Total equity
	  		  	 	7,423,678	 	 	 	1,243,238	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	$	8,640,115	 	 	$	1,436,817	 
		  		  	  
	  
	 	 	  
	  
	 

  
 Page 1 

 CANOPY GROWTH CORPORATION 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 
 FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 
 UNAUDITED 
  

																					
	 	  	 	 	  	Three months ended	 	 	Nine months ended	 
	 	  	 	 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31	 
	
(Expressed in CDN $000’s except share amounts)
	  	Notes	 	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 	  	 	 	  	 	 	 	(As Restated -	 	 	 	 	 	(As Restated -	 
	 	  	 	 	  	 	 	 	see note 3)	 	 	 	 	 	see note 3)	 
	 Revenue
	  	 	3(b),4	 	  	$	97,703	 	 	$	21,700	 	 	$	146,946	 	 	$	55,142	 
	 Excise taxes
	  				  	 	14,655	 	 	 	—  	 	 	 	14,655	 	 	 	—  	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net revenue
	  				  	 	83,048	 	 	 	21,700	 	 	 	132,291	 	 	 	55,142	 
						
	 Inventory production costs expensed to cost of sales
	  				  	 	64,758	 	 	 	9,811	 	 	 	96,349	 	 	 	25,073	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross margin before the undernoted
	  				  	 	18,290	 	 	 	11,889	 	 	 	35,942	 	 	 	30,069	 
						
	 Fair value changes in biological assets included in inventory sold and other charges
	  	 	8	 	  	 	28,105	 	 	 	24,204	 	 	 	105,989	 	 	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	7	 	  	 	(22,267	) 	 	 	(28,845	) 	 	 	(90,500	) 	 	 	(79,221	) 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Gross margin
	  				  	 	12,452	 	 	 	16,530	 	 	 	20,453	 	 	 	61,454	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Sales and marketing
	  				  	 	44,895	 	 	 	9,409	 	 	 	101,208	 	 	 	23,452	 
	 Research and development
	  				  	 	5,264	 	 	 	287	 	 	 	7,964	 	 	 	914	 
	 General and administration
	  				  	 	46,088	 	 	 	11,050	 	 	 	102,777	 	 	 	26,936	 
	 Acquisition-related costs
	  				  	 	4,520	 	 	 	790	 	 	 	9,606	 	 	 	2,491	 
	 Share-based compensation expense
	  	 	19(b)	 	  	 	40,062	 	 	 	8,965	 	 	 	108,159	 	 	 	17,708	 
	 Share-based compensation expense related to acquisition milestones
	  	 	19(c)	 	  	 	23,849	 	 	 	8,914	 	 	 	81,674	 	 	 	11,228	 
	 Depreciation and amortization
	  				  	 	5,015	 	 	 	3,147	 	 	 	11,640	 	 	 	9,974	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Operating expenses
	  				  	 	169,693	 	 	 	42,562	 	 	 	423,028	 	 	 	92,703	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Loss from operations
	  				  	 	(157,241	) 	 	 	(26,032	) 	 	 	(402,575	) 	 	 	(31,249	) 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Share of loss on equity investments
	  	 	15	 	  	 	(2,089	) 	 	 	—  	 	 	 	(9,021	) 	 	 	(170	) 
	 Other income
	  	 	20	 	  	 	235,231	 	 	 	44,641	 	 	 	63,466	 	 	 	41,281	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Other income
	  				  	 	233,142	 	 	 	44,641	 	 	 	54,445	 	 	 	41,111	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Income (loss) before income taxes
	  				  	 	75,901	 	 	 	18,609	 	 	 	(348,130	) 	 	 	9,862	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  				  	 	(1,041	) 	 	 	(7,595	) 	 	 	1,398	 	 	 	(9,635	) 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net income (loss)
	  				  	$	74,860	 	 	$	11,014	 	 	$	(346,732	) 	 	$	227	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net income (loss) attributable to:
	  				  				 				 				 			
	 Canopy Growth Corporation
	  				  	$	67,582	 	 	$	1,583	 	 	$	(349,831	) 	 	$	(8,809	) 
	 Non-controlling interests
	  				  	 	7,278	 	 	 	9,431	 	 	 	3,099	 	 	 	9,036	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  				  	$	74,860	 	 	$	11,014	 	 	$	(346,732	) 	 	$	227	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Earnings (loss) per share, basic
	  				  				 				 				 			
	 Net income (loss) per share, basic:
	  	 	21	 	  	$	0.22	 	 	$	0.01	 	 	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average number of outstanding common shares, basic:
	  				  	 	303,281,549	 	 	 	182,029,481	 	 	 	241,806,351	 	 	 	171,075,324	 
	 Earnings (loss) per share, diluted
	  				  				 				 				 			
	 Net income (loss) per share, diluted:
	  	 	21	 	  	$	(0.38	) 	 	$	0.01	 	 	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average number of outstanding common shares, diluted:
	  				  	 	315,974,639	 	 	 	194,739,044	 	 	 	242,044,821	 	 	 	171,075,324	 

  
 Page 2 

 CANOPY GROWTH CORPORATION 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

UNAUDITED 
  

																					
	 	  	 	 	 	Three months ended	 	 	Nine months ended	 
	 	  	 	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 
	 (Expressed in CDN $000’s)
	  	Notes	 	 	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Net income (loss)
	  				 	$	74,860	 	 	$	11,014	 	 	$	(346,732	) 	 	$	227	 
		  				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Fair value changes on equity instruments at FVOCI
	  	 	16	 	 	 	(38,473	) 	 	 	9,130	 	 	 	(30,743	) 	 	 	651	 
	 Fair value changes of own credit risk of financial liabilities designated at FVTPL
	  	 	18(a	) 	 	 	12,510	 	 	 	—  	 	 	 	(62,520	) 	 	 	—  	 
	 Exchange differences on translating foreign operations
	  				 	 	114,153	 	 	 	168	 	 	 	109,447	 	 	 	533	 
	 Income tax recovery (expense)
	  				 	 	4,316	 	 	 	(1,210	) 	 	 	3,367	 	 	 	(86	) 
		  				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  				 	 	92,506	 	 	 	8,088	 	 	 	19,551	 	 	 	1,098	 
	 Comprehensive income (loss)
	  				 	$	167,366	 	 	$	19,102	 	 	$	(327,181	) 	 	$	1,325	 
		  				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Comprehensive income (loss) attributable to:
	  				 				 				 				 			
	 Canopy Growth Corporation
	  				 	$	178,908	 	 	$	9,671	 	 	$	(319,413	) 	 	$	(7,711	) 
	 Non-controlling interests
	  				 	 	(11,542	) 	 	 	9,431	 	 	 	(7,768	) 	 	 	9,036	 
		  				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  				 	$	167,366	 	 	$	19,102	 	 	$	(327,181	) 	 	$	1,325	 
		  				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  
 Page 3 

 CANOPY GROWTH CORPORATION 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 

FOR THE NINE MONTHS ENDED DECEMBER 31 2017     

UNAUDITED 
  

																																									
	 	 	 	 	 	 	 	 	Other reserves	 	 	Accumulated other
comprehensive income	 	 	 	 	 	 	 	 	 	 
	 (Expressed in CDN $000’s except
share
amounts)
	 	Number
of shares	 	 	Share
capital	 	 	Share-
based
reserve	 	 	Warrants	 	 	Ownership
changes	 	 	Exchange
differences	 	 	Fair value
changes,
net of tax	 	 	Deficit	 	 	Non-
controlling
interests	 	 	Shareholders’
equity	 
	 Balance at March 31, 2017
	 	 	162,187,262	 	 	$	621,541	 	 	$	23,415	 	 	$	—  	 	 	$	—  	 	 	$	198	 	 	$	15,900	 	 	$	(21,296	) 	 	$	(32	) 	 	$	639,726	 
	 Equity financings and private placements
	 	 	21,982,491	 	 	 	198,667	 	 	 	—  	 	 	 	70,265	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	268,932	 
	 Issuance of shares from acquisitions
	 	 	3,548,408	 	 	 	29,413	 	 	 	689	 	 	 	1,303	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	31,405	 
	 Exercise of warrants
	 	 	183,816	 	 	 	681	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	681	 
	 Exercise of ESOP stock options
	 	 	2,879,160	 	 	 	12,801	 	 	 	(5,191	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	7,610	 
	 Other share issuances
	 	 	177,243	 	 	 	1,647	 	 	 	(644	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,003	 
	 Other share issue costs
	 	 	—  	 	 	 	(197	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(197	) 
	 Tax benefit associated with share issue costs
	 	 	—  	 	 	 	1,997	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,997	 
	 Share-based compensation
	 	 	—  	 	 	 	—  	 	 	 	27,876	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	27,876	 
	 NCI arising from Canopy Rivers financing - net of share issue costs of $1,425
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	120	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	35,135	 	 	 	35,255	 
	 NCI arising from Canopy Rivers
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(143	) 	 	 	(143	) 
	 Additional non-controlling interest relating to
share-based payment
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,374	 	 	 	2,374	 
	 NCI arising from acquisitions and ownership changes
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,014	 	 	 	2,014	 
	 Net income
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(8,809	) 	 	 	9,036	 	 	 	227	 
	 Other comprehensive income
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	533	 	 	 	565	 	 	 	—  	 	 	 	—  	 	 	 	1,098	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance at December 31, 2017
	 	 	190,958,380	 	 	$	866,550	 	 	$	46,145	 	 	$	71,568	 	 	$	120	 	 	$	731	 	 	$	16,465	 	 	$	(30,105	) 	 	$	48,384	 	 	$	1,019,858	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  
 Page 4 

 CANOPY GROWTH CORPORATION     

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY     

FOR THE NINE MONTHS ENDED DECEMBER 31, 2018     

UNAUDITED 
  

																																													
	 	 	 	 	 	 	 	 	 	 	 	Other reserves	 	 	Accumulated other
comprehensive income	 	 	 	 	 	 	 	 	 	 
	
(Expressed in CDN $000’s except share
amounts)
	 	Note	 	 	Number
of shares	 	 	Share
capital	 	 	Share-
based
reserve	 	 	Warrants	 	 	Ownership
changes	 	 	Exchange
differences	 	 	Fair
value
changes,
net of tax	 	 	Deficit	 	 	Non-
controlling
interests	 	 	Shareholders’
equity	 
	 Balance at March 31, 2018
	 				 	 	199,320,981	 	 	$	1,076,838	 	 	$	57,982	 	 	$	70,455	 	 	$	(1,019	) 	 	$	608	 	 	$	45,558	 	 	$	(91,649	) 	 	$	84,465	 	 	$	1,243,238	 
	 Constellation investment - net of share issue costs $12,100
	 	 	19(a)(i)	 	 	 	104,500,000	 	 	 	3,558,640	 	 	 	—  	 	 	 	1,501,760	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	5,060,400	 
	 Issuance of shares from acquisitions
	 	 	19(a)(ii)	 	 	 	18,293,872	 	 	 	947,470	 	 	 	30,574	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	978,044	 
	 Exercise of warrants
	 	 	19(a)(iv)	 	 	 	454,378	 	 	 	31,493	 	 	 	—  	 	 	 	(12,809	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	18,684	 
	 Exercise of ESOP stock options
	 	 	19(b)	 	 	 	4,278,671	 	 	 	63,012	 	 	 	(34,282	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	28,730	 
	 Issuance of shares on vesting of restricted share units
	 	 	19(b)	 	 	 	52,871	 	 	 	2,191	 	 	 	(2,191	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Acquisition of BC Tweed NCI - net of share issue costs $250
	 	 	11(b)	 	 	 	5,091,523	 	 	 	201,883	 	 	 	265,253	 	 	 	—  	 	 	 	(422,786	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	44,350	 
	 Acquisition of other NCI
	 				 	 	60,844	 	 	 	3,730	 	 	 	—  	 	 	 	—  	 	 	 	(3,730	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Other share issuances
	 	 	19(a)(iii)	 	 	 	2,599,288	 	 	 	63,422	 	 	 	(45,555	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	17,867	 
	 Other share issue costs
	 				 	 	—  	 	 	 	(964	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(964	) 
	 Share-based compensation
	 	 	19(b)	 	 	 	—  	 	 	 	—  	 	 	 	178,941	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	178,941	 
	 Issuance of restricted share units
	 				 	 	—  	 	 	 	—  	 	 	 	2,247	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,247	 
	 Replacement options for Hiku and CHI
	 				 	 	—  	 	 	 	—  	 	 	 	21,737	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	21,737	 
	 Replacement warrants for Hiku
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	30,611	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	30,611	 
	 Equity component of Hiku convertible debt
	 				 	 	—  	 	 	 	—  	 	 	 	949	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	949	 
	 Ownership change arising from Spectrum Cannabis Chile purchase of NCI
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(1,327	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	331	 	 	 	(996	) 
	 NCI arising from Canopy Rivers financing - net of share issue costs $3,371
	 	 	13, 14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	9,138	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	77,916	 	 	 	87,054	 
	 Rivers warrants reclassed from Liability to Equity
	 	 	15(i)	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	28,512	 	 	 	28,512	 
	 Additional non-controlling interest related to share based
payments
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(5	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	10,934	 	 	 	10,929	 
	 Ownership change arising from changes in non-controlling
interest
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(502	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,028	 	 	 	526	 
	 Net income (loss)
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(349,831	) 	 	 	3,099	 	 	 	(346,732	) 
	 Other comprehensive income (loss)
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	109,447	 	 	 	(79,029	) 	 	 	—  	 	 	 	(10,867	) 	 	 	19,551	 
		 				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance at December 31, 2018
	 				 	 	334,652,428	 	 	$	5,947,715	 	 	$	475,655	 	 	$	1,590,017	 	 	$	(420,231	) 	 	$	110,055	 	 	$	(33,471	) 	 	$	(441,480	) 	 	$	195,418	 	 	$	7,423,678	 
		 				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  
 Page 5 

 CANOPY GROWTH CORPORATION 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 
 FOR
THE NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 
 UNAUDITED 
  

													
	 	  	 	 	  	December 31,	 	 	December 31	 
	 (Expressed in CDN $000’s)
	  	Notes	 	  	2018	 	 	2017	 
	 	  	 	 	  	 	 	 	 (Restated -

see note 3)
	 
	 Net inflow (outflow) of cash related to the following activities:
	  				  				 			
				
	 Operating
	  				  				 			
	 Net income (loss)
	  				  	$	(346,732	) 	 	$	227	 
	 Adjustments for:
	  				  				 			
	 Depreciation of property, plant and equipment
	  				  	 	15,703	 	 	 	6,360	 
	 Amortization of intangible assets
	  				  	 	7,869	 	 	 	9,175	 
	 Share of loss on equity investments
	  				  	 	9,021	 	 	 	170	 
	 Fair value changes in biological assets included in inventory sold and other charges
	  				  	 	105,989	 	 	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  				  	 	(90,500	) 	 	 	(79,221	) 
	 Share-based compensation
	  	 	19	 	  	 	194,686	 	 	 	30,249	 
	 Loss on disposal of property, plant and equipment and intangible assets
	  				  	 	1,443	 	 	 	553	 
	 Other assets
	  	 	9	 	  	 	(16,908	) 	 	 	(1,932	) 
	 Other income and expense
	  	 	20	 	  	 	(45,919	) 	 	 	(40,972	) 
	 Income tax (recovery) expense
	  				  	 	(1,398	) 	 	 	9,635	 
	 Non-cash interest and FX impact on assets
	  				  	 	1,394	 	 	 	—  	 
	 Changes in non-cash operating working capital
items
	  	 	23	 	  	 	(129,547	) 	 	 	(26,675	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in operating activities
	  				  	 	(294,899	) 	 	 	(44,595	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Investing
	  				  				 			
	 Purchases and deposits of property, plant and equipment and assets in process
	  				  	 	(495,236	) 	 	 	(86,107	) 
	 Purchases of intangible assets and intangibles in process
	  				  	 	(40,140	) 	 	 	(1,033	) 
	 Proceeds on disposals of property and equipment
	  				  	 	—  	 	 	 	75	 
	 Purchases of marketable securities
	  				  	 	(802,247	) 	 	 	(118	) 
	 Proceeds on assets classified as held for sale
	  				  	 	—  	 	 	 	7,000	 
	 Investments in associates
	  				  	 	(27,201	) 	 	 	(18,824	) 
	 Investments in other financial assets
	  				  	 	(74,071	) 	 	 	(27,732	) 
	 Net cash outflow on acquisition of BC Tweed NCI
	  	 	11(b)	 	  	 	(1,000	) 	 	 	—  	 
	 Net cash outflow on acquisition of Spectrum Chile NCI
	  				  	 	(996	) 	 	 	—  	 
	 Net cash inflow (outflow) on acquisition of subsidiaries
	  	 	11(a)	 	  	 	(344,472	) 	 	 	(3,600	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in investing activities
	  				  	 	(1,785,363	) 	 	 	(130,339	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Financing
	  				  				 			
	 Payment of share issue costs
	  				  	 	(18,617	) 	 	 	(1,345	) 
	 Proceeds from issuance of common shares and warrants
	  				  	 	5,072,500	 	 	 	269,990	 
	 Proceeds from issuance of shares by Canopy Rivers
	  				  	 	91,218	 	 	 	35,113	 
	 Proceeds from exercise of stock options
	  				  	 	28,730	 	 	 	7,544	 
	 Proceeds from exercise of warrants
	  				  	 	18,684	 	 	 	681	 
	 Issuance of long-term debt
	  	 	18(a)	 	  	 	600,000	 	 	 	—  	 
	 Payment of long-term debt issue costs
	  				  	 	(16,380	) 	 	 	—  	 
	 Repayment of finance lease obligations
	  				  	 	(2,728	) 	 	 	—  	 
	 Repayment of long-term debt
	  				  	 	(3,499	) 	 	 	(1,141	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash provided by financing activities
	  				  	 	5,769,908	 	 	 	310,842	 
		  				  	  
	  
	 	 	  
	  
	 
	 Effect of exchange rate changes on cash and cash equivalents
	  				  	 	103,664	 	 	 	—  	 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash inflow
	  				  	 	3,793,310	 	 	 	135,908	 
	 Cash and cash equivalents, beginning of period
	  				  	 	322,560	 	 	 	101,800	 
		  				  	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents, end of period
	  				  	$	4,115,870	 	 	$	237,708	 
		  				  	  
	  
	 	 	  
	  
	 
				
	 Refer to Note 23 for supplementary cash flow information
	  				  				 			

  
 Page 6 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	1.	 DESCRIPTION OF BUSINESS 

Canopy Growth Corporation (“Canopy Growth”) is a publicly traded corporation, incorporated in Canada, with its head office located at
1 Hershey Drive, Smiths Falls, Ontario with its common shares listed on the TSX, under the trading symbol “WEED” and as of May 24, 2018 on the NYSE, under the trading symbol “CGC”. 

The condensed interim consolidated financial statements (“interim financial statements”) as at and for the three and nine months
ended December 31, 2018, and 2017, include Canopy Growth and its subsidiaries (together referred to as “the Company”) and the Company’s interest in other entities. 

The principal activities of the Company are the production, distribution and sale of cannabis as regulated by the Access to Cannabis for
Medical Purposes Regulations (“ACMPR”) in Canada, up to and including October 16, 2018. On October 17, 2018, the ACMPR was superseded by The Cannabis Act which regulates the production, distribution, and possession of
cannabis for both medical and adult recreational access in Canada. The Company is also expanding to jurisdictions outside of Canada where federally lawful and regulated including subsidiaries which operate in Europe, Latin America and the Caribbean.
Through its partially owned subsidiary Canopy Rivers Corporation (“Canopy Rivers”), the Company also provides growth capital and a strategic support platform that pursues investment opportunities in the global cannabis sector, where
federally lawful. 
  

	2.	 BASIS OF PRESENTATION 

Statement of compliance 

The interim financial statements have been prepared in compliance with International Accounting Standard 34 - Interim Financial Reporting,
except as described in Note 3 to the interim financial statements, the Company followed the same accounting policies and methods of application as those disclosed in the annual audited consolidated financial statements for the year ended
March 31, 2018. The interim financial statements should be read in conjunction with the annual financial statements of the Company for the year ended March 31, 2018, which have been prepared in accordance with International Financial
Reporting Standards (“IFRS”). 
 These interim financial statements were approved by the Board of Directors and authorized for
issue by the Board of Directors on February 14, 2019. 
 Basis of measurement 

These interim financial statements have been prepared in Canadian dollars on a historical cost basis except for biological assets and certain
financial assets and liabilities which are measured at fair value. 
 Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether the price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or
a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. 

Fair value measurements are classified using a fair value hierarchy that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following levels: 
 Level 1 - valuation based on quoted prices (unadjusted) in active markets
for identical assets or liabilities; 
 Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and 
 Level 3 -
valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). 
 The fair
value hierarchy requires the use of observable market inputs whenever such inputs exist. 
 Further information on fair value measurements is
available in Notes 7 and 24. 
 Classification of expenses 

The expenses within the condensed interim consolidated statements of operations (“statements of operations”) and comprehensive loss
(“statements of comprehensive loss”) are presented by function. 

  
 Page 7 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	3.	 CHANGES IN ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS AND INTERPRETATIONS 

(a) Change in accounting policies 

Effective April 1, 2018, the Company has changed its accounting policy with respect to production and fulfillment related depreciation.
Prior to this change the Company expensed all depreciation and amortization costs as operating expenses. The Company now capitalizes production related depreciation and amortization to biological assets and inventory and expenses this depreciation
to costs of goods sold as inventory is sold. In addition, depreciation and amortization associated with shipping and fulfillment will be recorded to cost of goods sold as incurred. Previously this depreciation and amortization was grouped with other
depreciation and amortization on the statements of operations. The Company believes that the revised policy and presentation provides more relevant financial information to users of the financial statements. 

The Company’s amended policy is as follows: 

Biological assets 
 The
Company’s biological assets consist of cannabis plants. The Company capitalizes all the direct and indirect costs as incurred related to the biological transformation of the biological assets between the point of initial recognition and the
point of harvest including labour related costs, grow consumables, materials, utilities, facilities costs, quality and testing costs, and production related depreciation. The Company then measures the biological assets 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. Cost to sell includes post-harvest production, shipping and fulfillment costs. The net unrealized gains or losses arising from changes
in fair value less cost to sell during the period are included in the results of operations of the related period. Seeds are measured at fair value. 

Inventories 
 Inventories
of harvested work-in-process and finished goods are valued at the lower of cost and net realizable value. Inventories of harvested cannabis are transferred from
biological assets at their fair value less cost to sell up to the point of harvest, which becomes the initial deemed cost. All subsequent direct and indirect post-harvest costs are capitalized to inventory as incurred, including labour related
costs, consumables, materials, packaging supplies, utilities, facilities costs, quality and testing costs, and production related depreciation. 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. Inventories for resale and supplies and consumables are valued at the lower of costs and net realizable value, with cost determined using the weighted average cost
basis. 
 The line item “Inventory production costs expensed to cost of sales” in the statements of operations is comprised of the
cost of inventories expensed in the period and the direct and indirect costs of shipping and fulfillment including labour related costs, materials, shipping costs, customs and duties, royalties, utilities, facilities costs, and shipping and
fulfillment related depreciation. 
 The change in accounting policy has been applied retrospectively. The Company has restated the
comparative figures in the statements of operations and the condensed interim consolidated statements of cash flows (“statements of cash flows”). The following tables summarize the effects of the change described above. 

  
 Page 8 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 Line item on the statements of operations: 

 

													
	
For the three months ended December 31, 2017
	  	As previously
reported	 	  	Adjustment	 	  	As
restated	 
	 Revenue
	  	 	21,700	 	  	 	—  	 	  	 	21,700	 
	 Inventory production costs expensed to cost of sales
	  	 	9,166	 	  	 	645	 	  	 	9,811	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross margin before the undernoted
	  	 	12,534	 	  	 	(645	) 	  	 	11,889	 
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	23,692	 	  	 	512	 	  	 	24,204	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(29,728	) 	  	 	883	 	  	 	(28,845	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross margin
	  	 	18,570	 	  	 	(2,040	) 	  	 	16,530	 
	 Depreciation and Amortization
	  	 	5,187	 	  	 	(2,040	) 	  	 	3,147	 
				
	
For the nine months ended December 31, 2017
	  	As previously
reported	 	  	Adjustment	 	  	As
restated	 
	 Revenue
	  	 	55,142	 	  	 	—  	 	  	 	55,142	 
	 Inventory production costs expensed to cost of sales
	  	 	23,501	 	  	 	1,572	 	  	 	25,073	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross margin before the undernoted
	  	 	31,641	 	  	 	(1,572	) 	  	 	30,069	 
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	46,339	 	  	 	1,497	 	  	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(81,713	) 	  	 	2,492	 	  	 	(79,221	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross margin
	  	 	67,015	 	  	 	(5,561	) 	  	 	61,454	 
	 Depreciation and Amortization
	  	 	15,535	 	  	 	(5,561	) 	  	 	9,974	 

 Line item on statements of cash flows: 

 

													
	
For the nine months ended December 31, 2017
	  	As previously
reported	 	  	Adjustment	 	  	As
restated	 
	 Operating
	  				  				  			
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	46,339	 	  	 	1,497	 	  	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(81,713	) 	  	 	2,492	 	  	 	(79,221	) 
	 Changes in non-cash operating working capital
items
	  	 	(22,686	) 	  	 	(3,989	) 	  	 	(26,675	) 

 (b) New or amended standards effective April 1, 2018 

The Company has adopted the following new or amended IFRS standards for the interim and annual period beginning on April 1, 2018. 

IFRS 15 Revenue from Contracts with Customers 

IFRS 15 was issued by the IASB in May 2014 and specifies how and when revenue should be recognized based on a five-step model, which is applied
to all contracts with customers. On April 12, 2016, the IASB published final clarifications to IFRS 15 with respect to identifying performance obligations, principal versus agent considerations, and licensing. 

  
 Page 9 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The Company has applied IFRS 15 retrospectively and determined that there is no change to the
comparative periods or transitional adjustments required as a result of the adoption of this standard. The Company’s accounting policy for revenue recognition under IFRS 15 is as follows: 

To determine the amount and timing of revenue to be recognized, the Company follows a 5-step process:

  

	 	1.	 Identifying the contract with a customer 

 

	 	2.	 Identifying the performance obligations 

 

	 	3.	 Determining the transaction price 

 

	 	4.	 Allocating the transaction price to the performance obligations 

 

	 	5.	 Recognizing revenue when/as performance obligation(s) are satisfied. 

Revenue from the sale of cannabis to medical and recreational customers is recognized when the Company transfers control of the good to the
customer. In some cases, judgement is required in determining whether the customer is a business or the end consumer. This evaluation was made on the basis of whether the business obtains control of the product before transferring to the end
consumer. Control of the product transfers at a point in time either upon shipment to or receipt by the customer, depending on the contractual terms. 

The Company recognizes revenue in an amount that reflects the consideration that the Company expects to receive taking into account any
variation that may result from rights of return. 
 IFRS 9 Financial Instruments (“IFRS 9”) 

IFRS 9 was issued by the IASB on July 24, 2014 and replaced IAS 39. IFRS 9 uses a single approach to determine whether a financial asset
is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow
characteristics of the financial assets. Financial liabilities are classified in a similar manner as under IAS 39. 
 Under IFRS 9,
financial assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit and loss [“FVTPL”], transaction costs. Financial assets are subsequently measured at: 

 

	 	i)	 FVTPL; 

  

	 	ii)	 amortized cost; 

  

	 	iii)	 debt measured at fair value through other comprehensive income [“FVOCI”]; 

 

	 	iv)	 equity investments designated at FVOCI; or 

 

	 	v)	 financial instruments designated at FVTPL. 

The classification is based on whether the contractual cash flow characteristics represent “solely payment of principal and
interest” [the “SPPI test”] as well as the business model under which the financial assets are managed. Financial assets are required to be reclassified only when the business model under which they are managed has changed. All
reclassifications are to be applied prospectively from the reclassification date. 
 The Company has elected to measure investments in
equity instruments of AusCann, JWC, HydRx, Good Leaf, Solo Growth, LiveWell and Headset which are included in Other financial assets on the Condensed Interim Consolidated Statements of Financial Position (“statements of financial
position”), at FVOCI on transition or initial recognition as these investments are long-term and strategic in nature, and net changes in fair value are more suited to be presented in other comprehensive income. 

Debt investments are recorded at amortized cost for financial assets that are held within a business model with the objective to hold the
financial assets in order to collect contractual cash flows that meet the SPPI test. 
 The assessment of the Company’s business models
for managing the financial assets was made as of the date of initial application of April 1, 2018 or on initial recognition. The assessment of whether contractual cash flows on debt instruments meet the SPPI test was made based on the facts and
circumstances as at the initial recognition of the financial assets. 
 Consistent with IAS 39, all financial liabilities held by the
Company under IFRS 9, other than convertible debentures, are initially measured at fair value and subsequently measured at amortized cost. The convertible debenture issued by the Company in June 2018 has been designated at FVTPL upon initial
recognition as permitted by IFRS 9 as the debenture contains multiple embedded derivatives. 

  
 Page 10 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The following table summarizes the original measurement categories under IAS 39 and the new
measurement categories under IFRS 9 for each class of the Company’s financial assets and financial liabilities: 
  

					
	 	 	 IAS 39

Classification
	 	 IFRS 9

Classification

	 Cash and cash equivalents
	 	Loans and receivables	 	Amortized cost
	 Marketable securities
	 	Not applicable	 	FVTPL
	 Accounts receivables
	 	Loans and receivables	 	Amortized cost
	 Interest receivable
	 	Loans and receivables	 	Amortized cost
	 Restricted investments
	 	Loans and receivables	 	Amortized cost
	 Other financial assets
	 	Available for sale, loans and receivables and FVTPL	 	FVOCI and FVTPL
	 Accounts payable and accrued liabilities
	 	Other liabilities	 	Other liabilities
	 Long-term debt
	 	Other liabilities	 	Other liabilities
	 Convertible debentures
	 	Not applicable	 	FVTPL
	 Vert Mirabel put liability
	 	FVTPL	 	FVTPL
	 Acquisition consideration related liabilities
	 	FVTPL	 	FVTPL

 The Company’s investments in James E. Wagner Cultivation Ltd (“JWC”) royalty interest,
Agripharm Corporation (“Agripharm”) royalty interest and Radicle Medical Marijuana Inc. (“Radicle”) repayable debenture (Note 16) were classified as loans and receivables and measured at amortized cost under IAS 39. Under IFRS 9,
these investments are classified and measured at FVTPL as these investments fail the SPPI test. The change in classification of these investments did not impact the carrying amounts of these investments on the transition date. 

Impairment 
 Under IFRS 9,
the Company is required to apply an expected credit loss [“ECL”] model to all debt financial assets not held at FVTPL, where credit losses that are expected to transpire in futures years are provided for, irrespective of whether a loss
event has occurred or not as at the balance sheet date. For trade receivables, the Company has applied the simplified approach under IFRS 9 and has calculated ECLs based on lifetime expected credit losses taking into considerations historical credit
loss experience and financial factors specific to the debtors and general economic conditions. The Company has assessed the impairment of its amounts receivable using the expected credit loss model, and no difference was noted. As a result, no
incremental impairment loss has been recognized upon transition and at April 1, 2018. 
 (c) New and revised IFRS in issue but not
yet effective 
 IFRS 16 Leases (“IFRS 16”) 

IFRS 16 was issued by the IASB in January 2016 and specifies the requirements to recognize, measure, present and disclose leases. IFRS 16 is
effective for the Company for its annual period ending March 31, 2020 with early adoption permitted. The Company is continuing to assess the impact of this new standard on its financial position and financial performance. 

  
 Page 11 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	4.	 REVENUE 

Revenues are disaggregated as follows: 
  

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	December 31,	 	  	December 31,	 	  	December 31,	 	  	December 31,	 
	 	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Recreational revenue
	  				  				  				  			
	 Business to business
	  	$	60,141	 	  	$	—  	 	  	$	60,141	 	  	$	—  	 
	 Business to consumer
	  	 	11,477	 	  	 	—  	 	  	 	11,477	 	  	 	—  	 
	 Medical revenue
	  				  				  				  			
	 Canadian
	  	 	15,931	 	  	 	19,331	 	  	 	57,198	 	  	 	51,079	 
	 International
	  	 	2,702	 	  	 	988	 	  	 	8,294	 	  	 	1,392	 
	 Other revenue
	  	 	7,452	 	  	 	1,381	 	  	 	9,836	 	  	 	2,671	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross revenue
	  	 	97,703	 	  	 	21,700	 	  	 	146,946	 	  	 	55,142	 
	 Excise taxes
	  	 	14,655	 	  	 	—  	 	  	 	14,655	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net revenue
	  	$	83,048	 	  	$	21,700	 	  	$	132,291	 	  	$	55,142	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	5.	 MARKETABLE SECURITIES 

Marketable securities represent short-term investments not qualifying as cash equivalents but having maturity dates of less than 1 year that
are readily convertible to cash. 
  

