Document:

EX-4.13

 Exhibit 4.13 

CANOPY GROWTH CORPORATION 
 CONSOLIDATED FINANCIAL
STATEMENTS 
 FOR THE YEARS ENDED MARCH 31, 2018 AND 2017 

(IN CANADIAN DOLLARS) 

 CANOPY GROWTH CORPORATION 

TABLE OF CONTENTS 
  

					
	 Independent auditor’s report
	  	 	1	 
		
	 Consolidated statements of financial position
	  	 	2	 
		
	 Consolidated statements of operations
	  	 	3	 
		
	 Consolidated statements of comprehensive income (loss)
	  	 	4	 
		
	 Consolidated statements of changes in shareholders’ equity
	  	 	5	 
		
	 Consolidated statements of cash flows
	  	 	6	 
		
	 Notes to the consolidated financial statements
	  	 	7-53	 

 INDEPENDENT AUDITOR’S REPORT 

To the Shareholders of 
 Canopy Growth Corporation 

We have audited the accompanying consolidated financial statements of Canopy Growth Corporation, which comprise the consolidated statements of financial
position as at March 31, 2018 and March 31, 2017, and the consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated statements of changes in shareholders’ equity and consolidated
statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. 

Management’s Responsibility for the Consolidated Financial Statements 

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

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Canopy Growth Corporation as at
March 31, 2018 and March 31, 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. 

 

	
	/s/ Deloitte LLP
	Chartered Professional Accountants
	Licensed Public Accountants
	
	June 27, 2018
	Toronto, Canada

  
 Page 1 

											
	CANOPY GROWTH CORPORATION	  	 	  	 	 	 	 	 
	CONSOLIDATED STATEMENTS OF FINANCIAL POSITION	 
				
	 (Expressed in CDN $000’s)
	  	 Notes
	  	March 31,
2018	 	 	March 31,
2017	 
	 Assets
	  		  				 			
	 Current assets
	  		  				 			
	 Cash and cash equivalents
	  	27	  	$	322,560	 	 	$	101,800	 
	 Amounts receivable
	  	4	  	 	21,425	 	 	 	5,815	 
	 Biological assets
	  	5	  	 	16,348	 	 	 	14,725	 
	 Inventory
	  	6	  	 	101,607	 	 	 	45,981	 
	 Prepaid expenses and other assets
	  	7	  	 	19,837	 	 	 	4,285	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	481,777	 	 	 	172,606	 
				
	 Assets classified as held for sale
	  	8	  	 	—  	 	 	 	6,180	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	481,777	 	 	 	178,786	 
				
	 Property, plant and equipment
	  	9	  	 	303,682	 	 	 	96,270	 
	 Other long-term assets
	  	7	  	 	8,340	 	 	 	—  	 
	 Investments in associates
	  	15	  	 	63,106	 	 	 	—  	 
	 Other financial assets
	  	16	  	 	163,463	 	 	 	24,030	 
	 Intangible assets
	  	11	  	 	101,526	 	 	 	162,263	 
	 Goodwill
	  	11	  	 	314,923	 	 	 	241,371	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	$	1,436,817	 	 	$	702,720	 
		  		  	  
	  
	 	 	  
	  
	 
	 Liabilities
	  		  				 			
	 Current liabilities
	  		  				 			
	 Accounts payable and accrued liabilities
	  	17	  	$	89,571	 	 	$	15,386	 
	 Deferred revenue
	  		  	 	900	 	 	 	588	 
	 Current portion of long-term debt
	  	18(a)	  	 	1,557	 	 	 	1,691	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	92,028	 	 	 	17,665	 
				
	 Long-term debt
	  	18(a)	  	 	6,865	 	 	 	8,639	 
	 Deferred tax liability
	  	24	  	 	33,536	 	 	 	35,924	 
	 Other long-term liabilities
	  	18(b)	  	 	61,150	 	 	 	766	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	 	193,579	 	 	 	62,994	 
		  		  	  
	  
	 	 	  
	  
	 
	 Commitments and contingencies
	  	26	  				 			
				
	 Shareholders’ equity
	  		  				 			
	 Share capital
	  	20	  	 	1,076,838	 	 	 	621,541	 
	 Other reserves
	  	20	  	 	127,418	 	 	 	23,415	 
	 Accumulated other comprehensive income
	  		  	 	46,166	 	 	 	16,098	 
	 Deficit
	  		  	 	(91,649	) 	 	 	(21,296	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Equity attributable to Canopy Growth Corporation
	  		  	 	1,158,773	 	 	 	639,758	 
		  		  	  
	  
	 	 	  
	  
	 
	 Non-controlling interests
	  	14	  	 	84,465	 	 	 	(32	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Total equity
	  		  	 	1,243,238	 	 	 	639,726	 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	$	1,436,817	 	 	$	702,720	 
		  		  	  
	  
	 	 	  
	  
	 

  
 Page 2 

											
	CANOPY GROWTH CORPORATION	  	 	  	 	 	 	 	 
	CONSOLIDATED STATEMENTS OF OPERATIONS	  	 	 	 	 	 
	FOR THE YEARS ENDED MARCH 31, 2018 AND 2017	  	 	 	 	 	 
	
(Expressed in CDN $000’s except share amounts)
	  	 Notes
	  	March 31,
2018	 	 	March 31,
2017	 
	 Revenue
	  		  	$	77,948	 	 	$	39,895	 
				
	 Inventory production costs expensed to cost of sales
	  		  	 	37,790	 	 	 	15,293	 
		  		  	  
	  
	 	 	  
	  
	 
	 Gross margin before the undernoted
	  		  	 	40,158	 	 	 	24,602	 
				
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	6	  	 	66,268	 	 	 	34,978	 
	 Unrealized gain on changes in fair value of biological assets
	  	5	  	 	(100,302	) 	 	 	(49,090	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Gross margin
	  		  	 	74,192	 	 	 	38,714	 
		  		  	  
	  
	 	 	  
	  
	 
	 Sales and marketing
	  		  	 	38,203	 	 	 	12,960	 
	 Research and development
	  		  	 	1,453	 	 	 	810	 
	 General and administration
	  		  	 	43,819	 	 	 	16,858	 
	 Acquisition-related costs
	  		  	 	3,406	 	 	 	7,369	 
	 Share-based compensation expense
	  	20(b)	  	 	29,631	 	 	 	8,046	 
	 Share-based compensation expense related to acquisition milestones
	  	20(c)	  	 	19,475	 	 	 	690	 
	 Depreciation and amortization
	  		  	 	20,486	 	 	 	6,064	 
		  		  	  
	  
	 	 	  
	  
	 
	 Operating expenses
	  		  	 	156,473	 	 	 	52,797	 
		  		  	  
	  
	 	 	  
	  
	 
	 Loss from operations
	  		  	 	(82,281	) 	 	 	(14,083	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Share of loss on equity investments
	  	15	  	 	(1,473	) 	 	 	(50	) 
	 Other income, net
	  	21	  	 	31,213	 	 	 	3,858	 
		  		  	  
	  
	 	 	  
	  
	 
	 Other income
	  		  	 	29,740	 	 	 	3,808	 
		  		  	  
	  
	 	 	  
	  
	 
	 Loss before income taxes
	  		  	 	(52,541	) 	 	 	(10,275	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  	24	  	 	(1,593	) 	 	 	2,703	 
		  		  	  
	  
	 	 	  
	  
	 
	 Net loss
	  		  	$	(54,134	) 	 	$	(7,572	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Net income (loss) attributable to:
	  		  				 			
	 Canopy Growth Corporation
	  		  	$	(70,353	) 	 	$	(7,521	) 
	 Non-controlling interests
	  		  	 	16,219	 	 	 	(51	) 
		  		  	  
	  
	 	 	  
	  
	 
		  		  	$	(54,134	) 	 	$	(7,572	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Earnings per share, basic and diluted
	  		  				 			
	 Net loss per share:
	  	23	  	$	(0.40	) 	 	$	(0.06	) 
	 Weighted average number of outstanding common shares:
	  		  	 	177,301,767	 	 	 	118,989,713	 

  
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	CANOPY GROWTH CORPORATION	 
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	 
	FOR THE YEARS ENDED MARCH 31, 2018 AND 2017	 
	 (Expressed in CDN $000’s)
	  	Notes	 	  	March 31,
2018	 	 	March 31,
2017	 
	 Net loss
	  				  	$	(54,134	) 	 	$	(7,572	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Fair value changes on available for sale financial assets
	  	 	16	 	  	 	38,673	 	 	 	18,328	 
	 Exchange differences on translating foreign operations
	  				  	 	410	 	 	 	198	 
	 Income tax
	  				  	 	(4,982	) 	 	 	(2,428	) 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	34,101	 	 	 	16,098	 
				
	 Comprehensive income (loss)
	  				  	$	(20,033	) 	 	$	8,526	 
		  				  	  
	  
	 	 	  
	  
	 
	 Comprehensive income (loss) attributable to:
	  				  				 			
	 Canopy Growth Corporation
	  				  	$	(40,285	) 	 	$	8,577	 
	 Non-controlling interests
	  				  	 	20,252	 	 	 	(51	) 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	$	(20,033	) 	 	$	8,526	 
		  				  	  
	  
	 	 	  
	  
	 

  
 Page 4 

																																													
	CANOPY GROWTH CORPORATION	 
	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	 
	FOR THE YEARS ENDED MARCH 31, 2018 AND 2017	 
	 	 	 	 	 	 	 	 	 	 	 	Other reserves	 	 	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, 2016
	 				 	 	98,818,213	 	 	$	131,080	 	 	$	5,804	 	 	$	676	 	 	$	—  	 	 	$	—  	 	 	$	—  	 	 	$	(13,775	) 	 	$	—  	 	 	$	123,785	 
	 Equity financings and private placements
	 	 	20(a)(i)	 	 	 	22,617,500	 	 	 	123,186	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	123,186	 
	 Issuance of shares from acquisitions
	 	 	20(a)(ii)	 	 	 	36,138,911	 	 	 	353,214	 	 	 	11,675	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	364,889	 
	 Exercise of warrants
	 	 	20(a)(iv)	 	 	 	213,104	 	 	 	195	 	 	 	607	 	 	 	(676	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	126	 
	 Exercise of ESOP stock options
	 	 	20(b)	 	 	 	4,010,865	 	 	 	11,036	 	 	 	(4,075	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	6,961	 
	 Non-controlling interests from acquisitions
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	19	 	 	 	19	 
	 Other share issuances
	 	 	20(a)(iii)	 	 	 	388,669	 	 	 	2,830	 	 	 	(639	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,191	 
	 Fair value changes on available for sale investments, net of tax
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	15,900	 	 	 	—  	 	 	 	—  	 	 	 	15,900	 
	 Share-based compensation
	 	 	20(b)	 	 	 	—  	 	 	 	—  	 	 	 	10,043	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	10,043	 
	 Net loss
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(7,521	) 	 	 	(51	) 	 	 	(7,572	) 
	 Other comprehensive income
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	198	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	198	 
		 				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 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
	 	 	20(a)(i)	 	 	 	27,782,491	 	 	 	390,752	 	 	 	—  	 	 	 	70,265	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	461,017	 
	 Issuance of shares from acquisitions
	 	 	20(a)(ii)	 	 	 	4,515,879	 	 	 	30,248	 	 	 	689	 	 	 	1,303	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	32,240	 
	 Exercise of warrants
	 	 	20(a)(iv)	 	 	 	207,297	 	 	 	1,883	 	 	 	—  	 	 	 	(1,113	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	770	 
	 Exercise of ESOP stock options
	 	 	20(b)	 	 	 	3,912,946	 	 	 	19,197	 	 	 	(8,144	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	11,053	 
	 Other share issuances
	 	 	20(a)(iii)	 	 	 	715,106	 	 	 	9,795	 	 	 	(5,575	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	4,220	 
	 Share-based compensation
	 	 	20(b)	 	 	 	—  	 	 	 	—  	 	 	 	47,597	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	47,597	 
	 Other share issue costs
	 				 	 	—  	 	 	 	(206	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(206	) 
	 Tax benefit associated with share issue costs
	 				 	 	—  	 	 	 	3,628	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,628	 
	 Non-controlling interest arising from Canopy Rivers
financings - net of share issue costs of $2,448
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(55	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	55,777	 	 	 	55,722	 
	 Additional non-controlling interest relating to share-based
payment
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,579	 	 	 	3,579	 
	 Non-controlling interest arising from acquisitions and
ownership changes
	 	 	14	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	4,889	 	 	 	4,889	 
	 Ownership change arising from Canopy Rivers investment in Vert Mirabel
	 	 	10(a)(iv)	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(964	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(964	) 
	 Net income (loss)
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(70,353	) 	 	 	16,219	 	 	 	(54,134	) 
	 Other comprehensive income
	 				 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	410	 	 	 	29,658	 	 	 	—  	 	 	 	4,033	 	 	 	34,101	 
		 				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 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	 
		 				 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  
 Page 5 

													
	CANOPY GROWTH CORPORATION	 
	CONSOLIDATED STATEMENTS OF CASH FLOWS	 
	FOR THE YEARS ENDED MARCH 31, 2018 AND 2017	 
				
	 (Expressed in CDN $000’s)
	  	Notes	 	  	March 31,
2018	 	 	March 31,
2017	 
	 Net inflow (outflow) of cash related to the following activities:
	  				  				 			
				
	 Operating
	  				  				 			
	 Net loss
	  				  	$	(54,134	) 	 	$	(7,572	) 
	 Adjustments for:
	  				  				 			
	 Depreciation of property, plant and equipment
	  				  	 	8,725	 	 	 	4,146	 
	 Amortization of intangible assets
	  				  	 	11,761	 	 	 	1,918	 
	 Share of loss in equity investments
	  				  	 	1,473	 	 	 	50	 
	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  				  	 	66,268	 	 	 	34,978	 
	 Unrealized gain on changes in fair value of biological assets
	  				  	 	(100,302	) 	 	 	(49,090	) 
	 Share-based compensation
	  	 	20	 	  	 	51,177	 	 	 	10,043	 
	 Non-cash acquisition costs
	  				  	 	—  	 	 	 	1,333	 
	 Loss on disposal of property, plant and equipment and intangible assets
	  				  	 	1,285	 	 	 	661	 
	 Other assets
	  				  	 	(1,853	) 	 	 	—  	 
	 Non-cash other income and expense
	  	 	21	 	  	 	(38,779	) 	 	 	(5,702	) 
	 Income tax (recovery) expense
	  				  	 	1,593	 	 	 	(2,703	) 
	 Increase in fair value of acquisition consideration related liabilities
	  				  	 	—  	 	 	 	1,193	 
	 Non-cash interest and FX impact on assets
	  				  	 	(201	) 	 	 	—  	 
	 Changes in non-cash operating working capital
items
	  	 	27	 	  	 	(28,519	) 	 	 	(16,348	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in operating activities
	  				  	 	(81,506	) 	 	 	(27,093	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Investing
	  				  				 			