									
	 	  	December 31,
2018	 	  	March 31,
2018	 
	 U.S. agency bonds
	  	$	150,798	 	  	$	—  	 
	 U.S. agency discount notes
	  	 	141,504	 	  	 	—  	 
	 U.S. treasury bills
	  	 	124,533	 	  	 	—  	 
	 U.S. federal bonds
	  	 	202,816	 	  	 	—  	 
	 Canadian agency bonds
	  	 	75,050	 	  	 	—  	 
	 Canadian federal bonds
	  	 	104,717	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Total marketable securities
	  	$	799,418	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

 The Company has designated its marketable securities as fair value through profit or loss. Fair values have
been determined based on quoted market prices. Accrued interest of $990 is included in interest receivable. 
  

	6.	 AMOUNTS RECEIVABLE 

Amounts receivable was comprised of: 
  

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Accounts receivable
	  	$	65,732	 	  	$	5,863	 
	 Indirect tax receivable
	  	 	16,455	 	  	 	15,262	 
	 Interest receivable
	  	 	7,294	 	  	 	300	 
	 Other receivables
	  	 	5,995	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Total amounts receivable
	  	$	95,476	 	  	$	21,425	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 12 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	7.	 BIOLOGICAL ASSETS 

The Company’s biological assets consists of seeds and cannabis plants. The continuity of biological assets for the nine months ended
December 31, 2018 and the year ended March 31, 2018 was as follows: 
  

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Balance, beginning of period
	  	$	16,348	 	  	$	14,725	 
	 Purchases (use) of seeds
	  	 	(7	) 	  	 	271	 
	 Acquisition / (disposal) of biological assets due to acquisition / disposal of consolidated
entity
	  	 	184	 	  	 	(1,430	) 
	 Unrealized gain on changes in fair value of biological assets
	  	 	90,500	 	  	 	100,302	 
	 Increase in biological assets due to capitalized costs
	  	 	66,577	 	  	 	17,309	 
	 Net write-off of biological assets
	  	 	(20,272	) 	  	 	—  	 
	 Transferred to inventory upon harvest
	  	 	(122,317	) 	  	 	(114,829	) 
		  	  
	  
	 	  	  
	  
	 
	 Balance, end of period
	  	$	31,013	 	  	$	16,348	 
		  	  
	  
	 	  	  
	  
	 

 Biological assets are valued in accordance with IAS 41 and are presented at their fair values less costs to
sell up to the point of harvest. The Company’s biological assets are primarily cannabis plants, and because there is no actively traded commodity market for plants or dried product, the valuation of these biological assets is obtained using
valuation techniques where the inputs are based upon unobservable market data (Level 3). 
 The valuation of biological assets is based
on a market approach where fair value at the point of harvest is estimated based on future selling prices less the costs to sell at harvest. For in process biological assets, the fair value at point of harvest is adjusted based on the stage of
growth. Stage of growth is determined by reference to costs incurred to date as a percentage of total expected costs from inception to harvest. 

The significant unobservable inputs and their range of values are noted in the table below: 

 

					
	 Unobservable Inputs
	  	 Range
	  	 Sensitivity

	Estimated Yield per Plant – varies by strain and is obtained through historical growing results (trailing 6-months moving average) or grower estimate if historical results are not
available.	  	12 grams/plant to 386 grams/plant	  	A slight increase in the estimated yield per plant would result in a significant increase in fair value, and vice versa.
			
	Average Selling Price of Dry Cannabis – varies by strain and is obtained through average selling prices or estimated future selling prices if historical results are not available.	  	$5.26 to $9.15/gram	  	A slight increase in the estimated selling price per strain would result in a significant increase in fair value, and vice versa.

  

	8.	 INVENTORY 

Inventory was comprised of the following items: 
  

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Finished Goods
	  	$	22,245	 	  	$	26,506	 
	
Work-in-process
	  	 	120,912	 	  	 	71,883	 
	 Merchandise and devices
	  	 	9,105	 	  	 	571	 
	 Supplies and consumables
	  	 	32,699	 	  	 	2,647	 
		  	  
	  
	 	  	  
	  
	 
		  	$	184,961	 	  	$	101,607	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 13 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 Inventories expensed during the three and nine months ended December 31, 2018, was
$67,130 and $157,220 respectively (three and nine months ended December 31, 2017 - $20,694 and $53,935, respectively). Included in other charges is a net realizable value adjustment for anticipated price changes and a net write-off of biological assets. 
  

	9.	 PREPAID EXPENSES AND OTHER ASSETS AND OTHER LONG-TERM ASSETS 

(a) Prepaid expenses and other assets 

The Company’s prepaid expenses and other assets consists of the following: 

 

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Prepaid expenses
	  	$	23,542	 	  	$	7,358	 
	 Deposits
	  	 	18,210	 	  	 	842	 
	 Prepaid packaging and merchandise
	  	 	4,660	 	  	 	8,774	 
	 Restricted short-term investments
	  	 	3,493	 	  	 	664	 
	 Other
	  	 	534	 	  	 	2,199	 
		  	  
	  
	 	  	  
	  
	 
		  	$	50,439	 	  	$	19,837	 
		  	  
	  
	 	  	  
	  
	 

 (b) Other long-term assets 

The Company’s other long-term assets consists of the following: 
  

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Property, plant, and equipment deposits
	  	$	5,755	 	  	$	6,487	 
	 Purchase option and deposit on production facility
	  	 	18,739	 	  	 	—  	 
	 Prepaid royalty
	  	 	7,408	 	  	 	—  	 
	 Other
	  	 	1,017	 	  	 	1,853	 
		  	  
	  
	 	  	  
	  
	 
		  	$	32,919	 	  	$	8,340	 
		  	  
	  
	 	  	  
	  
	 

 On May 4, 2018, the Company entered into an agreement to lease a production facility in Newfoundland. The
facility is currently under construction and the annual lease payments of $4,988 plus operating costs will commence after the completion of the building which is expected to be in August 2019. The Company also acquired an option to purchase the
production facility from the lessor beginning five years after the commencement date of the lease. The Company paid $8,739 for this purchase option by way of the issuance of 332,009 shares on May 11, 2018. As part of the arrangement, the
Company also provided an interest free construction loan of $10,000 to the lessor which is to be repaid the earlier of the lessor obtaining construction financing, the lessor selling the property to a third party, and the Company’s purchase of
the production facility under the purchase option noted above. The Company expects that the loan will be outstanding until the Company exercises the purchase option and is in substance a further deposit on the purchase price. 

On September 4, 2018, the Company entered into an exclusive supply arrangement with Centric Health Corporation (“CHC”). Under
the arrangement, Canopy advanced $7,000 to CHC in exchange for reduced royalties and 850,000 warrants for common shares of CHC. The warrants have an exercise price of $0.25, vest on September 4, 2020 and expire on September 4, 2022.
Management has estimated the fair value of the warrants at inception to be $92 and the difference of $6,908 has been recorded as a prepaid royalty. 

  
 Page 14 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	10.	 PROPERTY, PLANT AND EQUIPMENT 

A continuity of property, plant and equipment for the nine months ended December 31, 2018 is as follows: 

COST 
  

																					
	 	  	Balance at	 	  	 	 	  	Additions	 	  	Transfers/	 	 	Balance at	 
	 	  	April 1,	 	  	 	 	  	from	 	  	disposals/	 	 	December 31,	 
	 	  	2018	 	  	Additions	 	  	acquisitions	 	  	exchange differences	 	 	2018	 
	 Computer equipment
	  	$	6,241	 	  	$	8,643	 	  	$	219	 	  	$	2,159	 	 	$	17,262	 
	 Office/lab equipment
	  	 	1,720	 	  	 	899	 	  	 	1,954	 	  	 	457	 	 	 	5,030	 
	 Furniture and fixtures
	  	 	1,381	 	  	 	5,544	 	  	 	114	 	  	 	293	 	 	 	7,332	 
	 Production equipment
	  	 	28,764	 	  	 	78,611	 	  	 	6,401	 	  	 	13,998	 	 	 	127,774	 
	 Leasehold improvements
	  	 	22,482	 	  	 	21,988	 	  	 	1,114	 	  	 	1,927	 	 	 	47,511	 
	 Building and improvements1
	  	 	67,513	 	  	 	135,654	 	  	 	23,956	 	  	 	35,751	 	 	 	262,874	 
	 Greenhouse and improvements
	  	 	4,095	 	  	 	6,837	 	  	 	—  	 	  	 	21,412	 	 	 	32,344	 
	 Land and improvements
	  	 	8,470	 	  	 	11,669	 	  	 	8,290	 	  	 	1,011	 	 	 	29,440	 
	 Warehouse equipment
	  	 	167	 	  	 	11,582	 	  	 	—  	 	  	 	121	 	 	 	11,870	 
	 Assets in process
	  	 	176,998	 	  	 	336,159	 	  	 	14,035	 	  	 	(78,572	) 	 	 	448,620	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Total
	  	$	317,831	 	  	$	617,586	 	  	$	56,083	 	  	$	(1,443	) 	 	$	990,057	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 

  

	1 	 Building and improvements includes $73M of assets under a finance lease, refer to note 18(a)

 ACCUMULATED DEPRECIATION 
  

																	
	 	  	 	 	  	 	 	  	 	 	 	 	 
	 	  	Balance at	 	  	 	 	  	Transfers/	 	 	Balance at	 
	 	  	April 1,	 	  	 	 	  	disposals/	 	 	December 31,	 
	 	  	2018	 	  	Depreciation	 	  	exchange differences	 	 	2018	 
	 Computer equipment
	  	$	1,900	 	  	$	2,036	 	  	$	(65	) 	 	$	3,871	 
	 Office/lab equipment
	  	 	479	 	  	 	493	 	  	 	31	 	 	 	1,003	 
	 Furniture and fixtures
	  	 	218	 	  	 	1,002	 	  	 	112	 	 	 	1,332	 
	 Production equipment
	  	 	2,730	 	  	 	4,566	 	  	 	(96	) 	 	 	7,200	 
	 Leasehold improvements
	  	 	3,452	 	  	 	2,102	 	  	 	65	 	 	 	5,619	 
	 Building and improvements
	  	 	4,821	 	  	 	4,567	 	  	 	—  	 	 	 	9,388	 
	 Greenhouse and improvements
	  	 	513	 	  	 	522	 	  	 	—  	 	 	 	1,035	 
	 Land and improvements
	  	 	30	 	  	 	39	 	  	 	—  	 	 	 	69	 
	 Warehouse equipment
	  	 	6	 	  	 	376	 	  	 	—  	 	 	 	382	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Total
	  	 	14,149	 	  	 	15,703	 	  	 	47	 	 	 	29,899	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Net book value
	  	$	303,682	 	  				  				 	$	960,158	 
		  	  
	  
	 	  				  				 	  
	  
	 

 During the nine months ended December 31, 2018, the assets in process additions were $336,159 of which
$153,416, $60,457, and $36,163 related to the expansion or growing operations at Smiths Falls Ontario, both BC locations, and Fredericton New Brunswick, respectively. The remaining $86,123 was for ongoing projects at the Company’s other
subsidiaries. 
 On November 16, 2018 the Company acquired two facilities that it had been leasing in Toronto and Edmonton from a
company controlled by a former director of Canopy Growth Corporation for $29,827 cash. 

  
 Page 15 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	11.	 ACQUISITIONS 

a) Acquisitions of Consolidated Entities 

The following table summarizes the balance sheet impact on the acquisition date of the Company’s business combinations that occurred in
the period ended December 31, 2018: 
  

																																	
	 	  	 	 	 	Spectrum	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	  	DCL	 	 	Colombia	 	 	CHI	 	 	Hiku	 	 	ebbu	 	 	POS	 	 	S&B	 	 	Other	 
	 	  	(i)	 	 	(ii)	 	 	(iii)	 	 	(iv)	 	 	(v)	 	 	(vi)	 	 	(vii)	 	 	(viii)	 
	 Cash and cash equivalents
	  	$	496	 	 	$	3	 	 	$	8,369	 	 	$	4,089	 	 	$	—  	 	 	$	2,908	 	 	 	998	 	 	$	(37	) 
	 Amounts receivable
	  	 	—  	 	 	 	—  	 	 	 	144	 	 	 	2,996	 	 	 	—  	 	 	 	10,512	 	 	 	3,714	 	 	 	—  	 
	 Subscription receivable
	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Inventory and Biological Assets
	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,772	 	 	 	138	 	 	 	1,662	 	 	 	754	 	 	 	—  	 
	 Prepaids and other assets
	  	 	—  	 	 	 	13	 	 	 	33	 	 	 	1,559	 	 	 	—  	 	 	 	818	 	 	 	180	 	 	 	83	 
	 Property, plant and equipment
	  	 	—  	 	 	 	5,145	 	 	 	121	 	 	 	15,846	 	 	 	1,821	 	 	 	9,541	 	 	 	23,609	 	 	 	—  	 
	 Investments
	  				 	 	—  	 	 	 	8,563	 	 	 	1,204	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Intangible assets
	  	 	—  	 	 	 	—  	 	 				 	 	974	 	 	 	1,556	 	 	 	328	 	 	 	276	 	 	 	—  	 
	 Goodwill
	  	 	25,973	 	 	 	46,269	 	 	 	152,639	 	 	 	578,162	 	 	 	363,326	 	 	 	108,138	 	 	 	217,574	 	 	 	1,538	 
	 Accounts payable and accrued liabilities
	  	 	(573	) 	 	 	(53	) 	 	 	(954	) 	 	 	(3,691	) 	 	 	—  	 	 	 	(1,804	) 	 	 	(4,500	) 	 	 	(16	) 
	 Debt and other liabilities
	  				 	 	(5,258	) 	 				 	 	(1,954	) 	 	 	(665	) 	 	 	(3,145	) 	 	 	(24,464	) 	 			
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net assets
	  	 	25,896	 	 	 	46,119	 	 	 	168,915	 	 	 	600,957	 	 	 	366,176	 	 	 	128,958	 	 	 	218,141	 	 	 	1,568	 
	 Non-controlling interests
	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net assets acquired
	  	$	25,896	 	 	$	46,119	 	 	$	168,915	 	 	$	600,957	 	 	$	366,176	 	 	$	128,958	 	 	$	218,141	 	 	$	1,568	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Consideration paid in cash
	  	$	500	 	 	$	—  	 	 	$	—  	 	 	$	11,994	 	 	$	16,060	 	 	$	128,958	 	 	$	203,786	 	 	$	—  	 
	 Consideration paid in shares
	  	 	24,702	 	 	 	46,119	 	 	 	98,034	 	 	 	543,866	 	 	 	234,052	 	 	 	—  	 	 	 	—  	 	 	 	1,568	 
	 Gain on fair value of previously held equity interest
	  	 	—  	 	 	 	—  	 	 	 	62,682	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Replacement options
	  	 	—  	 	 	 	—  	 	 	 	8,199	 	 	 	13,537	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Replacement warrants
	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	30,611	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Other consideration
	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	949	 	 	 	29,880	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Contingent consideration
	  	 	694	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	86,184	 	 	 	—  	 	 	 	14,355	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total consideration
	  	$	25,896	 	 	$	46,119	 	 	$	168,915	 	 	$	600,957	 	 	$	366,176	 	 	$	128,958	 	 	$	218,141	 	 	$	1,568	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Consideration paid in cash
	  	$	500	 	 	$	—  	 	 	$	—  	 	 	$	11,994	 	 	$	16,060	 	 	$	128,958	 	 	$	203,786	 	 	$	—  	 
	 Less: Cash and cash equivalents acquired
	  	 	(496	) 	 	 	(3	) 	 	 	(8,369	) 	 	 	(4,089	) 	 	 	—  	 	 	 	(2,908	) 	 	 	(998	) 	 	 	37	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net cash outflow
	  	$	4	 	 	$	(3	) 	 	$	(8,369	) 	 	$	7,905	 	 	$	16,060	 	 	$	126,050	 	 	$	202,788	 	 	$	37	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Acquisition-related costs expensed
	  	$	28	 	 	$	330	 	 	$	412	 	 	$	1,988	 	 	$	822	 	 	$	920	 	 	$	385	 	 	$	63	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 Goodwill arose in these acquisitions because the cost of acquisition included a control premium. In addition,
the consideration paid for the combination reflected the benefit of expected revenue growth and future market development. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable
intangible assets. None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes. 
 The accounting for
these acquisitions has been provisionally determined at December 31, 2018. The fair value of net assets acquired and total consideration have been determined provisionally and subject to adjustment. Upon completion of a comprehensive valuation
and finalization of the purchase price allocation, goodwill may be adjusted retrospectively to the acquisition date in future reporting periods 

(i) DaddyCann Lesotho PTY Ltd. 

On May 30, 2018, the Company purchased 100% of the issued and outstanding shares of DaddyCann Lesotho PTY Ltd. (“DCL”). Based in
the Kingdom of Lesotho, DCL holds a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin. 

On closing, 666,362 common shares were issued to former shareholders of DCL at a price of $37.07 for consideration of $24,702. An additional
33,318 common shares will be issued on the achievement of a licensing 

  
 Page 16 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 
milestone. These shares have been accounted for as equity classified contingent consideration. Management assessed the probability and timing of achievement and then discounted to present value
using a put option pricing model in order to derive a fair value of the contingent consideration of $694. There was also the effective settlement of a note receivable of $500, which was advanced in cash by the Company prior to closing, for total
consideration of $25,896. 
 An additional 299,863 common shares will be issued to the former shareholders of DCL contingent on the
achievement of certain operational milestones. These are being accounted for as share-based compensation expense. The fair value on the grant date of May 30, 2018 of $11,116 will be amortized over the expected vesting period. 

(ii) Colombian Cannabis S.A.S. 

On July 5, 2018 through Canopy LATAM Corporation (“Canopy LATAM”), the Company acquired Spectrum Cannabis Colombia S.A.S.
(“Spectrum Colombia”), which previously operated as Colombian Cannabis S.A.S. The consideration for the transaction was 1,193,237 common shares with a fair value of $46,119 based on the Company’s share price on the closing date. 

On July 5, 2018, in conjunction with the acquisition of Spectrum Colombia the Company acquired all the outstanding shares of Canindica
Capital Ltd (“Canindica”) in exchange for 595,184 common shares. Canindica was controlled by the Canopy LATAM Regional Managing Director. Canindica does not meet the definition of a business and the fair value of the consideration paid of
$23,004 has been recorded as compensation expense. 
 Upon the achievement of future cultivation and sales milestones, the Company will issue
up to 2,098,304 additional common shares of the Company to the former shareholders of Spectrum Colombia and shares to a value of $42,623 to the former shareholders of Canindica. If Canindica fails to meet certain of these milestones, Canindica will
pay USD $10,000 to the Company. This obligation is secured by a note receivable from Canindica. Additionally, if all of these milestones are met prior to July 4, 2023, the Company will issue, to the previous shareholders of Spectrum Colombia
and Canindica, the number of Company shares equal to four percent and six percent, respectively, of the fair market value of Canopy LATAM. The milestone shares are being provided in exchange for services and are being accounted for as share-based
compensation expense. Management has estimated the grant date fair value of all these milestone shares to be $106,377 which will be expensed rateably over the estimated vesting periods. 

(iii) Canopy Health Innovations 

Canopy Health Innovations Inc. (“CHI”) is a cannabis research innovator. On August 3, 2018, the Company acquired all of its
unowned interest in CHI to increase its total ownership to 100% of CHI’s issued and outstanding shares. Immediately preceding the acquisition, CHI amalgamated with its wholly-owned subsidiary, Canopy Animal Health (“CAH”), creating
one amalgamated corporation which continued as CHI. In addition, the vesting of certain CHI and CAH options was accelerated and certain options were exercised. Following this transaction, the Company will control CHI and CHI will be accounted for as
a wholly-owned subsidiary. CHI shares and options were exchanged at a ratio of 0.379014 CHI shares to 1 Canopy Growth share or replacement option, resulting in 2,591,369 common shares, 568,008 replacement options and 485,572 common shares of which
217,859 are subject to certain trading restrictions (“Compensation Shares”) being issued. This consideration included 278,230 shares and 154,208 replacement options that were issued to key management personnel of the Company that were
shareholders and option holders in CHI. 
 The fair value of the shares issued totaled $98,034 which is comprised of $87,717 calculated as
the 2,591,369 common shares issued at the Company’s share price on the date of the transaction and $10,317 which reflects the fair value of the Compensation Shares issued, calculated using a Black-Scholes model. 

The fair value of the replacement options was determined using a Black-Scholes model and the total fair value has been allocated to the
consideration paid for CHI only to the extent that it related to pre-combination services. As a result, $8,199 of the total fair value has been included as consideration paid to acquire CHI as it related to pre-combination vesting service and $11,714 of the fair value will be recognized as share-based compensation expense rateably over the post-combination vesting period (see Note 18(b) for details on the share-based
compensation expense). 
 Prior to this acquisition, the Company’s 43% participating share was accounted for using the equity method, as
an investment in an associate. The acquisition of the 57% interest is accounted for as a business combination achieved in stages under IFRS 3 Business Combinations. The Company remeasured its 43% interest to fair value and recognized a gain of
$62,682 which reflects the difference between the carrying value of NIL and the implied fair value $62,682. The fair value was estimated to be the transaction price less an estimated control premium of 5%. 

  
 Page 17 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 (iv) Hiku Brands Company Ltd 

On September 5, 2018, the Company purchased 100% of the issued and outstanding shares of Hiku Brands Company Ltd (“Hiku”). Hiku
is federally licensed to cultivate and sell cannabis through its wholly-owned subsidiary DOJA Cannabis Ltd. Hiku also operates a network of retail stores selling coffee, clothing and curated accessories, across British Columbia, Alberta and Ontario.
Hiku shares, options and warrants were exchanged at a ratio of 0.046 Hiku shares to 1 Canopy Growth share, replacement option, or warrant. 

On the acquisition date Hiku had convertible debentures outstanding with a principal amount of $618 which were convertible into 498,387 Hiku
common shares. As a result of the acquisition the conversion feature was adjusted in accordance with the above exchange ratio. The fair value of these debentures on September 5, 2018 was estimated to be $1,570 which was allocated $949 to the
conversion feature and $621 to the debt component. On November 5, 2018 in accordance with the terms of the debenture the Company completed the forced conversion of the debenture in exchange for 22,866 shares. 

Prior to closing the Company advanced cash of $10,000 to Hiku pursuant to a promissory note. The funds were used to pay the termination fee
owed by Hiku in connection with a previously announced transaction. 
 On closing the Company issued 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, cash consideration of $1,994, 920,452 replacement warrants and 291,629 replacement options. The fair value of the replacement warrants was estimated to be
$30,611 using a Black-Scholes model. The replacement options’ fair value totaled $17,693, calculated using a Black-Scholes model, of which $13,537 has been included as consideration paid as it related to
pre-combination services and the residual $4,156 fair value will be recognized as stock compensation expense rateably over the post-combination vesting period. Other consideration also includes $949 related to
the convertible debenture and the effective settlement of the promissory note of $10,000. 
 (v) ebbu Inc. 

On November 23, 2018 the Company, through its wholly owned subsidiary 11065220 Canada Inc., acquired substantially all the assets and
intellectual property of ebbu Inc. (“ebbu”), a Colorado-based hemp research operation in exchange for $25,000 cash and 6,221,210 common shares of which $7462 cash and 899,424 shares were held back for a period of 12 to 18 months in respect
of certain representations and warranties of the seller. Up to a further $100,000 will be paid subject to the achievement of certain scientific related milestones within a period of two years of closing. The Company will have the option of
satisfying these milestone payments in cash, shares or a combination of cash and shares, subject to the restriction that each payment must be comprised of at least 10% cash but the cash portion cannot exceed 19.9% of the payment. If such payments
are satisfied in shares, the number of shares will be calculated based on the volume weighted average price of the shares on the TSX for the 20 trading days immediately prior to the date of achievement of the milestone. 

The assets transferred constitute a business and the transaction will be accounted for as a business combination. The consideration for this
transaction is estimated to be $366,176. This includes cash and shares transferred on closing with a value of $16,060 and $234,052 respectively and contingent consideration of $116,065. The contingent consideration includes $29,880 which is
classified as equity and $86,184 which is classified as a liability. Management has estimated the fair value of the contingent consideration by assessing the probability of releasing the holdback amounts and probability and timing of achieving the
milestones. The fair value of the equity classified contingent consideration is determined using a put option pricing model. The fair value of the liability classified contingent consideration is determined by discounting the expected cash outflows
to present value. 
 Management has determined that a portion of the consideration transferred is being provided in exchange for services and
will be accounted for as compensation expense. The grant date fair value of this compensation has been estimated to be $8,416 which will be expensed rateably over the estimated vesting periods. 

(vi) POS Holdings Inc. 

On November 23, 2018 the Company acquired effective control for accounting purposes over the operations of POS Holdings Inc.
(“POS”), as a result of a debenture financing transaction which was entered into concurrent with the grant of an option to acquire POS. POS is a bio-processing facility located in Saskatchewan,
Canada. 
 On July 1, 2018, the Company had entered into an agreement whereby the Company was granted an option to acquire all of the
assets of POS in exchange for $6,000. The amount advanced for this option was to be applied against the purchase price of the assets of POS when the option was exercised and had been recorded as a 

  
 Page 18 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 
deposit. In addition, the Company had entered into an agreement for processing services to be conducted by POS on behalf of the Company and had made advances of $13,864 under this agreement.
Since processing under this agreement has not yet commenced, all the amounts advanced prior to November 23, 2018 had been recorded as a prepaid expense. The deposit and prepaid amounts form part of the consideration transferred. On
November 23, 2018, the Company advanced a further $109,094 pursuant to a convertible debenture for total cash consideration of $128,958. 

(vii) Storz & Bickel GmbH & Co. KG 

On December 6, 2018 the Company acquired Storz & Bickel GmbH & Co. KG, related entities, and IP (collectively,
“Storz & Bickel” or “S&B”) for $203,786 cash. Based in Tuttlingen, Germany Storz & Bickel are designers and manufacturers of medically approved vaporizers. 

Up to a further €10,000 will be paid to the former shareholders subject to the achievement of certain market launch milestones. This
represents liability classified contingent consideration. Management has estimated the fair value of this consideration to be $14,355 by assessing the probability and timing of achievement of the milestones and discounting the expected cash outflows
to present value. 
 (viii) Other fiscal 2019 acquisitions 

On April 16, 2018 the Company acquired 100% of Annabis Medical s.r.o. a company that imports and distributes cannabis products pursuant to
federal Czech licenses. Under the terms of the agreement the Company issued 50,735 common shares on closing for total consideration of $1,568. An additional 34,758 common shares will be issued contingent on future services and the achievement of
certain milestones. These shares are being accounted for as share based compensation and being amortized over the expected vesting period. 
 b)
Acquisition of non-controlling shareholder’s interest in BC Tweed 
 During the second
quarter of 2018, the Company revised its previous conclusion that BC Tweed Joint Venture Inc. (“BC Tweed”) was subject to joint control. The Company has concluded that based on the shareholders’ agreement and the contractual terms of
the offtake agreement that the significant relevant activities 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. 

On July 5, 2018, the Company acquired the non-controlling shareholder’s (the
“Partner’s”) 33% interest in BC Tweed (the “Transaction”) for total consideration of $495,386. Consideration included $1,000 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. The 5,091,523 shares issued on
close were recorded at an issue price of $39.70 per share for consideration of $202,133. The fair value of the shares held in escrow was estimated to be $265,253 using a put option pricing model discounted to reflect management’s best estimate
of the expected dates of release. 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. Management has determined that this increase in the call option price represents additional consideration for the Partner’s interest. 

On closing of the Transaction, the Company also 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
in the quarter ended September 30, 2018. 
 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 put option was accounted for as a liability of the Company, measured at fair value. The excess of the consideration paid for the Partner’s 33% interest over the
fair value of the put liability on the transaction date of $72,600 was recognized as a $422,786 charge to Equity. 
 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 (“California
Option”). 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 California 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 “California 

  
 Page 19 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 
Trigger Date”) and the California Option expires on the earlier of 90 days after the California Trigger Date and July 5, 2023. The California Option is a derivative instrument that will
be measured initially and subsequently at fair value. With the assistance of valuation specialists Management has estimated the fair value of the California Option at December 31, 2018 to be $2,500 using an income approach and giving
consideration to the probability of US Federal Legalization occurring during the period over which the California Option can be exercised. At September 30, 2018 Management had estimated that the option had a nominal value. 

 

	12.	 INTANGIBLE ASSETS AND GOODWILL 

A continuity of the intangible assets for the nine months ended December 31, 2018 is as follows: 

COST 
  

																									
	 	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	  	 	 
	 	  	Balance at	 	  	 	 	  	Additions	 	  	 	 	 	 	 	  	Balance at	 
	 	  	April 1,	 	  	 	 	  	from	 	  	Disposals/	 	 	Exchange	 	  	December 31,	 
	 	  	2018	 	  	Additions	 	  	acquisitions	 	  	adjustments	 	 	differences	 	  	2018	 
	 Health Canada licenses
	  	$	64,600	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	 	$	—  	 	  	$	64,600	 
	 Distribution channel
	  	 	38,900	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	38,900	 
	 Brand
	  	 	6,042	 	  	 	—  	 	  	 	499	 	  	 	392	 	 	 	—  	 	  	 	6,933	 
	 Import license
	  	 	841	 	  	 	8,328	 	  	 	26	 	  	 	(121	) 	 	 	28	 	  	 	9,102	 
	 Software
	  	 	1,455	 	  	 	1,240	 	  	 	246	 	  	 	16	 	 	 	8	 	  	 	2,965	 
	 Domain name
	  	 	54	 	  	 	205	 	  	 	194	 	  	 	—  	 	 	 	—  	 	  	 	453	 
	 Product rights
	  	 	—  	 	  	 	107	 	  	 	1,802	 	  	 	(229	) 	 	 	—  	 	  	 	1,680	 
	 ERP
	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	4,291	 	 	 	—  	 	  	 	4,291	 
	 Licensed Brands
	  	 	—  	 	  	 	56,705	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	56,705	 
	 Intangibles in process
	  	 	2,144	 	  	 	4,333	 	  	 	39	 	  	 	(3,770	) 	 	 	—  	 	  	 	2,746	 
	 Internally generated intangibles in process
	  	 	326	 	  	 	601	 	  	 	328	 	  	 	(385	) 	 	 	—  	 	  	 	870	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Total
	  	$	114,362	 	  	$	71,519	 	  	$	3,134	 	  	$	194	 	 	$	36	 	  	$	189,245	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 

 ACCUMULATED AMORTIZATION 
  

																					
	 	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 
	 	  	Balance at	 	  	 	 	 	 	 	  	 	 	  	Balance at	 
	 	  	April 1,	 	  	 	 	 	Disposals/	 	  	Exchange	 	  	December 31,	 
	 	  	2018	 	  	Amortization	 	 	adjustments	 	  	differences	 	  	2018	 
	 Health Canada licenses
	  	$	2,624	 	  	$	1,434	 	 	$	—  	 	  	$	—  	 	  	$	4,058	 
	 Distribution channel
	  	 	9,077	 	  	 	5,835	 	 	 	—  	 	  	 	—  	 	  	 	14,912	 
	 Brand
	  	 	—  	 	  	 	106	 	 	 	—  	 	  	 	—  	 	  	 	106	 
	 Import license
	  	 	219	 	  	 	153	 	 	 	—  	 	  	 	3	 	  	 	375	 
	 Software
	  	 	863	 	  	 	412	 	 	 	—  	 	  	 	1	 	  	 	1,276	 
	 Domain name
	  	 	53	 	  	 	(3	) 	 	 	—  	 	  	 	—  	 	  	 	50	 
	 Product rights
	  	 	—  	 	  	 	(68	) 	 	 	—  	 	  	 	—  	 	  	 	(68	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	 	12,836	 	  	 	7,869	 	 	 	—  	 	  	 	4	 	  	 	20,709	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value
	  	$	101,526	 	  				 				  				  	$	168,536	 
		  	  
	  
	 	  				 				  				  	  
	  
	 

 A continuity of goodwill for the nine months ended December 31, 2018 is as follows: 

 

					
	 As at April 1, 2018
	  	$	314,923	 
		  	  
	  
	 
	 Additions from acquisitions of subsidiaries
	  	 	1,493,619	 
	 Exchange differences
	  	 	7,082	 
		  	  
	  
	 
	 As at December 31, 2018
	  	$	1,815,624	 
		  	  
	  
	 

 The Company has entered into licensing agreements which provide the Company with the exclusive rights to sell
branded products for the term of the agreement in exchange for upfront payments, in cash or shares, and future royalties from sale of these products. In certain cases, the contracts provide for annual minimum royalty payments. The Company has
recorded these licensing rights as intangible assets with the cost equal to upfront payments and the present value of the minimum royalty payments. Amortization will commence separately for each individual licensing agreement on the date that the
identified branded product(s) under the licensing agreement are available for sale. 
 The product rights are contained in the licensing and
distribution agreement (“Licensing Agreement”) between the former Bedrocan Canada Inc, now 1955625 Ontario Inc. (“Bedrocan Canada”), a wholly owned subsidiary of the Company and Bedrocan International BV (“Bedrocan
International”). On July 14, 2017, Bedrocan Canada 

  
 Page 20 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 
commenced arbitration proceedings against Bedrocan International seeking performance of Bedrocan International’s contractual obligations under the Licensing Agreement. During the fourth
quarter of fiscal 2018 the Company initiated settlement negotiations with Bedrocan International which would include the orderly termination of the Licensing Agreement. As a result of these developments, management estimated that the recoverable
amount for these product rights would be minimal, and an impairment loss of $28,000 was recognized in the year ended March 31, 2018. Following this impairment, the carrying amount of these product rights was nil. 

On June 11, 2018 the Company announced that it had reached an agreement with Bedrocan International to bring the Licensing Agreement to a
close. As part of this agreement, Bedrocan Canada and Bedrocan International will discontinue the previously announced arbitration proceedings and Bedrocan Canada will decrease and then end the production and sale of Bedrocan products within the
calendar year. Canopy Growth will retain the licensed production facility, licensed sales facility, and all associated licenses owned and operated by Bedrocan Canada. Management will redeploy these facilities, free of the current royalty structure
and fixed production practices. As a result of this agreement, in the first quarter of fiscal 2019 the Company derecognized these product rights. 
  

	13.	 CANOPY RIVERS 

On July 6, 2018, Canopy Rivers completed a private placement offering, pursuant to which Canopy Rivers issued an aggregate of 29,774,857
subscription receipts at a price of $3.50 per subscription receipt for gross proceeds of $104,212, including $15,050 invested by Canopy Growth. Canopy Rivers issued 28,792,000 subscription receipts pursuant to a brokered offering and 982,857
subscription receipts on a non-brokered basis. Funds from the private placement were placed in escrow pending the completion of the RTO. Share issue costs of $3,371 were incurred as part of this private
placement offering, which have been deducted from the carrying value of the non-controlling interest. 

On September 17, 2018 Canopy Rivers completed the RTO, the funds were released from escrow and Canopy Rivers began trading under the
symbol RIV.V on the TSX Venture Exchange. 
 Since AIM2 does not have the inputs and processes capable of producing outputs that are
necessary to meet the definition of a business as defined by IFRS 3–Business Combinations the RTO has been accounted for under IFRS2, Share-based Payments. Accordingly, the RTO has been accounted for at the fair value of the equity instruments
granted by the shareholders of Canopy Rivers to the shareholders and option holders of AIM2. Consideration paid by the acquirer is measured at the fair value of the equity issued to the shareholders of AIM2, $1,353 (361,377 shares at $3.50 per
share, 36,137 options with a fair value of $89 calculated using a Black-Scholes option pricing model and 18,821 broker warrants measured using the Black-Scholes option pricing model), with the excess amount above the fair value of the net assets
acquired, treated as a listing expense in profit and loss. 

  
 Page 21 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The assets acquired and
liabilities assumed at their fair value on the acquisition date are as follows. 
  

					
	 	  	Amount	 
	 Consideration
	  	$	1,353	 
	 Cash Acquired
	  	 	583	 
	 Listing Expense
	  	 	770	 

 After the completion of the private placement and RTO, Canopy Growth holds 36,468,318 Class A shares and
8,973,938 Class B shares of Canopy Rivers. Through these shares, the Company’s ownership interest in Canopy Rivers is 27.2% and it holds 85.8% of the voting rights. The voting rights allow the Company to direct the relevant activities of
Canopy Rivers such that the Company has control over Canopy Rivers and Canopy Rivers is consolidated in these financial statements. Prior to the transaction the Company’s ownership interest in Canopy Rivers was 30.07% and it held 88.5% of the
voting rights. An amount of $9,138 has been recorded as an increase in equity attributable to the parent which represents the change in the carrying amount of the non-controlling interest as a result of the
difference between the consideration paid and the net assets acquired and the dilution of Canopy Growth’s ownership interest. 

Seed capital options 
 On
the formation of Canopy Rivers in May 2017, 10,066,668 Class B common shares were paid for through share purchase loans, whereby funds were advanced to Canopy Rivers by Canopy Growth on behalf of certain employees of Canopy Growth and another
individual. Under the share purchase loan, Canopy Growth’s recourse is limited to the shares purchased by the employees and the individual. Accordingly, it is accounted for as a grant of options to acquire shares of Canopy Rivers at $0.05 per
Class B common share. The shares treated as options will be considered exercised on the repayment of the loan. The shares purchased by employees and the consultant have been placed in trust and vest in 3 equal tranches over 3 years if the
employees remain as employees of Canopy Growth and the individual remains as a consultant and the loan is repaid. In certain cases, there are also additional performance targets. 

The shares treated as options were measured at fair value on May 12, 2017 using a Black-Scholes model and will be expensed over their
vesting period. Shares issued to non-employees will be remeasured until their performance is complete. Where there are performance conditions in addition to service requirements, Canopy Growth has estimated
the number of shares it expects to vest and is amortizing the expense over the expected vesting period. 
 On May 8, 2018 share purchase
loans in the amount of $288 were repaid, resulting in the release from escrow of 5,750,000 shares. The remaining unamortized expense relating to these shares of $1,459 was recorded in the period. For the three and nine months ended December 31,
2018, the Company recorded $405 and $3,046 in share-based compensation expense relating to the remaining unvested shares which were acquired by way of the share purchase loan (three and nine months ended December 31, 2017 - $827 and $2,100)
with a corresponding increase to non-controlling interests. 
 Stock options 

To December 31, 2018 Canopy Rivers has granted 6,475,000 options to purchase Class B common shares to employees of Canopy Growth and
5,440,000 options to purchase Class B common shares to consultants of Canopy Growth. The options have a weighted average exercise price of $2.72 per Class B common shares and are exercisable in increments, with one third being exercisable
on each of the first, second and third anniversaries from the date of grant. The expiry date of the options ranges from December 4, 2022 to November 26, 2023. The options were measured at fair value at the date of issuance using a
Black-Scholes model and will be expensed over their vesting period. Options issued to non-employees will be remeasured until their performance is complete. For the three and nine months ended December 31,
2018, the Company recorded $2,789 and $11,547 (three and nine months ended December 31, 2017 - $273) in share-based compensation expense related to these options with a corresponding increase to
non-controlling interests. 

  
 Page 22 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	14.	 NON-CONTROLLING INTERESTS 

The following table presents the summarized financial information about the Company’s subsidiaries that have non-controlling interests. This information represents amounts before intercompany eliminations. 
  

													
	 As at December 31, 2018
	  	Canopy
Rivers	 	  	Tweed
JA	 	  	Vert
Mirabel	 
	 Cash and cash equivalents
	  	$	46,929	 	  	$	16	 	  	$	764	 
	 Amounts receivable
	  	 	1,678	 	  	 	—  	 	  	 	1,832	 
	 Prepaid expenses and other assets
	  	 	307	 	  	 	—  	 	  	 	515	 
	 Inventory
	  	 	—  	 	  	 	—  	 	  	 	945	 
	 Biological assets
	  	 	—  	 	  	 	—  	 	  	 	308	 
	 Investments in associates
	  	 	53,355	 	  	 	—  	 	  	 	—  	 
	 Other financial assets
	  	 	145,880	 	  	 	—  	 	  	 	—  	 
	 Property, plant and equipment
	  	 	2,700	 	  	 	3,302	 	  	 	28,745	 
	 Preferred shares
	  	 	15,000	 	  	 	—  	 	  	 	—  	 
	 Goodwill
	  	 	—  	 	  	 	1,938	 	  	 	5,625	 
	 Intangible assets
	  	 	—  	 	  	 	21	 	  	 	—  	 
	 Accounts payable and accrued

liabilities
	  	 	(557	) 	  	 	(938	) 	  	 	(2,100	) 
	 Other current liabilities
	  	 	(952	) 	  	 	—  	 	  	 	(351	) 
	 Other long-term liabilities
	  	 	—  	 	  	 	—  	 	  	 	(43,124	) 
	 Deferred tax liability
	  	 	(4,732	) 	  	 	—  	 	  	 	—  	 
	 Non-controlling interests
	  	 	(197,706	) 	  	 	(1,284	) 	  	 	3,572	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Equity (deficit) attributable to Canopy Growth
	  	$	61,902	 	  	$	3,055	 	  	$	(3,269	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 The net change in the non-controlling interests is as follows: 

 

																									
	 	  	Note	 	  	Canopy
Rivers	 	 	Tweed
JA	 	 	Vert
Mirabel	 	 	Other non-
material
interests1	 	 	Total	 
	 As at April 1, 2018
	  				  	$	80,844	 	 	$	1,686	 	 	$	2,155	 	 	$	(220	) 	 	$	84,465	 
	 Net Income (loss)
	  				  	 	9,308	 	 	 	(365	) 	 	 	(5,733	) 	 	 	(111	) 	 	 	3,099	 
	 Other comprehensive income (loss)
	  				  	 	(10,830	) 	 	 	(37	) 	 	 	—  	 	 	 	—  	 	 	 	(10,867	) 
	 Share-based compensation
	  				  	 	10,934	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	10,934	 
	 Ownership changes
	  				  	 	78,938	 	 	 	—  	 	 	 	6	 	 	 	331	 	 	 	79,275	 
	 Warrant
	  	 	15(i)	 	  	 	28,512	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	28,512	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 As at December 31, 2018
	  				  	$	197,706	 	 	$	1,284	 	 	$	(3,572	) 	 	$	—  	 	 	$	195,418	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	1 	 Includes the non-controlling interests in Groupe H.E.M.P. CA and
Spectrum Chile S.A. 

  
 Page 23 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	15.	 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 

The following table outlines changes in the investments in associates that are accounted for using the equity method. As permitted by IAS 28
Investments in Associates and Joint Ventures, in cases where the Company does not have the same reporting date as its associates the Company will account for its investment one quarter in arrears. Accordingly, the share of net income (loss) in the
following table is based on values at September 30, 2018 with adjustments for any significant transactions. 
  

																																	
	 	  	 	  	 	  	 	 	 	Balance at	 	  	 	 	  	Share of net	 	 	 	 	 	 	 	 	Balance at	 
	 Entity
	  	Instrument	  	 Note
	  	Participating
share	 	 	March 31,
2018	 	  	Additions	 	  	income
(loss)	 	 	Interest
income	 	 	Derecognition
of investment	 	 	December 31,
2018	 
	 PharmHouse
	  	shares	  	15(i)	  	 	49.0	% 	 	$	—  	 	  	$	39,032	 	  	$	(87	) 	 	$	—  	 	 	$	—  	 	 	$	38,945	 
	 Agripharm
	  	shares	  		  	 	40.0	% 	 	 	38,479	 	  	 	—  	 	  	 	(1,430	) 	 	 	—  	 	 	 	—  	 	 	 	37,049	 
	 BCT
	  	shares	  	15(iii)	  	 	42.2	% 	 	 	—  	 	  	 	12,549	 	  	 	(180	) 	 	 	—  	 	 	 	—  	 	 	 	12,369	 
	 CanapaR
	  	shares	  	15(v)	  	 	43.7	% 	 	 	—  	 	  	 	8,750	 	  	 	(28	) 	 	 	—  	 	 	 	—  	 	 	 	8,722	 
	 Radicle
	  	shares	  		  	 	23.8	% 	 	 	4,754	 	  				  	 	(715	) 	 	 	(157	) 	 	 	—  	 	 	 	3,882	 
	 Civilized
	  	convertible
debenture	  	15(ii)	  	 	25.5	% 	 	 	—  	 	  	 	3,665	 	  	 	(1,403	) 	 	 	(456	) 	 	 	—  	 	 	 	1,806	 
	 N49AROW
	  	shares	  	15(iv)	  	 	25.0	% 	 	 	—  	 	  	 	1,000	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,000	 
	 TerrAscend
	  	shares	  		  	 	—  	 	 	 	16,912	 	  	 	—  	 	  	 	(2,217	) 	 	 	—  	 	 	 	(14,695	) 	 	 	—  	 
	 CHI
	  	shares	  	15(iii)	  	 	—  	 	 	 	2,961	 	  	 	—  	 	  	 	(2,961	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Bedrocan Brasil
	  	shares	  		  	 	39.8	% 	 	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Entourage
	  	shares	  		  	 	40.0	% 	 	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		  		  		  				 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  		  		  				 	$	63,106	 	  	$	64,996	 	  	$	(9,021	) 	 	$	(613	) 	 	$	(14,695	) 	 	$	103,773	 
		  		  		  				 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	 	(i)	 On May 7, 2018 Canopy Rivers and 2615975 Ontario Limited (the “Joint Venture Partner) entered into an
agreement to form a new company, 10730076 Canada Inc. (“‘PharmHouse”) with the intent of PharmHouse becoming a licensed producer of cannabis in Ontario. In exchange for $1, a commitment to provide $9,800 in financing, and the issuance
of 14,400,000 warrants of Canopy Rivers to the Joint Venture Partner, Canopy Rivers received a 49% interest in PharmHouse and a global non-competition agreement from the Joint Venture Partner. On July 19,
2018 Canopy Rivers advanced $9,800 to PharmHouse pursuant to the terms of this agreement. 

 The warrants are exercisable
for a period of two years following the date that PharmHouse receives a license to sell cannabis and satisfies certain financing conditions related to the loan noted below, at an exercise price which is the lesser of $2.00 per share and the price of
a defined liquidity event. The warrants were initially accounted for as a derivative liability as the exercise price was not fixed. The fair value of the warrants at inception and at June 30, 2018 was estimated to be $29,232. On
September 17, 2018, Canopy Rivers closed a brokered and non-brokered private placement of subscription receipts in connection with its planned public listing at $3.50 per subscription receipt. As a
result, the exercise price of the warrants was fixed at $2.00 per share, and the warrant liability was reclassified to equity. The Company recognized a gain of $720 from the warrant liability re-measurement
and reclassified $28,512 to non-controlling interest. 
 Canopy Rivers has joint control over
PharmHouse, which has been determined to be a joint venture, and therefore will be accounted for using the equity method. 
 As part of the
arrangement, Canopy Rivers also entered into a services agreement with PharmHouse whereby, upon PharmHouse receiving its license to sell cannabis, Canopy Rivers is required to arrange for buyers to purchase 25% of the cannabis produced by PharmHouse
at a fixed price until December 31, 2020. Additionally, Canopy Growth has agreed to purchase from PharmHouse 10% of the cannabis it produces for a fixed price until December 31, 2020. If either Canopy Rivers or Canopy Growth is unable to
arrange for buyers to purchase the required cannabis or purchase the required cannabis from PharmHouse, respectively, then a penalty is due equal to the amount otherwise payable under the agreements. 

  
 Page 24 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 PharmHouse has also agreed to provide Canopy Rivers with a right of first offer of up to 50%
to the cannabis produced by PharmHouse. The right of first offer percentage is reduced by the services and purchase agreements noted above. 

On November 21, 2018, under the terms of the agreement, Canopy Rivers entered into a shareholder loan agreement with PharmHouse pursuant
to which Canopy Rivers has committed to advance up to $40,000 of secured debt financing with a three-year term and an annual interest rate of 12%, calculated monthly and payable quarterly after the first full quarter after receipt of the sales
license at PharmHouse’s initial production and processing facility. Proceeds are expected to be utilized to supplement personnel and logistics resources for domestic and international distribution, capital expenditures related to the ongoing
upgrade and retrofit of PharmHouse’s nursery, processing and greenhouse infrastructure, working capital and other general corporate purposes. As part of the loan agreement, certain additional exercise conditions were placed on the PharmHouse
warrants, as noted above. The amount available under the shareholder loan agreement was fully advanced as of December 31, 2018. 
  

	 	(ii)	 During the quarter ended June 30, 2018 Canopy Rivers advanced $5,000 to Civilized Worldwide Inc.
(“Civilized”) under a convertible debenture. The debenture bears interest at 14% and matures on the maturity date being the earliest of i) 2 years, ii) the date that Civilized lists on a recognized stock exchange. In addition, Canopy
Rivers received a warrant to acquire additional Class A common shares for $3,500. 

 On the maturity date, the
convertible debenture is convertible into 18.2% of the common shares and this interest, together with other rights provided under the agreements, such as the right to nominate 20% of Civilized’s directors, give Canopy Rivers significant
influence over the investee and Canopy Rivers is accounting for the investment using the equity method. 
 The warrant is exercisable the
later of May 7, 2021 and two years from when Civilized becomes a public company. The exercise price is the lower of the price of the subsequent round and the price per common share obtained by dividing $40,000 by the issued and outstanding
shares at the date of exercise. The warrant was initially measured at its fair value of $1,335 using a Black-Scholes option pricing model and the residual amount of $3,665 represents the initial cost of its equity investment. 

 

	 	(iii)	 As described in Note 11(a)(iii), the Company acquired a controlling interest in CHI on August 3, 2018,
resulting in the consolidation of CHI and its equity accounted investment, Beckley Canopy Therapeutics (“BCT”). BCT operates as a cannabis research and development organization in the United Kingdom. On January 20, 2018, CHI and
Beckley Research and Innovations Limited (the “Joint Venture Partner”) each invested $500 in exchange for a collaboration agreement whereby each party received a 50% ownership interest in Beckley. This arrangement provided CHI with joint
control over Beckley, and the investment had been determined to be a joint venture, and therefore accounted for using the equity method. As at the date of the CHI acquisition, in accordance with IFRS 3 Business Combinations, the Company calculated
the fair value of the equity investment in Beckley to be $8,563 (see Note 11(a)(iii)). 

 On September 28, 2018, BCT
completed a private placement financing where the Company, indirectly through CHI, acquired an additional 2,508,333 common shares for $3,986. The Company’s participating share was diluted from 50% to 42.2%. The previously mentioned
collaboration agreement remains in effect and management has concluded that CHI has maintained joint control over BCT and therefore, the BCT investment continues to be accounted for as a joint venture using the equity method. 

 

	 	(iv)	 On September 26, 2018, the Company entered into a series of agreements to create a business venture which
will allow the Company to gain access to rights to sell certain branded products. In exchange for cash consideration of $24,263 the Company acquired a 25% interest in a new company, N49AROW Global Ventures, ULC, (“N49AROW”), entered into a
licensing agreement and received an option to acquire an interest in a potential future US based entity. Management has estimated that the fair value of any rights under the option are nominal and the consideration has been allocated $1,000 to the
investment and $23,263 to the licensing rights. 

 This ownership interest together with other rights provided under the
agreements gave the Company significant influence over N49AROW. The Company is accounting for its investment using the equity method and recorded the investment at its cost amount.     

 

	 	(v)	 On July 24, 2018, Canopy Rivers acquired a 35% ownership interest in CanapaR Corp. (“CanapaR”)
for cash consideration of $750. This ownership interest and other rights give Canopy Rivers significant 

  
 Page 25 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	 	
influence over the investee and Canopy Rivers is accounting for the investment using the equity method. CanapaR is the Canadian parent corporation of CanapaR SrL (“CanapaR Italy”), a
Sicily-based company formed for the purposes of organic hemp cultivation and extraction in Italy. In December 2018 CanapaR Canopy Rivers invested a further $8,000 through a non-brokered private placement and
increased its ownership position to 46%. 

 In connection with the investment, Canopy Rivers received an option to purchase
all of CanapaR’s interest in its investees for consideration of the greater of: (i) eight times EBITDA; and (ii) $200,000, less the liabilities of the acquired investees, multiplied by the interest not owned by Canopy Rivers at the time of
exercise. The option is exercisable for a period of five years following the transaction date. The option was initially estimated to have a nominal fair value. As at December 31, 2018, the fair value of the option was estimated to be $4,453
using a Black-Scholes option pricing model. 
  

	 	(vi)	 On November 30, 2018 TerrAscend completed the restructuring of its share capital by way of a plan of
arrangement (“Arrangement”). The restructuring is intended to accommodate TerrAscend’s strategic pursuits, while also maintaining strict compliance with industry regulations and the policies of the various securities exchanges.
Pursuant to the Arrangement, the Company exercised its TerrAscend warrants for no cash consideration, resulting in the net issuance of 16,318,912 common shares based on the five day volume weighted average trading price of the common shares of
TerrAscend on the Canadian Securities Exchange (the “CSE”) for the period ending October 5, 2018, the last trading day prior to the date of the Arrangement Agreement. All 38,890,570 common shares held by the Company were thereafter
exchanged pursuant to the Arrangement for 38,890,570 new, conditionally exchangeable shares in the capital of TerrAscend (the “Exchangeable Shares”). The Exchangeable Shares would only become convertible into common shares following
changes in U.S. federal laws regarding the cultivation, distribution or possession of cannabis, the compliance of TerrAscend with such laws and the approval of the various securities exchanges upon which the issuer’s securities are listed (the
“TerrAscend Triggering Event”). The Exchangeable Shares are not transferrable or monetizable until exchanged into common shares. In the interim, the Company will not be entitled to voting rights, dividends or other rights upon dissolution
of TerrAscend. 

 Management has estimated the fair value of the Exchangeable Shares at December 31, 2018 to be
$120,000. The Exchangeable Shares represent a derivative financial instrument that will be initially measured at fair value in other financial assets and subsequently remeasured to its fair value at the end of each reporting period with changes in
fair value recorded through profit or loss. The common shares of TerrAscend are freely tradeable, while the Exchangeable Shares are not tradeable and hold no economic rights other than the possible opportunity to exchange such shares for common
shares in TerrAscend at a future date. Therefore, the fair value of the Exchangeable Shares was estimated by giving consideration to the trading price of TerrAscend common shares (CNSX: TER) on the valuation date and applying a discount for lack of
marketability that was calculated using an Asian Put Option model, across a series of possible exercise dates. Management has made assumptions as to the probability that the TerrAscend Triggering Event would occur at future dates and estimated the
fair value of the Exchangeable Shares as the sum of the probability weighted discounted values across the range of these dates. 
 After
completion of the Arrangement the Company no longer has significant influence over TerrAscend and ceased using the equity method. The Company recognized a net loss of $6,322 which is comprised of a gain of $54,949 on the derecognition of the equity
investment and a loss of $61,271 on the Exchangeable Shares held following the Arrangement. 

  
 Page 26 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	16.	 OTHER FINANCIAL ASSETS 

The following table outlines changes in other financial assets. Additional details on how fair value is calculated is included in Note 24. 

 

							
	 	  	 	  	 	  	Accounting
	 Entity
	  	Instrument	  	Note	  	method
	 TerrAscend
	  	warrants	  	15(vi)	  	FVTPL
	 TerrAscend
	  	exchangeable shares	  	15(vi)	  	FVTPL
	 AusCann
	  	shares	  	16(i)	  	FVOCI
	 AusCann
	  	options	  	16(i)	  	FVTPL
	 Slang
	  	warrants	  	16(x)	  	FVTPL
	 HydRx
	  	shares	  	16(ii)	  	FVOCI
	 HydRx
	  	warrants	  	16(ii)	  	FVTPL
	 Solo Growth
	  	shares	  	16(v)	  	FVOCI
	 LiveWell
	  	shares	  	16(iii)	  	FVOCI
	 JWC
	  	shares	  	16(iv)	  	FVOCI
	 Agripharm
	  	royalty interest /
repayable debenture	  	16(vii)	  	FVTPL
	 Radicle
	  	repayable
 debenture
	  	16(viii)	  	FVTPL
	 CA infrastructure option
	  	option	  	11(b)	  	FVTPL
	 Good Leaf
	  	shares	  	16(vi)	  	FVOCI
	 Good Leaf
	  	warrants	  	16(vi)	  	FVTPL
	 PharmHouse
	  	loan receivable	  	15(i)	  	Amortized cost
	 Headset
	  	shares	  	16(ix)	  	FVOCI

  

																															
	 	  	 	  	Balance at	 	  	 	 	  	 	 	 	 	 	 	 	 	  	 	 	 	Balance at	 
	 	  	 	  	March 31,	 	  	 	 	  	 	 	 	 	 	 	Interest	 	  	Exercise of	 	 	December 31,	 
	 Entity
	  	 Instrument
	  	2018	 	  	Additions	 	  	FVOCI	 	 	FVTPL	 	 	Revenue	 	  	warrants	 	 	2018	 
	 TerrAscend
	  	warrants	  	$	75,154	 	  	$	—  	 	  	$	—  	 	 	$	36,473	 	 	$	—  	 	  	$	(111,627	) 	 	$	—  	 
	 TerrAscend
	  	exchangeable shares	  	 	—  	 	  	 	120,000	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	120,000	 
	 AusCann
	  	shares	  	 	39,086	 	  	 	3,975	 	  	 	(24,855	) 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	18,206	 
	 AusCann
	  	options	  	 	10,487	 	  	 	915	 	  	 	—  	 	 	 	(8,295	) 	 	 	—  	 	  	 	—  	 	 	 	3,107	 
	 Slang
	  	warrants	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	20,000	 	 	 	—  	 	  	 	—  	 	 	 	20,000	 
	 HydRx
	  	shares	  	 	12,401	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	  	 	5,210	 	 	 	17,611	 
	 HydRx
	  	warrants	  	 	5,210	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	  	 	(5,210	) 	 	 	—  	 
	 Solo Growth
	  	shares	  	 	—  	 	  	 	3,265	 	  	 	(6,192	) 	 	 	6,192	 	 	 	—  	 	  	 	—  	 	 	 	3,265	 
	 LiveWell
	  	shares	  	 	—  	 	  	 	250	 	  	 	3,629	 	 	 	4,799	 	 	 	—  	 	  	 	—  	 	 	 	8,678	 
	 JWC
	  	shares	  	 	10,591	 	  	 	2,124	 	  	 	(3,955	) 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	8,760	 
	 Agripharm
	  	royalty interest / repayable debenture	  	 	2,326	 	  	 	9,000	 	  	 	—  	 	 	 	(400	) 	 	 	—  	 	  	 	—  	 	 	 	10,926	 
	 Radicle
	  	repayable debenture	  	 	3,075	 	  	 	2,000	 	  	 	—  	 	 	 	(3	) 	 	 	—  	 	  	 	—  	 	 	 	5,072	 
	 California Option
	  	option	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	2,500	 	 	 	—  	 	  	 	—  	 	 	 	2,500	 
	 Good Leaf
	  	shares	  	 	—  	 	  	 	4,566	 	  	 	45	 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	4,611	 
	 Good Leaf
	  	warrants	  	 	—  	 	  	 	912	 	  	 	—  	 	 	 	9	 	 	 	—  	 	  	 	—  	 	 	 	921	 
	 PharmHouse
	  	loan receivable	  	 	—  	 	  	 	40,000	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	40,000	 
	 Headset
	  	shares	  	 	—  	 	  	 	4,085	 	  	 	8	 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	4,093	 
	 Canapar
	  	options	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	4,453	 	 	 	—  	 	  	 	—  	 	 	 	4,453	 
	 Other measured at FVTPL
	  	various	  	 	3,923	 	  	 	4,102	 	  	 	578	 	 	 	(418	) 	 	 	—  	 	  	 	—  	 	 	 	8,185	 
	 Other measured at FVOCI
	  	various	  	 	1,210	 	  	 	331	 	  	 	(1	) 	 	 	—  	 	 	 	—  	 	  	 	—  	 	 	 	1,540	 
		  		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 
		  		  	$	163,463	 	  	$	195,525	 	  	$	(30,743	) 	 	$	65,310	 	 	$	—  	 	  	$	(111,627	) 	 	$	281,928	 
		  		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 

  

	 	(i)	 On July 12, 2018, the Company invested a further $4,890 in AusCann Group Holdings Ltd.
(“AusCann”) through a private placement in exchange for 4,545,00 common shares and 2,272,500 options. The options are exercisable at AUD$ 1.465 for a term of 30 months. If the closing price of AusCann is AUD$ 2.25 or

  
 Page 27 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	 	
greater for 10 consecutive trading days, the issuer has the right to force early exercise of the option. The consideration was allocated $3,975 to the shares and $915 to the warrants based on
their fair value on the transaction date. Following this financing the Company’s ownership interest in AusCann is 11.13%. 

  

	 	(ii)	 HydRx Farms Ltd. (“HydRx”) operates as Scientus Pharma Inc. In the quarter ended June 30, 2018,
the Company completed a cashless exercise of the 1,860,680 warrants in exchange for 1,302,476 shares. At December 31, 2018 the Company holds 4,402,783 shares in HydRx which represents a 9.6% ownership interest. 

 

	 	(iii)	 On April 2, 2018, the Company entered into a strategic agreement with LiveWell Foods Canada Inc.
(“LiveWell”) and its subsidiary, Artiva Inc. (“Artiva”). LiveWell and Artiva are both Cannabis Act applicants. This strategic agreement represents an amendment to the original investment agreement that the parties entered into on
November 22, 2017. Under the terms of the amended agreement, in exchange for strategic support services, the offering of financial support and a commitment to fund $250 of licensing expenses, Canopy Growth was issued 5,487,642 common shares and
Canopy Rivers was issued 5,487,642 common shares of LiveWell, together representing 10% equity interest in LiveWell. The total fair value of this investment on initial recognition was $5,049 resulting in a gain of $4,799 which was unrecognized until
June 20, 2018 when LiveWell became a publicly-traded company. At that time the gain was recognized in the statement of operations. An additional 5,487,642 common shares, representing an additional 5% equity interest, were placed in escrow and
will be released to the Company on the achievement of certain licensing milestones. These shares are a contingent asset since their receipt is based on future events not wholly within the control of the Company. 

LiveWell was provided with the option to draw on up to $20,000 of debt financing from Canopy Rivers subject to the completion of certain
milestones. The financing offer was not accepted and has expired. 
 Artiva has agreed to sell the Company 20% of its production for a 20-year term upon receiving its license to sell cannabis. Canopy Rivers is entitled to a royalty of $0.075 for every gram of cannabis purchased from LiveWell and Artiva by the Company. 

 

	 	(iv)	 On April 6, 2018, Canopy Rivers subscribed for 2,000,000 subscription receipts in James E. Wagner
Cultivation ltd. (“JWC”) for $2,300 in connection with a brokered private placement financing undertaken by JWC. Each receipt entitled the Company to one common share in the capital of JWC and
one-half of one common share purchase warrant. Each warrant entitled the Company to acquire one common share in the capital of JWC for $1.50 for a period of 24 months following a specified date. The offering
closed April 27, 2018 and the subscription price was allocated $2,124 to the shares and $176 to the warrants. The Company’s ownership interest in JWC is 14.2%. 

 

	 	(v)	 On June 28, 2018 Canopy Rivers acquired 55,300,000 common shares of Solo Growth Corporation (“Solo
Growth”) through a private placement for $2,765. The shares are subject to a four month hold period. On December 18, 2018, Canopy Rivers acquired an additional 10,000,000 common shares for $500. The Company’s ownership interest in
Solo Growth at December 31, 2018 is 9.7% of the issued and outstanding shares. 

  

	 	(vi)	 On April 23, 2018, the Company invested $5,478 in Good Leaf, Inc. (“Good Leaf”) in exchange for
674,709 Series A-1 preferred shares and warrants to acquire 139,432 common shares. The warrants are exercisable at a price of $0.01 per share for a period of 7 years. Following the transaction, the
Company’s ownership interest in Good Leaf is 8.8% on a fully diluted basis. 

  

	 	(vii)	 In the nine-month period ended December 31, 2018, Canopy Rivers further advanced an additional $9,000
under the Agripharm repayable debenture. 

  

	 	(viii)	 In the nine-month period ended December 31, 2018, Canopy Rivers further advanced an additional $2,000
under the Radicle repayable debenture. 

  

	 	(ix)	 On December 21, 2018 Canopy Rivers acquired 1,500,000 Series A Convertible Preferred Shares in Headset
Inc. (“Headset”) for $4,085 cash. Following the investment the Company’s ownership interest in Headset is 7.9% of the issued and outstanding shares. 

 

	 	(x)	 The Company holds a warrant to purchase shares of SLANG Worldwide Inc. (“SLANG Warrant”). The SLANG
Warrant allows the Company to acquire 31,669,945 shares of SLANG Worldwide Inc. for a total exercise price of one dollar. The triggering event is the date the growth, cultivation, production, sale, use and consumption of cannabis and
cannabis-related products are permitted in the US for any and all purposes under all applicable federal laws (“SLANG Triggering Event”). The SLANG warrant expires the earlier of two years following the SLANG Triggering Event and
December 15, 2023. 

  
 Page 28 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 Management has estimated the fair value of the SLANG Warrant at December 31, 2018 to be
$20,000 using a Black-Scholes option pricing model, across a series of possible exercise dates. The fair value of the SLANG Warrant was calculated as the sum of the probability weighted option values across the range of these dates. Up to
September 30, 2018 Management had estimated that this instrument had a nominal value. 
  

	 	(xi)	 BC Tweed has entered into call/put option agreements with the Partner to acquire all of the limited partnership
units of the limited partnerships which hold the greenhouses and related property. Since these options represent options to acquire the limited partnership units, the options will be accounted for as derivative financial instruments which will be
recognized initially and subsequently at fair value through profit or loss. The fair value of these options is $nil as the exercise price of the option approximates the fair value of the limited partnership units. 