	 Purchases and deposits of property, plant and equipment and assets in process
	  				  	 	(176,037	) 	 	 	(29,391	) 
	 Purchases of intangible assets and intangibles in process
	  				  	 	(2,132	) 	 	 	(141	) 
	 Proceeds on disposals of property and equipment
	  				  	 	75	 	 	 	37	 
	 Purchases of restricted investments
	  				  	 	(118	) 	 	 	(300	) 
	 Proceeds on assets classified as held for sale
	  				  	 	7,000	 	 	 	—  	 
	 Investments in associates
	  				  	 	(26,179	) 	 	 	—  	 
	 Investments in other financial assets
	  				  	 	(22,439	) 	 	 	—  	 
	 Net cash inflow (outflow) on acquisition of subsidiaries
	  	 	10	 	  	 	(3,753	) 	 	 	11,193	 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in investing activities
	  				  	 	(223,583	) 	 	 	(18,602	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Financing
	  				  				 			
	 Proceeds from issuance of common shares and warrants
	  	 	20(a)(i,iv)	 	  	 	470,670	 	 	 	130,276	 
	 Payment of share issue costs
	  				  	 	(10,008	) 	 	 	(8,066	) 
	 Proceeds from issuance of shares by Canopy Rivers, net of share issue costs of $2,448
	  	 	12	 	  	 	54,876	 	 	 	—  	 
	 Proceeds from exercise of stock options
	  				  	 	11,053	 	 	 	6,961	 
	 Proceeds from exercise of warrants
	  				  	 	770	 	 	 	126	 
	 Issuance of long-term debt
	  				  	 	—  	 	 	 	3,500	 
	 Increase in finance lease obligations
	  				  	 	(317	) 	 	 	260	 
	 Repayment of long-term debt
	  	 	18	 	  	 	(1,195	) 	 	 	(959	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash provided by financing activities
	  				  	 	525,849	 	 	 	132,098	 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash inflow
	  				  	 	220,760	 	 	 	86,403	 
	 Cash and cash equivalents, beginning of year
	  				  	 	101,800	 	 	 	15,397	 
		  				  	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents, end of year
	  				  	$	322,560	 	 	$	101,800	 
		  				  	  
	  
	 	 	  
	  
	 
				
	 Refer to Note 27 for supplementary cash flow information
	  				  				 			

  
 Page 6 

	
	CANOPY GROWTH CORPORATION

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEARS ENDED MARCH 31, 2018 AND 2017 

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

 
  

	1.	 DESCRIPTION OF BUSINESS 

Canopy Growth Corporation 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”. References in these consolidated financial statements to
“Canopy Growth” or “the Company” refer to Canopy Growth Corporation and its direct and indirect subsidiaries. 
 The
principal activities of the Company are the growing, possession and sale of cannabis as regulated by the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) 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 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 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS”). 
 These consolidated financial statements were approved by the Board of
Directors and authorized for issue by the Board of Directors on June 27, 2018. 
 Subsidiaries 

These consolidated financial statements are comprised of the financial results of the Company and its subsidiaries, which are the entities over
which Canopy Growth has control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its power over the investee. Non-controlling interests in the equity of Canopy Growth’s subsidiaries are shown separately in equity in the consolidated statements of financial position. The table below lists the Company’s subsidiaries
that are consolidated in these financial statements and the ownership interest held by non-controlling interests. 

  
 Page 7 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	2.	 BASIS OF PRESENTATION (CONTINUED) 

 

 Subsidiaries (continued) 

 

							
	 Subsidiaries
	  	Defined as	  	Non-controlling interests	 
	 Tweed Inc.
	  	Tweed	  	 	—  	 
	 Tweed Farms Inc.
	  	Tweed Farms	  	 	—  	 
	 Bedrocan Canada Inc.
	  	Bedrocan Canada	  	 	—  	 
	 Spectrum Cannabis Canada Ltd. (formerly Mettrum Ltd.)
	  	Spectrum Cannabis	  	 	—  	 
	 Tweed Grasslands Cannabis Inc.
	  	Tweed Grasslands	  	 	—  	 
	 Les Serres Vert Cannabis
	  	Vert Mirabel	  	 	33.3	% 
	 Spot Therapeutics Inc.
	  	Spot	  	 	—  	 
	 Vert Cannabis Inc.
	  	Vert Cannabis	  	 	—  	 
	 2344823 Ontario Inc. d/b/a Bodystream
	  	Bodystream	  	 	—  	 
	 Apollo Applied Research Inc. and Apollo CRO Inc.
	  	together “Apollo”	  	 	—  	 
	 Mettrum Hempworks Inc.
	  	Mettrum Hempworks	  	 	—  	 
	 Groupe H.E.M.P.CA
	  	Group H.E.M.P.	  	 	25	% 
	 Spectrum Health Corp. (formerly Mettrum Health Corp.)
	  	Spectrum Health	  	 	—  	 
	 10252832 Canada Inc
	  	Edmonton	  	 	—  	 
	 9388036 Canada Inc.
	  	9388036 Canada	  	 	—  	 
	 10663824 Canada Inc.
	  	Alberta	  	 	—  	 
	 80694 Newfoundand and Labrador Inc.
	  	Newfoundland	  	 	—  	 
	 Spektrum Cannabis GmbH
	  	Spektrum Cannabis	  	 	—  	 
	 Canopy LATAM Corporation
	  	LATAM	  	 	—  	 
	 Spectrum Chile SpA
	  	Spectrum Chile	  	 	15	% 
	 Grow House JA Limited
	  	Tweed JA	  	 	51	% 
	 Spectrum Cannabis Denmark Aps
	  	Spectrum Cannabis Denmark	  	 	—  	 
	 Spectrum Polska Sp
	  	Spectrum Polska	  	 	—  	 
	 Spectrum Cannabis Australia PTY Ltd.
	  	Spectrum Australia	  	 	—  	 
	 Spectrum Cannabis Italia srl
	  	Spectrum Italy	  	 	—  	 
	 Canopy Rivers Corporation
	  	Canopy Rivers	  	 	68.5	% 

 Refer to Note 14 for additional information on subsidiaries of the Company with
non-controlling interests. 
 Business combinations 

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The Company measures goodwill as the fair value of
the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree, less the net recognized amount of the identifiable assets and liabilities assumed, all measured
as of the acquisition date. Any excess of the fair value of the net assets acquired over the assumed consideration paid is a gain on business acquisition and is recognized as a gain in the Statement of Operations. The Company elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair value or at its proportionate share of the
recognized amount of the identifiable net assets, at the acquisition date. 
 Transaction costs, other than those associated with the issue
of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred. 

  
 Page 8 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	2.	 BASIS OF PRESENTATION (CONTINUED) 

 

 Joint operations 

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, related to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of parties sharing
control. The Company recognizes only its assets, liabilities and share of the results of operations of the joint operation. The assets, liabilities and results of joint operations are included within the respective line items of the Consolidated
Statements of Financial Position, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Changes in Shareholders Equity and Consolidated Statements of Cash Flows. 

Refer to Note 13 for additional information on the Company’s joint operation. 

Investments in associates 

Associates are entities over which the Company exercises significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but without control or joint control over those policies. The Company accounts for associates using the equity method of accounting. Interests in associates accounted for using the equity
method are initially recognized at cost. Subsequent to initial recognition, the carrying value of the Company’s interest in an associate is adjusted for the Company’s share of comprehensive income and distributions of the investee. The
carrying value of associates is assessed for impairment at each balance sheet date. 
 Refer to Note 15 for additional information on
associates of the Company. 
 Basis of measurement 

These consolidated financial statements have been prepared in Canadian dollars on a historical cost basis except for biological assets, assets
classified as held for sale, available for sale investments, other long-term liabilities and derivatives, which are measured at fair value. Historical cost is generally based upon the fair value of the consideration given in exchange for assets.

 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 5, 10(c) and 28. 
 Classification of expenses 

The expenses within the statements of operations and comprehensive income (loss) are presented by function. Refer to Note 22 for details of
expenses by nature. 

  
 Page 9 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES 

(a) Foreign currency translation 

All figures presented in the consolidated financial statements and tabular disclosures to the consolidated financial statements are reflected
in Canadian dollars, which is the functional currency of the Company. 
 Foreign currency transactions are translated into Canadian dollars
at exchange rates in effect on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated to Canadian dollars at the foreign exchange rate applicable at
that date. Realized and unrealized exchange gains and losses are recognized through profit or loss. 

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of the transaction. 
 The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising from the acquisition, are translated in Canadian dollars at year-end exchange rates. Income and expenses, and cash flows of foreign operations are translated into
Canadian dollars using average exchange rates. Exchange differences resulting from translating foreign operations are recognized in other comprehensive income and accumulated in equity. 

(b) Biological assets 

The Company’s biological assets consist of cannabis plants. With the exception of depreciation, which is directly expensed in the
period and presented separately in the Consolidated Statement of Operations, the Company capitalizes the direct and indirect costs incurred related to the biological transformation of the biological assets between the point of initial
recognition and the point of harvest. 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. 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. 

(c) Inventory 

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 at harvest, which becomes the initial deemed cost. Any subsequent
post-harvest costs are capitalized to inventory to the extent that cost is less than net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale. Inventories for resale and supplies and consumables are valued at the lower of costs and net realizable value, with cost determined using the average cost basis. 

(d) Property, plant and equipment 

Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses. Depreciation is provided on a
straight-line basis over the following terms: 
  

			
	 Computer equipment
	  	2-3 years
	 Office/lab equipment
	  	3-5 years
	 Furniture and fixtures
	  	3-10 years
	 Warehouse equipment
	  	5-15 years
	 Production equipment
	  	3-30 years
	 Leasehold improvements
	  	3-20 years
	 Building and improvements
	  	20-40 years
	 Greenhouse and improvements
	  	20-25 years

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

Gains and losses on disposal of an item are determined by comparing the proceeds from disposal with the carrying amount of the item and
recognized in profit or loss. 
 Assets under capital lease are amortized according to their asset category. 

Assets in process are transferred to the appropriate asset class when available for use and depreciation of the assets commences at that point.

  
 Page 10 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

 (e) Finite-lived and indefinite-lived intangible assets 

Finite-lived intangible assets are recorded at cost less accumulated amortization and accumulated impairment losses. Amortization is provided
on a straight-line basis over the following terms: 
  

			
	 Domain name
	  	5 years
	 Health Canada licenses
	  	Useful life of facility or lease term
	 Distribution channel
	  	5 years
	 Import license
	  	4 years
	 Software
	  	3 years

 The estimated useful life and amortization method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis. 
 Intangible assets with indefinite useful lives are comprised
of acquired product rights and brand name which are carried at cost less accumulated impairment losses. 
 (f) Impairment of long-lived
assets 
 Long-lived assets, including property, plant and equipment and intangible assets are reviewed for impairment at each statement
of financial position date or whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or “CGU”). The recoverable amount of
an asset or a CGU is the higher of its fair value, less costs to sell, and its value in use. If the carrying amount of an asset exceeds its recoverable amount, an impairment charge is recognized immediately in profit or loss equal to the amount by
which the carrying amount exceeds the recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would
have been recorded had no impairment loss been recognized previously. 
 (g) Goodwill 

Goodwill represents the excess of the price paid for the acquisition of an entity over the fair value of the net identifiable tangible and
intangible assets and liabilities acquired. Goodwill is allocated to the CGU or CGUs to which it relates. Currently, the Company has one reportable segment. The Company has determined that the goodwill associated with all acquisitions belongs to
this segment as this is the lowest level at which management monitors goodwill. 
 Goodwill is measured at historical cost and is evaluated
for impairment annually in the fourth quarter or more often if events or circumstances indicate there may be an impairment. CGUs have been grouped for purposes of impairment testing. Impairment is determined for goodwill by assessing if the carrying
value of CGUs, including goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs to sell and the value in use. Impairment losses recognized in respect of the CGUs are first allocated to the carrying
value of goodwill and any excess is allocated to the carrying amount of assets in the CGUs. Any goodwill impairment is recorded in income in the period in which the impairment is identified. Impairment losses on goodwill are not subsequently
reversed. 
 (h) Leased assets 

The Company leases some items of property, plant and equipment. A lease of property, plant and equipment is classified as a capital lease if it
transfers substantially all the risks and rewards incidental to ownership to the Company. A lease of property, plant and equipment is classified as an operating lease whenever the terms of the lease do not transfer substantially all of the risks and
rewards of ownership to the lessee. Lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which the economic benefits are
consumed. 

  
 Page 11 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

 (i) Assets held for sale 

Assets and liabilities held for disposal are no longer depreciated and are presented separately in the statement of financial position at the
lower of their carrying amount and fair value less costs to sell. An asset is regarded as held for sale if its carrying amount will be recovered principally through a sale transaction, rather than through continuing use. For this to be the case, the
asset must be available for immediate sale and its sale must be highly probable. 
 (j) Revenue recognition 

Revenue is recognized at the fair value of consideration received or receivable. Revenue from the sale of goods is recognized when all the
following conditions have been satisfied: 
  

	 	•	 	 the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

  

	 	•	 	 the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold; 

  

	 	•	 	 the amount of revenue can be measured reliably; 

 

	 	•	 	 it is probable that the economic benefits associated with the transaction will flow to the entity; and

  

	 	•	 	 the costs incurred or to be incurred in respect of the transaction can be measured reliably.

 (k) Research and development 

Research costs are expensed as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development to use or sell the asset. Other development expenditures are
recognized in profit or loss as incurred. 
 (l) Income taxes 

The Company uses the liability method to account for income taxes. Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the carrying amounts of existing assets and liabilities for accounting purposes, and their respective tax bases. Deferred income tax assets and liabilities are measured using tax rates that have been
enacted or substantively enacted applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in statutory tax rates is
recognized in profit or loss in the year of change. Deferred income tax assets are recorded when their recoverability is considered probable and are reviewed at the end of each reporting period. 

(m) Share-based compensation 

The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over
the vesting period based on the Company’s estimate of equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary
from the original estimate. The impact of the revision of the original estimate is recognized in profit or loss such that the cumulative expense reflects the revised estimate. For share based payments granted to
non-employees the compensation expense is measured at the fair value of the good and services received except where the fair value cannot be estimated in which case it is measured at the fair value of the
equity instruments granted. The fair value of share-based compensation to non-employees is periodically re-measured until counterparty performance is complete, and any
change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments. Consideration paid by employees or non-employees on the
exercise of stock options is recorded as share capital and the related share-based compensation is transferred from share-based reserve to share capital. 