 

	17.	 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

 

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Trade payables
	  	$	39,272	 	  	$	46,175	 
	 Accrued liabilities
	  	 	176,340	 	  	 	43,396	 
		  	  
	  
	 	  	  
	  
	 
	 Total accounts payable and accrued liabilities
	  	$	215,612	 	  	$	89,571	 
		  	  
	  
	 	  	  
	  
	 

 The accounts payable and accrued liabilities balance of $215,612 (March 31, 2018 – $89,571) is comprised
of amounts for property, plant and equipment of $98,043 (March 31, 2018 – $62,034), professional fees of $17,366 (March 31, 2018 – $7,391), excise taxes of $12,058 (March 31, 2018 – $nil), compensation related liabilities of $10,261
(March 31, 2018 – $5,747), marketing related liabilities of $11,426 (March 31, 2018 – $1,280), inventory purchase liabilities of $9,176 (March 31, 2018 – $nil), and other miscellaneous liabilities of $57,282 (March 31, 2018 –
$13,119). 

  
 Page 29 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	18.	 LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES 

 

	 	(a)	 Long-term debt 

 

											
	 	  	 	  	December 31,	 	  	March 31,	 
	 	  	 Maturity Date
	  	2018	 	  	2018	 
	 Convertible senior notes at 4.25% interest with semi-annual interest payments
	  	July 15, 2023	  				  			
				
	 Principal amount
	  		  	$	600,000	 	  	$	—  	 
	 Accrued interest
	  		  	 	13,668	 	  	 	—  	 
	 Non-credit risk fair value adjustment (FVTPL)
	  		  	 	26,730	 	  	 	—  	 
	 Credit risk fair value adjustment (FVOCI)
	  		  	 	62,520	 	  	 	—  	 
		  		  	  
	  
	 	  	  
	  
	 
		  		  	 	702,918	 	  	 	—  	 
				
	 Mortgages payable with five-year terms and amortization periods of seven to twenty years bearing
an annual interest rate of 4.5% to 5.3%
	  	December 1, 2019 to November 1, 2021	  	$	8,179	 	  	$	6,514	 
				
	 Loan payables with terms from forty-two to eighty-seven
months, bearing an annual interest rate between 1.23% and prime plus 3.0%
	  	April 20, 2020 to June 30, 2025	  	 	6,385	 	  	 	—  	 
				
	 Term loan at 10% interest with monthly repayment
	  		  	 	—  	 	  	 	1,564	 
				
	 Finance lease obligations
	  		  	 	74,014	 	  	 	344	 
		  		  	  
	  
	 	  	  
	  
	 
		  		  	 	791,496	 	  	 	8,422	 
	 Less: current portion
	  		  	 	(18,447	) 	  	 	(1,557	) 
		  		  	  
	  
	 	  	  
	  
	 
	 Long-term portion
	  		  	$	773,049	 	  	$	6,865	 
		  		  	  
	  
	 	  	  
	  
	 

 Convertible senior notes 

On June 20, 2018, the Company issued convertible senior notes (“the notes”) with an aggregate principal amount of $600,000. The
notes bear interest at a rate of 4.25% per annum, payable semi-annually on January 15th and July 15th of each year commencing from January 15, 2019. The notes will mature on July 15, 2023. The notes are subordinated in right of payment to
any existing and future senior indebtedness, including indebtedness under the revolving credit facility. The notes will rank senior in right of payment to any future subordinated borrowings. The notes are effectively junior to any secured
indebtedness and the notes are structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries. 

Holders of the notes may convert the notes at their option at any time from January 15, 2023 to the maturity date. The notes will be
convertible, at the holder’s option, at a conversion rate of 20.7577 common shares for every $1 principal amount of notes (equal to an initial conversion price of approximately $48.18 per common share), subject to adjustments in certain events.
In addition, the holder has the right to exercise the conversion option from September 30, 2018 to January 15, 2023, if (i) the market price of the Company common shares for at least 20 trading days during a period of 30 consecutive
trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day, (ii) during the 5 business day period after any consecutive 5 trading day
period (the “measurement period”) in which the trading price per $1 principal amount of the notes for each trading day in the measurement period was less than 98% of the product of the last reported sales price of the Company’s common
shares and the conversion rate on each such trading day, (iii) the notes are called for redemption or (iv) upon occurrence of certain corporate events (“Fundamental Change”). The Company may upon conversion by the holder, elect
to settle in either cash, common shares, or a combination of cash and common shares, subject to certain circumstances. Under the terms of the indenture if a Fundamental Change occurs and a holder elects to convert its notes from and including on the
date of the fundamental change up to, and including, the business day immediately prior to the fundamental change repurchase date, the Company may be required to increase the Conversion Rate for the Notes so surrendered for conversion by a number of
additional common shares (“Make Whole Fundamental Change”). 

  
 Page 30 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The Company could not redeem the notes prior to July 20, 2021, except in the event of
certain changes in Canadian tax law. On or after July 20, 2021, the Company could redeem for cash, subject to certain conditions, any or all of the notes, at its option, if the last reported sales price of the Company’s common shares for
at least 20 trading days during any 30 consecutive trading day period ending within 5 trading days immediately preceding the date on which the Company provides notice of redemption exceeds 130% of the conversion price on each applicable trading day.
The Company may also redeem the notes, if certain tax laws related to Canadian withholding tax change subject to certain further conditions. The redemption of notes in either case shall be at a redemption price equal to 100% of the principal amount
of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. 
 For accounting purposes, the Company
has designated the notes at fair value through profit or loss (“FVTPL”). The equity conversion option was not separately classified as equity, since the Company has the ability to settle the option at fair value in cash, common shares or a
combination of cash and common shares in certain circumstances. The Company does not separately account for the fair value of the equity conversion option as a derivative, as it has classified the entire notes as a liability accounted for at FVTPL.
The notes were initially recognized at fair value on the balance sheet with all subsequent changes in fair value excluding the impact of the change in fair value related to Company’s own credit risk being recorded immediately in the statement
of operations and changes in fair value related to the Company’s own credit risk through OCI. Transaction costs directly attributable to the issuance of the notes were immediately expensed in the statement of operations in the amount of
$16,380. 
 The overall change in fair value of the notes during the three and nine months ended December 31, 2018 was a decrease of
$198,306 and an increase $102,918 which included accrued contractual interest of $6,444 and $13,668. 
 On August 14, 2018 the Company
entered into a subscription agreement with CBG Holdings LLC (“CBG”). In accordance with the indenture, the closing of this investment would result in a Fundamental Change which provides the note holders with the right to surrender all or
any portion of their notes for conversion at any time from or after the date that is 30 scheduled trading days prior to anticipated effective date of the Fundamental Change. On September 18, 2018 the Company notified the note holders of this
proposed Fundamental Change and, the notes are subject to conversion at any time from or after September 18, 2018 until the related fundamental change repurchase date. As a result of the proposed Fundamental Change the Company does not have the
unconditional right to defer settlement of the liability and the convertible notes have been classified as current as of September 30, 2018. On November 1, 2018 this investment was completed (Note 19(a)(i)). 

No note holders surrendered any portion of their notes as at the repurchase date of December 5, 2018 and no other redemption events have
been triggered as of December 31, 2018 and the Company has therefore re-classified the convertible notes as non-current. 

Term loans 
 The term loan
was added to the existing lease agreement for the Toronto facilities and is held by a related party. On November 16, 2018 the Company purchased the leased facility and repaid the term loan.  

Finance lease obligations 

On October 24, 2018 the Company amended the terms of the lease agreements for the BC Tweed facilities in Delta and Aldergrove and the
leases are now classified as finance leases. The Company has recognized the assets under finance lease and related of lease obligation of $73,000. 

  
 Page 31 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	 	(b)	 Other long-term liabilities 

 

									
	 	  	December 31,
2018	 	  	March 31,
2018	 
	 Acquisition consideration related liabilities
	  	$	125,694	 	  	$	—  	 
	 Minimum royalty obligations
	  	 	27,587	 	  	 	—  	 
	 Due to former shareholders of S&B
	  	 	17,775	 	  	 	—  	 
	 Put liability
	  	 	9,600	 	  	 	61,150	 
	 Other
	  	 	2,707	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
		  	 	183,363	 	  	 	61,150	 
	 Less: current portion
	  	 	(61,357	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Long-term portion
	  	$	122,006	 	  	$	61,150	 
		  	  
	  
	 	  	  
	  
	 

  

	19.	 SHARE CAPITAL 

(a) Authorized 
 An
unlimited number of common shares. 
  

	 	(i)	 Equity Raises 

On November 1, 2018 the Company issued 104,500,000 common shares from treasury and two tranches of warrants to Constellation Brands, Inc.
(“CBI”) in exchange for proceeds of $5,072,500. The first tranche warrants (“New Warrants”) will allow CBI to acquire 88.5 million additional shares of Canopy for a fixed price of $50.40 per share. The second tranche
warrants (“Final Warrants”) allows the purchase of 51.3 million additional shares at a price equal to the 5-day volume weighted average price immediately prior to exercise. These warrants can
only be exercised after the New Warrants have been exercised. The New Warrants are immediately vested upon closing of the share purchase agreement and the Final Warrants become exercisable once the New Warrants have been exercised. Both the New and
Final Warrants expire on November 1, 2021. 
 The proceeds of the common share issuance were allocated to the common shares and New
Warrants based on their relative fair values in the amount of $3,567,149 and $1,505,351, respectively. The fair value of the common shares was determined using the closing price on October 31, 2018, and the fair value of the warrants was
determined using a Black-Scholes model. Share issuance costs of $8,509 were allocated to the common shares and $3,591 to the warrants. Since the Final Warrants will be issued for a price that is equal to the
5-day volume weighted average price immediately prior to exercise, they fail the ‘fixed for fixed’ criterion and will be classified as a derivative liability. Management has estimated that the value
of this liability is nominal and no value was allocated to the Final Warrants. 
 Through a wholly owned subsidiary, Greenstar Canada
Investment Limited Partnership, CBI currently owns approximately 18.9 million shares of the Company and warrants to acquire an additional 18.9 million shares a price of $12.9783 per common share (“Greenstar Warrants”). CBI also
holds convertible senior notes of the Company with an aggregate principal amount of $200,000. Following the exercise of the Greenstar Warrants, the New Warrants and the Final Warrants and conversion of these notes, CBI would hold approximately 57%
of the outstanding shares of Canopy, as adjusted for any potentially dilutive shares. 

  
 Page 32 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	 	(ii)	 Acquisitions 

During the nine months ended December 31, 2018 the Company issued the following shares as a result of business combinations that occurred
in the current or prior periods: 
  

																	
	 	  	Notes	 	  	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Issuance of shares for Annabis acquisition - net of share issue costs of $10
	  	 	11(a)((viii)	 	  	 	50,735	 	  	$	1,558	 	  	$	—  	 
	 Issuance of shares for DCL acquisition - net of share issue costs of $58
	  	 	11(a)(i)	 	  	 	666,362	 	  	$	24,644	 	  	$	694	 
	 Issuance of shares for Spectrum Cannabis Colombia S.A.S. acquisition - net of share issue costs of
$101
	  	 	11(a)(ii)	 	  	 	1,193,237	 	  	$	46,018	 	  	$	—  	 
	 Issuance of shares for CHI acquisition - net of share issue costs of $202
	  	 	11(a)(ii)	 	  	 	3,076,941	 	  	$	97,832	 	  	$	—  	 
	 Issuance of shares for Hiku acquisition - net of share issue costs of $250
	  	 	11(a)(iv)	 	  	 	7,943,123	 	  	$	543,616	 	  	$	—  	 
	 Shares released from escrow related to the Vert acquisition
	  				  	 	88,469	 	  	$	—  	 	  	$	—  	 
	 Issuance of shares for ebbu acquisition - net of share issue costs of $250
	  	 	11(a)(v)	 	  	 	5,275,005	 	  	$	233,802	 	  	$	29,880	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Acquisition related share issuances for the nine months ended December 31,
2018
	  				  	 	18,293,872	 	  	$	947,470	 	  	$	30,574	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	 	(iii)	 Other 

During the period ended December 31, 2018 the Company’s other share issuances were comprised of: 

 

													
	 	  	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Shares issued relating to milestone and performance conditions
	  	 	1,292,707	 	  	$	15,181	 	  	$	(15,202	) 
	 Shares released from escrow
	  	 	39,463	 	  	 	1,448	 	  	 	(1,460	) 
	 Shares issued in advance of meeting milestone and performance conditions
	  	 	46,781	 	  	 	2,076	 	  	 	(2,076	) 
	 Shares issued relating to fixed and intangible asset acquisitions
	  	 	61,492	 	  	 	2,251	 	  	 	—  	 
	 Shares issued relating to royalty agreements
	  	 	208,786	 	  	 	9,168	 	  	 	(2,864	) 
	 Shares issued for Newfoundland lease purchase option - net of share issue costs of $25
	  	 	332,009	 	  	 	8,714	 	  	 	—  	 
	 Shares issued to Canindica Capital Ltd
	  	 	595,184	 	  	 	23,004	 	  	 	(23,004	) 
	 Shares issued on conversion of Hiku debenture
	  	 	22,866	 	  	 	1,580	 	  	 	(949	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Other share issuances for the nine months ended December 31, 2018
	  	 	2,599,288	 	  	$	63,422	 	  	$	(45,555	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 33 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	 	(iv)	 Warrants 

 

													
	 	  	Number of
whole
warrants	 	  	Average
exercise
price	 	  	Warrant
value	 
	 Balance outstanding at March 31, 2018
	  	 	18,912,012	 	  	$	12.96	 	  	$	70,455	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Issuance of warrants 1
	  	 	88,472,861	 	  	 	50.40	 	  	 	1,501,760	 
	 Replacement warrants granted through Hiku acquisition (Note 9(a)(iv))
	  	 	920,452	 	  	 	41.28	 	  	 	30,611	 
	 Exercise of warrants
	  	 	(454,378	) 	  	 	41.12	 	  	 	(12,809	) 
	 Expiry of warrants
	  	 	(1	) 	  	 	3.80	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at December 31, 2018
1
	  	 	107,850,946	 	  	$	43.80	 	  	$	1,590,017	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	1 	 This balance excludes Final Warrants, which represent a derivative liability and have nominal value, see note
19(a)(i). 

 (b) Omnibus plan 

On September 15, 2017, shareholders approved an Omnibus Incentive Plan (“Omnibus Plan”) pursuant to which the Company is able to
issue share-based long-term incentives. All directors, officers, employees and independent contractors of the Company are eligible to receive awards of common share purchase options (“Options”) restricted share units (“RSUs”),
deferred share units (“DSUs”), stock appreciation rights (“Stock Appreciation Rights”), restricted stock (“Restricted Stock”), performance awards (“Performance Awards”) or other stock based awards
(collectively, the “Awards”), under the Omnibus Plan. In addition, shareholders also approved the 2017 Employee Stock Purchase Plan of the Company (the “Purchase Plan”). 

Under the Purchase Plan, the aggregate number of common shares that may be issued is 400,000, and the maximum number of common shares which may
be issued in any one fiscal year shall not exceed 200,000. 
 Under the Omnibus Plan, the maximum number of shares issuable from treasury
pursuant to Awards shall not exceed 15% of the total outstanding shares from time to time less the number of shares issuable pursuant to all other security-based compensation arrangements of the Company (being the existing employee stock option plan
(“ESOP”) and the Purchase Plan). The maximum number of common shares reserved for Awards is 50,197,864 at December 31, 2018. As of December 31, 2018, the only Awards issued have been options under the ESOP and RSUs. No shares
have been issued under the Purchase Plan as it has not yet been implemented. 
 The ESOP is administered by the Board of Directors of the
Company who establishes exercise prices, at not less than the market price at the date of grant, and expiry dates. Options under the Plan generally remain exercisable in increments with 1/3 being exercisable on each of the first, second and third
anniversaries from the date of grant, and have expiry dates set at six years from issuance. The Board of Directors has the discretion to amend general vesting provisions and the term of any award, subject to limits contained in the Plan. 

  
 Page 34 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The following is a summary of the changes in the Company’s ESOP options during the
period: 
  

									
	 	  	Options
issued	 	  	Weighted
average
exercise price	 
	 Balance outstanding at March 31, 2018
	  	 	17,245,835	 	  	$	12.95	 
		  	  
	  
	 	  	  
	  
	 
	 Options granted
	  	 	2,595,000	 	  	 	40.51	 
	 Options exercised
	  	 	(637,187	) 	  	 	8.00	 
	 Options forfeited/cancelled
	  	 	(234,153	) 	  	 	21.00	 
		  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at June 30, 2018
	  	 	18,969,495	 	  	$	16.79	 
		  	  
	  
	 	  	  
	  
	 
	 Options granted
	  	 	5,942,000	 	  	 	50.45	 
	 Replacement options issued as a result of the CHI acquisitions
	  	 	568,005	 	  	 	14.98	 
	 Replacement options issued as a result of the Hiku acquisition
	  	 	291,629	 	  	 	10.64	 
	 Options exercised
	  	 	(3,207,004	) 	  	 	6.48	 
	 Options forfeited/cancelled
	  	 	(355,287	) 	  	 	27.06	 
		  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at September 30, 2018
	  	 	22,208,838	 	  	$	28.16	 
		  	  
	  
	 	  	  
	  
	 
	 Options granted
	  	 	10,539,052	 	  	 	37.66	 
	 Options exercised
	  	 	(434,480	) 	  	 	8.83	 
	 Options forfeited/cancelled
	  	 	(759,289	) 	  	 	40.57	 
		  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at December 31, 2018
	  	 	31,554,121	 	  	$	31.30	 
		  	  
	  
	 	  	  
	  
	 

 For the three and nine months ended December 31, 2018 the Company recorded $34,984 and $79,462,
respectively, in share-based compensation expense related to options issued to both employees and consultants (for the three and nine months ended December 31, 2017 - $7,864 and $15,349 respectively). For the period ended December 31, 2018
compensation expense includes an amount related to 545,000 options being provided in exchange for services which are subject to performance conditions. 

During the second quarter of fiscal 2019, the Company issued replacement options to employees in accordance with the CHI and Hiku acquisitions
(Note 11(iii) and 11(iv), respectively). For the three- and nine-month period ended December 31, 2018 (December 31, 2017 - $nil) the Company recorded share-based compensation expense of $1,484 and $9,569, respectively related to these
replacement options, of which $7,502 relates to an immediate share-based compensation expense recorded at the CHI acquisition date to reflect the accelerated vesting of certain CHI replacement options. 

In determining the amount of share-based compensation related to options issued during the year, the Company used the Black-Scholes option
pricing model to establish the fair value of options granted during the three months ended December 31, 2018 and 2017 on their measurement date by applying the following assumptions: 

 

					
	 	  	December 31,	 	December 31,
	 	  	2018	 	2017
	 Risk-free interest rate
	  	1.96%	 	1.61%
	 Expected life of options (years)
	  	2-5	 	3-5
	 Expected annualized volatility
	  	77%	 	64%
	 Expected forfeiture rate
	  	12%	 	10%
	 Expected dividend yield
	  	nil	 	nil
	 Black-Scholes value of each option
	  	$21.56	 	$9.05

 Volatility was estimated by using the historical volatility of the Company and other companies that the
Company considers comparable that have trading and volatility history prior to the Company becoming public. Beginning the fourth quarter of Fiscal 2017, the Company began using its own historical volatility. The expected life in years represents the
period of time that options granted are expected to be outstanding. The risk-free rate was based on the zero coupon Canada government bonds with a remaining term equal to the expected life of the options. 

  
 Page 35 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The Company recorded $3,194 and $16,053 in the three and nine months ended December 31,
2018 (three and nine months ended December 31, 2017 – $1,101 and $2,373) in share-based compensation expense related to the issuance of shares and options in Canopy Rivers to employees and consultants (refer to Note 13). 

During the nine months ended December 31, 2018, 4,278,671 ESOP options were exercised ranging in price from $0.56 to $29.57 for gross
proceeds of $28,728. 
 During the three and nine months ended December 31, 2018 the Company issued 7,300 and 101,821, respectively,
RSUs to consultants and directors of the Company of which 52,871 vested immediately, 29,306 vest over 5 years, 19,644 vest over 1 year. For the three months and nine months ended December 31, 2018 the Company recorded $400 and $3,075 in
share-based compensation expense related to these RSUs (three and nine months ended December 31, 2017 – $nil). 
 (c)
Share-based compensation expense related to acquisition and asset purchase milestones 
 Share-based compensation expense related to
acquisition milestones is comprised of: 
  

																					
	 	  	 	 	  	Compensation expense	 	  	Compensation expense	 
	 	  	Notes	 	  	December 31,
2018
(3 months)	 	  	December 31,
2017
(3 months)	 	  	December 31,
2018
(9 months)	 	  	December 31,
2017
(9 months)	 
	 Apollo / Bodystream
	  				  	$	1,481	 	  	$	1,044	 	  	$	5,568	 	  	$	3,132	 
	 Spektrum Cannabis GmBH
	  				  	 	35	 	  	 	87	 	  	 	168	 	  	 	259	 
	 Spot
	  				  	 	65	 	  	 	149	 	  	 	273	 	  	 	204	 
	 Spectrum Denmark
	  				  	 	880	 	  	 	4,738	 	  	 	9,259	 	  	 	4,737	 
	 BC Tweed
	  				  	 	—  	 	  	 	2,732	 	  	 	1,387	 	  	 	2,732	 
	 Vert Mirabel
	  				  	 	84	 	  	 	164	 	  	 	1,100	 	  	 	164	 
	 Green Hemp
	  				  	 	231	 	  	 	—  	 	  	 	691	 	  	 	—  	 
	 Intellectual property acquisition
	  				  	 	157	 	  	 	—  	 	  	 	739	 	  	 	—  	 
	 Annabis
	  	 	11(a)(viii)	 	  	 	192	 	  	 	—  	 	  	 	542	 	  	 	—  	 
	 DCL
	  	 	11(a)(i)	 	  	 	3,957	 	  	 	—  	 	  	 	6,405	 	  	 	—  	 
	 Colombia
	  	 	11(a)(ii)	 	  	 	9,845	 	  	 	—  	 	  	 	19,262	 	  	 	—  	 
	 Canindica
	  	 	11(a)(ii)	 	  	 	6,643	 	  	 	—  	 	  	 	36,001	 	  	 	—  	 
	 ebbu
	  	 	11(a)(v)	 	  	 	279	 	  	 	—  	 	  	 	279	 	  	 	—  	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
		  				  	$	23,849	 	  	$	8,914	 	  	$	81,674	 	  	$	11,228	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 At December 31, 2018 there were up to 6,457,889 shares to be issued on the completion of acquisition and
asset purchase milestones. In certain cases, the number of shares to be issued is based on the volume weighted average share price at the time the milestones are met. The number of shares has been estimated assuming the milestones were met at
December 31, 2018. The number of shares excludes shares to be issued on July 4, 2023 to the previous shareholders of Spectrum Colombia and Canindica based on the fair market value of Canopy LATAM on that date. The number of shares to be
issued to the previous shareholders of Spectrum Colombia and Canindica excludes shares to be issued on July 4, 2023 based on the fair market value of Canopy LATAM on that date. 

(d) Other share-based payments 

The Company recorded share-based compensation of $nil ($nil and a gain of $14 for the three and nine month period ended December 31, 2017)
for escrowed shares issued on the acquisition of MedCann Access that were related to employment. 
 The Company recorded expenses in the
amount of $177 and $4,763 for the three and nine month period ended December 31, 2018 ($1,137 and $1,314 for the three and nine months ended December 31, 2017, respectively) related to shares provided in exchange for royalty and marketing
services. The Company has determined that these services received are best measured by reference to the fair value of the equity granted as the services are rendered. These expenses have been allocated as either sales and marketing expenses or
royalty expenses reflected in cost of sales, depending on the terms of the agreement. 

  
 Page 36 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	20.	 OTHER INCOME, NET 

 

																					
	 	  	 	 	  	Three months ended	 	 	Nine months ended	 
	 	  	 	 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 
	 	  	Notes	 	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Fair value changes on financial assets classified as FVTPL
	  	 	16	 	  	$	36,457	 	 	$	35,854	 	 	$	65,310	 	 	$	32,500	 
	 Loss on exchange of TerrAscend shares
	  	 	15(vi)	 	  	 	(6,322	) 	 	 	—  	 	 	 	(6,322	) 	 	 	—  	 
	 Convertible debt issuance costs
	  	 	18(a)	 	  	 	—  	 	 	 	—  	 	 	 	(16,380	) 	 	 	—  	 
	 Fair value changes on financial liabilities designated as FVTPL
	  	 	18(a)	 	  	 	185,796	 	 	 	—  	 	 	 	(40,398	) 	 	 	—  	 
	 Fair value changes on other liabilities
	  	 	18(b)	 	  	 	(479	) 	 	 	—  	 	 	 	(19,429	) 	 	 	—  	 
	 Gain on warrant liability remeasurement
	  	 	15(i)	 	  	 	—  	 	 	 	—  	 	 	 	720	 	 	 	—  	 
	 Interest income
	  				  	 	18,643	 	 	 	304	 	 	 	22,196	 	 	 	915	 
	 Interest (expense)
	  				  	 	(1,025	) 	 	 	(186	) 	 	 	(1,374	) 	 	 	(643	) 
	 Gain/loss disposal of property, plant and equipment
	  				  	 	272	 	 	 	(80	) 	 	 	(1,637	) 	 	 	(209	) 
	 Gain on disposal/acquisition of consolidated entity
	  	 	11(a)(iii)	 	  	 	—  	 	 	 	8,820	 	 	 	62,682	 	 	 	8,820	 
	 Other income (expense), net
	  				  	 	1,889	 	 	 	(71	) 	 	 	(1,902	) 	 	 	(102	) 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total other income, net
	  				  	$	235,231	 	 	$	44,641	 	 	$	63,466	 	 	$	41,281	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  
 Page 37 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	21.	 EARNINGS PER SHARE 

A computation of earnings (loss) per share and weighted average shares of the Company’s common stock outstanding for the three and nine
months ended December 31, 2018 and 2017 is as follows: 
  

																	
	 	  	Three months ended
December 31,	 	  	Nine months ended
December 31,	 
	 	  	2018	 	  	2017	 	  	2018	 	 	2017	 
	 Net income (loss) attributable to common stockholders
	  	$	67,582	 	  	$	1,583	 	  	$	(349,831	) 	 	$	(8,809	) 
	 Numerator adjustments for diluted EPS
	  				  				  				 			
	 Income allocated to non-controlling interest
	  	 	(1,105	) 	  	 	—  	 	  	 	(1,212	) 	 	 	—  	 
	 Removal of
mark-to-market gain on convertible senior notes
	  	 	(187,504	) 	  	 	—  	 	  	 	—  	 	 	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Net income (loss) attributable to common stockholders for diluted EPS
	  	$	(121,027	) 	  	$	1,583	 	  	$	(351,043	) 	 	$	(8,809	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Basic weighted average common shares outstanding
	  	 	303,281,549	 	  	 	182,029,481	 	  	 	241,806,351	 	 	 	171,075,324	 
	 Denominator adjustments for diluted EPS
	  
	  				 			
	 Assumed exercise of put liability
	  	 	238,470	 	  	 	—  	 	  	 	238,470	 	 	 	—  	 
	 Assumed exercise of stock options
	  	 	—  	 	  	 	7,441,248	 	  	 	—  	 	 	 	—  	 
	 Assumed exercise of warrants
	  	 	—  	 	  	 	5,268,315	 	  	 	—  	 	 	 	—  	 
	 Assumed conversion of senior notes
	  	 	12,454,620	 	  	 	—  	 	  	 	—  	 	 	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Dilutive weighted average common shares outstanding
	  	 	315,974,639	 	  	 	194,739,044	 	  	 	242,044,821	 	 	 	171,075,324	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Earnings (loss) per share attributable to common stockholders
	  
	 			
	 Basic
	  	$	0.22	 	  	$	0.01	 	  	$	(1.45	) 	 	$	(0.05	) 
	 Diluted
	  	$	(0.38	) 	  	$	0.01	 	  	$	(1.45	) 	 	$	(0.05	) 

 For the three and nine months ended December 31, 2018 and 2017, the following securities were not included
in the computation of diluted shares outstanding because the effect would be anti-dilutive or because milestones were not yet achieved for awards contingent on the achievement of licensing, operational, cultivation or sales
milestones:     
  

																	
	 	  	Three months ended
December 31,	 	  	Nine months ended
December 31,	 
	 	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Shares issuable upon settlement of Vert Mirabel put liability
	  	 	0	 	  	 	—  	 	  	 	0	 	  	 	—  	 
	 Shares issuable upon vesting and exercise of stock options
	  	 	31,555,057	 	  	 	1,607,500	 	  	 	19,229,357	 	  	 	14,350,455	 
	 Shares issuable upon exercise of warrants
	  	 	107,850,946	 	  	 	—  	 	  	 	107,850,946	 	  	 	5,268,315	 
	 Shares issuable upon conversion of convertible senior notes
	  	 	—  	 	  	 	—  	 	  	 	12,454,620	 	  	 	—  	 
	 Shares issuable upon achievement of certain milestones
	  	 	12,195,574	 	  	 	6,701,652	 	  	 	12,195,574	 	  	 	6,701,652	 

  
 Page 38 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	22.	 COMMITMENTS AND CONTINGENCIES 

(a) In March 2015, a claim was commenced against Canopy Growth Corporation by the former CEO for $330 in specified damages for breach of
contract and wrongful dismissal. The litigation process will continue into the foreseeable future unless settled. No amount has been recorded in the interim financial statements since the amount cannot be reliably measured at this point. 

(b) Prior to its acquisition by the Company, Mettrum had initiated voluntary Type III recalls for products where trace amounts of an
unauthorized pesticide was found to have been applied in certain Mettrum products. A Type III recall refers to a situation in which the use of, or exposure to, a product is not likely to cause any adverse health consequences. In March 2017, two
separate class action lawsuits relating to the Mettrum recalls were initiated naming Mettrum Health Corp. as respondent. 
 The proposed
action seeks damages for the proposed class of individuals who purchased the products affected by the recall. The Company and its insurers are contesting the litigation. The litigation process will continue into the foreseeable future before the
class action suit is certified by the court and unless settled out of court. No amount has been recorded in the interim financial statements since the amount cannot be reliably measured at this point. 

 

	23.	 SUPPLEMENTARY CASH FLOW INFORMATION 

The changes in non-cash working capital items are as follows: 

 

									
	 	  	For the nine months ended	 
	 	  	December 31,
2018	 	  	December 31,
2017	 
	 	  	 	 	  	 (Restated - see

note 3)
	 
	 Amounts receivable
	  	$	(56,137	) 	  	$	(3,388	) 
	 Prepaid expenses and other assets
	  	 	(22,007	) 	  	 	(15,200	) 
	 Biological assets and inventory
	  	 	(109,182	) 	  	 	(17,475	) 
	 Accounts payable and accrued liabilities
	  	 	57,362	 	  	 	9,331	 
	 Deferred revenue
	  	 	(845	) 	  	 	137	 
	 Other liabilities
	  	 	1,262	 	  	 	(80	) 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	(129,547	) 	  	$	(26,675	) 
		  	  
	  
	 	  	  
	  
	 

 Non-cash transactions 

Excluded from the December 31, 2018 interim statements of cash flows was a total of $98,568 in accounts payable and accrued liabilities as
follows: $98,043 of property, plant and equipment and assets in process purchases and $525 of share issue costs. Included in the December 31, 2018 interim statements of cash flows is a total of $49,679 in accounts payable and accrued
liabilities as follows: $49,627 of property, plant and equipment and assets in process purchases and $52 of share issue costs. 
 Excluded
from the December 31, 2017 interim statements of cash flows was a total of $9,058 in accounts payable and accrued liabilities relating to property, plant and equipment and assets in process purchases. Included in the December 31, 2017
interim statements of cash flows was a total of $2,491 in accounts payable and accrued liabilities as follows: $2,338 of property, plant and equipment and assets in process purchases and $153 of share issue costs. 