  
 Page 12 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

 (n) Earnings (loss) per share 

The Company presents basic and diluted earnings (loss) per share data for its common shares. Basic earnings (loss) per share is calculated by
dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is determined by adjusting the profit or loss
attributable to common shareholders and the weighted average number of common shares outstanding, adjusted for the effects of all dilutive potential common shares, which comprise warrants and share options issued. 

(o) Financial instruments 

Financial assets 

The Company initially recognizes financial assets at fair value on the date that they are originated. All financial assets (including assets
designated at fair value through profit or loss, “FVTPL”) are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. 

The Company classifies its financial assets as financial assets at FVTPL, available for sale (“AFS”) financial assets or loans and
receivables. A financial asset is classified at FVTPL if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at FVTPL if the Company manages such investments and makes purchase and
sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. 

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are
recognized initially at fair value. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. 

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as
loans and receivables or financial assets at FVTPL. AFS financial assets are stated at fair value at the end of each reporting period. The fair value is determined in the manner described in Note 28. Changes in the carrying amount of AFS monetary
financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other changes in the carrying amount of AFS
financial assets are recognized in other comprehensive income (“OCI”). When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in OCI is reclassified to profit or loss. AFS
equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period. 

Financial liabilities 

The Company initially recognizes financial liabilities at fair value on the date that they are originated. All financial liabilities (including
liabilities designated at FVTPL) are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are
discharged or cancelled or expire. 
 The Company classifies its financial liabilities as either financial liabilities at FVTPL or other
liabilities. Subsequent to initial recognition other liabilities are measured at amortized cost using the effective interest method. Financial liabilities at fair value are stated at fair value with changes being recognized in profit or loss. 

  
 Page 13 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

 (o) Financial instruments (continued) 

 

 Classification of financial instruments 

The Company classifies its financial assets and liabilities depending on the purpose for which the financial instruments were acquired, their
characteristics, and management intent as outlined below: 
  

			
	 	  	 Classification

	 Cash and cash equivalents
	  	FVTPL
	 Accounts receivable
	  	Loans and receivable
	 Restricted investments
	  	Loans and receivable
	 Other financial assets
	  	Available for sale financial assets, Loans and
		  	receivables and FVTPL
	 Accounts payable and accrued liabilities
	  	Other liabilities
	 Long-term debt
	  	Other liabilities
	 BC Tweed and Vert Mirabel put liability
	  	FVTPL
	 Acquisition consideration related liabilities
	  	FVTPL

 Effective interest method 

The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition. 
 Transaction costs 

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss. 
 Impairment of financial assets

 Financial assets, other than those classified at FVTPL, are assessed for indicators of impairment at the end of the reporting
period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been affected. 
 (p) Critical judgments in applying accounting policies 

The following are the critical judgments, apart from those involving estimations (refer to (q) below), that have the most significant
effect on the amounts recognized in the financial statements. 
 Business combinations 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. Judgement is also required to assess
whether the amounts paid on achievement of milestones represents contingent consideration or compensation for post-acquisition services. Judgment is also required to assess whether contingent consideration should be classified as equity or a
liability. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as a liability is remeasured
at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss. 

  
 Page 14 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

 (p) Critical judgments in applying accounting policies (continued) 

 

 Control, joint control or level of influence 

When determining the appropriate basis of accounting for the Company’s interests in affiliates, the Company makes judgments about the
degree of influence that it exerts directly or through an arrangement over the investees’ relevant activities. Information about these judgments is included in Note 12,15 and 16. 

Accounting for joint operation 

Judgment was used to determine whether the joint venture agreement described in Note 13 should be accounted for as a joint operation or a joint
venture. Given the Company has rights to substantially all the economic benefits of the arrangement, through its obligation to purchase all of the output of BC Tweed, and also has an obligation for the liabilities of the arrangement the Company has
concluded it will be accounted for as a joint operation. The Company will recognize its share of assets and liabilities and revenue and expenses in its consolidated financial statements on the basis of the Company’s proportionate share of BC
Tweed’s output, being 100%. 
 (q) Critical accounting estimates 

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods affected. 
 Biological assets and inventory 

In calculating the value of the biological assets and inventory, management is required to make a number of estimates, including estimating the
stage of growth of the cannabis up to the point of harvest, harvesting costs, selling costs, average or expected selling prices and list prices, expected yields for the cannabis plants, and oil conversion factors. In calculating final inventory
values, management compares the inventory cost to estimated net realizable value. Further information on estimates used in determining the fair value of biological assets is contained in Note 5. 

Estimated useful lives and depreciation and amortization of property, plant and equipment and intangible assets 

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

 Share-based compensation 

In calculating the share-based compensation expense, key estimates such as the rate of forfeiture of options granted, the expected life of the
option, the volatility of the Company’s stock price and the risk free interest rate are used. To calculate the share-based compensation expense related to key employee performance milestones associated with the terms of an acquisition, the
Company must estimate the number of shares that will be earned and when they will be issued based on estimated discounted probabilities. 

Fair value measurements 

Certain of the Company’s assets and liabilities are measured at fair value. In estimating fair value the Company uses market-observable
data to the extent it is available. In certain cases where Level 1 inputs are not available the Company will engage third party qualified valuers to perform the valuation. 

Information about the valuation techniques and inputs used in determining the fair value of biological assets is disclosed in Note 5, the
retained interest in Agripharm in Note 10(c) and financial assets and liabilities in Note 28. 

  
 Page 15 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

	

  

 (r) New and revised IFRS in issue but not yet effective 

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. The Company will adopt IFRS 15
effective April 1, 2018. The Company is currently completing its assessment of the impact of this new standard. 
 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. The Company will adopt IFRS 9 effective April 1, 2018. The Company is
currently completing its assessment of the impact of this new standard. 
 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. 

 

	4.	 AMOUNTS RECEIVABLE 

Amounts receivable was comprised of: 
  

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Accounts receivable
	  	$	5,863	 	  	$	2,794	 
	 Commodity tax receivable
	  	 	15,262	 	  	 	2,769	 
	 Interest receivable
	  	 	300	 	  	 	252	 
		  	  
	  
	 	  	  
	  
	 
	 Total amounts receivable
	  	$	21,425	 	  	$	5,815	 
		  	  
	  
	 	  	  
	  
	 

  

	5.	 BIOLOGICAL ASSETS 

The Company’s biological assets consists of seeds and cannabis plants. The continuity of biological assets for the years ended
March 31, 2018 and 2017 was as follows: 
  

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Balance, beginning of year
	  	$	14,725	 	  	$	5,321	 
	 Purchases of seeds
	  	 	271	 	  	 	70	 
	 Acquired biological assets
	  	 	—  	 	  	 	1,691	 
	 Disposed biological assets due to disposal of consolidated entity (Note 10(c))
	  	 	(1,430	) 	  	 	—  	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	100,302	 	  	 	49,090	 
	 Increase in biological assets due to capitalized costs
	  	 	17,309	 	  	 	11,983	 
	 Transferred to inventory upon harvest
	  	 	(114,829	) 	  	 	(53,430	) 
		  	  
	  
	 	  	  
	  
	 
	 Balance, end of year
	  	$	16,348	 	  	$	14,725	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 16 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	5.	 BIOLOGICAL ASSETS (CONTINUED) 

 

 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 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. As at March 31, 2018, on average, the biological assets were 12% complete as to the next expected harvest date, compared to a 43% average stage of completion as at March 31, 2017. 

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.	  	25 grams/plant to 400 grams/plant	  	A slight increase in the estimated yield per plant would result in a significant increase in fair value, and vice versa.
			
	Listed Selling Price of Dry Cannabis – varies by strain and is obtained through listed selling prices or estimated selling prices if historical results are not available.	  	$6 to $12/gram	  	A slight increase in the estimated selling price per strain would result in a significant increase in fair value, and vice versa.

  

	6.	 INVENTORY 

Inventory was comprised of the following items: 
  

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Dry Cannabis
	  				  			
	 Finished goods
	  	$	14,114	 	  	$	2,478	 
	
Work-in-process
	  	 	51,309	 	  	 	33,418	 
		  	  
	  
	 	  	  
	  
	 
		  	 	65,423	 	  	 	35,896	 
	 Cannabis Oils
	  				  			
	 Finished goods
	  	 	9,624	 	  	 	2,085	 
	
Work-in-process
	  	 	20,574	 	  	 	5,492	 
		  	  
	  
	 	  	  
	  
	 
		  	 	30,198	 	  	 	7,577	 
	 Capsules - Finished goods
	  	 	2,705	 	  	 	—  	 
	 Seeds - Finished goods
	  	 	63	 	  	 	74	 
		  	  
	  
	 	  	  
	  
	 
		  	 	2,768	 	  	 	74	 
		  	  
	  
	 	  	  
	  
	 
		  	 	98,389	 	  	 	43,547	 
	 Product for resale (vaporizers and other)
	  	 	571	 	  	 	1,017	 
	 Supplies and consumables
	  	 	2,647	 	  	 	1,417	 
		  	  
	  
	 	  	  
	  
	 
		  	$	101,607	 	  	$	45,981	 
		  	  
	  
	 	  	  
	  
	 

 Inventories expensed during the year ended March 31, 2018, was $92,683 (year ended March 31, 2017 -
$39,210). 
 The fair value changes in biological assets included in inventory sold and other inventory charges of $66,268 consists of fair
value changes in biological assets included in inventory sold of $40,509 and other inventory charges of $25,759. Included in other inventory charges is a net realizable value adjustment for anticipated price changes of $8,431 and inventory
write-offs of $7,903. 

  
 Page 17 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	7.	 PREPAID EXPENSES AND OTHER ASSETS 

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

 

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Prepaid packaging
	  	$	8,774	 	  	$	—  	 
	 Prepaid expenses
	  	 	7,358	 	  	 	2,934	 
	 Prepaid deposits
	  	 	842	 	  	 	—  	 
	 Restricted short-term investments
	  	 	664	 	  	 	550	 
	 Other assets
	  	 	2,199	 	  	 	801	 
		  	  
	  
	 	  	  
	  
	 
		  	$	19,837	 	  	$	4,285	 
		  	  
	  
	 	  	  
	  
	 

 Other long-term assets of $8,340 includes deposits on property, plant and equipment amounting to $6,487 and a
lease payment of $1,853 which is being amortized over the term of the lease. 
  

	8.	 ASSETS CLASSIFIED AS HELD FOR SALE 

The assets classified as held for sale represented a non-strategic facility that was sold on
September 13, 2017, for $7,000 which equated to its carrying amount after adjusting for the deferred tax liability of $820. The Company has agreed to provide transitional services to the purchaser and has entered into a three-year supply
agreement to provide medical cannabis and cannabis extracts to the purchaser. 
  

	9.	 PROPERTY, PLANT AND EQUIPMENT 

A continuity of property, plant and equipment for the year ended March 31, 2018 is as follows: 

 

																									
	COST	 
							
	 	  	Balance at	 	  	 	 	  	 	 	  	Disposal of	 	 	 	 	 	Balance at	 
	 	  	April 1,	 	  	 	 	  	Additions from	 	  	consolidated	 	 	Transfers/	 	 	March 31,	 
	 	  	2017	 	  	Additions	 	  	acquisitions	 	  	entity	 	 	disposals	 	 	2018	 
	 Computer equipment
	  	$	4,181	 	  	$	1,219	 	  	$	—  	 	  	$	(101	) 	 	$	942	 	 	$	6,241	 
	 Office/lab equipment
	  	 	831	 	  	 	626	 	  	 	—  	 	  	 	(16	) 	 	 	279	 	 	 	1,720	 
	 Furniture and fixtures
	  	 	875	 	  	 	348	 	  	 	109	 	  	 	—  	 	 	 	49	 	 	 	1,381	 
	 Production equipment
	  	 	11,132	 	  	 	4,511	 	  	 	468	 	  	 	(2,619	) 	 	 	15,272	 	 	 	28,764	 
	 Leasehold improvements
	  	 	17,155	 	  	 	338	 	  	 	—  	 	  	 	—  	 	 	 	4,989	 	 	 	22,482	 
	 Building and improvements
	  	 	43,449	 	  	 	3,799	 	  	 	—  	 	  	 	(5,066	) 	 	 	25,331	 	 	 	67,513	 
	 Greenhouse and improvements
	  	 	3,528	 	  	 	106	 	  	 	—  	 	  	 	—  	 	 	 	461	 	 	 	4,095	 
	 Land and improvements
	  	 	2,397	 	  	 	5,728	 	  	 	345	 	  	 	—  	 	 	 	—  	 	 	 	8,470	 
	 Warehouse equipment
	  	 	—  	 	  	 	138	 	  	 	—  	 	  	 	—  	 	 	 	29	 	 	 	167	 
	 Assets in process
	  	 	19,302	 	  	 	201,509	 	  	 	5,164	 	  	 	—  	 	 	 	(48,977	) 	 	 	176,998	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total
	  	$	102,850	 	  	$	218,322	 	  	$	6,086	 	  	$	(7,802	) 	 	$	(1,625	) 	 	$	317,831	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

																					
	ACCUMULATED DEPRECIATION	 
						
	 	  	Balance at	 	  	 	 	  	Disposal of	 	 	 	 	 	Balance at	 
	 	  	April 1,	 	  	 	 	  	consolidated	 	 	Transfers/	 	 	March 31,	 
	 	  	2017	 	  	Depreciation	 	  	entity	 	 	disposals	 	 	2018	 
	 Computer equipment
	  	$	889	 	  	$	1,043	 	  	$	(31	) 	 	$	(1	) 	 	$	1,900	 
	 Office/lab equipment
	  	 	82	 	  	 	404	 	  	 	(5	) 	 	 	(2	) 	 	 	479	 
	 Furniture and fixtures
	  	 	82	 	  	 	137	 	  	 	—  	 	 	 	(1	) 	 	 	218	 
	 Production equipment
	  	 	1,038	 	  	 	2,539	 	  	 	(587	) 	 	 	(260	) 	 	 	2,730	 
	 Leasehold improvements
	  	 	1,930	 	  	 	1,510	 	  	 	—  	 	 	 	12	 	 	 	3,452	 
	 Building and improvements
	  	 	2,182	 	  	 	2,920	 	  	 	(217	) 	 	 	(64	) 	 	 	4,821	 
	 Greenhouse and improvements
	  	 	358	 	  	 	155	 	  	 	—  	 	 	 	—  	 	 	 	513	 
	 Land and improvements
	  	 	19	 	  	 	11	 	  	 	—  	 	 	 	—  	 	 	 	30	 
	 Warehouse equipment
	  	 	—  	 	  	 	6	 	  	 	—  	 	 	 	—  	 	 	 	6	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total
	  	 	6,580	 	  	 	8,725	 	  	 	(840	) 	 	 	(316	) 	 	 	14,149	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net book value
	  	$	96,270	 	  				  				 				 	$	303,682	 
		  	  
	  
	 	  				  				 				 	  
	  
	 

  
 Page 18 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	9.	 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 

 

 During the year ended March 31, 2018, the assets in process additions were $201,509 of
which $71,155, $64,813, and $43,847 related to the expansion or growing operations at both BC locations, Smiths Falls Ontario, and
Niagara-on-the-Lake, respectively. The remaining $21,694 was for ongoing projects at the Company’s other subsidiaries. 

On September 7, 2017, the Company acquired the parcel of land including an operational greenhouse adjacent to its current greenhouse
facility in Niagara-on-the Lake. The purchase price of $8,865 was partially settled through the payment on closing of $6,000 cash and the issuance of 111,366 common
shares with a value of $1,003. The balance will be paid through the issuance of common shares to a value of $2,000 calculated at the 5-day volume weighted average price (“VWAP”) on the earlier of the
completion of the facility’s renovation and September 7, 2018. The value to be paid was discounted to arrive at the initial present value of the obligation of $1,862. The Company also capitalized $71 of acquisition costs. The newly
acquired greenhouse is undergoing improvements and is recorded in assets in process. 
 A continuity of property, plant and equipment for the
year ended March 31, 2017 is as follows: 
  

																					
	COST	 
						
	 	  	 Balance at

April 1,
	 	  	 	 	  	Additions
from	 	  	Transfers/	 	 	 Balance at

March 31,
	 
	 	  	2016	 	  	Additions	 	  	acquisitions	 	  	disposals	 	 	2017	 
	 Computer equipment
	  	$	958	 	  	$	886	 	  	$	313	 	  	$	2,024	 	 	$	4,181	 
	 Office/lab equipment
	  	 	935	 	  	 	536	 	  	 	408	 	  	 	(1,048	) 	 	 	831	 
	 Furniture and fixtures
	  	 	2,428	 	  	 	1,343	 	  	 	26	 	  	 	(2,922	) 	 	 	875	 
	 Production equipment
	  	 	1,543	 	  	 	1,668	 	  	 	3,789	 	  	 	4,132	 	 	 	11,132	 
	 Leasehold improvements
	  	 	37,620	 	  	 	2,972	 	  	 	229	 	  	 	(23,666	) 	 	 	17,155	 
	 Building and improvements
	  	 	136	 	  	 	6,551	 	  	 	12,449	 	  	 	24,313	 	 	 	43,449	 
	 Greenhouse and improvements
	  	 	2,951	 	  	 	—  	 	  	 	—  	 	  	 	577	 	 	 	3,528	 
	 Land and improvements
	  	 	723	 	  	 	420	 	  	 	1,000	 	  	 	254	 	 	 	2,397	 
	 Warehouse equipment
	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 
	 Assets in process
	  	 	403	 	  	 	18,771	 	  	 	5,138	 	  	 	(5,010	) 	 	 	19,302	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Total
	  	 	47,697	 	  	 	33,147	 	  	 	23,352	 	  	 	(1,346	) 	 	 	102,850	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 

  

																	
	ACCUMULATED DEPRECIATION	 
					
	 	  	Balance at	 	  	 	 	  	 	 	 	Balance at	 
	 	  	April 1,	 	  	 	 	  	Transfers/	 	 	March 31,	 
	 	  	2016	 	  	Depreciation	 	  	disposals	 	 	2017	 
	 Computer equipment
	  	$	255	 	  	$	516	 	  	$	118	 	 	$	889	 
	 Office/lab equipment
	  	 	157	 	  	 	266	 	  	 	(341	) 	 	 	82	 
	 Furniture and fixtures
	  	 	223	 	  	 	356	 	  	 	(497	) 	 	 	82	 
	 Production equipment
	  	 	139	 	  	 	279	 	  	 	620	 	 	 	1,038	 
	 Leasehold improvements
	  	 	1,714	 	  	 	2,455	 	  	 	(2,239	) 	 	 	1,930	 
	 Building and improvements
	  	 	14	 	  	 	156	 	  	 	2,012	 	 	 	2,182	 
	 Greenhouse and improvements
	  	 	211	 	  	 	118	 	  	 	29	 	 	 	358	 
	 Land and improvements
	  	 	—  	 	  	 	—  	 	  	 	19	 	 	 	19	 
	 Warehouse equipment
	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Total
	  	 	2,713	 	  	 	4,146	 	  	 	(279	) 	 	 	6,580	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Net book value
	  	$	44,984	 	  				  				 	$	96,270	 
		  	  
	  
	 	  				  				 	  
	  
	 

 The $23,666 cost adjustment from leasehold improvements is largely due to improvements which were made to the
facility in Smiths Falls Ontario which were transferred to building and improvements upon acquisition on January 13, 2017. On January 13, 2017, the Company acquired the 472,000 square foot property at 1 Hershey Drive that currently houses
Canopy Growth’s headquarters and the Tweed production facilities for $7,163, including transaction costs of $179, from Tweed Hershey Drive Inc. (“Tweed Hershey”). Tweed Hershey was related through common ownership (the Company’s
CEO and Chairman is a significant shareholder of Tweed Hershey). The purchase price was partially settled with the issuance of 94,397 of the Company’s common shares with a value of $858 and the rent deposit of $450. The shares were subject to a
4-month lockup. The remainder was paid in cash on closing. The portion of the facility that is not currently being used by the Company has been recorded in assets in process. 

  
 Page 19 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	9.	 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 

 

 Of the $1,346 net cost disposals/adjustments, $632 was transferred to intangibles as these
amounts were composed of software. Refer to Note 11. 
 During the year ended March 31, 2017, the assets in process additions were
$18,771 of which $15,997 related principally to the expansion or growing operations at Tweed in Smiths Falls Ontario. 
  

	10.	 ACQUISTIONS AND DISPOSALS 

(a) Acquisitions completed in Fiscal 2018 

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

																					
	 	  	Tweed
Grasslands	 	 	Tweed JA	 	 	Odense	 	 	Vert
Mirabel	 	 	Other
acquisitions	 
	 	  	(i)	 	 	(ii)	 	 	(iii)	 	 	(iv)	 	 	(v)	 
	 Cash and cash equivalents
	  	$	59	 	 	$	125	 	 	$	—  	 	 	$	—  	 	 	$	7	 
	 Amounts receivable
	  	 	16	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	14	 
	 Subscription receivable
	  	 	—  	 	 	 	3,669	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Inventory
	  	 	—  	 	 	 	—  	 	 	 	173	 	 	 	—  	 	 	 	—  	 
	 Prepaids and other assets
	  	 	6	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	107	 
	 Property, plant and equipment
	  	 	1,446	 	 	 	182	 	 	 	3,990	 	 	 	—  	 	 	 	468	 
	 Goodwill
	  	 	29,736	 	 	 	1,835	 	 	 	—  	 	 	 	5,625	 	 	 	1,562	 
	 Accounts payable and accrued liabilities
	  	 	(336	) 	 	 	(29	) 	 	 	—  	 	 	 	—  	 	 	 	(143	) 
	 Deferred tax liability
	  	 	—  	 	 	 	—  	 	 	 	(297	) 	 	 	—  	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net assets
	  	 	30,927	 	 	 	5,782	 	 	 	3,866	 	 	 	5,625	 	 	 	2,015	 
	 Non-controlling interests
	  	 	—  	 	 	 	(2,013	) 	 	 	—  	 	 	 	(2,839	) 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net assets acquired
	  	$	30,927	 	 	$	3,769	 	 	$	3,866	 	 	$	2,786	 	 	$	2,015	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Consideration paid in cash
	  	$	450	 	 	$	100	 	 	$	3,228	 	 	$	—  	 	 	$	166	 
	 Consideration paid in shares
	  	 	6,381	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,850	 
	 Future cash consideration
	  	 	—  	 	 	 	3,669	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Other consideration
	  	 	2,382	 	 	 	—  	 	 	 	—  	 	 	 	3,750	 	 	 	—  	 
	 Contingent consideration
	  	 	21,714	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total consideration
	  	$	30,927	 	 	$	3,769	 	 	$	3,228	 	 	$	3,750	 	 	$	2,016	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Consideration paid in cash
	  	$	(450	) 	 	$	(100	) 	 	$	(3,228	) 	 	$	—  	 	 	$	(166	) 
	 Less: Cash and cash equivalents acquired
	  	 	59	 	 	 	125	 	 	 	—  	 	 	 	—  	 	 	 	7	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net cash (outflow) inflow
	  	$	(391	) 	 	$	25	 	 	$	(3,228	) 	 	$	—  	 	 	$	(159	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Acquisition-related costs expensed
	  	$	302	 	 	$	24	 	 	$	33	 	 	$	54	 	 	$	213	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 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 are expected to be deductible for tax purposes. 

  
 Page 20 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (i) Tweed Grasslands Cannabis Inc. (formerly rTrees) 

On May 1, 2017, the Company purchased 100% of the issued and outstanding shares of rTrees Producers Inc. (“rTrees”), a
late-stage ACMPR applicant based in Yorkton, Saskatchewan. On June 30, 2017, rTrees changed its name to Tweed Grasslands Cannabis Inc (“Tweed Grasslands”). 

The consideration for the transaction included 3,494,505 common shares issued to former shareholders of rTrees, of which 2,795,604 common
shares were to be held in escrow and will be either released to the former shareholders of rTrees upon the satisfaction of certain specific license achievement, or released to the Company for cancellation. The 698,901 shares released on closing were
recorded at an issue price of $9.13 per share for consideration of $6,381. 
 The shares being held in escrow were recorded as equity based
contingent consideration. The achievement of milestones was assessed probabilities by management which were then discounted to present value in order to derive a fair value of the contingent consideration. In aggregate, the amount of contingent
consideration is up to $25,524 with a fair value of $21,714 at the acquisition date. All the milestones were achieved in fiscal 2018 and the shares were released from escrow. 

Other consideration included $1,079 of replacement options and $1,303 of replacement warrants. There was also an effective settlement of a note
receivable of $450 for total consideration of $30,927. 
 For the year ended March 31, 2018, rTrees contributed a loss of $1,565. 

(ii) Tweed JA 
 On
September 6, 2017, the Company subscribed for 49% of the issued and outstanding shares of Grow House JA Limited (now operating as Tweed JA), for $3,769 payable in cash. Tweed JA is a Jamaican company that had received a provisional license to
cultivate and sell medical cannabis. As of March 31, 2018, $2,000 of the subscription price has been advanced and the balance of the subscription price will be advanced based on funding milestones. 

Through the shareholder agreement, the Company has rights that allow it to direct the relevant activities of Tweed JA such that the Company has
control, and Tweed JA is consolidated in these financial statements. The non-controlling interest recognized at the acquisition date was recorded at its proportionate share of the identifiable net assets. 

For the year ended March 31, 2018, Tweed JA contributed a loss of $391. 

(iii) Spectrum Cannabis Denmark ApS and acquisition of Odense operation 

On September 20, 2017, the Company formed Spectrum Cannabis Denmark ApS (“Spectrum Denmark”). Spectrum Denmark will 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. The Company owns 62% of the issued shares of Spectrum
Denmark and Danish Cannabis ApS (“Danish Cannabis”) owns the remaining 38% of shares. 
 Upon achievement of defined milestones,
Danish Cannabis has a right to exchange its shares in Spectrum Denmark for a maximum of 1,906,214 common shares of the Company. On issuance, the shares are subject to either a three or six month restriction on trading. If after 4 years, the defined
milestones are not met then the Company will be entitled to purchase any remaining interest of Danish Cannabis in Spectrum Denmark for up to $6,000. The shares are being provided in exchange for the services that the principals of Danish Cannabis
are providing to Spectrum Denmark and are being accounted for as share-based compensation expense. The fair value on the grant date of September 20, 2017, of $18,805 was estimated by discounting the quoted price of the shares to reflect the
restriction on trading using a put option pricing model. The Company is amortizing the expense over the estimated vesting period. For the year ended March 31, 2018, the Company recorded $7,206 in share-based compensation related to these
shares. 
 On December 5, 2017, Spectrum Denmark purchased a 40,000 square meter operating greenhouse facility in Odense, Denmark
(“Odense”) from a liquidator for cash consideration of $3,228. This transaction was accounted for as a business combination and generated a bargain purchase gain of $ 638 which is included in Other income and expense. Excluding the impact
of the bargain purchase gain for the year ended March 31, 2018, Odense contributed a loss of $1,772. The accounting for the acquisition of Odense was only provisionally determined at December 31, 2017. The Company has now completed its
final assessment of the accounting for this transaction. 

  
 Page 21 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (iv) Vert Mirabel 

On December 18, 2017, the Company, Canopy Rivers and Les Serres Stephane Bertrand Inc. (“Bertrand”) formed a new company, Les
Serres Vert Cannabis Inc. (“Vert Mirabel”). Bertrand was a large-scale greenhouse operator in Mirabel, Quebec. The Company owns 40.7%, Canopy Rivers 26% and Bertrand owns 33.3% of the common shares of Vert Mirabel. Vert Mirabel will lease
from Bertrand its 700,000-square foot greenhouse which will be retrofitted for cannabis production. Vert Mirabel has an option to acquire the property for a term of ten years from the date Vert Mirabel
receives its sales and cultivation license under ACMPR. The purchase price for acquiring the property is $20 million (this price will increase by 3% per year from the License Date with a minimum purchase price of $23 million if exercised
within five years of signing this agreement). 
 The Company has the option to purchase from Bertrand its interest in Vert Mirabel and
Bertrand has the option to sell its interest in Vert Mirabel to the Company in exchange for shares in the Company equal to the fair value of their interest in Vert Mirabel on the date of exercise. The call and put options are exercisable only on
specific dates – the 5th and 10th anniversary of receiving the sales license, the 5th anniversary of the date the property is acquired and
such earlier date, as the parties may mutually agree. The put option gives rise to a liability for the Company (“Vert Mirabel Put Liability”) and is recorded in the Statements of Operations in Other long-term liabilities and is
subsequently measured at fair value with changes in fair value recorded in net income in the period in which they arise. On the acquisition date the fair value of the Vert Mirabel Put Liability was estimated to be $3,750 using a discounted cash flow
approach by estimating the expected future cash flows and applying a discount rate to arrive at the present value of the put option’s strike price. On March 31, 2018 the Vert Mirabel Put Liability was estimated to be $4,850 and the
increase of $1,100 was recorded in Other income and expense. For further information on valuation techniques and significant unobservable inputs used to estimate the fair value refer to Note 28. 