Cash and cash equivalents consist of the following: 
  

									
	 	  	December 31,
2018	 	  	March 31,
2018	 
	 Cash
	  	$	2,014,590	 	  	$	322,560	 
	 Short term investments
	  	 	2,101,280	 	  			
		  	  
	  
	 	  			
	 Total cash and cash equivalents
	  	$	4,115,870	 	  	$	322,560	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 39 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

	24.	 FINANCIAL INSTRUMENTS 

(a) Fair value of financial assets and liabilities that are measured at fair value on a recurring basis

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of level 2 financial instruments:

  

					
	 Financial asset/financial liability
	 	 Valuation techniques
	 	 Key inputs

	AusCann shares	 	Put option pricing model	 	Quoted prices in active market
			
	AusCann options	 	Black-Scholes option pricing model	 	Quoted prices in active market
			
	Convertible senior note	 	Convertible note pricing model	 	Quoted prices in over-the-counter broker market
			
	JWC warrants	 	Black-Scholes option pricing model	 	Quoted prices in active market
			
	Solo Growth shares	 	Put option pricing model	 	Quoted prices in active market
			
	TerrAscend warrants	 	Black-Scholes option pricing model	 	Quoted prices in active market

  
 Page 40 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 The following table summarizes the valuation techniques and significant unobservable inputs
in the fair value measurement of level 3 financial instruments 
  

							
	 Financial

asset/financial

liability            
	  	 Valuation

techniques
	  	 Significant

unobservable

inputs
	  	
Relationship of unobservable inputs to fair

value

	Agripharm warrant	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	Agripharm royalty interest and repayable debenture	  	Discounted cash flow	  	Discount rate	  	Increase or decrease in discount rate will result in a decrease or increase in fair value
				
		  		  	Future royalties	  	Increase in future royalties to be paid will result in an increase in fair value
				
	BC Tweed and Vert Mirabel put liability	  	Discounted cash flow	  	Discount rate	  	Increase or decrease in discount rate will result in a decrease or increase in fair value
				
		  		  	Future wholesale price and production levels	  	Increase in future wholesale price and production levels will result in an increase in fair value
				
	BC Tweed call option	  	Market approach	  	Appraised value of property	  	Increase or decrease in value will result in a increase or decrease in fair value
				
	California Option	  	Discounted cash flow	  	Probability and timing of US legalization	  	Increase or decrease in probability of US legalization will result in an increase or decrease in fair value
				
	CanapaR call option	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in value will result in a increase or decrease in fair value
				
	Civilized shares	  	Market approach	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	Civilized warrants	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	Good Leaf shares	  	Market approach	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	Good Leaf warrants	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	Headset shares	  	Market approach	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	HydRx shares	  	Market approach	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	JWC royalty interest	  	Discounted cash flow	  	Discount rate	  	Increase or decrease in discount rate will result in a decrease or increase in fair value
				
		  		  	Future royalties	  	Increase in future royalties to be paid will result in an increase in fair value
				
	Radicle repayable debenture	  	Discounted cash flow	  	Discount rate	  	Increase or decrease in discount rate will result in a decrease or increase in fair value
				
	SLANG Warrant	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
		  		  	Probability and timing of US legalization	  	Increase or decrease in probability of US legalization will result in an increase or decrease in fair value
				
	TerrAscend Exchangeable Shares	  	Put option pricing model	  	Probability and timing of US legalization	  	Increase or decrease in probability of US legalization will result in an increase or decrease in fair value

  
 Page 41 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 

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

 
  

 During the nine month period ended December 31, 2018, there were no transfers of amounts
between levels. 
 (b) Fair value of financial assets and liabilities that are not measured at fair value but fair value disclosures are
required 
 The carrying values of cash, cash equivalents, accounts receivable and restricted investments and accounts payable and
accrued liabilities approximate their fair values due to their short-term to maturity. The carrying value of mortgage payables approximates their fair value. 
  

	25.	 SEGMENTED INFORMATION 

The Company operates in two segments. 1) Cannabis operations, which encompasses the production, distribution and sale of both medical and
recreational cannabis and 2) Canopy Rivers, through which the Company provides growth capital and strategic support in the global cannabis sector, where federally lawful. Financial information for Canopy Rivers is included in Note 13. 

All property, plant and equipment and intangible assets are located in Canada, except for $70,604 which is located outside of Canada. 

All revenues were principally generated in Canada during the three and nine months ended December 31, 2018, except for $6,089 and $11,699,
respectively, related to exported medical cannabis generated outside of Canada (three and nine months ended December 31, 2017 - $994 and $1,404, respectively). 
  

	26.	 CAPITAL MANAGEMENT 

As at December 31, 2018 total managed capital was comprised of shareholders’ equity and debt of $8,215,174 (March 31, 2018 -
$1,251,660). 
 As described in Note 19, on November 1, 2018 the Company issued shares and warrants to CBI for cash consideration of
$5,072,500 to fund domestic and international expansion and emerging opportunities including research, production, distribution and sale of hemp as well as innovation investments. 

The Company is subject to externally imposed restrictions related to covenants on its mortgages payable. 

 

	27.	 SUBSEQUENT EVENT 

On February 4, 2019, Canopy Rivers announced that it had entered into an agreement with CIBCapital Markets (“CIBC”) and Eight
Capital (together with CIBC, the “Joint Bookrunners”), under which the Joint Bookrunners have agreed to purchase, together with a syndicate of underwriters (the “Underwriters”), 11,500,000 subordinated voting shares of Canopy
Rivers (the “Subordinated Voting Shares”) on a “bought deal” basis at a price of $4.80 per Subordinated Voting Share (the “Issue Price”) for gross proceeds of approximately $55,000 (the “Bought Deal”). 

Concurrent with the Bought Deal, Canopy Growth, will purchase a minimum of 6,250,000 Subordinated Voting Shares on a private placement basis,
at a price per Subordinated Voting Share equal to the Issue Price (the “Private Placement” and together with the Bought Deal, the “Offering”) for additional gross proceeds of a minimum of approximately $30,000. Canopy Growth
currently owns approximately 26.5% of the issued and outstanding shares of Canopy Rivers on a non-diluted basis and has elected to subscribe under the Private Placement for more than its pro rata participation
right. Following completion of the Offering (prior to giving effect to an over-allotment options granted to the Underwriters), Canopy Growth’s ownership interest in Canopy Rivers will increase to approximately 27.3% of the issued and
outstanding shares of Canopy Rivers on a non-diluted basis. The combined gross proceeds to Canopy Rivers under the Offering will be a minimum of approximately $85,000 and is expected to close on or about
February 27, 2019. 

  
 Page 42EX-4.16

 Exhibit 4.16 

CANOPY GROWTH CORPORATION 
 AMENDED AND RESTATED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 FOR THE THREE AND NINE MONTHS ENDED
DECEMBER 31, 2018 
 AMENDED AND RESTATED AS OF FEBRUARY 20, 2019 

 Canopy Growth Corporation (“the Company” or “Canopy Growth”) is a publicly traded
corporation, incorporated in Canada, with its head office located at 1 Hershey Drive, Smiths Falls, Ontario. Common shares of Canopy Growth trade on the Toronto Stock Exchange (“TSX”) under the ticker symbol “WEED” and on the New
York Stock Exchange (“NYSE”) under the symbol “CGC”. 
 Notice to Reader 

Please be advised that the following change was made to the management’s discussion and analysis of financial condition and results of operations for the
three and nine months ended December 31, 2018 (“MD&A”) as previously filed. 
  

	 	i)	 The correction of the adjusted EBITDA loss for the nine months ended December 31, 2018 from $69,006 to
$155,154. The correction was made due to a formula error in the spreadsheet supporting the year to date Adjusted EBITDA loss calculation. 

The unaudited condensed interim consolidated financial statements for the three and nine months ended December 31, 2018, filed on February 14, 2019,
were unaffected by the formula error. Further, the Adjusted EBITDA loss for the three months ended as December 31, 2018 was correct as reported, as were all prior quarters as released. Other than as expressly set forth above, the revised
MD&A does not purport to update or restate the information in the original MD&A or reflect any events that occurred after the date of the filing of the Original MD&A other than changes to the sections entitled Results of Operations,
Third Quarter Review, and Adjusted EBITDA (Non-GAAP Measure). 
 This Management’s Discussion and Analysis of
the Financial Condition and Results of Operation (“MD&A”) is amended and restated as of February 20, 2019. It should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements (the
“Interim Financial Statements”) for the three and nine months ended December 31, 2018, including the accompanying notes. 
 This MD&A was
prepared with reference to National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators. Under the U.S./Canada Multijurisdictional Disclosure System, we are
permitted to prepare this MD&A in accordance with Canadian disclosure requirements which may differ from U.S. disclosure requirements. This MD&A provides information for the three and nine months ended December 31, 2018 and up to and
including February 14, 2019 other than as expressly set forth above. 
 The Interim Financial Statements and this MD&A have been reviewed by the
Company’s Audit Committee and were approved by the Company’s Board of Directors on February 20, 2019. 
 The accompanying Interim Financial
Statements were prepared in compliance with International Financial Reporting Standards 34 – Interim Financial Reporting (“IAS 34”), in accordance with subparagraph 3.2(1) (b) of NI 52-107 and
include the accounts of the Company and its subsidiaries and the Company’s interests in affiliated companies (see page 5). All intercompany balances and transactions have been eliminated on consolidation. 

Additional information including this MD&A, the Interim Financial Statements, and press releases have been filed electronically through the System for
Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com or at www.sec.gov/edgar and also on the Company’s website at www.canopygrowth.com. 

Canopy Growth does not engage in any unlawful U.S. marijuana-related activities as defined in Canadian Securities Administrators Staff Notice 51-352. While the Company has several partnerships with U.S.-based companies that may themselves participate in the U.S. cannabis market, these relationships are licensing relationships that see intellectual
property developed in the United States brought into Canada, and in no manner involves Canopy Growth in any unlawful US activities respecting cannabis. Where a non-controlled affiliate has expressed an intent
to enter the U.S. cannabis market, the Company has taken steps to insulate itself from all economic and voting interests until such time that U.S. federal laws change in favour of cannabis related activities. (See Corporate Position on Conducting
Business in the United States) 
 Financial information contained herein is expressed in thousands of Canadian dollars, except share and per share
amounts, or as otherwise stated. 

  
 2 

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This MD&A contains certain “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 Canadian securities legislation, including but not limited to statements relating to: 
  

	•	 	 assumptions and expectations described in the Company’s critical accounting policies and estimates;

  

	•	 	 the Company’s expectations regarding the adoption and impact of certain accounting pronouncements;

  

	•	 	 the Company’s expectations regarding legislation, regulations and licensing related to the cultivation,
production and sale of cannabis and hemp products by the Company’s wholly-owned subsidiaries; 

  

	•	 	 the expected number of users of medical cannabis or the size of the legal medical cannabis market in Canada and
internationally; 

  

	•	 	 the expected number of users of recreational cannabis or the size of the legal recreational cannabis market in
Canada and internationally; 

  

	•	 	 the expected number of users of hemp or the size of the legal hemp market in Canada and internationally;

  

	•	 	 the potential time frame for the implementation of legislation to legalize regulated medical or recreational
cannabis, or hemp internationally and the potential form implementation of the legislation will take, including the method of delivery and framework adopted or to be adopted by various international jurisdictions; 

 

	•	 	 the ability to enter and participate in international market opportunities; 

 

	•	 	 the Company’s expectations with respect to the Company’s future financial and operating performance;

  

	•	 	 the Company’s expectations with respect to future performance, results and terms of strategic initiatives,
strategic agreements and supply agreements; 

  

	•	 	 product sales expectations; 

 

	•	 	 development of affiliated brands, product diversification and future corporate development;

  

	•	 	 anticipated results of research and development; 

 

	•	 	 inventory and production capacity expectations including discussions of plans or potential for expansion of
capacity at existing or new facilities; 

  

	•	 	 expectations with respect to future expenditures and capital activities; 

 

	•	 	 statements about expected use of proceeds from fund raising activities; and 

 

	•	 	 the Company’s ability to achieve profitability without further equity or debt financing.

 The words “plans”, “expects”, “is expected”, “budget”, “scheduled”,
“estimates” “forecasts”, “intends”, “anticipates”, or “believes” or variation (including negative variations) of such words and phrases, or statements that certain actions, events, or results
“may”, “could”, “would”, “might”, or “will” be taken, occur or to achieve are all forward-looking statements. Forward-looking statements are based on the reasonable assumptions, estimates, internal
and external analysis and opinions of management made considering its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that
such statements are made. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements. This MD&A should be read in conjunction with the risk factors described in the “Risk and Uncertainties” section of this MD&A and as
described in the Company’s annual information form for the year ended March 31, 2018. Although the Company has attempted to identify important factors that could cause actions, events or results to differ materially from those described in
the forward-looking statements, there may be other factors that cause actions, events, or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as at the date of the MD&A. There can
be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the
forward-looking statements. The Company does not undertake to update any forward-looking statements except as required by applicable securities laws. 

  
 3 

 CORPORATE STRATEGY 

Canopy Growth, an early mover in Canadian and international markets, is a multi-brand cannabis and hemp company that management believes its strong focus on
and investment in the development of intellectual property, domestic and international markets, differentiated products, brands, increased cannabis and hemp supply, securing channels to market, and education, to help citizens safely, effectively and
responsibly use cannabis and hemp, will create a dominant global business with the potential to generate a significant and sustained return on invested capital over the long-term. 

To achieve this, the Company will continue making deliberate investments, including via acquisition and entering into strategic partnerships to: 

 

	•	 	 Invest in the development of international markets in which cannabis or hemp is or is expected to become
federally legal/permissible, with the goal of increasing the Company’s total addressable market over the medium to long term; 

  

	•	 	 Invest in research and development activities to increase cultivation efficiency and yield and to develop
protectable intellectual property; 

  

	•	 	 Invest in research and development activities related to the development and production of value-added,
higher-margin cannabis and hemp-based consumer products to increase the Company’s total addressable market over the medium to long-term and to develop protectable intellectual property; 

 

	•	 	 Invest in research and development activities related to the development of value-added, higher margin, cannabis
and hemp-based medical treatments to increase the Company’s total addressable market over the medium to long-term and to develop protectable intellectual property; 

 

	•	 	 Invest in the marketing, production and sale of value-added, higher margin, cannabis and hemp based consumer and
medical products as permitted by regulations; 

  

	•	 	 Invest in research and development activities to increasing the capacity and efficiency of the Company’s
post-harvest processing capabilities and to develop protectable intellectual property; 

  

	•	 	 Invest in research and development activities related to packaging automation to improve operating efficiencies
and develop protectable intellectual property; 

  

	•	 	 Implement retail sales strategies, effective sales management and market support capabilities to help drive and
participate in the growth of the Canadian Regulated Recreational, or Adult Access market; 

  

	•	 	 Increase the strength and differentiation of the Company’s multiple brands; 

 

	•	 	 Implement robust information technology systems including Enterprise Resource Planning; 

 

	•	 	 Increase the efficiency and effectiveness of the Company’s customer engagement resources;

  

	•	 	 Support and participate in the development of social responsibility initiatives related to cannabis; and

  

	•	 	 Foster a positive, challenging and rewarding work environment for the Company’s staff.

 In the third quarter, Canopy Growth closed the previously announced strategic $5 billion investment from Fortune 500 beverage
leader Constellation Brands. These funds will be deployed towards the Company’s core strategic objectives of (i) intellectual property development or acquisition, and (ii) replicating the Company’s Canadian platform for success
across many international markets. These objectives will be achieved through international acquisitions as well as continued internal investments across the globe. 

BUSINESS TRANSITION 
 In the period leading up to
legalizing recreational cannabis in Canada on October 17, 2018, while operating in an existing medical cannabis market, the Company began expanding its Canadian business model from business to consumer (“B2C”) transactions to a
hybrid-business model dominated by business to business (“B2B”) transactions in a new expanded market, both through provincial on-line and brick and mortar stores as well as continuation of B2C
online medical sales and introducing brick and mortar retail stores where permitted in a recreational market. 
 From inception of the Company’s
business up to the launch of the recreational market in Canada on October 17, 2018, the Company has been in control of every aspect of the sales process to the Company’s Canadian end customers, from product selection, to inventory
management and logistics, to the operation of the Company’s online medical cannabis sales portal. 
 With the opening of the new recreational cannabis
market in Canada on October 17, 2018, the Company’s business transitioned largely to a B2B model. Being a brand new market, it will take some time for Licensed Producers (“LP”), including Tweed Inc. (“Tweed”), and
provincial/territorial agencies to develop an understanding and readiness for the real demand profile for regulated recreational cannabis products, including the type/strain and quantity of products.

  
 4 

 
Evidence of these early challenges were observable on launch of recreational cannabis on October 17, 2018 and through to December 31, 2018. Management believes these challenges
throughout the sector supply chain will continue in the months to come before stabilizing. 
 In transitioning to a largely B2B model in Canada, the Company
wholesales large quantities of cannabis as requested by provincial/territorial agencies for distribution to new brick & mortar and online retail stores. In this model, sales of the Company’s products are impacted by many factors that
are beyond the Company’s control including the profile of cannabis products (type/strain) being purchased by provincial/territorial agencies, the size and frequency of wholesale cannabis orders received from provincial/territorial agencies, the
effectiveness of inventory and distribution management systems operated by provincial/territorial agencies, the size of brick & mortar retail networks and the quality of the shopping experience delivered by online and brick and mortar
retail stores. 

  
 5 

 CORPORATE STRUCTURE 

Controlled subsidiaries 
  

									
	Legal entity	  	Defined as	  	% Ownership	 	 	Accounting method
	 Tweed Inc.
	  	Tweed	  	 	100.0	% 	 	consolidation            
	 Tweed Farms Inc.
	  	Tweed Farms	  	 	100.0	% 	 	consolidation
	 1955625 Ontario Inc.
	  	1955625 Ontario Inc.	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis Canada Ltd. (formerly Mettrum Ltd.)
	  	Spectrum Cannabis	  	 	100.0	% 	 	consolidation
	 BC Tweed Joint Venture Inc.
	  	BC Tweed	  	 	100.0	% 	 	consolidation
	 Tweed Grasslands Cannabis Inc.
	  	Tweed Grasslands	  	 	100.0	% 	 	consolidation
	 Mettrum Hempworks Inc.
	  	Mettrum Hempworks	  	 	100.0	% 	 	consolidation
	 Hiku Brands Company Ltd.
	  	Hiku	  	 	100.0	% 	 	consolidation
	 POS Holdings Inc.
	  	POS	  	 	0.0	% 	 	consolidation
	 Spektrum Cannabis GmbH
	  	Spektrum Cannabis	  	 	100.0	% 	 	consolidation
	 Vert Cannabis Inc.
	  	Vert Cannabis	  	 	100.0	% 	 	consolidation
	 11065220 Canada Inc.
	  	11065220 Canada Inc.	  	 	100.0	% 	 	consolidation
	 2344823 Ontario Inc. d/b/a Bodystream
	  	Bodystream	  	 	100.0	% 	 	consolidation
	 Apollo Applied Research Inc. and Apollo CRO Inc.
	  	together “Apollo”	  	 	100.0	% 	 	consolidation
	 EB Transaction Sub I, LLC
	  	Transaction Sub I	  	 	100.0	% 	 	consolidation
	 Spot Therapeutics Inc.
	  	Spot	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis Australia PTY Ltd.
	  	Spectrum Australia	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis Farms Australia PTY Ltd.
	  	Spectrum Australia Farms	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis Czech s.r.o
	  	Spectrum Czech	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis Chile SpA
	  	Spectrum Chile	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis (Lesotho) PTY Ltd. (formerly DaddyCann Lesotho PTY Limited)
	  	DCL	  	 	100.0	% 	 	consolidation
	 Storz & Bickel GmbH & Co, KG
	  	S&B	  	 	100.0	% 	 	consolidation
	 Canopy Health Innovations Inc.
	  	CHI	  	 	100.0	% 	 	consolidation
	 Canopy LATAM Corporation
	  	Canopy LATAM	  	 	100.0	% 	 	consolidation
	 Spectrum Cannabis

Colombia S.A.S.
	  	Spectrum Colombia	  	 	100.0	% 	 	consolidation
	 Les Serres Vert Cannabis
	  	Vert Mirabel	  	 	66.7	% 	 	consolidation
	 Spectrum Cannabis Denmark Aps
	  	Spectrum Cannabis Denmark	  	 	82.0	% 	 	consolidation
	 Grow House JA Limited
	  	Tweed JA	  	 	49.0	% 	 	consolidation
	 Canopy Rivers Corporation
	  	Canopy Rivers	  	 	27.2	% 	 	consolidation

 Investments in affiliates 
  

									
	Legal entity	  	Defined as	  	% Ownership	 	 	Accounting method
	 Agripharm Corp.
	  	Agripharm	  	 	40.0	% 	 	equity
	 10730076 Canada Inc.
	  	PharmHouse	  	 	49.0	% 	 	equity
	 Bedrocan Brasil S.A.
	  	Bedrocan Brasil	  	 	39.4	% 	 	equity
	 Entourage Phytolab S.A.
	  	Entourage	  	 	40.0	% 	 	equity
	 N49AROW Global Ventures, ULC
	  	N49AROW	  	 	25.0	% 	 	equity
	 Beckley Canopy Therapeutics
	  	BCT	  	 	42.2	% 	 	equity
	 AusCann Group Holdings Ltd.
	  	AusCann	  	 	11.1	% 	 	FVTOCI and FVTPL
	 Vapium Incorporated
	  	Vapium	  	 	12.2	% 	 	FVTOCI
	 Headset Inc.
	  	Headset	  	 	7.9	% 	 	FVTOCI
	 HydRx Farms Ltd. (operating as Scientus Pharma Inc.)
	  	HydRx	  	 	9.6	% 	 	FVTOCI
	 Slang Worldwide Inc.
	  	Slang	  	 	0.0	% 	 	FVTPL
	 TerrAscend Corp
	  	TerrAscend	  	 	0.0	% 	 	FVTPL
	 Civilized Worldwide Inc.
	  	Civilized	  	 	25.5	% 	 	equity
	 CanapaR Corp.
	  	CanapaR	  	 	46.0	% 	 	equity
	 James E. Wagner Cultivation Ltd.
	  	JWC	  	 	14.2	% 	 	FVTOCI
	 Radicle Medical Marijuana Inc.
	  	Radicle	  	 	23.8	% 	 	equity
	 LiveWell Foods Canada Inc.
	  	LiveWell	  	 	10.0	% 	 	FVTOCI
	 Solo Growth Corp.
	  	Solo Growth	  	 	9.7	% 	 	FVTOCI
	 Good Leaf, Inc.
	  	Good Leaf	  	 	8.8	% 	 	FVTOCI and FVTPL

  
 6 

 HIGHLIGHTS 

Third Quarter Fiscal 2019 Highlights 
 Results

  

	•	 	 Net revenue, after deducting excise taxes of $14,655, was $83,048 representing a 283% increase over the quarter
ended December 31, 2017 when revenue totaled $21,700 and a 256% increase compared over revenues of $23,327 in the second quarter of fiscal 2019. Revenue from the new Canadian recreation market accounted for 71% of net revenue in the third
quarter; medical products accounting for 20% of third quarter net revenue, with other revenues (accessories, such as merchandise and devices, and clinics) making up the remainder. 

 

	•	 	 10,102 kilograms and kilogram1 equivalents were sold in the
third quarter ended December 31, 2018, representing an increase of 334% over the third quarter of last year, and an increase of 360% over the second quarter of fiscal 2019 in which 2,330 and 2,197 kilograms and kilogram equivalents were sold,
respectively. Recreation accounted for 8,288 kilogram and kilogram equivalents sold in the third quarter, of which 89% was sold directly to the provinces and the remainder through direct retail and on-line
consumer channels. Medical accounted for 1,814 kilograms and kilogram shipments in the quarter, representing a decline from the prior quarters which were entirely medical markets, due in part to repositioning to a more limited medical focused
Spectrum brand offering affecting supply availability for the on-line product offerings and to available competing offerings through the newly legal recreation market in Canada. 

 

	•	 	 Approximately 2.8 million units were shipped in the third quarter as compared to approximately
0.1 million units in the same quarter last year, reflecting the increase scale and automation of Canopy Growth’s shipping and fulfilment capability in the last year. A “unit” represents a discrete packaged item.

  

	•	 	 Oil sales, including gel caps, accounted for 33% of third quarter product revenue (reported revenue net of
merchandise and clinic revenue). In comparison, oil sales, including gel caps, accounted for 23% of product revenue in the three month period ended December 31, 2017. Approximately 30% of fiscal 2019 third quarter recreation sales were
comprised of oils, including gel caps. Oils, including gel caps, made up 42% of medical sales in the third quarter of fiscal 2019. 

  

	•	 	 International medical cannabis sales, consisting primarily of sales in Germany, accounted for 16% of net medical
product revenue in the third quarter as compared to 5% in the same quarter last year when medical access was still in its emerging phase after being introduced earlier in calendar 2018. 

 

	•	 	 Average sales price per gram, net of excise tax, was $7.33 for the third quarter, as compared to $8.30 last year
in the same quarter and $9.87 in the second quarter of fiscal 2019, due to a higher proportion of B2B recreational sales to provincial crown corporations, slightly offset by higher average pricing in the retail channel to achieve an overall
recreation average price of $6.96. The average medical sales price per gram was $9.03, net of excise taxes and more directly compares to the prior quarter figures above. 

 

	•	 	 Spektrum Cannabis sold 204 kilograms in Germany, all medical, at an average price of $13.28 per gram, up from 164
kilograms at an average price of $13.58 per gram in the second quarter of fiscal 2019, representing quarter over quarter increase of 22% on kilograms sold but down slightly on a price per gram basis due to mix. 

 

	•	 	 Harvested 7,556 kilograms in the third quarter as compared to 15,217 kilograms in the second quarter of fiscal
2019 and 7,961 kilograms in the third quarter of fiscal 2018. The lower harvest in the third quarter was due in part to timing at quarter end and certain greenhouses undergoing further retrofits. 

 

	•	 	 Net income for third quarter of fiscal 2019 was $74,860, or $0.22 per basic share and a net loss of $0.38 per
fully diluted share, due to the dilutive impact assuming the convertible debt was converted at the beginning of the quarter and compares to net income of $11,014 and $0.01 per share in the same quarter last year. The fiscal 2019 net income was
driven principally by fair value changes on financial liabilities more than offsetting the loss from operations. 

 Cash, cash
equivalents and marketable securities 
  

	•	 	 Consolidated cash, cash equivalents and marketable securities totaled $4,915,288 at December 31, 2018.

 Innovation 
  

	•	 	 Completed cannabis consumption safety trials key to validating safety of consumer products as well as animal and
human medicines, data expected to be released by end of fiscal 2019. 

  

	•	 	 Completed clinical trials of CBD-based anti-anxiety treatment for
companion animals, data expected to be released by end of fiscal 2019; The Company believes that the clinical trial activities completed and underway will position Canopy Growth to publicly announce cannabis-based companion animal products in the
first half of calendar 2019. 

  

	•	 	 Acquired the assets, including over 40 cannabis-related patent applications filed representing over 1,500
inventions, of Colorado-based hemp researcher, ebbu, Inc. (“ebbu”). Intellectual Property (“IP”) and R&D advancements 

 

	1 	 Kilogram equivalents refers to cannabis oils where 8 ml is the equivalent of approximately 1 gram of dried
cannabis. 

  
 7 

	 	 
achieved by ebbu’s team apply directly to Canopy Growth’s hemp and THC-rich cannabis genetic breeding program. The Company believes applying
ebbu’s IP has the potential to vastly reduce the cost of CBD production. In addition, ebbu’s IP portfolio will contribute to the clinical formulations program being executed by Canopy Health Innovations Inc. (“Canopy Health”).

  

	•	 	 Acquired Storz & Bickel GmbH & Co. KG and related IP (collectively, “Storz &
Bickel” or “S&B”). With a 22-year track record of breakthrough innovations, Storz & Bickel is widely recognized as the global leader for the design and manufacture of medically
approved vaporizers, most notably the Volcano® Medic and the Mighty® Medic. Storz & Bickel has spent the last two decades
developing an automated and internationally certified factory, achieving ISO 13485 certification in 2009. Storz & Bickel has exported devices to 50 markets around the world. Leveraging S&B will help the Company bring vaporizer products
to market that set a new bar for quality, functionality and safety. 

  

	•	 	 Company’s intellectual portfolio increased to 32 issued patents and over 140 patent applications.

 EVENTS SUBSEQUENT TO QUARTER-END 

 

	•	 	 On January 9, 2019, the Company announced the addition of Spectrum Cannabis Peru S.A.C. (“Spectrum
Cannabis Peru”) to the Canopy LATAM (Latin America) group of companies. With Peru poised to introduce new regulations for the use of medical cannabis, Spectrum Cannabis Peru will support the opening of the Peruvian market while leveraging
Canopy Growth’s global expertise in patient and physician education, as well as in medical cannabis production. 

  

	•	 	 On January 14, 2019, Canopy Growth announced that it had been granted a hemp processing and production
license by New York State and its commitment to invest in New York in order to establish a Hemp Industrial Park. Canopy Growth intends to invest between $100 million USD and $150 million USD in its New York operations, capable of producing
tons of hemp extract on an annual basis. 

  

	•	 	 On January 21, 2019, the Company announced that Spectrum Cannabis Polska, after completing a rigorous
regulatory approval process, completed its first import of medical cannabis into Poland. According to the Polish Pharmaceutical Chamber, which represents about 15,000 pharmacies in Poland, it is estimated that up to 300,000 patients could qualify
for medical cannabis treatment. 

  

	•	 	 On January 21, 2019, the Company announced Spectrum Biomedical UK, a new company focused on providing access
to cannabis-based medicinal products to UK patients with a wide range of symptoms. Spectrum UK aims to provide patients reliable access to Spectrum Cannabis products and information physicians can use to support them in their practice.

  

	•	 	 On February 4, 2019, Canopy Rivers announced a bought deal transaction and concurrent with the bought deal
transaction, Canopy Growth will participate through a private placement expected to close on or about February 27, 2019. Refer to the Canopy Rivers section below for details. 

DESCRIPTION OF THE BUSINESS 
 CANNABIS REGULATORY
FRAMEWORK IN CANADA 
 On October 17, 2018, the Cannabis Act went into effect which governs both the medical and recreational regulated markets in
Canada. 
 Prior to October 17, 2018, legal access to and use of medicinal cannabis in Canada was regulated by the Access to Cannabis for Medical
Purposes Regulations (“ACMPR”). The Cannabis Act now applies to both medical and recreational use of cannabis. Medical patients are required to obtain a medical approval from their healthcare practitioner and provide a medical document to
the licensed producer from which they wish to purchase cannabis. Health Canada recently reported that over 342,000 patients had enrolled by September 30, 20182. By 2024, Health Canada
estimates that the number of patients using medical cannabis will grow to 450,000 creating a market worth an estimated $1.3 billion3, estimates that management believes is conservative
considering the growth in patient enrollment that has been experienced to date in the program. 
 At the onset of the regulated recreational cannabis
market, permitted products are essentially the same as what is currently offered in the medical cannabis market – dried flowers, oils and soft-gel with the addition of
pre-rolled cannabis products. As this product offering represents only a portion of the products available on the illicit market, the federal government has indicated that value-added products including higher
concentrated oils and ingestibles will be permitted for sale within a year of the opening of the regulated recreational cannabis market. Federal legislation gives responsibility for regulating the distribution and retail of recreational cannabis to
the provinces and territories. 
  
  

	2 	
http://www.hc-sc.gc.ca/dhp-mps/marihuana/info/market-marche-eng.php
 

	3 	 http://www.cbc.ca/news/canada/1-3b-medical-marijuana-free-market-coming-to-canada-1.1872652 

  
 8 

 CIBC World Markets reports estimates of the potential value of the regulated recreational cannabis market in
Canada range from $5.0 billion to $10.0 billion per year. To put the potential size of the Canadian regulated recreational market in context, Statistics Canada valued the beer market in Canada, in 2014, at $8.7 billion.4 
 LEGALIZATION/PERMISSIBILITY OF CANNABIS IN INTERNATIONAL JURISDICTIONS 

In 2014, a limited number of countries in the world, in addition to Canada, specifically, Israel, Czech Republic, Netherlands and Uruguay had established
federally legal cannabis access regimes. 
 Since 2014, the actions of governments around the world have signaled a significant change in attitudes towards
cannabis. To date, federal governments in over 30 additional countries including Argentina, Austria, Australia, Brazil, Denmark, Chile, Colombia, England, Germany, Greece, Israel, Italy, Jamaica, Lesotho, Mexico, Netherlands, Norway, Poland, Puerto
Rico, South Africa, Switzerland and Turkey have formally legalized medicinal cannabis access to either foster research into cannabis-based medical treatments and/or towards increasing legal access to medical cannabis for their citizens. 

In addition, many other countries including Belgium, Ireland, France, Portugal, Spain, India, Malaysia, South Korea and Thailand have established formal
government efforts to explore the legalization of medicinal cannabis access. 
 In the United States of America, multiple legislative reforms related to
Cannabis are currently being considered by the federal government. On December 20, 2018, the Agricultural and Nutrition Act, H.R. 25 (the “Farm Bill”), which included the language
of the Hemp Farming Act of 2018, legalize the cultivation of Hemp to produce the CBD and other cannabinoids, except for THC. Further, management believes The Strengthening the Tenth Amendment Through Entrusting States Act (the “States
Act”), S.30326, if passed in its current form, would make cannabis federally permissible (not illegal) in US states where cannabis is state legal. 

Figure 1: Map of countries with/exploring federally legal cannabis access regimes in 2018 

 
 

 
 The forty-first meeting of the Expert Committee on Drug Dependence (“ECDD”) was held in Geneva, Switzerland,
November 12 to16, 2018. At that meeting, the ECDD undertook a critical review of whole-plant cannabis and cannabis extracts. The Director-General of the World Health Organization sent a letter to the UN Secretary General on January 24,
2019, outlining its recommendations that included the recommendation that cannabis be removed from Schedule IV of the 1961 Convention on Narcotic Drugs. The UN’s Commission on Narcotic Drugs may decide to consider, and vote upon, those
recommendations at its next annual session, which will be held March 22 to 26, 2019, in Vienna, Austria, however since the recommendations were only released in January it’s possible that consideration will be postponed until 2020. 