Through its direct and indirect voting rights, the Company controls Vert Mirabel. The greenhouse operation transferred by Bertrand meets the
definition of a business and will be accounted for as a business combination. The Vert Mirabel Put Liability represents the consideration paid by Canopy for acquiring control of this greenhouse operation. On this date Vert Mirabel had no
identifiable assets or liabilities so the offset is to goodwill. The non-controlling interests recognized at acquisition date were recorded at their proportionate share of fair value. The difference between
their proportionate share and the consideration paid of $964 was recorded in equity. Given the limited time between the acquisition and the end of the third quarter the accounting for the acquisition of Vert Mirabel was only provisionally determined
as of December 31, 2017. The Company has now completed its final assessment of the accounting for this acquisition. 
 The Company has
agreed to purchase from Vert Mirabel 100% of the cannabis produced for a fixed price during an initial term of two years and thereafter, for a price computed with reference to the market price and has also guaranteed a minimum level of income for
Vert Mirabel under this agreement. The offtake agreement terminates upon acquisition of the property by Vert Mirabel. Upon termination of the offtake agreement, Vert Mirabel will agree to provide the Company with a right of first offer to the
cannabis produced by Vert Mirabel. 
 Canopy Rivers has committed to contribute up to $15,000 in cash, in exchange for Class A Preferred
Shares with cumulative preferred dividends at a rate of 18%. Of this amount, $750 was advanced on closing. 
 The Company will issue to
Bertrand $2,750 of common stock in four equal tranches upon achievement of various milestones. These payments will be accounted for as share-based compensation expense. The fair value on the grant date of December 18, 2018, of $2,599 was
estimated by discounting the value of the shares. The Company is amortizing the expense over the estimated vesting period. For the year ended March 31, 2018, the Company recorded $1,131 in share-based compensation related to these shares. 

Excluding the increase in the Vert Mirabel Put Liability for the year ended March 31, 2018, Vert Mirabel contributed a loss of $1,411.

 Acquisition related costs of $54 were recognized as an expense for the year ended March 31, 2018. 

  
 Page 22 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (v) Other fiscal 2018 acquisitions 

On August 28, 2017, the Company purchased 100% of the issued and outstanding shares of Spot Therapeutics Inc. (“Spot”), an ACMPR
applicant based in Fredericton, New Brunswick. At closing, the Company issued 111,669 common shares to the shareholders of Spot which were recorded at an issue price of $8.90 per common share for consideration of $993. A second tranche payment which
is estimated to be $907 will be satisfied by the issuance of additional common shares calculated using the VWAP for 20 days preceding satisfaction of tranche conditions. The payment is contingent on the performance of future services and the
achievement of certain licensing and operational milestones. The second tranche payment will be treated as share-based compensation and the present value of $844 will be amortized rateably over the expected vesting period. 

On January 24, 2018, the Company acquired certain assets, intellectual property, and assumed various lease contracts relating to Green
Hemp Industries Ltd (“Green Hemp”), a veteran hemp farm operator based in Saskatchewan. 
 The consideration for the transaction
included 24,577 common shares issued to Green Hemp. The 24,577 shares released on closing were recorded at an issue price of $34.87 per share for consideration of $857. Other consideration included a cash payment of $166 for total consideration of
$1,023. A second tranche payment of 24,577 is contingent on the performance of future services and the achievement of certain milestones. This tranche will be treated as share-based compensation and the expense of $857 will be amortized rateably
over the expected vesting period. 
 (b) Acquisitions completed in Fiscal 2017 

The following table summarizes the balance sheet impact on the acquisition date of the Company’s business combinations that occurred in
the period ended March 31, 2017: 
  

													
	 	  	Mettrum
(i)	 	  	MedCann GmbH
(ii)	 	  	Other acquisitions
(iii)	 
	 Cash and cash equivalents
	  	$	12,309	 	  	$	—  	 	  	$	15	 
	 Amounts receivable
	  	 	2,140	 	  	 	5	 	  	 	—  	 
	 Biological assets
	  	 	1,691	 	  	 	—  	 	  	 	—  	 
	 Inventory
	  	 	5,022	 	  	 	137	 	  	 	—  	 
	 Prepaids and other assets
	  	 	1,184	 	  	 	102	 	  	 	24	 
	 Assets classified as held for sale
	  	 	7,000	 	  	 	—  	 	  	 	—  	 
	 Property, plant and equipment
	  	 	22,451	 	  	 	336	 	  	 	565	 
	 Intangible assets
	  	 	131,009	 	  	 	784	 	  	 	12	 
	 Goodwill
	  	 	207,081	 	  	 	9,209	 	  	 	4,024	 
	 Accounts payable and accrued liabilities
	  	 	(5,663	) 	  	 	(107	) 	  	 	(115	) 
	 Debt
	  	 	(3,576	) 	  	 	—  	 	  	 	—  	 
	 Other liabilities
	  	 	(768	) 	  	 	—  	 	  	 	—  	 
	 Deferred tax liability
	  	 	(29,546	) 	  	 	(60	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net assets
	  	 	350,334	 	  	 	10,406	 	  	 	4,525	 
	 Non-controlling interests
	  	 	—  	 	  	 	—  	 	  	 	(19	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net assets acquired
	  	$	350,334	 	  	$	10,406	 	  	$	4,506	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Consideration paid in cash
	  	$	—  	 	  	$	—  	 	  	$	1,131	 
	 Consideration paid in shares
	  	 	337,511	 	  	 	9,720	 	  	 	2,124	 
	 Other consideration
	  	 	12,823	 	  	 	—  	 	  	 	—  	 
	 Contingent consideration
	  	 	—  	 	  	 	688	 	  	 	1,251	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total consideration
	  	$	350,334	 	  	$	10,408	 	  	$	4,506	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Consideration paid in cash
	  	$	—  	 	  	$	—  	 	  	$	(1,131	) 
	 Less: Cash and cash equivalents acquired
	  	 	12,309	 	  	 	—  	 	  	 	15	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net cash (outflow) inflow
	  	$	12,309	 	  	$	—  	 	  	$	(1,116	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Acquisition-related costs expensed
	  	$	5,190	 	  	$	372	 	  	$	163	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 23 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (b) Acquisitions completed in Fiscal 2017 (continued) 

 

 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, along with the assembled work force for Mettrum. 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 are expected to be deductible for tax purposes. 

(i) Mettrum (renamed Spectrum Cannabis Canada) 

On January 31, 2017, the Company purchased 100% of the issued and outstanding shares of Mettrum Ltd. (“Mettrum”), a producer and
vendor of medical cannabis. Subsequent to year end, Mettrum Ltd. changed its name to Spectrum Cannabis Canada Ltd (“Spectrum Cannabis Canada”). 

The transaction was accounted for as a business combination. The consideration for the transaction was 34,265,042 shares issued at a price of
$9.85 per share which totaled $337,511, less cash acquired of $12,309. Other consideration included $11,663 of replacement stock options, other share based payments of $480 and an effective settlement of accounts receivable of $680 for total
consideration of $350,334. Mettrum shares and replacement options were exchanged at a ratio of 0.7132 Mettrum shares to 1 Canopy Growth share. 

Acquisition related costs of $5,190 were recognized as an expense in the year ended March 31, 2017, $1,000 of which was satisfied by
issuing 83,822 common shares at $11.93 per share. 
 For the year ended March 31, 2017, Mettrum accounted for $4,053 in net loss since
January 31, 2017. This amount included $2,659 of unrealized gain on changes in fair value of biological assets and revenues of $3,033. 

Had the business combination been effected at April 1, 2016, management estimates that the revenue of the Company would have been $15,428
higher and the net loss after income taxes of the Company would have increased by $12,673 for the year ended March 31, 2017. 

Additional purchase consideration included replacement options and other stock based compensation offered to employees and directors of Mettrum
including amounts provided to employees who were former shareholders of Apollo and Bodystream (refer to Note 20(c)). 
 Prior to the
acquisition of Mettrum, the Company had accounts receivable of $680 from Mettrum. As a result of the business combination the preexisting relationship is effectively settled. The Company has increased the consideration transferred to account for
this effective settlement. 
 (ii) MedCann GmbH (renamed Spektrum Cannabis GmbH) 

On December 12, 2016, the Company purchased 100% of the issued and outstanding shares of MedCann GmbH, a German-based pharmaceutical
importer and distributor who has successfully placed Tweed-branded cannabis strains in German pharmacies. Subsequent to the acquisition, MedCann GmbH Pharma and Nutraceuticals changed its name to Spektrum Cannabis GmbH. 

In connection with the acquisition of MedCann GmbH, the Company will issue up to 1,165,272 common shares to former shareholders of MedCann
GmbH, of which 674,631 were released on closing for consideration of $6,746 and 490,641 common shares will be held in escrow and either (i) released to the former shareholders of Medcann GmbH upon the satisfaction of certain milestones, or
(ii) released to the Company for cancellation. 
 The shares to be issued based on license achievements were accounted for as equity
classified contingent consideration. Management assessed the probability and timing of achievement then discounted to present value using a put option pricing model in order to derive a fair value of the contingent consideration of $3,660. In
aggregate, the amount of contingent consideration is up to $4,906 and the fair value was $3,660 at the acquisition date based on the expected timing of achievement. On November 23, 2017 the Company released 367,981 of the shares being held in
escrow. As of March 31, 2018, 122,660 remain in escrow. 
 For the year ended March 31, 2017, MedCann GmbH accounted for $542 in
net loss from December 12, 2016 to March 31, 2017, which included revenues of $35. 

  
 Page 24 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (ii) MedCann GmbH (renamed Spektrum Cannabis GmbH) (continued) 

 

 Had the business combination been effected at April 1, 2016, management estimates that
the revenue of the Company would have been $106 higher and the net loss after income taxes of the Company would have increased by $462 for the year ended March 31, 2017. 

(iii) Other fiscal 2017 acquisitions 

On November 1, 2016, the Company purchased 100% of the issued and outstanding shares of Vert Médical Inc. – Green Medical
Inc., a Quebec-based company that began its application for federal government approval to produce medical cannabis in 2013. On acquisition, the entity was amalgamated as Vert Cannabis Inc. (“Vert”). In connection with the acquisition of
Vert, the Company paid $498 and will issue up to 294,900 common shares to former shareholders of Vert, of which 58,978 were released on closing for consideration of $413 and 235,922 common shares were held in escrow and will be released to the
former shareholders of Vert upon the satisfaction of certain milestones. 
 The shares to be issued based on license achievements were
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 aggregate, the amount of contingent consideration is
up to $1,651 and the fair value was $1,251 at November 1, 2016. In January 2018, 147,453 shares were released from escrow. As of March 31, 2018, 88,469 remain in escrow. 

On November 1, 2016, the Company purchased 75% of the issued and outstanding shares of Hemp.CA. Through the acquisition, the Company
obtained a hemp production license and Hemp.CA brands and digital properties. In connection with the acquisition of Hemp.CA, the Company paid $595 and will issue up to 258,037 common shares to former shareholders of Hemp.CA, of which 129,021 were
issued on closing and 129,016 common shares were to be held in escrow until April 1, 2017. The common shares held in escrow were discounted to present value and amounted to $808 at November 1, 2016. In total, the consideration for the
transaction was $2,344 which included $338 in cash, $295 paid on March 30, 2017, $903 in common shares issued and $808 in common shares held in escrow. On April 1, 2017, the Company released the remaining 129,016 common shares held in
escrow in relation to the Hemp.CA purchase. 
 The non-controlling interest (25% ownership interest
in Hemp) recognized at acquisition date was recorded at their proportionate share of the identifiable net assets. 
 (c) Disposal of
Consolidated Entity 
 Agripharm Corp. (“Agripharm’) holds the lease and a Health Canada license for a facility at Creemore,
Ontario. Prior to December 1, 2017, Agripharm was a wholly-owned subsidiary of the Company. On December 1, 2017, the Company’s interest in Agripharm was diluted from 100% to 40% under an arrangement whereby Green House
Holdings North America Inc. and National Concessions Group Inc. granted exclusive royalty-free licenses in Canada to certain proprietary technology, trademarks, genetics, know-how and other intellectual
property to Agripharm in exchange for shares of Agripharm. At the same time, Agripharm entered into an agreement to sublicense these licenses to the Company, as permitted under the arrangement. 

  
 Page 25 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

	

  

 (c) Disposal of Consolidated Entity (continued) 

 

 Following this transaction, the Company no longer controls Agripharm and the Company
derecognized the assets and liabilities of Agripharm from its consolidated financial statements at their carrying amounts. Goodwill of $2,259 was allocated to Agripharm on the basis of the relative values of Agripharm on the date control was
lost and the Company as a whole. The derecognized assets and liabilities on November 30, 2017, were as follows: 
  

					
	 Cash and cash equivalents
	  	$	(17	) 
	 Amounts receivable
	  	 	158	 
	 Inventory
	  	 	21	 
	 Biological assets
	  	 	1,430	 
	 Prepaids and other assets
	  	 	451	 
	 Property, plant and equipment
	  	 	6,962	 
	 Intangible assets
	  	 	26,282	 
	 Goodwill
	  	 	2,259	 
	 Accounts payable and accrued liabilities
	  	 	(1,194	) 
	 Capital lease obligations
	  	 	(1,073	) 
	 Deferred tax liability
	  	 	(5,699	) 
		  	  
	  
	 
	 Net assets disposed
	  	$	29,580	 
		  	  
	  
	 
	 Fair value of retained interest
	  	 	38,400	 
		  	  
	  
	 
	 Gain on disposal of consolidated entity
	  	$	8,820	 
		  	  
	  
	 

 The gain calculated on the derecognition of Agripharm’s assets and liabilities is the difference between
the carrying amounts of the derecognized assets and liabilities of Agripharm and the fair value of consideration received, being the fair value of the Company’s retained interest in Agripharm. The fair value of this interest was estimated
to be $38,400 which was determined using a discounted cash flow approach. The most significant inputs to the fair value measurement are the discount rate, expectations about future prices and capacity of the facility. 

Through its ownership and other rights, the Company continues to have significant influence over Agripharm and will account for its retained
interest in Agripharm using the equity method of accounting. The investment will initially be recognized at its fair value and adjusted thereafter to recognize the Company’s share of net income or loss and other comprehensive income.
Transaction costs of $311 have been included in the carrying value of the investment. The Company will record its share of net income or loss one quarter in arrears with adjustments for any significant transactions. To the extent that there are
differences between the fair value of the assets and liabilities of Agripharm and the book value of these assets and liabilities that would impact earnings the Company has accounted for these differences in its equity earnings in the investee. 

The Company also entered into an agreement with Agripharm whereby Agripharm has committed to sell up to 100% of the output produced by
Agripharm to the Company, subject to the right of Agripharm to sell up to 25% of its products directly in its own physical brick-and-mortar retail locations, if
permitted by applicable law. The price to be paid is cost plus a percentage of profit margin. 
 Contemporaneously with entering into the
above agreement, Canopy Rivers committed to advance up to $20,000 to Agripharm under a repayable debenture and royalty agreement. Under the repayable debenture and royalty agreement, Canopy Rivers will receive a royalty for a term of 20
years. The repayable debenture and royalty is being accounted for as one instrument and is classified as loans and receivables and is being measured at amortized cost. To date, $3,000 has been advanced under the royalty agreement and $nil
advanced under the repayable debenture.