 
  

	4 	 http://www.statcan.gc.ca/daily-quotidien/150504/dq150504a-eng.htm

	5 	 https://agriculture.house.gov/farmbill/ 

	6 	 https://www.congress.gov/bill/115th-congress/senate-bill/3032/text 

  
 9 

 Canopy Growth will only conduct business activities related to growing or processing cannabis or hemp in
jurisdictions where it is federally lawful to do so. 
 OVERVIEW OF CANOPY GROWTH CORPORATION 

At December 31, 2018, there were approximately 2,700 full-time employees in the Company as compared to approximately 2,000 at September 30, 2018 and
approximately 700 at December 31, 2017. 
 Canopy Growth is a multi-brand cannabis and hemp company that management believes its strong focus on and
investment in the development of intellectual property, domestic and international markets, differentiated products, brands, increased cannabis and hemp supply, securing channels to market, and education, to help citizens safely, effectively and
responsibly use cannabis and hemp, will create a dominant global business with the potential to generate a significant and sustained return on invested capital over the long-term. 

INTELLECTUAL PROPERTY – PATENT PORTFOLIO 
 The
Company’s intellectual portfolio has increased to 32 issued patents and over 140 patent applications with more applications under development. Protectable inventions cover cannabis-based beverage production, cannabis-based medical treatments,
device & delivery technologies, large-scale cannabis processing and plant genetics. The portfolio features broad geographic coverage. 

INTELLECTUAL PROPERTY - RESEARCH & DEVELOPMENT 

Management believes a significant potential future opportunity exists, within an appropriate regulatory framework, to improve the Company’s profit margins
by vertically integrating up the value chain towards products that treat cannabis and cannabinoids as ingredients rather than the base product. This view applies to the medical and regulated recreational cannabis/cannabinoid markets. The Company has
been investing for over two years in research and development activities related to the development of medical and recreational products. 
 Development
of Cannabis-Based Medical Therapies - Canopy Health Innovations 
 Canopy Growth established the cannabis research incubator and now wholly-owned
subsidiary Canopy Health, to develop and research clinically ready cannabis drug formulations and dose delivery systems. Canopy Health has put a team in place to evaluate, prepare for, and develop cannabis drug formulations and dose delivery
systems. The role of the Canopy Health is to act as the pre-clinical and clinical research arm of the Company, which would include elements of product design and ingredient selection, formulation, safety and
efficacy testing, and pre-clinical and clinical trials (to the extent required), for a range of products which are anticipated to be developed as the regulatory framework and market evolve. Canopy Health
established a division called Canopy Animal Health (“CAH”) to create Cannabis-derived products for applications in veterinary medicine. 
 The
development and maintenance of a robust IP program, including filing provisional applications, conversion of provisional applications into non-provisional utility filings, prosecution of utility filings
through to issuance, and extending filings into various additional countries, is a key element of the Canopy Health’s strategy. IP is important in order to create competitive advantage in the marketplace and provide an opportunity to earn
appropriate economic returns on R&D investments. 
 To date, Canopy Health has filed forty-three (43) US provisional patent applications, across a
range of cannabis and cannabinoid uses, compositions, formulations, indications, methods of delivery, and dosing regimens. 
 On June 12, 2018, the
Company announced that Canopy Health has received approval from Health Canada to proceed with Phase IIb “in-human” clinical trials to evaluate the use of medical cannabis in the treatment of
insomnia. The trial is being conducted in collaboration with a leading Canadian research institution. 
 On August 8, 2018, the Company announced that
CAH has received approval from the Veterinary Drug Directorate of Health Canada to research the effectiveness of cannabidiol to treat anxiety in certain animals. Canopy Health has a total of 15 clinical trials underway or planned. 

  
 10 

 Development of Cannabis-based Consumer Recreational Products 

The Canadian federal government has indicated that the sale of value-added cannabis-based Consumer Recreational products will be permitted within one of year
of the opening of the legal recreational cannabis market in Canada. These products can be expected to include higher concentrated vaping oils (along with related device hardware), edibles and beverages. 

Canopy Growth is actively laying the foundation for these products through investment in a range of research and development efforts, the licensing of
intellectual property from innovative entrepreneurs in the cannabis industry, the acquisition of select technologies and investing in and constructing and outfitting edible and beverage production facilities. 

Development of Cannabis-based Beverages 
 Management
believes the benefits that cannabis-based beverages can offer consumers including tailored consumption experiences, consumption with reduced/no weight gain, no “hangover”, and limited/no negative interaction with traditional pharmaceutical
medications, could cause significant demand to develop for cannabis-based beverages and resulting disruption to traditional alcohol beverage markets. 

Canopy has invested significant resources in researching and developing technologies, processes and applications involved in the creation of clear,
shelf-stable cannabis-based beverages that offer a social experience that is superior to that of traditional sugar-based alcoholic beverages, specifically, a rapid on-set and shorter duration. Like the IP
program at Canopy Health, Canopy Growth has built, or otherwise secured, protected status, through pending patents and other IP forms. 
 CBD Products

 The Company has taken steps to diversify its cannabis-related business into the development, production and sale of hemp-based medical, regulated
recreational and industrial products. Hemp and cannabis come from the Cannabis sativa L specie but are genetically distinct and are further distinguished by use, chemical makeup and cultivation methods. Hemp, which refers to the non-psychoactive (less than 0.3% THC) varieties of Cannabis sativa L, is a renewable raw material used in thousands of products including health foods, body care, clothing, construction materials, biofuels
and plastic composites. The Company believes that entry into the regulated hemp market, whose regulations allow for more robust consumer-facing brand marketing, advertising and retail channels, will serve to strengthen the Company’s consumer
facing brands in the future. 
 Management believes the Company’s expertise in large-scale cannabinoid extraction processes with its unique whole-plant
hemp harvesting knowledge and library of stable CBD-rich hemp genetics, acquired through the acquisition of Green Hemp Industries Ltd. in fiscal 2018 and its relationship with POS Holdings Inc.
(“POS”) described below, positions Canopy Growth as a leader in low-cost, high yield CBD production. 
 On
November 23, 2018 the Company acquired effective control for accounting purposes over the operations of POS, a bio-processing facility located in Saskatchewan, Canada as a result
of a debenture financing transaction which was entered concurrent with the grant of an option to acquire POS. 
 In July 2018, prior to completing the
transaction, the Company had entered into an agreement whereby the Company was granted an option to acquire all the assets of POS in exchange for $6,000. The amount advanced for this option was to be applied against the purchase price of the
assets of POS when the option was exercised and had been recorded as a deposit. In addition, the Company had entered into an agreement for processing services to be conducted by POS on behalf of the Company and had made advances of $13,864 under
this agreement. Since processing under this agreement has not yet commenced, all the amounts advanced prior to November 23, 2018 had been recorded as a prepaid expense. The deposit and prepaid amounts form part of the consideration
transferred. On closing November 23, 2018, the Company advanced a further $109,094 pursuant to a convertible debenture for total cash consideration of $128,958. 

The acquisition of ebbu with research and resultant IP related to hemp-based CBD and other non-THC cannabinoids along
with receiving a hemp license in the State of New York (See EVENTS SUBSEQUENT TO QUARTER-END) are other key elements in the deployment of Canopy Growth’s hemp and CBD product strategy. 

  
 11 

 INTERNATIONAL DEVELOPMENT 

Management believes that a significant opportunity exists today to leverage the Company’s intellectual property, expertise, financial strength and
business model in federally legal/permissible cannabis markets around the world. In addition, management believes future opportunities are likely to exist for the Company in jurisdictions where governments are actively moving towards such a legal
framework. Subject to regulatory approval, strategic international business opportunities pursued by the Company could include: 
  

	•	 	 Providing advisory services to third-parties that are interested in establishing licensed cannabis cultivation
and sales operations; 

  

	•	 	 The export of cannabis and cannabis-based medicines to countries outside of Canada; and 

 

	•	 	 Ownership of cannabis cultivation, value-added cannabis-based product production and sales operations in
countries outside of Canada, where it is federally legal/permissible to do so. 

 Canopy Growth, with the assistance of international
subsidiaries or partners, has secured the necessary agreements to export cannabis to Australia, Brazil, Czech Republic, Denmark, Germany, Poland, Spain and certain Caribbean countries. Management believes that an opportunity will exist, for some
time to come, to export medical cannabis to countries that require a secure supply of medicinal cannabis but have yet to develop domestic production capabilities. 

Further, management believes that over time many countries will move to establish domestic production capabilities, in part due to the economic development
opportunities that this represents. Many countries are looking to Canada, and its regulatory framework for the production and commercialization of medical cannabis, with much interest and respect. As Canada has developed an enviable regulatory
model, companies acting within that framework have expertise, knowledge and potentially product to share with the global community. 
 To date, the Company
has announced subsidiaries, partnerships or business activities in Germany, Chile, Peru, Columbia, Denmark, Jamaica, Lesotho, Australia, Brazil, Czech Republic, the UK, Poland Spain, and the United States as described below. 

Figure 2: International subsidiaries, partnerships or business activities 
  

 

  
 12 

 Europe 

Spektrum Biomedical UK 
 Subsequent to the end of the third
quarter of fiscal 2019, the Company announced Spectrum Biomedical UK, a new company focused on providing access to cannabis-based medicinal products to UK patients with a wide range of symptoms. Spectrum UK aims to provide patients reliable access
to Spectrum Cannabis products and information physicians can use to support them in their practice. 
 Spektrum Cannabis GmbH 

Spektrum Cannabis GmbH (“Spektrum”) is a German-based pharmaceutical distributor. Spektrum has the necessary approvals in Canada and Germany to
export/import medical cannabis for sale to German patients. To date, Spektrum distributes cannabis products to over 1,200 pharmacies across Germany. Spektrum’s processing facility is GMP certified by Regierungspraesidium Tübingen. 

Spectrum Denmark ApS 
 Spectrum Denmark ApS
(“Spectrum Denmark”) was established to produce, cultivate and distribute medical cannabis products in Denmark. Spectrum Denmark will also seek to establish operations in other jurisdictions in Europe where federally lawful and regulated.
In fiscal 2018, Spectrum Denmark purchased a 430,000 sq. ft. operating greenhouse facility in Odense, Denmark (“Odense”) and received a cannabis production license by Laegemiddelstyrelsen, Denmark’s Medicines Agency. The license was
issued without conditions, meaning that Spectrum Cannabis Denmark will not be limited to a production cap or limited to the product formats it can produce. Spectrum Denmark recently received clones from our Spanish partner for purposes of testing
and are now held as mother plants. 
 Spectrum Czech ApS 

In the first quarter of fiscal 2019, the Company acquired Annabis Medical s.r.o (“Annabis Medical”). Annabis Medical is the leader in the Czech
Republic’s medical cannabis industry and currently imports and distributes cannabis products pursuant to federal Czech licenses, with products for sale through pharmacy channels across the Czech Republic. Annabis Medical was renamed Spectrum
Czech ApS. 
 Spectrum Cannabis Polska 
 Subsequent to
the end of the third quarter of fiscal 2019, the Company announced that Spectrum Cannabis Polska, after completing a rigorous regulatory approval process, completed its first import of medical cannabis into Poland. According to the Polish
Pharmaceutical Chamber, which represents about 15,000 pharmacies in Poland, it is estimated that up to 300,000 patients could qualify for medical cannabis treatment. 

Alcaliber S.A. 
 In fiscal 2018, the Company and its
wholly-owned subsidiary Spektrum announced a supply license agreement with Spain’s Alcaliber, S.A. (“Alcaliber”). Per the supply license agreement, Canopy Growth and Spektrum will grant Alcaliber a license to use certain strains and
seeds to be grown and cultivated at Alcaliber’s facilities for sale worldwide. In the fourth quarter of fiscal 2018, Canopy Growth confirmed that it had completed a transfer of 1,500 cannabis clones to Alcaliber completing the first phase of
the partnership announced on September 11, 2017. Alcaliber shipped the first group of clones to Spectrum Denmark in the first quarter of fiscal 2019. 

Alcaliber specializes in research and development, breeding and cultivation, and the extraction, purification and preparation of Narcotic Raw Materials
(“NRMs”) and Active Pharmaceutical Ingredients (“APIs”). Alcaliber has been granted a license to cultivate, produce, manufacture, export/import, and commercialize cannabis for medical and scientific purposes by the Spanish Agency
of Medicinal Products and Medical Devices. 
 Asia/Pacific 

Spectrum Australia 
 In the first quarter of fiscal 2019,
Canopy Growth and the Victoria State Government announced the launch of Spectrum Australia. The Victoria facility, when completed, will enable domestic cultivation and production of high quality medical cannabis for patients while serving as a
distribution hub for other jurisdictions in APAC. It will also operate as the APAC Research and Development Center for the Company, supporting the ongoing research collaboration between Spectrum Australia and Agriculture Victoria on innovations in
medical cannabis cultivation and production. 

  
 13 

 In fiscal 2018, the Company and the Victorian State Government signed a MOU to further develop research and
technical capabilities in the production of medical cannabis in Australia. The work will focus on medical applications for cannabis genetics, strain development, cultivation, and processing. This partnership will directly contribute to the emerging
medical cannabis industry in Australia, allowing for improved patient access in that market, creating a leadership position for Australia and Canopy Growth in the Asia Pacific geography. 

AusCann Group Holdings Ltd. 
 In exchange for consultation
in several areas including production, quality assurance and operations and strategic advisory services, the Company initially received a 15% interest and options in Auscann (ASX:AC8). Following subsequent dilutive financings, now owns an 11.1%
interest. 
 The Company has an exclusive supply agreement with AusCann, whereby Canopy Growth will act as AusCann’s exclusive supplier of medical
cannabis for the Australian market, beginning with the transfer of a range of medicines for research and commercialization in Australia. 
 Africa

 Spectrum Cannabis Africa 
 Spectrum Cannabis
Africa has received license approval, under the South African unregistered medicines program, to facilitate prescriptions for Spectrum Cannabis Oil products that are necessary to seek a permit to import products into South Africa. 

Spectrum Lesotho 
 In the first quarter of fiscal 2019,
Canopy Growth announced that it had acquired DaddyCann Lesotho PTY Ltd., trading as Highlands (“Highlands”) and since renamed Spectrum Cannabis Lesotho (Pty) Ltd (“Spectrum Lesotho”). Based in the Kingdom of Lesotho, Spectrum
Lesotho holds a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin. 
 Combining the domestic and regional
knowledge of Spectrum Lesotho with the global experience and expertise of Canopy Growth is the latest example of the Company establishing a meaningful local presence. With the objective of future local production to serve the regional market, these
operations are part of Canopy Growth’s commitment to the Lesotho economy including supporting job creation and lasting community engagement. All key members of Spectrum Lesotho’s management team will continue to lead the organization. 

Spectrum Lesotho has commenced cultivation operations at its facility near the Capital City, Maseru. The facility, covering approximately 48,400 sq. ft.
includes a propagation room, vegetation greenhouse, and an outdoor growing area. 
 Caribbean 

Tweed JA 
 The Company owns 49% of Tweed JA, a Jamaican
company that recently received its cultivation license after completing construction of the greenhouse. Canopy Growth believes that the production and formulation model it has built in Canada, combined with the strength of the existing team in
Jamaica, made up of experienced entrepreneurs with substantial cannabis cultivation experience, will drive the national conversation around cannabis forward, and promote Jamaica’s well-established and renowned ganja, oils and other cannabis
products on a global level. The post-harvest building is expected to be completed in the first half of calendar 2019. The processing license is expected to follow completion of the post-harvest building in the first calendar quarter of 2019. Tweed
JA completed a clone transfer of Tweed genetics into Jamaica and has commenced the production of cannabis for medical purposes. Tweed JA expects to be selling medical cannabis in Jamaica by the second half of calendar 2019. 

  
 14 

 LATAM 

Canopy LATAM, headquartered in Sao Paulo, Brazil, will focus on advancing medical cannabis through the Spectrum brand and capturing market share across the
region comprised of Brazil, Columbia and Chile, home to more than 600 million people, as individual nations modernize their medical cannabis legislation. 

Spectrum Cannabis Colombia 
 Spectrum Cannabis Colombia
will serve as a regional production and processing hub for Canopy LATAM. Further, Spectrum Cannabis Colombia owns a uniquely-positioned 126 hectare farm suitable for growing and future operations. This site receives a steady supply of fresh water
from a natural lagoon, has favourable electricity rates, and is currently licensed for 126 hectares (4.5 million sq. ft.) of production capacity. 

Spectrum Chile SpA 
 Medical cannabis markets in Chile are
emerging and the Company plans to enter the market aggressively in order to position itself as a leader. Through a strategic partnership with a domestic Chilean medical cannabis company, Spectrum Chile will work to ensure Chilean patients have
access to high-quality cannabis products. 
 Spectrum Cannabis Peru 

With Peru poised to introduce new regulations for the use of medical cannabis, Spectrum Cannabis Peru will support the opening of the Peruvian market while
leveraging Canopy Growth’s global expertise in patient and physician education, as well as in medical cannabis production. 
 CORPORATE POSITION ON
CONDUCTING BUSINESS IN THE UNITED STATES 
 Canopy Growth will only conduct business activities related to growing or processing cannabis, in
jurisdictions where it is federally legal/permissible to do so. As cannabis is currently federally illegal in the U.S., Canopy Growth does not engage in any U.S. cannabis- related activities as defined in Canadian Securities Administrators Staff
Notice 51-352 as of February 14, 2019. 
 While the Company has several partnerships with U.S.-based companies
that may themselves participate in the U.S. cannabis market, these relationships are licensing relationships that see intellectual property developed in the United States brought into Canada, and in no manner involve Canopy Growth in any US
activities respecting cannabis. 
 Further, while the Company will not engage in cannabis-related activities in the U.S related to growing and processing
cannabis so long as cannabis is federally illegal, Canopy Growth has developed specific plans related to establishing business operations in the U.S. in the event cannabis becomes federally legal/permissible. The Company has entered into option
agreements to purchase certain cultivation infrastructure (for capped capital investment amounts) should cannabis become federally legal/permissible in the U.S. 

In respect of the Company’s policy to not engage in any unlawful U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff
Notice 51-352, two affiliates of the Company, TerrAscend and Slang, with interests in pursuing cannabis related business in the United States, the Company took steps to structure the Company’s ownership
stake interest in the affiliates to insulate the Company. Under the restructurings and arrangement, the Company has no voting rights and economic interest in these affiliates until cannabis becomes federally lawful/permissible in the United States.
Ownership in the affiliates has been held or converted to warrants that are exercisable in circumstances related to cannabis becoming federally lawful/permissible in the United States. The Company monitors its
non-controlled affiliates for compliance with U.S. cannabis laws, and would make similar arrangements, if necessary, to ensure the Company’s ongoing compliance with U.S. federal laws. 

Multiple legislative reforms related to cannabis were recently implemented or are currently being considered by the federal government. The Farm Bill was
recently signed into by law by the US President which federally legalized the cultivation of Hemp to produce CBD and other cannabinoids, except for THC. The STATES Act, in the current form being debated by the US Senate, if passed into law, would
make cannabis federally permissible (not illegal) in US states where cannabis is state legal. 
 Leading up to and following passage of the Farm Bill,
including its provisions for federally legalizing the production and sale of Hemp-based CBD products, the Company began to seize this potentially large opportunity. On November 26, 2018, the Company closed its previously announced agreement to
acquire the assets of ebbu, an Evergreen, Colorado-based hemp research leader. Intellectual Property (“IP”) and R&D advancements achieved by ebbu’s team apply directly 

  
 15 

 
to Canopy Growth’s hemp and THC-rich cannabis genetic breeding program and its cannabis-infused beverage capabilities. In addition, ebbu’s IP
portfolio will contribute to the clinical formulations program being executed by Canopy Health. Canopy Growth operates a rapidly emerging, field-scale hemp operation based in Saskatchewan and by applying ebbu’s IP, the Company has the potential
to vastly reduce the cost of CBD production. 
 Canopy Growth, through a newly formed subsidiary, will employ ebbu’s assets and personnel to conduct
R&D. There will be no production or sale of cannabis products resulting from such R&D in the United States unless and until it would be federally legal/permissible to do so. 

On October 9, 2018, the Company announced that it had completed a legal transfer of cannabis products to a research partner in the United States. To the
Company’s knowledge, this was the first export of legal cannabis products from Canada to the United States pursuant to an import permit issued by the federal United States Drug Enforcement Administration (“DEA”). The shipment was
completed for the sole purpose of supporting medical research and development. To date, four such shipments have been made under DEA approval. 
 On
January 14, 2019, Canopy Growth announced that it had been granted a hemp processing and production license by New York State and its commitment to invest in New York in order to establish a Hemp Industrial Park. Canopy Growth intends to invest
between $100 million USD and $150 million USD in its New York operations, capable of producing tons of hemp extract on an annual basis. Cannabis leader has completed four federally legal shipments of cannabis to the United States. 

CANNABIS BRANDS 
  
 

 
 The Company’s diverse platform of brands “under the Canopy” allows the Company to effectively deploy brands
that are targeted towards specific customer demographics, use occasions and product form factors. 
 OWNED BRANDS 

Spectrum Cannabis 
 Spectrum Cannabis is the Company’s
international medical brand and will serve as the Company’s physician and patient facing identity across all federally legal jurisdictions where Canopy Growth operates. “Spectrum” in the name refers to the Company’s trademarked
colour-coded cannabis strain classification system. 
 Tweed 

A key focus of the Company, since its inception, has been the development of its flagship Tweed brand. From the name, quality and consistency, logo and design
aesthetic, to the tone and light-hearted copy, Tweed deliberately chose to incorporate a sense of texture and approachability that welcomes customers and encourages an intimate relationship and trust with the brand. The Tweed brand has evolved
towards an adult lifestyle brand to best serve the needs of the regulated recreational market in Canada. 

  
 16 

 Van der Pop 

Van der Pop is a female focused cannabis brand, with a focus on education and community; a guide to helping women discover and consider cannabis for self-care.
Van der Pop dried cannabis whole flower launched in select markets in January 2019. Soft gels are planned to be released in the first half of calendar 2019 while a selection of Van der Pop derivative cannabis products is planned to launch in the
second half of calendar 2019. 
 Maitri 
 Founded by
Quebecers for Quebecers, Maitri focuses on adventure seekers looking to combine the power of the outdoors with cannabis. Maitri continues to build loyal followers through its growing line of designed-in-Quebec accessories. Maitri plans to launch a line of derivative cannabis products in the second half of calendar 2019. 

Vert 
 From the Company’s facility in Mirabel,
Quebec, Vert is poised to be a premium supplier of craft cannabis for markets in Canada. Vert intends to launch into the Canadian recreational market in the second half of calendar 2019. 

AFFILIATED BRANDS 
 LBS 

Tweed and renowned cannabis business pioneer Snoop Dogg have partnered to bring the LBS (formerly known as Leafs By Snoop prior to October 17, 2018)
offering of diverse whole-flower and oil strains, including a high CBD option and mid to high-range THC options to the recreational market. 
 DNA-Certified 
 DNA Genetics, world-renowned Cannabis breeders, have won awards in every category in the Cannabis Cup,
the world’s preeminent cannabis competition. Tweed has leveraged DNA’s expertise in cannabis breeding to bring new, exclusive DNA Certified strains to primarily the recreational market. 

Green House Brands and Organa Brands 
 Green House Brands,
through Canopy Growth, is bringing the most awarded and recognized cannabis brand in the world to the Canadian market in the second half of calendar 2019. Established in 1985, the Green House Brands portfolio includes Green House Seed Co. and Strain
Hunters, both of which are market exclusive cannabis strains. Green House assets have won numerous accolades, including over 40 High Times Cannabis Cups and 200 plus awards for top genetics, establishing the brand’s leadership in the
global cannabis industry. As Strain Hunters, the brand has been featured in documentary series on HBO and VICE, highlighting its globetrotting journeys to find the rarest landrace strains of cannabis. 

Organa Brands revolutionized the cannabis industry with the introduction of supercritical CO2
extracted cannabis oil in 2010 and the introduction of the groundbreaking O.penVAPE device in 2012. Today the company is home to some of the world’s largest consumer cannabis brands, including O.penVAPE, Bakked, Magic Buzz and District Edibles.
Organa Brands will launch in the Canadian recreational market, through Canopy Growth, in the second half of calendar 2019.
 RETAIL STRATEGY AND BRANDS

 The provinces of New Brunswick[7],
Quebec8 , PEI9 and Nova Scotia10 decided that their provincial liquor control agencies
will oversee the distribution and retail on non-medicinal cannabis. The provinces of Manitoba11, Newfoundland & Labrador12, Saskatchewan13, Alberta14, British
Columbia15, Ontario16 and the Yukon Territory17 decided that the provincial/territorial
liquor control agency will be responsible for distribution and oversee the private retail of non-medicinal cannabis. 
  

 

	7 	 http://www2.gnb.ca/content/gnb/en/news/news_release.2017.09.1206.html 

	8 	 http://plus.lapresse.ca/screens/b9063848-7868-4a20-846b-a84fcd3a747f%7C_0.html 

	9 	 https://www.princeedwardisland.ca/en/news/province-sets-next-policy-directions-cannabis-legalization

	10 	
https://novascotia.ca/cannabis/#cannabis-retail-and-distribution
 

	11 	 http://news.gov.mb.ca/news/?archive=&item=42491 

	12 	 http://www.releases.gov.nl.ca/releases/2017/exec/1123n01.aspx 

	13 	 https://globalnews.ca/news/3951690/marijuana-to-be-sold-in-private-saskatchewan-stores-and-online/

	14 	 https://www.alberta.ca/cannabis-framework.aspx 

	15 	 https://globalnews.ca/news/3897846/bc-government-unveils-how-cannabis-will-be-sold-once-legalized/

	16 	 https://news.ontario.ca/mof/en/2018/08/ontario-announces-cannabis-retail-model.html 

	17 	 https://yukon.ca/en/news/government-yukon-tables-cannabis-control-and-regulation-act 

  
 17 

 The Company is pursuing a cannabis retail presence in provinces, where permitted, to capture retail gross
margin (incremental to wholesale margin), capture higher market share and establish direct connections with customers. Controlling the retail environment provides the Company with a powerful marketing engine to build the Tweed, Tokyo Smoke and other
company owned brands whilst data and customer feedback collected from owned stores enables the Company to better understand customers and quickly react to their changing needs. 

The Company operates in both physical and digital channels to better meet to the needs of our customers. To date, the Company has received licenses or permits
to apply for licenses to operate private retail and online sites in each of the provinces that have announced private retail operations – Newfoundland & Labrador (licenses for up to 7 stores), Manitoba (licenses for up to 15 stores)
and Saskatchewan (licenses for up to 6 stores). The Company is also pursuing retail licenses in a select number of cities in Alberta and British Columbia; the Company has already secured over 20 development permits in Alberta and is progressing
through the provincial cannabis retail licensing process. Finally, the Company is pursuing opportunities to license its Tweed and Tokyo Smoke retail banners in Ontario. As at February 14, 2019, the Company had opened 15 cannabis retail stores,
including one Tweed store under license, with more to follow in the coming months, subject to cannabis retail licensing timelines in each province. 
 The
Company has established an owned, technology-enabled direct sales force across the country. This sales force will be responsible for interfacing with cannabis retailers across the country to, among other things, educate retail staff on the
Company’s products, foster positive product placement in retail stores and garner real-time/near real-time market intelligence on product demand and to communicate this intelligence back to the Company’s operations. 

Tweed and Tokyo Smoke Stores 
 Canopy Growth finalized its
acquisition of HIKU during the second quarter of fiscal 2019, adding the Tokyo Smoke retail network to its network of Tweed stores. Offering two distinct customer experiences will allow the Company to appeal to various consumer demographics without
saturating any single segment. Tokyo Smoke operates four retail cannabis stores and an e-commerce platform in Manitoba. Tweed retail now has 10 locations selling cannabis across Newfoundland &
Labrador and Manitoba, a licensed store in Saskatchewan and an e-commerce presence in Manitoba and Nunavut. The Company plans to add, in provinces with private retail models, 20 additional Tweed stores and 20
additional Tokyo Smoke stores. In the province of Ontario, the company is exploring partnership opportunities to ensure consumers in the that market can experience the distinct Tweed and Tokyo Smoke retail experiences while working within the
provincial framework limited to Licensed Producer ownership at 9.9%. 
 DOMESTIC CANNABIS PRODUCTION – OWNED & PARTNER FACILITIES 

Through its wholly-owned subsidiaries and partnerships, Canopy Growth operates numerous state-of-the-art production facilities with over 4.3 million sq. ft. of licensed indoor and greenhouse production capacity. In addition, through wholly-owned subsidiaries and partnerships, the
Company is developing several additional production facilities in Canada. The Company has ten licenses issued by Health Canada to cultivate cannabis and 8 licenses from Health Canada to sell cannabis. 

The Company will continue to place the highest priority on meeting the needs of medical patients, expanding internationally as federal laws permit, and
increasing its capacity to serve regulated recreational customers across Canada in the future. To date, the Company has announced capacity expansions totaling over 1.3 million sq. ft. beyond the current licensed footprint for a total of
5.6 million sq. ft licensed facilities when completed. Construction commenced in October 2018 at Smiths Falls to build a 125,000 square foot bottling facility with four automated bottling and canning lines. It is expected to be fully completed
and ready by the summer of calendar 2019. 

  
 18 

 DOMESTIC CANNABIS PRODUCTION – PARTNER CAPACITY OFFTAKE 

The Company has established several programs designed to help sector partners, both license applicants and LPs, establish and/or grow their licensed operations
and achieve greater success faster. Through these programs, additional cannabis production capacity will be secured for sale to the Company’s customers. 

Tweed’s Curated CraftGrow Line 

Tweed’s curated CraftGrow line was created to introduce high quality cannabis grown by a diverse set of producers to our customers. As of
February 14, 2019, CraftGrow partners include AB Laboratories Inc., Delta 9 Cannabis Inc., JWC Ltd., PhyeinMed Inc., PUF Ventures Inc. SweetGrass Inc., TerrAscend Corp. and Valens GroWorks, all with different growing styles and
approaches to cannabis. Cannabis grown by AB Laboratories Inc. and JWC Ltd. Is available on the Company’s on-line medical store at www.spectrumcannabis.com. 

Agripharm 
 Agripharm is 40% owned by the Company under a
collaborative agreement with Green House and Organa Brands. Pursuant to the agreement, the Company has the right to purchase all the cannabis products produced by Agripharm, subject to the right of Agripharm to sell up to 25% of its products
directly in its own physical brick and mortar retail locations. 
 Canopy Rivers 

Canopy Rivers (TSXV:RIV) works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support and
affiliation with the Canopy Growth group of companies. The result is an ecosystem of complementary companies operating throughout the cannabis value chain. As the portfolio continues to develop, each constituent benefits from opportunities to
collaborate with Canopy Growth and among themselves, which the company believes results in an ideal environment for innovation, synergy, and value creation for Canopy Rivers, Canopy Growth, and across the entire Rivers ecosystem. 

To date, in collaboration with Canopy Growth, Canopy Rivers has established a diversified portfolio of cannabis industry investments that includes licensed
producers, late stage applicants, pharmaceutical formulators, branded developers & distributors, and technology & media platforms. Investments are customized for each counterparty and include a balanced mix of equity, debt,
royalty, and profit-sharing agreements. 
 On February 4, 2019, Canopy Rivers announced that it had entered into an agreement with CIBC Capital Markets
(“CIBC”) and Eight Capital (together with CIBC, the “Joint Bookrunners”), under which the Joint Bookrunners have agreed to purchase, together with a syndicate of underwriters (the “Underwriters”), 11,500,000
subordinated voting shares of the Canopy Rivers (the “Subordinated Voting Shares”) on a “bought deal” basis at a price of $4.80 per Subordinated Voting Share (the “Issue Price”) for gross proceeds of approximately
$55,000 (the “Bought Deal”). 
 Concurrent with the Bought Deal, Canopy Growth, will purchase a minimum of 6,250,000 Subordinated Voting Shares on
a private placement basis, at a price per Subordinated Voting Share equal to the Issue Price (the “Private Placement” and together with the Bought Deal, the “Offering”) for additional gross proceeds of a minimum of approximately
$30,000. Canopy Growth currently owns approximately 26.5% of the issued and outstanding shares of the Canopy Rivers on a non-diluted basis and has elected to subscribe under the Private Placement for more than
its pro rata participation right. Following completion of the Offering (prior to giving effect to an over-allotment options granted to the Underwriters), Canopy Growth’s ownership interest in the Canopy Rivers will increase to approximately
27.3% of the issued and outstanding shares of the Canopy Rivers on a non-diluted basis. The combined gross proceeds to the Canopy Rivers under the Offering will be a minimum of approximately $85,000 and is
expected to close on or about February 27, 2019. 

  
 19 

 RESULTS OF OPERATIONS 

The following table sets forth consolidated statements of operations and balance sheet data, which is expressed in thousands of Canadian dollars, except share
and per share amounts, for the indicated periods. 
 SELECTED OPERATIONAL INFORMATION 

(CDN $000’s, except share amounts) 
  

																	
	 	  	Three Months Ended	 	 	Nine Months Ended	 
	 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 
	 	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 	  	 	 	 	(Restated)	 	 	 	 	 	(Restated)	 
	 Gross revenue
	  	$	97,703	 	 	$	21,700	 	 	$	146,946	 	 	$	55,142	 
	 Net revenue
	  	 	83,048	 	 	 	21,700	 	 	 	132,291	 	 	 	55,142	 
	 Gross margin before fair value impacts in cost of sales
	  	 	18,290	 	 	 	11,889	 	 	 	35,942	 	 	 	30,069	 
	 Gross margin before fair value impacts in cost of sales %
	  	 	19	% 	 	 	55	% 	 	 	24	% 	 	 	55	% 
	 Gross margin
	  	 	12,452	 	 	 	16,530	 	 	 	20,453	 	 	 	61,454	 
	 Gross margin %
	  	 	13	% 	 	 	76	% 	 	 	14	% 	 	 	111	% 
	 Operating expenses before acquisition costs and non-cash
operating expenses
	  	 	96,247	 	 	 	20,746	 	 	 	211,949	 	 	 	51,302	 
	 Total operating expenses
	  	 	169,693	 	 	 	42,562	 	 	 	423,028	 	 	 	92,703	 
	 Loss from operations
	  	 	(157,241	) 	 	 	(26,032	) 	 	 	(402,575	) 	 	 	(31,249	) 
	 Adjusted EBITDA1
	  	 	(75,081	) 	 	 	(5,681	) 	 	 	(155,154	) 	 	 	(14,359	) 
	 Net loss after taxes
	  	 	74,860	 	 	 	11,014	 	 	 	(346,732	) 	 	 	227	 
	 Net loss attributable to Canopy Growth Corporation
	  	 	67,582	 	 	 	1,583	 	 	 	(349,831	) 	 	 	(8,809	) 
	 Net loss per share - basic
	  	$	0.22	 	 	$	0.01	 	 	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average shares - basic
	  	 	303,281,549	 	 	 	182,029,481	 	 	 	241,806,351	 	 	 	171,075,324	 
	 Net loss per share - diluted
	  	$	(0.38	) 	 	$	0.01	 	 	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average shares - diluted
	  	 	315,974,639	 	 	 	194,739,044	 	 	 	242,044,821	 	 	 	171,075,324	 

  

	1 	 Adjusted EBITDA, a non-GAAP measure, is Earnings Before Interest, Tax,
and Depreciation and other non-cash items, and as adjusted for acquisition related items. 

Selected statements of financial position information 
  

									
	 	  	December 31,	 	  	March 31,	 
	 	  	2018	 	  	2018	 
	 Cash and cash equivalents
	  	$	4,115,870	 	  	$	322,560	 
	 Marketable Securities
	  	 	799,418	 	  	 	—  	 
	 Biological assets
	  	 	31,013	 	  	 	16,348	 
	 Inventory
	  	 	184,961	 	  	 	101,607	 
	 Other working capital
	  	 	(131,317	) 	  	 	(49,209	) 
	 Total assets
	  	 	8,640,115	 	  	 	1,436,817	 
	 Current and long-term debt
	  	 	791,496	 	  	 	8,422	 
	 Other long-term liabilities
	  	 	122,006	 	  	 	61,150	 
	 Deferred tax liability
	  	 	25,703	 	  	 	33,536	 
	 Shareholders’ equity
	  	 	7,423,678	 	  	 	1,243,238	 

  
 20 

 THIRD QUARTER REVIEW 

Results of Operations for the three and nine months ended December 31, 2018 as compared to the three and nine months ended December 31, 2017. 

 

																	
	 	  	SELECTED QUARTERLY INFORMATION	 	  	 	 	 	 	 
	(CDN $000’s, except share amounts)	  	Q3’19	 	  	Q2’19	 	  	Q1’19	 	 	Q4’18	 
	 Net revenue - Recreational
	  	$	57,687	 	  	$	—  	 	  	$	—  	 	 	$	—  	 
	 Net revenue - Medical & Other
	  	$	25,362	 	  	$	23,327	 	  	$	25,916	 	 	$	22,806	 
	 Net income (loss) attributable to Canopy Growth Corporation
	  	$	67,582	 	  	$	(337,136	) 	  	$	(80,277	) 	 	$	(61,544	) 
	 Net income (loss) per share - basic
	  	$	0.22	 	  	$	(1.52	) 	  	$	(0.40	) 	 	$	(0.31	) 
	 Weighted average shares - basic
	  	 	303,281,549	 	  	 	221,725,511	 	  	 	200,160,740	 	 	 	196,571,715	 
	 Net income (loss) per share - diluted
	  	$	(0.38	) 	  	$	(1.52	) 	  	$	(0.40	) 	 	$	(0.31	) 
	 Weighted average shares - diluted
	  	 	315,974,639	 	  	 	221,725,511	 	  	 	200,160,740	 	 	 	196,571,715	 
					
	 	  	Q3’18	 	  	Q2’18	 	  	Q1’18	 	 	Q4’17	 
	 Net revenue - Recreational
	  	$	—  	 	  	$	—  	 	  	$	—  	 	 	$	—  	 
	 Net revenue - Medical & Other
	  	$	21,700	 	  	$	17,569	 	  	$	15,873	 	 	$	14,661	 
	 Net income (loss) attributable to Canopy Growth Corporation
	  	$	1,583	 	  	$	(1,338	) 	  	$	(9,054	) 	 	$	(11,994	) 
	 Net income (loss) per share - basic
	  	$	0.01	 	  	$	(0.01	) 	  	$	(0.06	) 	 	$	(0.08	) 
	 Weighted average shares - basic
	  	 	182,029,481	 	  	 	167,226,218	 	  	 	163,884,269	 	 	 	147,060,478	 
	 Net income (loss) per share - diluted
	  	$	0.01	 	  	$	(0.01	) 	  	$	(0.06	) 	 	$	(0.08	) 
	 Weighted average shares - diluted
	  	 	194,739,044	 	  	 	167,226,218	 	  	 	163,884,269	 	 	 	147,060,478	 
			
	 	  	Three months ended	 	  	Nine months ended	 
	(CDN $000’s, except share amounts)	  	December 31,
2018	 	  	December 31,
2017	 	  	December 31,
2018	 	 	December 31,
2017	 
	 Net revenue - Recreational
	  	$	57,687	 	  	$	—  	 	  	$	57,687	 	 	$	—  	 
	 Net revenue - Medical & Other
	  	$	25,362	 	  	$	21,700	 	  	$	74,605	 	 	$	55,142	 
	 Net income (loss) attributable to Canopy Growth Corporation
	  	$	67,582	 	  	$	1,583	 	  	$	(349,831	) 	 	$	(8,809	) 
	 Net income (loss) per share - basic
	  	$	0.22	 	  	$	0.01	 	  	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average shares - basic
	  	 	303,281,549	 	  	 	182,029,481	 	  	 	241,806,351	 	 	 	171,075,324	 
	 Net income (loss) per share - diluted
	  	$	(0.38	) 	  	$	0.01	 	  	$	(1.45	) 	 	$	(0.05	) 
	 Weighted average shares - diluted
	  	 	315,974,639	 	  	 	194,739,044	 	  	 	242,044,821	 	 	 	171,075,324	 

 REVENUE 
  

																	
	Revenue by Channel	  	Three months ended	 	  	Nine months ended	 
	 (CDN $000’s)
	  	December 31,
2018	 	  	December 31,
2017	 	  	December 31,
2018	 	  	December 31,
2017	 
	 Recreational revenue
	  				  				  				  			
	 Business to business
	  	$	60,141	 	  	$	—  	 	  	$	60,141	 	  	$	—  	 
	 Business to consumer
	  	 	11,477	 	  	 	—  	 	  	 	11,477	 	  	 	—  	 
	 Medical revenue
	  				  				  				  			
	 Canadian
	  	 	15,931	 	  	 	19,331	 	  	 	57,198	 	  	 	51,079	 
	 International
	  	 	2,702	 	  	 	988	 	  	 	8,294	 	  	 	1,392	 
	 Other revenue
	  	 	7,452	 	  	 	1,381	 	  	 	9,836	 	  	 	2,671	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Gross revenue
	  	 	97,703	 	  	 	21,700	 	  	 	146,946	 	  	 	55,142	 
	 Excise taxes
	  	 	14,655	 	  	 	—  	 	  	 	14,655	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net revenue
	  	$	83,048	 	  	$	21,700	 	  	$	132,291	 	  	$	55,142	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 21 

																									
	Revenue by Form	  	Three months ended	 
	 (CDN $000’s)
	  	December 31,
2018	 	  	As a % of
Gross
Revenue	 	 	Kilograms
and
Kilogram
Equivalents
Sold	 	  	December 31,
2017	 	  	As a % of
Gross
Revenue	 	 	Kilograms
and
Kilogram
Equivalents
Sold	 
	 Recreational revenue by form
	  				  				 				  				  				 			
	 Dry bud
	  	$	50,244	 	  	 	51	% 	 	 	6,394	 	  	$	—  	 	  	 	0	% 	 	 	—  	 
	 Oil (Includes oil’s and gelcaps)
	  	 	21,374	 	  	 	22	% 	 	 	1,893	 	  	 	—  	 	  	 	0	% 	 	 	—  	 
	 Medical revenue by form
	  				  				 				  				  				 			
	 Dry bud
	  	 	10,859	 	  	 	11	% 	 	 	1,196	 	  	 	13,059	 	  	 	60	% 	 	 	1,999	 
	 Oil (Includes oil’s and gelcaps)
	  	 	7,774	 	  	 	8	% 	 	 	619	 	  	 	4,435	 	  	 	20	% 	 	 	331	 
	 Other revenue
	  	 	7,452	 	  	 	8	% 	 				  	 	4,206	 	  	 	20	% 	 			
		  	  
	  
	 	  	  
	  
	 	 				  	  
	  
	 	  	  
	  
	 	 			
	 Gross revenue
	  	 	97,703	 	  				 				  	 	21,700	 	  				 			
	 Excise taxes
	  	 	14,655	 	  				 				  	 	—  	 	  				 			
		  	  
	  
	 	  				 				  	  
	  
	 	  				 			
	 Net revenue
	  	$	83,048	 	  				 				  	$	21,700	 	  				 			
		  	  
	  
	 	  				 				  	  
	  
	 	  				 			
		
	 	  	Nine months ended	 
	 	  	 	 	  	 	 	 	Kilograms	 	  	 	 	  	 	 	 	Kilograms	 
	 	  	 	 	  	 	 	 	and	 	  	 	 	  	 	 	 	and	 
	 	  	 	 	  	As a % of	 	 	Kilogram	 	  	 	 	  	As a % of	 	 	Kilogram	 
	 	  	December 31,	 	  	Gross	 	 	Equivalents	 	  	December 31,	 	  	Gross	 	 	Equivalents	 
	 (CDN $000’s)
	  	2018	 	  	Revenue	 	 	Sold	 	  	2017	 	  	Revenue	 	 	Sold	 
	 Recreational revenue by form
	  				  				 				  				  				 			
	 Dry bud
	  	$	50,244	 	  	 	34	% 	 	 	6,394	 	  	$	—  	 	  	 	0	% 	 	 	—  	 
	 Oil (Includes oil’s and gelcaps)
	  	 	21,374	 	  	 	15	% 	 	 	1,893	 	  	 	—  	 	  	 	0	% 	 	 	—  	 
	 Medical revenue by form
	  				  				 				  				  				 			
	 Dry bud
	  	 	44,040	 	  	 	30	% 	 	 	5,137	 	  	 	37,589	 	  	 	68	% 	 	 	5,336	 
	 Oil (Includes oil’s and gelcaps)
	  	 	21,453	 	  	 	15	% 	 	 	1,570	 	  	 	10,367	 	  	 	19	% 	 	 	853	 
	 Other revenue
	  	 	9,836	 	  	 	7	% 	 				  	 	7,186	 	  	 	13	% 	 			
		  	  
	  
	 	  	  
	  
	 	 				  	  
	  
	 	  	  
	  
	 	 			
	 Gross revenue
	  	 	146,947	 	  				 				  	 	55,142	 	  				 			
	 Excise taxes
	  	 	14,655	 	  				 				  	 	—  	 	  				 			
		  	  
	  
	 	  				 				  	  
	  
	 	  				 			
	 Net revenue
	  	$	132,292	 	  				 				  	$	55,142	 	  				 			
		  	  
	  
	 	  				 				  	  
	  
	 	  				 			

  

																	
	Average sales price per gram	  	Three months ended	 	  	Nine months ended	 
	 	  	December 31,	 	  	December 31,	 	  	December 31,	 	  	December 31,	 
	 $        
	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Recreational
	  	$	6.96	 	  	$	—  	 	  	$	6.96	 	  	$	—  	 
	 Medical
	  				  				  				  			
	 Canada
	  	$	8.49	 	  	$	8.21	 	  	$	9.18	 	  	$	8.11	 
	 International
	  	$	13.28	 	  	$	12.61	 	  	$	13.49	 	  	$	12.57	 
	 Recreational & medical (weighted average)
	  	$	7.33	 	  	$	8.36	 	  	$	7.99	 	  	$	8.11	 

 The Company currently offers the following formats to Canadian recreational markets; dry flower, milled, oils, gel caps, and pre-rolled cannabis. Medical offerings are similar, except for pre-rolled cannabis. Revenue also includes sales of merchandise and cannabis accessories, as well as clinic
revenue earned by Bodystream Medical and Apollo Cannabis clinics. New categories such as vape pens, edibles and beverages are expected to be available for sale later in calendar 2019 when Canadian laws permit. 

Net revenue is determined by deducting excise taxes included in the gross revenue and remitted to the provinces, which began on October 17, 2018 when The
Cannabis Act went into effect. These excise taxes accounted for 15% of gross revenue in the third quarter of fiscal 2019. The Company elected to absorb the excise taxes for medical customers, which amounted to $2.1 million of the total
$14.7 million in the third quarter. Shipments to the provinces commenced in volume on October 1, 2018, so the third quarter reflects a full quarter of revenue from the Canadian recreational market. 

The recreational market business model is, to date, principally a B2B market with sales directly to or through the provincial crown corporations, and to a
lesser extent, so far, through B2C channels with retail stores under the Tweed and Tokyo Smoke banners. The Medical business model is a B2C market in Canada where customers register and order directly on-line
through www.spectrumcannabis.com as well as international sales in emerging markets such as Germany. 
 The sales growth over the second quarter of
fiscal 2019 and third quarter of fiscal 2018 was entirely due to the launch of the Canadian recreation market on October 17, 2018. Recreational sales of Tweed and affiliated 

  
 22 

 
brands were recorded in all provinces and territories, with the highest concentration in those provinces where the Company focused on brick and mortar retail store channels, including Alberta,
Quebec, Newfoundland, and New Brunswick. Ontario which to date has only an on-line channel to market also contributed to the top line revenue growth. The Company believes focusing on brick and mortar retail
channels provides the greatest opportunity to develop brand loyalty, providing the customer with a consistent branded education and experience. 
 The
Company’s own retail stores in Newfoundland and Manitoba, under the Tweed and Tokyo Smoke brands contributed 12%, or 906 kilograms and kilogram equivalents sold in recreational channels in the quarter. 

The comparative periods have no recreational sales, except for a small amount of early shipments at the end of the second quarter of fiscal 2019. 

As expected, Medical product sales under principally the Spectrum Brand declined by approximately 12% and 8%, respectively, compared to the second quarter of
fiscal 2019 and the third quarter of fiscal 2018. The decline in medical revenue was expected due in part to the available legal recreation market but was also impacted as medical customers were transitioned to the new Spectrum website, a more
limited product offering and availability in particular spectrum formats and the absorption of the excise tax of $2.1 million by the Company for medical customers. The Company believes the Canadian medical market will recover and eventually
continue to grow as customers seek out trusted product and brand formats such as oils and gel caps, often with varying concentrations of CBD and THC which may be more difficult to access through recreational channels. However, it may take several
quarters before there is more certainty on the rate of patient and medical revenue growth. Brand loyalty and a direct relationship to medical practitioners and our customers through our customer care and the Spectrum Cannabis on-line store with prompt direct to home delivery remains an important factor in retaining and growing the medical market. The Company expects increased availability of CBD oils approved for sale to increase
significantly in the coming quarters, from planned harvests, to translate into improved medical product revenue. In addition, the Company is actively exploring other opportunities to increase the reach to medical patients and the medical community,
as well as expanding global medical markets. 
 As at December 31, 2018, there were approximately 83,400 registered Canadian patients with the Company
(Spectrum Cannabis) down slightly as compared to approximately 84,400 patients at September 30, 2018 but higher by 21% compared to approximately 69,000 patients a year ago on December 31, 2017. The decrease since the preceding quarter
partly reflects a partial cannibalization caused by the introduction of the Canadian recreational market. As noted, the Company believes the medical market will continue to grow, but it will take several quarters before there is more certainty on
the rate of growth to be expected in concert with other medical channel programs being developed by the Company. 
 Other sales include revenue from
clinics, merchandise and almost one month of device sales resulting from the acquisition of Storz & Bickel on December 6, 2018. 
 The total
quantity of cannabis sold during the three months ended December 31, 2018 was 10,102 kilograms and kilogram equivalents at an overall average price of $7.33 per gram, up from 2,330 kilograms and kilogram equivalents at an average price of $8.30
per gram in same period last year. As noted, the increase in kilograms and kilogram equivalents sold was due to the launch of the Canadian recreation market in the third quarter, offset by a slight decline in medical due to a limited product
offering in the on-line store and to cross-over effects for some customers to recreation channels. The average selling price declined in the third quarter due to principally wholesale pricing to the provincial
crown corporations in the recreation market. 
 Year-to-date, the Company
has sold 15,194 kilograms and kilogram equivalents at an average price of $7.99 per gram, compared to 6,198 kilograms and kilogram equivalents at an average price of $8.11 per gram in nine months ended December 31, 2017 due to the launch of the
Canadian recreational market in the third quarter of fiscal. 
 COST OF SALES 

Plants that are in pre-harvest are considered biological assets and are capitalized on the balance sheet at fair market
value less cost to sell at their point of harvest. Fair market value estimates are based directly on the Company’s selling list prices for specific cannabis strains and estimated or expected selling prices to provincial crown corporations in a
regulated domestic recreational market, as applicable, though no such prices have yet been established. Costs to sell include post-harvest, trimming, fulfillment, testing and shipping costs. The 

  
 23 

 
Company capitalizes all the direct and indirect costs as incurred related to the biological transformation of the biological assets between the point of initial recognition and the point of
harvest including labour related costs, grow consumables, materials, utilities, facilities costs, quality and testing costs, and production related depreciation. As they continue to grow through the
pre-harvest stages, a corresponding non-cash unrealized gain is recognized in income, reflecting the changes in fair value of the biological assets. At harvest, the
biological assets are transferred to inventory at their fair value, which becomes the deemed cost for inventory. Inventory is later expensed to cost of sales when sold. In addition, the inventory production costs are expensed through cost of sales
and represents overheads and other production costs of growing, processing and selling cannabis products, including packaging, shipping and fulfilment costs. Together, the inventory production costs expensed, the fair value changes in biological
assets included in inventory sold and other charges, and the gain from changes in the fair value of biological assets comprise cost of sales. Management expects cost of sales to vary from quarter to quarter based on the number of pre-harvest plants, the strains being grown, and where the pre-harvest plants are in the grow cycle at the end of the period. 

Cost of Sales 
  

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	December 31,	 	  	December 31,	 	  	December 31,	 	 	December 31,	 
	 (CDN $000’s)
	  	2018	 	  	2017	 	  	2018	 	 	2017	 
	 Cost of sales
	  				  				  				 			
	 Inventory production costs expensed to cost of sales
	  	$	64,758	 	  	$	9,811	 	  	$	96,349	 	 	$	25,073	 
	 Fair value changes in biological assets included in inventory sold and other charges
	  	 	28,105	 	  	 	24,204	 	  	 	105,989	 	 	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(22,267	) 	  	 	(28,845	) 	  	 	(90,500	) 	 	 	(79,221	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Total cost of sales
	  	$	70,596	 	  	$	5,170	 	  	$	111,838	 	 	$	(6,312	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 

 The cost of sales of $70,596 during the three months ended December 31, 2018 was comprised of inventory production costs
expensed to cost of sales of $64,758, fair value changes in biological assets included in inventory sold and other charges of $28,105 offset by the unrealized gain on changes in the fair value of biological assets of $22,267. 

The changes in the fair value of biological assets recorded during the third quarter of fiscal 2019 was principally due to commencement of growing at
Aldergrove and Mirabel, along with new grow rooms added at Smiths Falls. 
 In the quarter ended December 31, 2017, the net cost of sales was $5,170
with inventory production costs expensed amounting to $9,811, fair value changes in biological assets included in inventory sold and other charges of $24,204 offset by the unrealized gain on changes in the fair value of biological assets of $28,845.

 The inventory production costs expensed to cost of sales for the three month period ending December 31, 2018 of $64,578 was principally comprised of
the cash costs of the inventory sold in the period for both recreation and medical as well as $13,092 of cash operating costs of subsidiaries not yet fully cultivating, such as the Delta, BC greenhouse, a number of zones at the Aldergrove, BC
greenhouse, Mirabel, Quebec in a pilot phase and at Fredericton, New Brunswick) and distribution charges of $12,641. This compares to the same period last year when the inventory production costs expensed to cost of sales was $9,811. 

GROSS MARGIN 
 The third quarter fiscal 2019 gross margin
before the effects of IFRS fair value impacts in cost of sales and other charges and including the costs of non-cultivating subsidiaries of $13,092, distribution charges of $12,041 and medical excise taxes
absorbed by the company of $2,059 was $18,290 or 22% of net revenue. In comparison, the third quarter fiscal 2018 gross margin before the effects of IFRS fair value impacts in cost of sales and other charges was $11,889 or 55% of net revenue. 

In the nine month period ended December 31, 2018, gross margin before the effects of the IFRS fair value impacts in cost of sales and other charges, and
including the costs of not yet fully cultivating subsidiaries and medical excise taxes absorbed, totaling approximately $46,742, was $35,942 or 27% of net revenue. In the comparison period last year, gross margin before the effects of IFRS fair
value impacts in cost of sales and other charges was $30,069 or 55% of net revenue. 

  
 24 

 The lower gross margin percentage was due primarily to the impact of cash operating costs of subsidiaries
not yet cultivating as described above, the impact of absorbing excise taxes in the medical market, lower average selling price in B2B channels with the provinces in the recreation market, and to absorbing early costs associated with developing and
testing edibles and beverages for introduction later in calendar 2019. Greenhouse facilities in Aldergrove, Delta and Mirabel have since been planted in a manner that allows for ongoing harvests, rather than one large harvest, to increase the
utilization of assets such as post harvest processes and provide for a steady supply of product going forward. The Aldergrove greenhouse began its third harvest earlier in the fourth quarter of fiscal 2019 and the Delta facility is expected to begin
its next harvest later in the fourth quarter of fiscal 2019. The Denmark greenhouse is also expected to begin sales into Germany in the fall of calendar 2019. 

The Company believes gross margins will improve in the coming quarters when all of its cultivation facilities reach full utilization and cycle through initial
pilot harvests to be high performing assets. In addition, margins are expected to benefit when edibles and beverages are introduced later in calendar 2019 with lower costs of active ingredients per serving. 

The IFRS reported gross margin was $12,452 for the three-month period ended December 31, 2018. In the comparative period ended December 31,
2017, the gross margin on the same basis was $16,530 or 76% of revenue. Gross margin includes the fair value changes in biological assets included in inventory sold and other charges and unrealized gain on changes in fair value of biological assets.

 The IFRS gross margin was mostly impacted by the limited utilization of both BC Tweed facilities and Vert Mirabel, the absorption of medical excise taxes
and lower average selling price into the B2B recreational channel. 
 The IFRS reported gross margin was $20,453 or 15% of net revenue, for the nine month
period ended December 31, 2018. In the comparative period ended December 31, 2017, the gross margin on the same basis was $61,454 or 111% of revenue with differences mostly influenced by the IFRS accounting for the fair value changes in
biological assets relative to net revenue reported in each respective period. 
 The Company’s announced production expansion plans, which will add up
to 1.3 million sq. ft. over the remainder of calendar 2019, are expected to yield harvests that will produce increased volumes of available inventories for domestic sales and for export. The Company continues to refine its production processes
and methodologies to increase production yields and gross margins. 
 OPERATING EXPENSES 

Operating Expenses 
  

																	
	 	  	Three months ended	 
	 	  	 	 	  	As a % of	 	 	 	 	  	As a % of	 
	 	  	December 31,	 	  	Net	 	 	December 31,	 	  	Net	 
	 (CDN $000’s)
	  	2018	 	  	Revenue	 	 	2017	 	  	Revenue	 
	 Operating Expenses
	  				  				 				  			
	 Sales and marketing
	  	$	44,895	 	  	 	54	% 	 	$	9,409	 	  	 	43	% 
	 Research and development
	  	 	5,264	 	  	 	6	% 	 	 	287	 	  	 	1	% 
	 General and administration
	  	 	46,088	 	  	 	55	% 	 	 	11,050	 	  	 	51	% 
	 Acquisition-related costs
	  	 	4,520	 	  	 	5	% 	 	 	790	 	  	 	4	% 
	 Share-based compensation expense
	  	 	63,911	 	  	 	77	% 	 	 	17,879	 	  	 	82	% 
	 Depreciation and amortization
	  	 	5,015	 	  	 	6	% 	 	 	3,147	 	  	 	15	% 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Total operating expenses
	  	$	169,693	 	  				 	$	42,562	 	  			
		  	  
	  
	 	  				 	  
	  
	 	  			

  
 25 

																	
	 	  	Nine months ended	 
	 	  	 	 	  	As a % of	 	 	 	 	  	As a % of	 
	 	  	December 31,	 	  	Net	 	 	December 31,	 	  	Net	 
	 (CDN $000’s)
	  	2018	 	  	Revenue	 	 	2017	 	  	Revenue	 
	 Operating Expenses
	  				  				 				  			
	 Sales and marketing
	  	$	101,208	 	  	 	77	% 	 	$	23,452	 	  	 	43	% 
	 Research and development
	  	 	7,964	 	  	 	6	% 	 	 	914	 	  	 	2	% 
	 General and administration
	  	 	102,777	 	  	 	78	% 	 	 	26,936	 	  	 	49	% 
	 Acquisition-related costs
	  	 	9,606	 	  	 	7	% 	 	 	2,491	 	  	 	5	% 
	 Share-based compensation expense
	  	 	189,833	 	  	 	143	% 	 	 	28,936	 	  	 	52	% 
	 Depreciation and amortization
	  	 	11,640	 	  	 	9	% 	 	 	9,974	 	  	 	18	% 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Total operating expenses
	  	$	423,028	 	  				 	$	92,703	 	  			
		  	  
	  
	 	  				 	  
	  
	 	  			

 Sales and marketing expenses include, costs associated with the development of branding, marketing and education campaigns,
the development of new permitted product SKUs, the development of recreational product packaging, the development of cannabis retail and education programs as well as costs associated with the Company’s medical outreach
program.     
 These expenditures represent the Company’s view that strong brand recognition is, over time, essential to the
Company’s successful market share acquisition strategy, particularly in the new recreational market in Canada. These costs represent a strategic upfront investment, which management believes will have a long-term benefit in growing customer
acquisition and retention. Further, the Company is making these investments to aggressively seek new domestic and international business opportunities to build for the future. 

As a result, sales and marketing expenses were up significantly relative to the same period last year for the purpose of being ready for the emerging
recreation market while at the same time developing international markets. 
 The Company’s R&D team is researching a variety of intellectual
property opportunities (See also INTELLECTUAL PROPERTY – PATENT PORTFOLIO and INTELLECTUAL PROPERTY - RESEARCH & DEVELOPMENT), including those relating to growth patterns under different environmental
scenarios and the genetics of various strains, the production of encapsulated cannabis oil capsules in higher volumes as well as in the development and implementation of internal testing resources, capabilities and procedures. In addition, the
Company has invested in the development of patent pending technology related to equipment that the Company has engineered specifically for the cannabis industry to be incorporated in Canopy Growth’s operations. Also, ongoing R&D work being
performed in the Company’s Dealers License Area is expected to lead to the development of new cannabis-based product form factors that will enter the market when permitted. R&D will continue to increase in absolute amounts with the
acquisition of Canopy Health and funding approved clinical human and animal trials. 
 The G&A expenses increased as the company scaled up to be ready
for the Canadian legal recreational market, international expansion, and increased governance costs associated with listing on the New York Stock Exchange and meeting additional regulatory reporting requirements. G&A includes higher legal and
professional services fees related to investments in governance, expanded operations and supporting business development as well as expanding the Company’s information technology capability. G&A expenses also included higher employee
compensation costs due to increased staff levels, necessary use of consultants and advisory services while expanding and commercializing the Company’s operations, compliance costs associated with meeting Health Canada requirements, as well as
other public company compliance related expenses including related professional fees. Overall, the increase in G&A reflects the Company’s growth and building of commercial capacity and capability. As international expansion forms a key
component of the Company’s business growth strategy, the Company expects to incur related costs, such as legal and tax advice, while pursuing these business ventures in the future. 

Acquisition-related expenses in the third quarter period ended December 31, 2018 were primarily related to the ebbu and Storz & Bickel
acquisitions and POS investment and costs incurred due to the ongoing evaluation of potential acquisitions performed during the period and increased legal, accounting and strategic business consulting services required to complete or evaluate the
transactions. The Company may acquire strategic businesses and assets in the future as it pursues its growth strategy. As such, the Company may incur related acquisition expenses, including legal, accounting and strategic business consulting service
related fees, in the future. 

  
 26 

 Share-based compensation expense related to options granted to employees and consultants of the Company and
to acquisition-related milestones. As noted earlier in this MD&A, the number of employees increased from 700 full time employees at the end of December 31, 2017 to approximately 2,700 at December 31, 2018. 

ADJUSTED EBITDA (NON-GAAP MEASURE) 

The Company’s “Adjusted EBITDA” is a Non-GAAP metric used by management that does not have any
standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the Income (loss) from operations, as reported, before interest, tax, and adjusted for
removing the share-based compensation expense, depreciation, and the fair value effects of accounting for biological assets and inventories, and further adjusted to remove acquisition related costs. Management believes Adjusted EBITDA is a useful
financial metric to assess its operating performance on an adjusted basis as described above. 
 Adjusted EBITDA in the three months ended December 31,
2018 and 2017, amounted to a loss of $75,081 and a loss of $5,681, respectively. 
 Adjusted EBITDA in the nine months ended December 31, 2018 and
2017, amounted to a loss of $155,154 and a loss of $14,359, respectively. 
 CANOPY GROWTH CORPORATION 

 

																	
	Adjusted EBITDA1 Non-GAAP Measure	  	Three Months Ended	 	  	Nine Months Ended	 
	 (In CDN$000’s)
	  	December 31,
2018	 	  	December 31,
2017	 	  	December 31,
2018	 	 	December 31,
2017	 
	 	  	 	 	  	(Restated)	 	  	 	 	 	(Restated)	 
	 Adjusted EBITDA1
Reconciliation
	  				  				  				 			
	 Loss from operations - as reported
	  	$	(157,241	) 	  	$	(26,032	) 	  	$	(402,575	) 	 	$	(31,249	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 IFRS fair value accounting related to biological assets and inventory
	  

	 Fair value changes in biological assets included in inventory sold and other charges
	  	 	28,105	 	  	 	24,204	 	  	 	105,989	 	 	 	47,836	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(22,267	) 	  	 	(28,845	) 	  	 	(90,500	) 	 	 	(79,221	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
		  	 	5,838	 	  	 	(4,641	) 	  	 	15,489	 	 	 	(31,385	) 
	 Share-based compensation expense (per statement of cash flows)2
	  	 	64,090	 	  	 	19,015	 	  	 	194,686	 	 	 	30,249	 
	 Excess space provision included in general and administration expenses
	  	 	(178	) 	  	 	—  	 	  	 	4,068	 	 	 	—  	 
	 Acquisition Costs
	  	 	4,520	 	  	 	790	 	  	 	9,606	 	 	 	2,491	 
	 Depreciation and amortization (per statement of cash flows)
	  	 	7,890	 	  	 	5,187	 	  	 	23,572	 	 	 	15,535	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
		  	 	76,322	 	  	 	24,992	 	  	 	231,932	 	 	 	48,275	 
	 Adjusted EBITDA
	  	$	(75,081	) 	  	$	(5,681	) 	  	$	(155,154	) 	 	$	(14,359	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 

  

	1 -	 Adjusted EBITDA is Earnings Before Interest, Tax, and Depreciation, stock compensation, fair value changes
and other non-cash items, and as adjusted for acquisition related items. 

	2 -	 Includes $23,849 and $8,914 for the three months ended December 31, 2018 and 2017, respectively, in
share-based compensation expense related to acquisition milestones 

  
 27 

 OTHER EXPENSES AND NET INCOME 

Other income of $235,231 for the three months ended December 31, 2018 was primarily made up of fair value changes on financial assets and financial
liabilities. The amount includes a fair value gain of $185,796 arising from the decrease in the fair value of the senior convertible notes from the end of the second quarter to the end of the third quarter and a fair value gain of $36,457 on
financial assets, principally the TerrAscend and Slang warrants. The Company also had interest income of $18,643 on cash and marketable securities. This income was partly offset by a loss of $6,322 as a result of the TerrAscend restructuring which
resulted in the exchange of the TerrAscend shares for the non-voting, non-participating exchangeable shares. 