  
 Page 26 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	10.	 ACQUISTIONS AND DISPOSALS (CONTINUED) 

 

 (c) Disposal of Consolidated Entity (continued) 

 

 As part of the consideration for entering into the repayable debenture and royalty agreement,
Canopy Rivers also received a warrant to acquire 4% of Agripharm for $5,000. The warrant expires the later of November 16, 2020, or two years after Agripharm becomes a public company. The warrant represents a derivative financial
instrument that is initially measured at fair value and subsequently measured to its fair value at the end of each reporting period, with changes in fair value recorded through profit or loss. On initial recognition the fair value of the warrant was
estimated as $586 using a Black-Scholes model. The fair value of the warrant was recorded as a reduction to the $3,000 receivable under the royalty agreement which resulted in the residual amount of $2,414 being allocated to the royalty receivable.
Estimated future cash flows to be received under the repayable debenture and royalty agreement will be discounted back to the amounts advanced to Agripharm by Canopy Rivers, net of the warrant received, at the effective interest rate. Amounts
received by Agripharm will be allocated to reduce the principal amount owing and interest payments based on the effective interest rate. Estimated future cash flows will be updated at each reporting date based on the most recent information
available. 
  

	11.	 INTANGIBLE ASSETS AND GOODWILL 

A continuity of the intangible assets for the year ended March 31, 2018 is as follows: 

 

																									
	COST	 
							
	 	  	Balance at
April 1,
2017	 	  	Additions	 	  	Additions
from
acquisitions	 	  	Disposals/
adjustments	 	 	Exchange
differences	 	 	Balance at
March 31,
2018	 
	 Health Canada licenses
	  	$	92,200	 	  	$	—  	 	  	$	—  	 	  	$	(27,600	) 	 	$	—  	 	 	$	64,600	 
	 Distribution channel
	  	 	38,900	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	38,900	 
	 Product rights
	  	 	28,000	 	  	 	—  	 	  	 	—  	 	  	 	(28,000	) 	 	 	—  	 	 	 	—  	 
	 Brand
	  	 	3,410	 	  	 	—  	 	  	 	2,632	 	  	 	—  	 	 	 	—  	 	 	 	6,042	 
	 Import license
	  	 	795	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	46	 	 	 	841	 
	 Software
	  	 	1,197	 	  	 	117	 	  	 	—  	 	  	 	143	 	 	 	(2	) 	 	 	1,455	 
	 Domain name
	  	 	54	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	54	 
	 Intangibles in process
	  	 	92	 	  	 	1,646	 	  	 	600	 	  	 	(194	) 	 	 	—  	 	 	 	2,144	 
	 Internally generated intangibles in process
	  	 	—  	 	  	 	326	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	326	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total
	  	$	164,648	 	  	$	2,089	 	  	$	3,232	 	  	$	(55,651	) 	 	$	44	 	 	$	114,362	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

																					
	ACCUMULATED AMORTIZATION	 
						
	 	  	Balance at
April 1,
2017	 	  	Amortization	 	  	Disposals/
adjustments	 	 	Exchange
differences	 	  	Balance at
March 31,
2018	 
	 Health Canada licenses
	  	$	985	 	  	$	2,957	 	  	$	(1,318	) 	 	$	—  	 	  	$	2,624	 
	 Distribution channel
	  	 	1,000	 	  	 	8,077	 	  	 	—  	 	 	 	—  	 	  	 	9,077	 
	 Import license
	  	 	57	 	  	 	155	 	  	 	—  	 	 	 	7	 	  	 	219	 
	 Software
	  	 	305	 	  	 	557	 	  	 	—  	 	 	 	1	 	  	 	863	 
	 Domain name
	  	 	38	 	  	 	15	 	  	 	—  	 	 	 	—  	 	  	 	53	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Total
	  	 	2,385	 	  	 	11,761	 	  	 	(1,318	) 	 	 	8	 	  	 	12,836	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Net book value
	  	$	162,263	 	  				  				 				  	$	101,526	 
		  	  
	  
	 	  				  				 				  	  
	  
	 

 A significant disposal of intangible assets in the period related to the disposal of Agripharm which resulted
in a net derecognition of the related Health Canada License of $26,282. Refer to Note 10 (c). 

  
 Page 27 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	11.	 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) 

 

 The product rights were acquired as part of the acquisition of Bedrocan Canada Inc. that was
completed in August 2015. On July 14, 2017 Bedrocan Canada Inc., a wholly owned subsidiary of the Company, commenced arbitration proceedings against Bedrocan International BV (“Bedrocan International”) seeking performance of Bedrocan
International’s contractual obligations under the licensing and distribution agreement between the parties. During the fourth quarter of fiscal 2018 the Company initiated settlement negotiations with Bedrocan International which would include
the orderly termination of the licensing and distribution agreement. As a result of these developments management has estimated that the recoverable amount for these product rights would be minimal and an impairment loss of $28,000 has been
recognized in the Consolidated Statements of Operations within Other Income. 
 On February 7, 2018, the Company acquired a brand,
certain technology, and lab equipment in exchange for the issuance of 117,253 common shares with a value of $3,239. The Company capitalized $43 of acquisition costs related to this transaction. Lab equipment of $50 was recorded to property plant,
and equipment with the remaining $3,232 recorded to intangible assets. Under the terms of the transaction, the sellers will receive additional shares up to a value of $1,065 if certain milestones are met. This variable consideration will be recorded
if and when these milestones are achieved. On closing of the transaction the sellers entered in to consulting agreements with the Company. As additional consideration for entering in to these agreements they will receive shares to a value of $1,127,
based on the 5 day VWAP at the time the shares are issued, which will be recorded as share based compensation expense over the term of the agreements. 

A continuity of the intangible assets for the year ended March 31, 2017 is as follows: 

 

																									
	COST	 
							
	 	  	Balance at
April 1,
2016	 	  	Additions	 	  	Additions
from
acquisitions	 	  	Disposals/
adjustments	 	  	Exchange
differences	 	  	Balance at
March 31,
2017	 
	 Health Canada licenses
	  	$	4,000	 	  	$	—  	 	  	$	88,200	 	  	$	—  	 	  	$	—  	 	  	$	92,200	 
	 Distribution Channel
	  	 	—  	 	  	 	—  	 	  	 	38,900	 	  	 	—  	 	  	 	—  	 	  	 	38,900	 
	 Product rights
	  	 	28,000	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	28,000	 
	 Brand
	  	 	—  	 	  	 	—  	 	  	 	3,410	 	  	 	—  	 	  	 	—  	 	  	 	3,410	 
	 Import license
	  	 	—  	 	  	 	—  	 	  	 	779	 	  	 	—  	 	  	 	16	 	  	 	795	 
	 Software
	  	 	—  	 	  	 	49	 	  	 	516	 	  	 	632	 	  	 	—  	 	  	 	1,197	 
	 Domain name
	  	 	54	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	54	 
	 Intangibles in process
	  	 	—  	 	  	 	92	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	92	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	 	32,054	 	  	 	141	 	  	 	131,805	 	  	 	632	 	  	 	16	 	  	 	164,648	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

																					
	ACCUMULATED AMORTIZATION	 
						
	 	  	Balance at
April 1,
2016	 	  	Amortization	 	  	Disposals/
adjustments	 	  	Exchange
differences	 	  	Balance at
March 31,
2017	 
	 Health Canada licenses
	  	$	166	 	  	$	819	 	  	$	—  	 	  	$	—  	 	  	$	985	 
	 Distribution Channel
	  	 	—  	 	  	 	1,000	 	  	 	—  	 	  	 	—  	 	  	 	1,000	 
	 Import license
	  	 	—  	 	  	 	57	 	  	 	—  	 	  	 	—  	 	  	 	57	 
	 Software
	  	 	—  	 	  	 	31	 	  	 	274	 	  	 	—  	 	  	 	305	 
	 Domain name
	  	 	27	 	  	 	11	 	  	 	—  	 	  	 	—  	 	  	 	38	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	 	193	 	  	 	1,918	 	  	 	274	 	  	 	—  	 	  	 	2,385	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value
	  	$	31,861	 	  				  				  				  	$	162,263	 
		  	  
	  
	 	  				  				  				  	  
	  
	 

  
 Page 28 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	11.	 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) 

 

 The net change in goodwill is as follows: 

 

									
	 As at March 31, 2016
	  				 	$	20,866	 
		  				 	  
	  
	 
	 Additions from acquisitions of subsidiaries
	  	 	10(b)	 	 	 	220,314	 
	 Exchange differences
	  				 	 	191	 
		  				 	  
	  
	 
	 As at March 31, 2017
	  				 	 	241,371	 
		  				 	  
	  
	 
	 Additions from acquisitions of subsidiaries
	  	 	10(a)	 	 	 	38,758	 
	 Additions from acquisition of joint operation
	  	 	13	 	 	 	36,400	 
	 Disposal of consolidated entity
	  	 	10(c)	 	 	 	(2,259	) 
	 Exchange differences
	  				 	 	653	 
		  				 	  
	  
	 
	 As at March 31, 2018
	  				 	$	314,923	 
		  				 	  
	  
	 

  

	12.	 FORMATION OF CANOPY RIVERS 

On May 12, 2017, the Company advanced $20,000 in the form of a convertible debenture to a newly formed subsidiary company, Canopy Rivers.
Other investors advanced $953 of seed capital to purchase 19,066,667 Class B common shares, including $503 that was advanced by certain employees of the Company and a consultant, where the Company provided a share purchase loan which was used
to pay for the Class B common shares. 
 On June 16, 2017, Canopy Rivers completed a Class B common share offering for
aggregate gross proceeds of $36,899 at which time the convertible debenture including interest of $57 was converted into Class A common shares of Canopy Rivers. This included shares with a value of $668 that were issued in exchange for
services. Share issue costs net of the related tax benefit were $1,709. Through these Class A common shares, the Company’s ownership interest in Canopy Rivers was 34.1%, and represented 91.2% 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. The difference between the consideration paid by investors to
acquire the non-controlling interests and the net assets acquired of $1,065 has been recorded as a decrease to equity attributable to the parent. 

Under the share purchase loan, the Company’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 8.7% 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 the Company and the individual remains as a consultant and the loan is repaid. In certain cases, there are also additional
performance targets. The shares 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, the Company has estimated the number of shares it expects to vest and is amortizing the expense over the expected vesting period. For
the year ended March 31, 2018, the Company recorded $3,090 in share-based compensation expense related to this arrangement with a corresponding increase to non-controlling interests. 

During fiscal 2018 Canopy Rivers granted 3,475,000 options to purchase Class B common shares to employees of the Company and 2,440,000
options to purchase Class B common shares to consultants of the Company. The options have an exercise price of $0.60 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 March 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. Shares issued to non-employees will be remeasured until their performance is complete. For the year ended March 31, 2018, the Company recorded $489 in share-based compensation
expense related to this arrangement with a corresponding increase to non-controlling interests. 

  
 Page 29 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	12.	 FORMATION OF CANOPY RIVERS (CONTINUED) 

 

 On January 8, 2018 Canopy Rivers completed a
non-brokered private placement of 23,636,365 Class B common shares for aggregate proceeds of $26,000 including $5,141 invested by Canopy Growth. Canopy Rivers incurred and paid $738 in issuance costs
related to this offering net of the associated tax benefit. Following this round Canopy Growth’s interest and voting rights were reduced to 31.5% and 89.1%, respectively. An amount of $1,047 has been recorded as an increase in the 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’s ownership interest. 
  

	13.	 JOINT OPERATION 

On October 10, 2017, the Company entered into a definitive joint venture agreement with a large-scale greenhouse operator (the
“Partner”) to form a new company, BC Tweed Joint Venture Inc. (“BC Tweed”). BC Tweed is 66.67% owned by the Company and 33.33% owned by the Partner. Since the decisions over relevant activities are jointly determined the Company
has concluded that the Company and the Partner have joint control over BC Tweed. As part of the transaction, BC Tweed agreed to lease from the Partner a 1.3 million square feet greenhouse facility located on a
55-acre parcel of land in British Columbia (“BC lease 1”). In December 2017, BC Tweed agreed to lease and develop a second greenhouse of 1.7 million square feet (“BC lease 2”) from the
Partner. BC Tweed intends to retrofit the facilities for cannabis production and obtain the necessary sales and cultivation licenses under ACMPR. 

The Partner has the option to sell its interest in BC Tweed, in whole or in part, to the Company. This put option is exercisable only on
specific dates following the license date – the 4th anniversary of the sales license date, then at the 6th, 8th, 10th and 12th anniversaries. The put option is accounted for as a liability of the Company (“BC Tweed Put Liability”) and
is recorded on the Statements of Financial Position in Other long-term liabilities and is subsequently measured at fair value with changes in fair value recorded in net income in the period in which they arise. On acquisition date the fair value of
the BC Tweed Put Liability was estimated to be $36,400 using a discounted cash flow approach by estimating the expected future cash flows and applying a discount rate to arrive at the present value of the put option’s strike price. On
March 31, 2018 the BC Tweed Put Liability was estimated to be $56,300 and the increase of $19,900 was recorded in the Statement of Operations (Note 21). For further information on valuation techniques and significant unobservable inputs used to
estimate the fair value refer to Note 28. 
 The greenhouse operation transferred by the Partner meets the definition of a business and will
be accounted for as a business combination. The BC Tweed Put Liability represents the consideration paid by Canopy for acquiring its interest in this greenhouse operation and the Company will recognize a liability equal to the present value of the
BC Tweed put option strike price. Since the operation had no identifiable assets or liabilities the offset is to goodwill. Given the limited time between the acquisition and the end of the third quarter the accounting for the acquisition of BC
Tweed was only provisionally determined as of December 31, 2018. The Company has now completed its final assessment of the accounting for this acquisition. 

To fund the development of BC Tweed, the Company will contribute, in multiple tranches, an aggregate of $20,000 in cash, of which approximately
$1,000 was advanced at closing in exchange for Class A preferred shares with cumulative preferred dividends with a dividend rate of 24%. To the extent that BC Tweed requires funding beyond the initial $20,000 in cash, the Company has committed
to provide additional funding in the form of preferred shares with prime rate plus 3% cumulative preferred dividends that will rank in seniority to the Class A preferred shares. The Company is obligated to purchase from BC Tweed 100% of the
cannabis produced for a fixed price per gram for the first two years of the agreement and thereafter at a price that is computed with reference to the market price and has also guaranteed a minimum level of income for BC Tweed under this agreement.
At March 31, 2018, the Company has advanced $79,879 to BC Tweed for preferred shares. 
 The Company will upon various milestones being
achieved issue 310,316 common shares over two tranches and a further $2,750 of common shares of the Company in two additional tranches to the Partner. These payments will be accounted for as share-based compensation expense. The grant date fair
value of the share-based compensation was $6,731. The Company is amortizing the expense over the estimated vesting period. In the year ended March 31, 2018, the Company recorded $5,001 in share-based compensation related to these shares. 