The Company recorded an income tax expense of $1,041 for the three months ended December 31, 2018. In the comparative period last year, the Company
recorded income tax expense of $7,595. 
 Net income for the three months ended December 31, 2018 was $74,860 compared to a net income of $11,014 in
the comparative period last year. 
 Other income of $63,466 for the nine months ended December 31, 2018 is primarily made up of fair value changes on
financial assets and financial liabilities, and a gain on the acquisition of the Company’s unowned interest in CHI. 
 The Company recorded an income
tax recovery of $1,398 for the nine months ended December 31, 2018. In the comparative period last year, the Company recorded income tax expense of $9,635. 

Net loss for the nine months ended December 31, 2018 was $346,732 compared to net income of $227 in the comparative period last year. 

LIQUIDITY 
 As at December 31, 2018, the Company had
cash and cash equivalents available of $4,115,870 and marketable securities of $799,418, a combined increase from $322,560 at the end of fiscal 2018. The increase from the end of fiscal 2018 was mainly due to the investment of approximately
$5,000,000 by Constellation Brands on November 1, 2018, issuance of convertible senior notes with an aggregate principal amount of $600,000 offset by cash used to fund operations of $294,949, cash used for acquisition of subsidiaries and
investments in facility enhancements totaling $568,236. The Company’s excess cash resources are invested in government backed, liquid treasury bills and bonds. 

While the Company has incurred losses to date, management anticipates success and eventual cash profitability of the business, though there can be no
assurance that the Company will gain adequate market acceptance for its products or be able to generate sufficient positive cash flow to achieve its business plans. 

The Company’s objectives when managing its liquidity and capital structure are to generate sufficient cash to fund the Company’s operating,
acquisition and organic growth requirements. 
 The table below sets out the cash, biological assets, inventory, other working capital, and long-term debt
at December 31, 2018 and March 31, 2018. 
  

									
	 (CDN $000’s)
	  	December 31,
2018	 	  	March 31,
2018	 
	 Cash & cash equivalents
	  	$	4,115,870	 	  	$	322,560	 
	 Marketable securities
	  	 	799,418	 	  	 	—  	 
	 Biological assets
	  	 	31,013	 	  	 	16,348	 
	 Inventory
	  	 	184,961	 	  	 	101,607	 
	 Other working capital
	  	 	(131,317	) 	  	 	(49,209	) 
	 Current and long-term debt
	  	 	791,496	 	  	 	8,422	 
	 Other long-term liabilities
	  	 	122,006	 	  	 	61,150	 

 The increase in total working capital to a surplus of $4,981,498 (March 31, 2018 – surplus of $389,749) was primarily due
to capital raised through the Constellation Brands investment and the convertible notes issued. An increase in accounts payable and accrued liabilities, primarily due to construction activities and the scaling of the business due to the new
recreation market, partially offset the increase in total working capital. 

  
 28 

 Inventory at December 31, 2018 amounted to $184,961 (March 31, 2018 - $101,607) and biological assets
amounted to $31,013 (March 31, 2018 - $16,348), together totaling $215,974 (March 31, 2018 - $117,955) all of which Management believes is required to meet expected market demands, including the legalized recreational market. 

Finished goods consist of packaged cannabis and cannabis derivatives.
Work-in-process inventory consists of bulk cannabis, bulk hemp, and cannabis derivative products in a semi-finished goods state or in a production process. Consumables
include non-cannabis purchased inputs into the production process including packaging and grow consumables. Merchandise include non-cannabis purchased goods ready for
sale as well as manufactured devices. 
 The increase in inventory since March 31, 2018 was due to the harvests at the Company’s greenhouses in Niagara-on-the-Lake and BC Tweed. Harvested plants were added to inventories during the quarter and quantities were maintained to meet
the growth in sales expected and meet strain availability requirements, and the expansion of oils. 
 The chart below highlights the Company’s cash
flows during the quarter ended December 31, 2018 and 2017. 
  

									
	(CDN $000’s)	  	Nine months ended	 
	 Net cash provided by (used in)
	  	December 31,
2018	 	  	December 31,
2017	 
	 Operating activities
	  	$	(294,899	) 	  	$	(44,595	) 
	 Investing activities
	  	 	(1,785,363	) 	  	 	(130,339	) 
	 Financing activities
	  	 	5,769,908	 	  	 	310,842	 
	 Effect of exchange rate changes on cash and cash equivalents
	  	 	103,664	 	  	 	—  	 
	 Cash and cash equivalents, beginning of year
	  	 	322,560	 	  	 	101,800	 
		  	  
	  
	 	  	  
	  
	 
	 Cash and cash equivalents, end of period
	  	$	4,115,870	 	  	$	237,708	 
		  	  
	  
	 	  	  
	  
	 

 CASH USED IN OPERATING ACTIVITIES 

The cash used in operating activities prior to changes in working capital during the nine months ended December 31, 2018 amounted to $165,353, with a net
loss of $346,732, which included the IFRS accounting for unrealized gain on biological assets of $90,500, change in other assets of $16,908, other income and expense of $45,919, and income tax recovery of $1,398 which is offset by the fair value
changes in biological assets included in inventory sold and other charges of $105,989 and other non-cash items such as depreciation and amortization of $23,572, total share-based compensation of $194,686, and
other non-cash operating adjustments of $11,857. The cash used in operating activities after changes in working capital during the quarter ended December 31, 2018 amounted to $294,900. 

In comparison, the cash used in operating activities prior to changes in working capital during the nine months ended December 31, 2017 amounted to
$17,290, with net income of $227 offset by the IFRS accounting for unrealized gain on biological assets of $79,221, change in other assets of $1,932, and other income and expense of $40,972 which are offset by the fair value changes in biological
assets included in inventory sold and other charges of $47,836 and other non-cash items such as depreciation and amortization of $15,535, total share-based compensation of $30,249, and other non-cash operating adjustments of $10,358. The cash used in operating activities after changes in working capital during the quarter ended December 31, 2017 amounted to $44,595. 

CASH USED IN INVESTING ACTIVITIES 
 The cash used in
investing activities during the nine months ended December 31, 2018 of $1,785,363 was primarily due to the expansion of growing capacity at Tweed, the development of BC Tweed and Fredericton New Brunswick locations of $495,236, purchases of
marketable securities of $802,247, and other investments made by the Company and its subsidiaries of $447,740. 
 In comparison, the cash used in investing
activities during the nine months ended December 31, 2017 of $130,339 was primarily due to the respective acquisition and construction of equipment and facilities and to investments made in associated companies. 

  
 29 

 CASH FROM FINANCING ACTIVITIES 

The cash provided by financing activities during the nine months ended December 31, 2018 of $5,769,908 is primarily due to closing the $5,072,500
Constellation Brands investment on November 1, 2018, the issuance of convertible senior notes of $600,000, the exercise of stock options and warrants amounting to $47,414, and proceeds from shares issued by Canopy Rivers of $91,218 which were
partially offset, by the payment of share issue costs of $18,617, payment of debt financing costs of $16,380 and payment of lease obligations and repayment of long-term debt amounting to $6,227. 

In comparison, the cash provided by financing activities during the nine months ended December 31, 2017 of $310,842 was due to $35,113 raised by a
controlled subsidiary, Canopy Rivers. The Company’s voting rights allow it to direct the relevant activities of Canopy Rivers such that the Company has control over Canopy Rivers and Canopy Rivers is consolidated in the financial statements.
The Company also received proceeds from the issuance of shares and warrants of $269,990 and the exercise of stock options and warrants amounting to $8,225. These were partially offset by the payment of share issue costs of $1,345 and repayment of
lease obligations and long-term debt amount to $1,141. 
 LIQUIDITY, FINANCING AND CAPITAL RESOURCES 

The Company is subject to risks including, but not limited to, its inability to raise additional funds through debt and/or equity financing to support the
Company’s development and continued operations and to meet the Company’s liabilities and commitments as they come due. Specifically, the Company has a history of losses with an accumulated deficit of $441,480, share capital of $5,947,715
and working capital surplus of $4,981,498 as at December 31, 2018. This compares to an accumulated deficit of $91,649, share capital of $1,076,838 and working capital surplus of $389,749 as at March 31, 2018. See below under the heading
“Risk Factors”. 
 FUNDAMENTAL CHANGE NOTICE AND TENDER OFFER 

On November 2, 2018, the Company provided a Fundamental Change Notice, Notice of Right to Convert, Notice of MakeWhole Fundamental Change and Related
Conversion Rate Adjustment, and Offer to Repurchase for Cash (the “Notice”) to holders of its $600,000 aggregate principal amount of 4.25% Convertible Senior Notes Due 2023 (the “Notes”), pursuant to the Indenture, dated
June 20, 2018. The Notice expired on December 6, 2018 without any repurchase or issuance of shares. 
 CAPITAL ACTIVITIES 

The Company manages its capital with the objective of maximizing shareholder value and sustaining future development of the business. The Company defines
capital as the Company’s equity and any debt it may issue. The Company manages its capital structure and adjusts it, based on the funds available to the Company, in order to support the Company’s activities. The Company, upon approval from
its Board of Directors, will undertake to balance its overall capital structure through new share issues, the issue of debt or by undertaking other activities as deemed appropriate under the specific circumstances. 

The Company’s principal capital needs are for funds to implement strategic acquisitions, invest in innovation and intellectual property, develop
international business opportunities, expand its growing rooms, ancillary rooms, invest in technology and equipment, and general working capital requirements to fund operations. Since its formation, the Company has financed its cash requirements
primarily through the issuance of capital stock, including the recent $5,000,000 investment by Constellation Brands, with the following exceptions. 
 On
June 20, 2018, the Company issued convertible senior notes (“the notes”) with an aggregate principal amount of $600,000. The notes bear interest at a rate of 4.25% per annum, payable semi-annually on January 15th and July 15th of each
year commencing from January 15, 2019. The notes will mature on July 15, 2023. 
 On November 7, 2014, a mortgage was obtained on the Tweed
Farms property. The mortgage was obtained from Farm Credit Canada for an original amount of $1,875 at an annual interest rate of 5.3% and had a term of 5 years and an amortization period of 7 years. On August 5, 2016, the Company obtained a
second mortgage on the Tweed Farms property with the same Canadian financial institution for an original amount of $3,500with an annual interest rate of 4.9%, term of 5 years and an amortization period of 7 years. Through the acquisition of Mettrum
on January 31, 2017, the Company has an additional mortgage of, also with the same Canadian 

  
 30 

 
financial institution, on the Mettrum property, with an annual interest rate of 4.8%, term of 5 years and an amortization period of 7 years. All combined, the mortgages with Farm Credit Canada
amounted to $8,179 at December 31, 2018 (March 31, 2018 - $6,514). 
 The Company also has revolving lines of credit for up to $6,018, with Farm Credit
Corporation, with variable interest rates based on the FCC Variable Mortgage Rate plus 1.2% with a 5-year term and interest only payments on drawn amounts but is payable on demand or may be prepaid at any time
at the option of the Company. The lines of credit are subject to disbursement conditions related to capital expenditures at Tweed Farms and Mettrum. The lines of credit were undrawn as at December 31, 2018. 

The Company’s authorized share capital is an unlimited number of common shares of which 342,983,810 common shares were issued and outstanding as at
December 31, 2018, after including 128,935 escrowed shares to be released after meeting certain conditions (March 31, 2018 – 199,557,208 common shares after including 236,277 escrowed shares to be released after meeting certain
conditions). 
 The Company has 31,555,161 options outstanding at December 31, 2018 under the Company employee stock option plan (“ESOP”) at
prices between $0.22 and $67.54 per share (March 31, 2018 – 17,245,835 option shares). 
 At December 31, 2018 the Company also had 159,122,618
warrants for common shares outstanding at prices between $12.98 and $50.40, which expire between January 31, 2020 and November 1, 2021. 
 OFF-BALANCE SHEET ARRANGEMENTS 
 The Company has no off-balance sheet
arrangements other than those as stated below in the section titled “Transactions with Related Parties”. 
 TRANSACTIONS WITH RELATED PARTIES

 On November 16, 2018, the Company acquired two previously leased facilities from a company controlled by Murray Goldman, a former director of
Canopy Growth Corporation for cash proceeds of $31,281, including $1,454 to repay the loan to Mr. Goldman’s company. Mr. Goldman resigned from the Board on November 1, 2018 following the previously discussed investment by
Constellation Brands. The basis for the consideration paid was supported by independent appraisals of the properties. The Company continues to lease one Toronto facility from Mr. Goldman’s company. The Toronto facility leases had original
expiration dates on October 15, 2018 and August 31, 2024 and the Edmonton facility lease was to expire on July 31, 2037. One of the Toronto facilities and the Edmonton facility were purchased on November 16, 2018 for $29,827.
Included in the expenses for the three and nine months ended December 31, 2018 for rent and operating costs was ($755) and $1,243, respectively (for the three and nine months ended December 31, 2017 - $1,301 and $1,673, respectively). In
addition to the leased premises, consulting services of $73 and $230 were also provided to the Company for the three and nine months ended December 31, 2018, respectively (three and nine months ended December 31, 2017 - $nil and $nil).
Included in interest expense for the three and nine months ended December 31, 2018 was an amount of $24 and $104, respectively (for the three and nine months ended December 31, 2017 - $44 and $130, respectively). At December 31, 2018,
the loan balance was $nil (March 31, 2018 - $1,564). The Company had $29 owing in accounts payable and accrued liabilities at December 31, 2018 (March 31, 2018 - $137). 

The Chairman and Chief Executive Officer has been engaged to provide services to the Company at $75 per quarter and is eligible for up to a $300 annual bonus.
For the three and nine months ended December 31, 2018 consulting expenses including travel totaled $80 and $215, respectively (for the three and nine months ended December 31, 2017 - $55 and $165, respectively). The Company had $225 owing
in accounts payable and accrued liabilities at December 31, 2018 (March 31, 2018 - $375). All amounts exclude HST. 
 During the three and nine months
ended December 31, 2018, $121 and $499 was expensed in director’s fees, respectively (for the three and nine months ended December 31, 2017 - $112 and $464, respectively). The Company had $nil owing in accounts payable and accrued
liabilities to directors at December 31, 2018 and March 31, 2018. 
 These transactions are in the normal course of operations and are measured at
the exchange amounts being the amounts agreed to by the parties. 

  
 31 

 CHANGE IN ACCOUNTING POLICIES 

Effective April 1, 2018, the Company has changed its accounting policy with respect to production and fulfillment related depreciation. Prior to this
change the Company expensed all depreciation and amortization costs as operating expenses. The Company now capitalizes production related depreciation and amortization to biological assets and inventory and expenses this depreciation to costs of
goods sold as inventory is sold. In addition, depreciation and amortization associated with shipping and fulfillment will be recorded to cost of goods sold as period charges. Previously this depreciation and amortization was grouped with other
depreciation and amortization on the Statement of Operations. The Company believes that the revised policy and presentation provides more relevant financial information to users of the financial statements. 

The Company’s amended policy is as follows: 
 Biological
assets 
 The Company’s biological assets consist of cannabis plants. The Company capitalizes all the direct and indirect costs as incurred related
to the biological transformation of the biological assets between the point of initial recognition and the point of harvest including labour related costs, grow consumables, materials, utilities, facilities costs, quality and testing costs, and
production related depreciation. The Company then measures the biological assets 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. Cost to sell includes
post-harvest production, fulfillment and shipping costs. The net 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. Seeds are measured at
fair value. 
 Inventories 
 Inventories of harvested work-in-process and finished goods are valued at the lower of cost and net realizable value. Inventories of harvested cannabis are transferred from biological assets at their
fair value less cost to sell to the point of harvest, which becomes the initial deemed cost. All subsequent direct and indirect post-harvest costs are capitalized to inventory as incurred, including labour related costs, consumables, materials,
packaging supplies, utilities, facilities costs, quality and testing costs, and production related depreciation. 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. Inventories for resale and supplies and consumables are valued at the lower of costs and net realizable value, with cost determined using the weighted average cost basis. 

The line item “Inventory production costs expensed to cost of sales” in the Consolidated Statements of Operations is comprised of the cost of
inventories expensed in the period and the direct and indirect costs of fulfillment including labour related costs, materials, shipping costs, customs and duties, royalties, utilities, facilities costs, and fulfillment related depreciation. 

The change in accounting policy has been applied retrospectively and is further described in Note 3 to the Interim Statements for the quarter ended
December 31, 2018. 
 NEW OR AMENDED STANDARDS EFFECTIVE APRIL 1, 2018 

The Company has adopted the following new or amended IFRS standards for the annual period beginning on April 1, 2018. 

IFRS 15 Revenue from Contracts with Customers 
 IFRS 15
was issued by the IASB in May 2014 and specifies how and when revenue should be recognized based on a five-step model, which is applied to all contracts with customers. On April 12, 2016, the IASB published final clarifications to IFRS 15 with
respect to identifying performance obligations, principal versus agent considerations, and licensing. 

  
 32 

 The Company has applied IFRS 15 retrospectively but determined that there is no change to the comparative
periods or transitional adjustments required as a result of the adoption of this standard The Company’s accounting policy for revenue recognition under IFRS 15 is as follows: 

To determine the amount and timing of revenue to be recognized, the Company follows a 5-step process: 

 

	 	1.	 Identifying the contract with a customer 

 

	 	2.	 Identifying the performance obligations 

 

	 	3.	 Determining the transaction price 

 

	 	4.	 Allocating the transaction price to the performance obligations 

 

	 	5.	 Recognizing revenue when/as performance obligation(s) are satisfied. 

Revenue from the direct sale of cannabis to customers for a fixed price is recognized when the Company transfers control of the good to the
customer.     
 IFRS 9 Financial Instruments (“IFRS 9”) 

IFRS 9 was issued by the IASB in November 2009 and October 2010 and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset
is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow
characteristics of the financial assets. Financial liabilities are classified in a similar manner as under IAS 39. 
 Under IFRS 9, financial assets are
initially measured at fair value plus, in the case of a financial asset not at fair value through profit and loss [“FVTPL”], transaction costs. 

Financial assets are subsequently measured at: 
  

	 	1.	 FVTPL; 

  

	 	2.	 amortized cost; 

  

	 	3.	 debt measured at fair value through other comprehensive income [“FVOCI”]; 

 

	 	4.	 equity investments designated at FVOCI; or 

 

	 	5.	 financial instruments designated at FVTPL. 

The classification is based on whether the contractual cash flow characteristics represent “solely payment of principal and interest” [the
“SPPI test”] as well as the business model under which the financial assets are managed. Financial assets are required to be reclassified only when the business model under which they are managed has changed. All reclassifications are to
be applied prospectively from the reclassification date. 
 The Company has elected to measure investments in equity instruments of AusCann, JWC, HydRx,
Vapium, Good Leaf, Solo Growth, Livewell and Headset which are included in Other financial assets on the Statement of Financial Position, at FVOCI on transition or initial recognition as these investments are long-term and strategic in nature, and
net changes in fair value are more suited to be presented in other comprehensive income. 
 Debt investments are recorded at amortized cost for financial
assets that are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the SPPI test. 

The assessment of the Company’s business models for managing the financial assets was made as of the date of initial application of April 1, 2018.
The assessment of whether contractual cash flows on debt instruments meet the SPPI test was made based on the facts and circumstances as at the initial recognition of the financial assets. 

Consistent with IAS 39, all financial liabilities held by the Company under IFRS 9, other than convertible debentures, are initially measured at fair value
and subsequently measured at amortized cost. The convertible debenture issued by the Company in June 2018 has been designated at FVTPL upon initial recognition as permitted by IFRS 9 as the debenture contains multiple embedded derivatives. 

  
 33 

 The following table summarizes the original measurement categories under IAS 39 and the new measurement
categories under IFRS 9 for each class of the Company’s financial assets and financial liabilities: 
  

					
	Financial assets	 	 IAS 39

Classification
	 	 IFRS 9

Classification

	 Cash and cash equivalents
	 	Loans and receivables	 	Amortized cost
	 Marketable securities
	 	FVTPL	 	FVTPL
	 Accounts receivables
	 	Loans and receivables	 	Amortized cost
	 Interest receivable
	 	Loans and receivables	 	Amortized cost
	 Restricted investments
	 	Loans and receivables	 	Amortized cost
	 Other financial assets
	 	Available for sale, loans and receivables and FVTPL	 	FVOCI and FVTPL
	 Accounts payable and accrued liabilities
	 	Other liabilities	 	Other liabilities
	 Long-term debt
	 	Other liabilities	 	Other liabilities
	 Convertible debentures
	 	Not applicable	 	FVTPL
	 BC Tweed and Vert Mirabel put liability
	 	FVTPL	 	FVTPL
	 Acquisition consideration related liabilities
	 	FVTPL	 	FVTPL

 The Company’s investments in JWC royalty interest, Agripharm royalty interest and Radicle repayable debenture (Note 14)
were classified as loans and receivables and measured at amortized cost under IAS 39. Under IFRS 9, these investments are classified and measured at FVTPL as these investments fail the SPPI test. The change in classification of these investments did
not materially impact the carrying amounts of these investments on the transition date. 
 Impairment 

Under IFRS 9, the Company is required to apply an expected credit loss [“ECL”] model to all debt financial assets not held at FVTPL, where credit
losses that are expected to transpire in futures years are provided for, irrespective of whether a loss event has occurred or not as at the balance sheet date. For trade receivables, the Company has applied the simplified approach under IFRS 9 and
has calculated ECLs based on lifetime expected credit losses taking into considerations historical credit loss experience and financial factors specific to the debtors and general economic conditions. The Company has assessed the impairment of its
amounts receivable using the expected credit loss model, and no material difference was noted. As a result, no impairment loss has been recognized upon transition and at April 1, 2018. 

CONTROLS AND PROCEDURES 
 Disclosure Controls and
Procedures 
 The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be
publicly disclosed is recorded, processed, summarized and reported on a timely basis. An evaluation of the design of Disclosure Controls was done under the supervision and with the participation of management, including our Chief Executive Officer
and Chief Financial Officer. Based upon this evaluation, the material weakness in our internal control over financial reporting set forth below was noted. 

Internal Controls Over Financial Reporting 
 National
Instrument 52-109 requires the CEO and CFO to certify that they are responsible for establishing and maintaining internal controls over financial reporting (“ICFR”) for the Company and that those
internal controls have been designed and are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. The CEO and CFO are also responsible for
disclosing any changes to the Company’s internal controls during the most recent period that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. 

  
 34 

 The Company’s management, under the supervision and with the participation of its Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company ́s internal control over financial reporting as of March 31, 2018, using the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013 (the “COSO 2013 Framework”). Based on this evaluation management concluded that a material weakness existed as of March 31, 2018, as described below.

 Previously Identified Material Weakness Not Fully Remediated 

As of March 31, 2018, management concluded that the Company did not maintain effective internal controls over Corporate-wide End User Computing (EUC)
spreadsheets; this material weakness was initially identified as of March 31, 2017. The accounting complexities encountered in the financial reporting relies on equally complex spreadsheets, most significantly around the valuation of inventory
and biological assets and the related classification of line items on the Consolidated Statements of Operations. Spreadsheets are inherently prone to error due to their manual nature. The Company ́s controls related to spreadsheets did not
address all risks associated with updating assumptions, manual entry into spreadsheets, completeness of data entry, nor evidence of review of completed spreadsheets 

Material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has
concluded, through testing, that these controls are operating effectively. Management has determined that the material weaknesses over EUC has not been fully remediated as of the date hereof. 

Remediation Plan and Activities 
 Management continues to
strengthen and improve controls related to the remaining material weaknesses related to End User Computing in the following ways: 
  

	•	 	 Continued engagement of third party resources to assist the Company in its risk assessment process and in
completing the design and implementation of certain internal controls over financial reporting pursuant to the COSO 2013 Framework; 

  

	•	 	 Inventoried EUC spreadsheets in use and associated control and implementation of several IT supported systems to
reduce reliance on EUC tools. Further IT support initiatives are underway to continue to reduce the use of EUC tools; 

  

	•	 	 A cross-functional business transformation process enabled by a new end to end Enterprise Resource Planning
(“ERP”) system was launched in June 2017 to standardize and automate business processes and controls across the organization domestically and internationally. The project is a major initiative that is utilizing third party consultants and
will expand the depth and breadth of the finance and information technology organizations. The project, named Project Summit, will enable continuous improvement and scalability. As Project Summit progresses internal controls over financial reporting
are being reviewed and are being updated accordingly. The new ERP is intended to facilitate improved reporting and oversight and enhance internal controls over financial reporting. 

  
 35 

 The material weakness related to reliance on EUC has not been fully remediated as at December 31, 2018.
The initial “go live” date for Phase 1 of the implementation was October fiscal 2019 and in order to accommodate changing business requirements the roll out will extend into fiscal 2020. Remediation is expected to be completed with the
full implementation of the ERP. 
 The ERP implementation represents a material change that took place during the period ended December 31, 2018. Phase
1 of the implementation project covered the migration of the new ERP system of certain entities, with the remainder to be migrated into fiscal 2020. In consequence, the internal controls over financial reporting are being reviewed and updated
accordingly. 
 Another significant change that took place during the period was the Cannabis Legalization across Canada on October 17, 2018. Due to
this, the company expanded its business model and the revenue stream was expanded to include retail sales and business to business sales for the recreational cannabis market. New processes and controls have been designed, implemented and continue to
be assessed for internal control over financial reporting purposes. 
 Other than those described above, there have been no changes in the Company’s
internal control over financial reporting during the three months ended December 31, 2018 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting. 

No assurance can be provided at this time that the actions and remediation efforts will effectively remediate the material weakness described above or prevent
the incidence of other material weaknesses in the Company’s internal control over financial reporting in the future. Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that disclosure controls and
procedures or internal control over financial reporting will prevent all errors, even as the remediation measures are implemented and further improved to address the material weaknesses. A control system is subject to inherent limitations and even
those systems determined to be effective can provide only reasonable, but not absolute, assurance that control objectives will be met with respect to financial statement preparation and presentation. 

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has limited the scope of the design of the
Company’s disclosure controls and procedures and internal controls over financial reporting to exclude controls, policies and procedures and internal controls over financial reporting of the recently acquired operations of ebbu Inc. (acquired
100% interest on November 23, 2018), Storz & Bickel GmbH & Co. (acquired 100% interest on December 6, 2018.), POS Holdings Corp. (acquired 100% control on November 23, 2018), DaddyCann Lesotho PTY Ltd (acquired on
May 17, 2018), Annabis Ltd (acquired on April 16, 2018), Spectrum Cannabis Colombia (acquired on July 5, 2018), Canopy Health Innovations (acquired on August 7, 2018), and HIKU (acquired on September 5, 2018). 

The operations of ebbu Inc., Storz & Bickel GmbH & Co. and POS Holdings Corp., DaddyCann Lesotho PTY Ltd, Annabis Ltd, Spectrum Cannabis
Colombia, Canopy Health Innovations and HIKU combined, represent approximately 20% of the Company’s assets (approximately 1% of current assets and 55% of non-current assets); they also represent
approximately 34% of current liabilities and 1% of long-term liabilities, 9% of the Company’s revenues and 5% of operating expenses for the three months ended December 31, 2018. 

ADDITIONAL GAAP MEASURES 
 The Company uses “Income
(loss) from operations” as an additional GAAP financial measure within the financial statements and MD&A, but is not a defined term under IFRS to assess performance. Management believes that this measure provides useful supplemental
information to investors and is computed on a consistent basis for each reporting period. 
 Income from operations is calculated as total revenues less
total operating expenses derived from the Consolidated Statements of Operations. It is used by management to analyze operating performance, but it is not intended to represent an alternative to net earnings or other measures of financial performance
in accordance with IFRS. 
 NON-GAAP MEASURE 

“Adjusted EBITDA” is a metric used by management which is Income (loss) from operations, as reported, before interest, tax, and adjusted for removing
other non-cash items, including the stock-based compensation expense, depreciation, and the non-cash effects of accounting for biological assets and inventories, and
further adjusted to remove acquisition related costs. Management believes “Adjusted EBITDA” is a useful financial metric to assess its operating performance on a cash basis before the impact of
non-cash items and acquisition related activities. 

  
 36 

 RISKS AND UNCERTAINTIES 

Many factors could cause the Company’s actual results, performance and achievements to differ materially from those expressed or implied by the
forward-looking statements and forward-looking information, including without limitation, the following factors, which are discussed in greater detail under the heading “Risk Factors” in the Company’s AIF dated June 27 2018 and
in the Company’s Short-Form Prospectus dated January 31, 2018 filed with securities regulators and available on www.sedar.com, which risk factors are incorporated by reference into this document, and should be reviewed in detail by
all readers: 
  

	•	 	 The Company operates in a highly regulated business and we may not always succeed in complying fully with
applicable regulatory requirements in all jurisdictions in which we operate; 

  

	•	 	 The laws and regulations governing cannabis are still developing, including in ways that the Company may not
foresee; 

  

	•	 	 The Company and its subsidiaries have limited operating history, and accordingly, we are subject to many of the
risks of early stage enterprises; 

  

	•	 	 The Company is reliant on a small number of facilities; 

 

	•	 	 This Company is highly dependent on our senior management; 

 

	•	 	 The Company is reliant on several key inputs, and we are vulnerable to increases in price of those inputs;

  

	•	 	 The Company is dependent on its suppliers and on access to, and its ability to retain, skilled labor;

  

	•	 	 The Company’s cannabis and hemp growing operations are subject to risks inherent in an agricultural
business; 

  

	•	 	 The Company is reliant on third parties to transport its products to its customers; 

 

	•	 	 Premiums for the Company’s insurance coverage may not continue to be commercially justifiable, and the
Company’s insurance coverage may have limitations and other exclusions and may not be enough to cover potential liabilities; 

  

	•	 	 The Company is required to comply with safety, health and environmental regulations; 

 

	•	 	 The Company may be subject to product liability claims; 

 

	•	 	 The Company’s products may be subject to recalls; 

 

	•	 	 The cannabis industry may receive unfavorable publicity or become subject to negative consumer perceptions;

  

	•	 	 The Company may not be able to attract or retain customers; 

 

	•	 	 The Company may not be able to successfully manage its growth; 

 

	•	 	 The Company has a history of losses; 

 

	•	 	 The development and operation of the Company’s business may require additional financing, which the Company
may not be able to secure; 

  

	•	 	 The Company must rely largely on its own market research and market demand which may not materialize;

  

	•	 	 Conflicts of interest may arise between the Company and its directors and officers; 

 

	•	 	 From time to time the Company may be involved in legal proceedings arising in the ordinary course of business;

  

	•	 	 The Company competes for market share with several competitors and expect even more competitors to enter the
market since the Cannabis Act came into effect, and many of the Company’s current and future competitors may have longer operating histories, more financial resources and lower costs; 

  
 37 

	•	 	 Third parties with whom the Company does business may perceive themselves as being exposed to reputational risk
by virtue of their relationship with the Company and may ultimately elect not to do business with the Company; 

  

	•	 	 The Company is subject to restrictions from the TSX and NYSE which may constrain the Company’s ability to
expand its business internationally; 

  

	•	 	 The Company operates as a holding company and depends on the Company’s subsidiaries for cash to satisfy the
obligations of the holding company; 

  

	•	 	 The Company’s due diligence may not have revealed all material issues relating to acquisitions;

  

	•	 	 The Company may not be successful in the integration of acquired companies into our business;

  

	•	 	 The Company may be unable to successfully achieve the objectives of our strategic alliances;

  

	•	 	 The Company’s operations are subject to increased risk as a result of international expansion;

  

	•	 	 The Company may encounter political and other risks in emerging markets; 

 

	•	 	 There may be a risk of corruption and fraud in the emerging markets in which the Company operates;

  

	•	 	 The Company’s operations in emerging international markets may posed an increased inflation risk on its
business; 

  

	•	 	 Foreign jurisdiction may impose ownership or control restrictions that could adversely impact the Company’s
international operations; 

  

	•	 	 The Company relies on international advisors and consultants in order to keep abreast of material legal,
regulatory and government developments that impact the Company’s business and operations in the jurisdictions in which it operates; 

  

	•	 	 International operations will result in increased operational, regulatory and other risks; 

 

	•	 	 Canadian laws impose prohibitions on corruption and bribery that may be violated by employees or other agents
without the Company’s knowledge and despite the Company’s policies and procedures; 

  

	•	 	 Future sales or issuances of equity securities could decrease the value of the Company’s common shares,
dilute investors’ voting power and reduce the Company’s earnings per share; 

  

	•	 	 The Company’s common share price has experienced volatility and may be subject to fluctuation in the future
based on market conditions; 

  

	•	 	 The listing on the TSX and NYSE may increase the volatility in the price of the Company’s common shares;

  

	•	 	 The Company may not pay dividends in the future; 

 

	•	 	 There is no assurance of a sufficient liquid trading market for the Company’s common shares in the future;

  

	•	 	 There is no assurance the Company will continue to meet the listing requirements of the TSX and NYSE;

  

	•	 	 A significant number of the Company’s common shares are owned by Greenstar Holdings and CBG Holdings LLC;

  

	•	 	 The Company may lose its status as a foreign private issuer; and 

 

	•	 	 As a public company, the Company has substantial obligations. 

  
 38

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00299-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00299-of-00352.parquet"}]]