  
 Page 30 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	13.	 JOINT OPERATION (CONTINUED) 

 

 As part of the transaction, BC Tweed 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. BC Tweed has the right to exercise the call options for a term of seven years from the respective license dates of the
facilities. The put option can only be exercised if BC Tweed exercises the call option (and gives the Partner the ability to receive the option price in Class B preferred shares of BC Tweed as opposed to cash). The purchase price for acquiring
the limited partnership units of the entity which owns the BC lease 1 property is $28,000 less any and all liabilities of the limited partnership (this price will increase by 3% per year from the license date with further increases of 8% per year
starting after the fifth anniversary from the license date until the end of the call/put option period, as applicable). The purchase price for acquiring the limited partnership units of the entity which owns the BC lease 2 property is $45,000 less
any and all liabilities of the limited partnership (this price will increase by 3% per year from the license date with further increases of 8% per year starting after the fifth anniversary from the license date until the end of the call/put option
period, as applicable). 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. At inception and March 31, 2018, the fair value of these options is $nil as the exercise price of the option approximates the fair value of the limited partnership units. 

BC Tweed also entered into a management services agreement with the Partner. 

Excluding the increase in the put liability and the partner expense paid to the Partner for the year ended March 31, 2018 BC Tweed
contributed a loss of $19,907. 
 Acquisition related costs of $641 were recognized as an expense in the year ended March 31, 2018. 

 

	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 March 31, 2018
	  	Canopy
Rivers	 	  	Tweed
JA	 	  	Vert
Mirabel	 
	 Cash and cash equivalents
	  	$	46,299	 	  	$	12	 	  	$	508	 
	 Amounts receivable
	  	 	519	 	  	 	—  	 	  	 	650	 
	 Subscription receivable
	  	 	—  	 	  	 	1,769	 	  	 	—  	 
	 Prepaid expenses and other assets
	  	 	2	 	  	 	—  	 	  	 	94	 
	 Investments in associates
	  	 	13,225	 	  	 	—  	 	  	 	—  	 
	 Other financial assets
	  	 	57,491	 	  	 	—  	 	  	 	—  	 
	 Property, plant and equipment
	  	 	2,610	 	  	 	1,677	 	  	 	6,818	 
	 Preferred shares
	  	 	5,455	 	  	 	—  	 	  	 	—  	 
	 Goodwill
	  	 	—  	 	  	 	1,939	 	  	 	5,625	 
	 Accounts payable and accrued liabilities
	  	 	(4,705	) 	  	 	(451	) 	  	 	(3,940	) 
	 Other current liabilities
	  	 	—  	 	  	 	—  	 	  	 	(88	) 
	 Other long-term liabilities
	  	 	—  	 	  	 	—  	 	  	 	(5,455	) 
	 Deferred tax liability
	  	 	(4,502	) 	  	 	—  	 	  	 	—  	 
	 Non-controlling interests
	  	 	(80,844	) 	  	 	(1,686	) 	  	 	(2,155	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Equity attributable to Canopy Growth
	  	$	35,550	 	  	$	3,260	 	  	$	2,057	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 31 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	14.	 NON-CONTROLLING INTERESTS (CONTINUED) 

 

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

																					
	 	  	Canopy
Rivers	 	  	Tweed
JA	 	 	Vert
Mirabel	 	 	Other non-
material
interests1	 	 	Total	 
	 As at March 31, 2016
	  	$	—  	 	  	$	—  	 	 	$	—  	 	 	$	—  	 	 	$	—  	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net(loss)/income
	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	(51	) 	 	 	(51	) 
	 Acquisitions
	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	19	 	 	 	19	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 As at March 31, 2017
	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	(32	) 	 	 	(32	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net (loss)/income
	  	 	17,490	 	  	 	(366	) 	 	 	(721	) 	 	 	(184	) 	 	 	16,219	 
	 Other comprehensive income
	  	 	3,998	 	  	 	39	 	 	 	—  	 	 	 	(4	) 	 	 	4,033	 
	 Share-based compensation
	  	 	3,579	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,579	 
	 Acquisitions and ownership changes 2
	  	 	55,777	 	  	 	2,013	 	 	 	2,876	 	 	 	—  	 	 	 	60,666	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 As at March 31, 2018
	  	$	80,844	 	  	$	1,686	 	 	$	2,155	 	 	$	(220	) 	 	$	84,465	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

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

	2 	 Includes $2,839 arising on acquisition and $37 arising on the change in ownership interest in Canopy Rivers

  

	15.	 INVESTMENTS IN ASSOCIATES 

The following table outlines changes in the investments in associates that are accounted for using the equity method. In accordance with 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 figures in the following tables are
based on values at December 31, 2017 with adjustments for any significant transactions. 
  

																															
	 Entity
	  	 Instrument
	  	Note	 	 	Participating
share	 	 	Balance at
March 31,
2017	 	  	Additions	 	  	Share of net
(loss)/
income	 	 	Interest
income	 	 	Balance at
March 31,
2018	 
	 Agripharm
	  	shares	  	 	10(c)	 	 	 	40.0	% 	 	$	—  	 	  	$	38,711	 	  	$	(232	) 	 	$	—  	 	 	$	38,479	 
	 TerrAscend
	  	shares	  	 	15(i)	 	 	 	24.0	% 	 	 	—  	 	  	 	16,978	 	  	 	(66	) 	 	 	—  	 	 	 	16,912	 
	 Radicle
	  	convertible debenture	  	 	15(ii)	 	 	 	23.8	% 	 	 	—  	 	  	 	5,000	 	  	 	(136	) 	 	 	(110	) 	 	 	4,754	 
	 CHI
	  	shares	  	 	15(iii)	 	 	 	43.0	% 	 	 	—  	 	  	 	4,000	 	  	 	(1,039	) 	 	 	—  	 	 	 	2,961	 
	 Bedrocan Brasil
	  	shares	  	 	15(iv)	 	 	 	39.8	% 	 	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 
	 Entourage
	  	shares	  	 	15(iv)	 	 	 	40.0	% 	 	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 
		  		  				 				 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  		  				 				 	$	—  	 	  	$	64,689	 	  	$	(1,473	) 	 	$	(110	) 	 	$	63,106	 
		  		  				 				 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The following table presents current and non-current assets, current
and non-current liabilities as well as revenues and profit or loss of the Company’s investments in associates: 
  

																									
	 Entity
	  	Current
assets	 	  	Non-
current
assets	 	  	Current
liabilities	 	  	Non-
current
liabilities	 	  	Revenue	 	  	Loss 1	 
	 Agripharm
	  	$	4,671	 	  	$	90,716	 	  	$	1,391	 	  	$	10,896	 	  	$	—  	 	  	$	(557	) 
	 TerrAscend
	  	 	53,693	 	  	 	15,369	 	  	 	1,692	 	  	 	—  	 	  	 	—  	 	  	 	(6,805	) 
	 Radicle
	  	 	2,576	 	  	 	4,382	 	  	 	94	 	  	 	7,174	 	  	 	—  	 	  	 	(506	) 
	 CHI
	  	 	12,160	 	  	 	123	 	  	 	364	 	  	 	—  	 	  	 	—  	 	  	 	(3,949	) 
	 Bedrocan Brasil
	  	 	659	 	  	 	—  	 	  	 	34	 	  	 	—  	 	  	 	—  	 	  	 	(162	) 
	 Entourage
	  	 	1,749	 	  	 	224	 	  	 	2,056	 	  	 	—  	 	  	 	—  	 	  	 	(2,061	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
		  	$	75,508	 	  	$	110,814	 	  	$	5,631	 	  	$	18,070	 	  	$	—  	 	  	$	(14,040	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	1 	 For the year ended December 31 except for Agripharm which is from the period of December 1, 2017 to
December 31, 2017 as this represents the period post derecognition 

  
 Page 32 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	15.	 INVESTMENTS IN ASSOCIATES (CONTINUED) 

 

	 	(i)	 TerrAscend Corp. (“TerrAscend”) is a publicly traded licensed producer under ACMPR. On
December 8, 2017, the Company subscribed for 9,545,456 units of TerrAscend directly, and 9,545,456 units indirectly through its subsidiary Canopy Rivers, for $1.10 per unit. Each unit included one common share of TerrAscend and one common share
purchase warrant. The warrants are exercisable until December 8, 2020 at $1.10 per common share. The Company has allocated the purchase price to the shares and warrants based on their relative fair values, in the amount of $13,460 and $7,540
respectively. On November 27, 2017, the Company acquired an additional 1,740,000 common shares of TerrAscend directly and 1,740,000 shares indirectly through its subsidiary Canopy Rivers under a block trade at a price of $1.00 per share.

 Following these transactions, the Company directly and indirectly owns 24% of the issued and outstanding shares of
TerrAscend and the Company has concluded it has significant influence over TerrAscend and will account for its investment in these common shares using the equity method. Costs of $38 have been capitalized to the cost of the investment. 

The warrants represent a derivative financial instrument that is 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 through profit or loss. 
 TerrAscend has agreed
to sell the Company approximately 25% of its current production for a term of 2 years upon receiving its license to sell cannabis, renewal annually for an additional one-year term. 

 

	 	(ii)	 Radicle Medical Marijuana Inc. (“Radicle”) is an ACMPR applicant. Canopy Rivers has entered into
funding arrangements with Radicle and its affiliates whereby they have committed to invest $5,000 in the form of a convertible debenture and $5,000 in a repayable debenture and has also entered into a royalty agreement with Radicle. The debentures
bear interest at 5%, payable quarterly in cash, and are due at the earlier of 24 months or the date Radicle receives a sales license and are secured against all of its assets. Assuming Radicle receives a sales license before maturity, the
convertible debenture automatically converts into common shares and the repayable debenture will convert into the royalty interest. Under the royalty agreement, Canopy Rivers will receive a royalty for a term of 20 years. To date $5,000 has been
advanced under the convertible debenture and $3,000 has been advanced under the repayable debenture. 

 The convertible
debenture is convertible into 23.8% of the common shares and this interest, together with other rights provided under the agreements, give Canopy Rivers significant influence over the investee and Canopy Rivers is accounting for the investment using
the equity method. 
 The repayable debenture and royalty agreement is being accounted for as one instrument and is classified as loans and
receivables and being measured at amortized cost. 
 Canopy Growth also entered into an agreement with Radicle whereby they have committed to
sell a specified portion of their output to Canopy Growth. 
  

	 	(iii)	 Canopy Health Innovations (“CHI”) was formed in December 2016 to act as a cannabis research
incubator. On December 21, 2016, CHI closed an initial round of financing for gross proceeds of approximately $7,000. Following this investment, the Company had a 46.15% ownership interest in CHI, however had a $nil balance at March 31,
2017. During the quarter ended September 30, 2017, CHI closed a second round of financing for $8,842 which included $4,000 invested by the Company. The Company’s ownership interest is currently 43.0%. 

 

	 	(iv)	 Bedrocan Brasil S.A. (“Bedrocan Brasil”) was formed in September 2016 to facilitate the importation
of Bedrocan International’s proprietary standardized cannabis varieties and the Company’s know-how into the Brazilian market. At the same time, the Company partnered with Entourage Phytolab S.A.
(“Entourage”) to develop cannabis-based pharmaceutical medical products for the Brazilian and international markets. The Company currently holds a 39.762% interest in Bedrocan Brasil and 39.990% interest in Entourage, however has a $nil
balance at March 31, 2018. 

  
 Page 33 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 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 28. 

 

																																	
	 Entity
	  	 Instrument
	  	Note	 	 	 Accounting method
	  	Balance at
March 31,
2017	 	  	Additions	 	  	FVTOCI 1	 	  	FVTPL	 	 	Interest
revenue	 	 	Balance at
March 31,
2018	 
	 TerrAscend
	  	warrants	  	 	15(i)	 	 	FVTPL	  	$	—  	 	  	$	7,540	 	  	$	—  	 	  	$	67,614	 	 	$	—  	 	 	$	75,154	 
	 AusCann
	  	shares	  	 	16(i)	 	 	FVOCI	  	 	18,328	 	  	 	1,214	 	  	 	19,544	 	  	 	—  	 	 	 	—  	 	 	 	39,086	 
	 AusCann
	  	options	  	 	16(i)	 	 	FVTPL	  	 	5,702	 	  	 	—  	 	  	 	—  	 	  	 	4,785	 	 	 	—  	 	 	 	10,487	 
	 JWC
	  	shares	  	 	16(ii)	 	 	FVTOCI	  	 	—  	 	  	 	3,863	 	  	 	6,728	 	  	 	—  	 	 	 	—  	 	 	 	10,591	 
	 JWC
	  	warrants	  	 	16(ii)	 	 	FVTPL	  				  	 	112	 	  				  	 	702	 	 	 	—  	 	 	 	814	 
	 JWC
	  	royalty interest	  	 	16(ii)	 	 	amortized cost	  	 	—  	 	  	 	2,500	 	  	 	—  	 	  	 	—  	 	 	 	162	 	 	 	2,662	 
	 Agripharm
	  	royalty interest	  	 	10(c)	 	 	amortized cost	  	 	—  	 	  	 	2,414	 	  	 	—  	 	  	 	—  	 	 	 	(88	) 	 	 	2,326	 
	 Agripharm
	  	warrants	  	 	10(c)	 	 	FVTPL	  	 	—  	 	  	 	586	 	  	 	—  	 	  	 	(139	) 	 	 	—  	 	 	 	447	 
	 Vapium
	  	shares	  	 	16(iii)	 	 	cost	  	 	—  	 	  	 	1,210	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	1,210	 
	 Radicle
	  	repayable debenture	  	 	15(ii)	 	 	amortized cost	  	 	—  	 	  	 	3,000	 	  	 	—  	 	  	 	—  	 	 	 	75	 	 	 	3,075	 
	 HydRx
	  	shares	  	 	16(iv)	 	 	FVTOCI	  				  	 	—  	 	  	 	12,401	 	  	 	—  	 	 	 	—  	 	 	 	12,401	 
	 HydRx
	  	warrants	  	 	16(iv)	 	 	FVTPL	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	5,210	 	 	 	—  	 	 	 	5,210	 
		  		  				 		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  		  				 		  	$	24,030	 	  	$	22,439	 	  	$	38,673	 	  	$	78,172	 	 	$	149	 	 	$	163,463	 
		  		  				 		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	1 	 Changes in fair value through other comprehensive income (“FVTOCI”) 

 

	 	(i)	 AusCann Group Holdings Ltd. (“AusCann”), operates in Australia’s medical cannabis industry and
is listed on the Australian Stock Exchange. The Company holds 29,865,000 ordinary shares of AusCann, which represents 11% of the issued and outstanding shares at March 31, 2018, and 7,677,639 options. Of the currently held shares, 27,465,000
have been placed in escrow until February 3, 2019. The options are exercisable at AUD$ 0.20 and expire on January 19, 2020. Any shares received on exercise of the options will also be held in escrow until February 3, 2019.

 For the year ended March 31, 2017, a gain of $15,900 (net of $2,428 in taxes) was recorded relating to the AusCann
shares in fair value changes on available for sale financial assets and a gain of $5,702 was recorded on the AusCann options in other income (expense). 
  

	 	(ii)	 James E. Wagner Cultivation Ltd. (“JWC”) is an ACMPR applicant. During the quarter ended
September 30, 2017, Canopy Rivers acquired 37,000 common shares and 5,000 warrants for $3,975, advanced $2,500 under a repayable debenture and also entered into a royalty agreement with JWC. The repayable debenture bears interest at 8%, payable
quarterly in cash, and is due at the earlier of 18 months or the date the applicant receives a sales license and is secured by the assets of the applicant. As JWC received a sales license before maturity, the principal amount drawn under the
repayable debenture automatically converted into a royalty interest. Under the terms of the royalty agreement, the Company will receive a royalty per gram of applicable JWC cannabis production for a term of 20 years. 

The repayable debenture and royalty agreement is being accounted for as one instrument and is classified as loans and receivables and being
measured at amortized cost. The carrying value approximates its fair value. 
 The common shares represent an 14.7% ownership interest in
JWC. JWC is a private company and prior to March 31, 2018, the fair value of the Company’s equity interest could not be reliably measured and the common shares and warrants were carried at their cost of $3,863 and $112, respectively.
Subsequent to year end, JWC completed a financing that provided a measure of the fair value of the common shares and warrants and the shares and warrants were adjusted to their fair value of $10,591 and $814, respectively. The difference between
their carrying amount of the shares and this fair value was recorded in other comprehensive income and the difference between the carrying amount of the warrants and this fair value for the warrants. 

Canopy Growth also entered into agreements with JWC whereby they have committed to sell a specified portion of their output to Canopy Growth.

  
 Page 34 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	16.	 OTHER FINANCIAL ASSETS (CONTINUED) 

 

	 	(iii)	 Vapium Incorporated (“Vapium”) is a company that designs and engineers portable vaporizer devices. On
September 29, 2017, the Company acquired a 9.93% ownership interest for a cash investment of $960. On November 27, 2017, the Company exercised an option to acquire additional shares for $250 and increased its ownership to 12.24%. Vapium is
a private company and the fair value of the instrument is not reliably determinable such that the investment is being carried at cost. 

  

	 	(iv)	 HydRx Farms Ltd. (“HydRx”), operates as Scientus Pharma Inc. The Company holds 3,100,307 shares and
1,860,680 warrants in the HydRx which represents a 8.7% ownership interest. HydRx is a private company and prior to February 2018 the fair value of the Company’s equity interest could not be reliably measured and the common shares and warrants
were carried at their cost amount of $nil. In the quarter ended March 31, 2018 the Company completed a financing that provided a measure of the fair value of the common shares and warrants and the shares and warrants were adjusted to their fair
value of $12,401 and $5,210, respectively. The difference between their carrying amount of the shares and this fair value was recorded in other comprehensive income and the difference between the carrying amount of the warrants and the fair value of
the warrants was recorded in other income (expense). 

  

	17.	 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

 

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Trade payables
	  	$	46,175	 	  	$	5,661	 
	 Accrued liabilities
	  	 	43,396	 	  	 	9,725	 
		  	  
	  
	 	  	  
	  
	 
	 Total accounts payable and accrued liabilities
	  	$	89,571	 	  	$	15,386	 
		  	  
	  
	 	  	  
	  
	 

 The accounts payable and accrued liabilities balance of $89,571 (2017 – $15,386) is comprised of amounts
for property, plant and equipment of $62,034 (2017 – $2,804), professional fees of $7,391 (2017 – $1,642), compensation related liabilities of $5,747 (2017 – $2,349), and other miscellaneous liabilities of $14,399 (2017 – 8,591).

  
 Page 35 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 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 
  

													
	 	  	Maturity Date	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Mortgage payable with a five-year term and amortization period of seven years bearing an annual
interest rate of 4.9%
	  	 	August 1, 2021	 	  	$	2,777	 	  	$	3,210	 
				
	 Mortgage payable with a five-year term and amortization period of seven years bearing an annual
interest rate of 5.3%
	  	 	December 1, 2019	 	  	 	1,089	 	  	 	1,345	 
				
	 Mortgage payable with a five-year term and amortization period of seven years bearing an annual
interest rate of 4.8%
	  	 	December 1, 2020	 	  	 	2,648	 	  	 	2,994	 
				
	 Term loan at 10% interest with monthly repayment
	  	 	October 1, 2024	 	  	 	1,564	 	  	 	1,724	 
				
	 Finance lease obligations with interest rates between
5.9%-17.1%, and terms between 2-5 years, liens against the related leased equipment
	  				  	 	344	 	  	 	1,057	 
		  				  	  
	  
	 	  	  
	  
	 
		  				  	 	8,422	 	  	 	10,330	 
	 Less: current portion
	  				  	 	(1,557	) 	  	 	(1,691	) 
		  				  	  
	  
	 	  	  
	  
	 
	 Long-term portion
	  				  	$	6,865	 	  	$	8,639	 
		  				  	  
	  
	 	  	  
	  
	 

 The mortgage with a maturity date of August 1, 2021 is secured by a first charge mortgage on the Tweed
Farms property, a first position on a Tweed Farms general security agreement and a specific security interest, backed by a corporate guarantee from the Company. 

The mortgage with a maturity date of December 1, 2019 is secured by a first charge on the Tweed Farms property. 

In respect of the mortgage with a maturity date of December 1, 2020, the mortgage is secured by a first charge on the Mettrum Bowmanville
property. 
 The mortgages payable, all with Farm Credit Canada, a Canadian Crown Corporation can be prepaid at any time but is subject to a
prepayment fee equal to the greater of (a) three months’ interest on the amount being prepaid or (b) the amount of interest lost by the lender over the remaining term of the loan on the amount being prepaid. 

The Company also has revolving lines of credit for up to $5,500 with Farm Credit Corporation, with variable interest rates based on the CIBC
prime 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 March 31, 2018 and March 31, 2017. 
 The term loan
was added to the existing lease agreement for the Toronto facilities and is held by a related party. The loan accrues interest at 10% annually and is payable over the initial ten-year term of the amended lease
to October 1, 2024 by way of additional monthly rent of $27, which includes principal and interest payments. 

  
 Page 36 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	18.	 LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES (CONTINUED) 

 

 Principal repayments required on the long-term debt in the next five fiscal years are as
follows: 
  

					
	 2019
	  	$	1,547	 
	 2020
	  	 	2,048	 
	 2021
	  	 	2,537	 
	 2022
	  	 	1,588	 
	 2023
	  	 	263	 
	 Thereafter
	  	 	439	 
		  	  
	  
	 
		  	$	8,422	 
		  	  
	  
	 

 (b) Other long-term liabilities 

At March 31, 2018 other long-term liabilities of $61,150 is comprised of the BC Tweed Put Liability (Note 13) with a fair value of $56,300
and the Vert Mirabel Put Liability (Note 10(a)(iv)) with a fair value of $4,850. 
  

	19.	 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES 

 

																					
	 	  	 	 	  	 	 	 	Non-cash changes	 	  	 	 
	 	  	April 1,
2017	 	  	Cash flows	 	 	Acquisition/
Disposal	 	 	New leases	 	  	March 31,
2018	 
	 Long-term borrowings
	  	$	9,273	 	  	$	(1,195	) 	 	$	—  	 	 	$	—  	 	  	$	8,078	 
	 Finance lease obligations
	  	 	1,057	 	  	 	(336	) 	 	 	(396	) 	 	 	19	 	  	 	344	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Long-term debt
	  	$	10,330	 	  	$	(1,531	) 	 	$	(396	) 	 	$	19	 	  	$	8,422	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
					
	 	  	 	 	  	 	 	 	Non-cash changes	 	  	 	 
	 	  	April 1,
2016	 	  	Cash flows	 	 	Acquisition/
Disposal	 	 	New leases	 	  	March 31,
2017	 
	 Long-term borrowings
	  	$	3,457	 	  	$	2,813	 	 	$	3,003	 	 	$	—  	 	  	$	9,273	 
	 Finance lease obligations
	  	 	565	 	  	 	(12	) 	 	 	504	 	 	 	—  	 	  	 	1,057	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Long-term debt
	  	$	4,022	 	  	$	2,801	 	 	$	3,507	 	 	$	—  	 	  	$	10,330	 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 

  

	20.	 SHARE CAPITAL 

(a) Authorized 
 An
unlimited number of common shares. 
  

	 	(i)	 Equity Raises 

During fiscal 2018 the Company completed the following equity financings: 

 

									
	 	  	Number of
Shares	 	  	Share Capital	 
	 Equity financing - February 7, 2018 - net of share issue costs of $8,615
	  	 	5,800,000	 	  	$	192,065	 
	 Equity investment from Greenstar - November 2, 2017 - net of share issue costs of
$707
	  	 	18,876,901	 	  	 	173,765	 
	 Equity financing - July 21, 2017 - net of share issue costs of $78
	  	 	3,105,590	 	  	 	24,922	 
		  	  
	  
	 	  	  
	  
	 
	 Total equity raise share issuances
	  	 	27,782,491	 	  	$	390,752	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 37 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

 During fiscal 2017 the Company completed the following equity financings: 

 

									
	 	  	Number of
Shares	 	  	Share Capital	 
	 Equity private placement financing - March 22, 2017 - net of share issue costs of $90
	  	 	2,500,000	 	  	$	24,160	 
	 Equity financing - December 22, 2016 - net of share issue costs of $3,886
	  	 	5,662,000	 	  	 	56,131	 
	 Equity financing - August 24, 2016 - net of share issue costs of $2,407
	  	 	9,453,000	 	  	 	32,096	 
	 Equity financing - April 15, 2016 - net of share issue costs of $707
	  	 	5,002,500	 	  	 	10,799	 
		  	  
	  
	 	  	  
	  
	 
	 Total equity raise share issuances
	  	 	22,617,500	 	  	$	123,186	 
		  	  
	  
	 	  	  
	  
	 

 On November 2, 2017, Greenstar Canada Investment Limited Partnership, which is an affiliate of
Constellation Brands, Inc., (“Greenstar”) acquired 18,876,901 common shares from treasury and 18,876,901 warrants in exchange for $244,990. The common shares have a hold period of four months and one day from the closing date. The
warrants, each exercisable at $12.9783 per warrant for a common share expire May 2, 2020 and are exercisable in two equal tranches, with the first exercisable tranche date being August 1, 2018, and the second exercisable tranche date being
February 1, 2019, provided at the time of exercising the warrants, the Company still owns the 18,876,901 common shares. The proceeds of the common share issuance were allocated to the common shares and warrants based on their relative fair
values in the amount of $174,472 and $70,518, respectively. The fair value of the common shares was determined using the closing price on the day the share subscription closed, and the fair value of the warrants was determined using a Black-Scholes
model. Share issuance costs of $707 were allocated to the common shares and $253 to the warrants. 
  

	 	(ii)	 Acquisitions 

During fiscal 2018 the Company issued the following shares as a result of business combinations that occurred in the current or prior years:

  

															
	 	  	Notes	 	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Issuance of shares for rTrees acquisition - net of share issue costs of $69
	  	10(a)(i)	 	 	3,494,505	 	  	$	28,026	 	  	$	1,079	 
	 Issuance of shares for Spot acquisition - net of share issue costs of $9
	  	10(a)(v)	 	 	111,669	 	  	 	984	 	  	 	—  	 
	 Issuance of shares for Green Hemp acquisition - net of share issue costs of $9
	  	10(a)(v)	 	 	24,577	 	  	 	848	 	  	 	—  	 
	 Shares released from escrow related to the MedCann Access acquisition
	  		 	 	240,678	 	  	 	390	 	  	 	(390	) 
	 Shares released from escrow related to the Hemp.CA acquisition
	  	10(b)(iii)	 	 	129,016	 	  	 	—  	 	  	 	—  	 
	 Shares released from escrow related to the Spektrum Cannabis GmbH acquisition
	  	10(b)(ii)	 	 	367,981	 	  	 	—  	 	  	 	—  	 
	 Shares released from escrow related to the Vert Medical acquisition
	  	10(b)(iii)	 	 	147,453	 	  	 	—  	 	  	 	—  	 
		  		 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total acquisition related share issuances
	  		 	 	4,515,879	 	  	$	30,248	 	  	$	689	 
		  		 	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 38 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

 During fiscal 2017 the Company issued the following shares as a result of business
combinations that occurred in the current or prior years: 
  

																	
	 	  	Notes	 	  	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Issuance of shares for Mettrum acquisition - net of share issue costs of $997
	  	 	10(b)(i)	 	  	 	34,265,042	 	  	$	336,514	 	  	$	12,143	 
	 Issuance of shares per Spektrum Cannabis GmbH acquisition
	  	 	10(b)(ii)	 	  	 	674,631	 	  	 	10,406	 	  	 	—  	 
	 Issuance of shares per Vert acquisition
	  	 	10(b)(iii)	 	  	 	58,978	 	  	 	1,664	 	  	 	—  	 
	 Issuance of shares per Hemp acquisition
	  	 	10(b)(iii)	 	  	 	129,021	 	  	 	1,711	 	  	 	—  	 
	 Shares released from escrow related to the MedCann Access acquisition
	  				  	 	1,011,239	 	  	 	2,919	 	  	 	(468	) 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total acquisition related share issuances
	  				  	 	36,138,911	 	  	$	353,214	 	  	$	11,675	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 During fiscal 2018, the Company released 240,678 (fiscal 2017 – 1,011,239) of the common shares held in
escrow in relation to the fiscal 2016 MedCann Access acquisition as certain milestones of the acquisition had been met. In addition, 48,078 (fiscal 2017 – 1,149,892) escrowed shares were cancelled. No shares remain in escrow at March 31,
2018. 
  

	 	(iii)	 Other 

During fiscal 2018 the Company other share issuances were comprised of: 

 

																	
	 	  	Notes	 	  	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Shares released from escrow to LBC Holdings, Inc.
	  				  	 	87,836	 	  	$	1,297	 	  	$	(1,297	) 
	 Shares issued to BC Tweed Partner for performance conditions
	  	 	20(c)	 	  	 	155,158	 	  	 	1,880	 	  	 	(1,880	) 
	 Shares issued for Apollo/Bodystream earnout
	  	 	20(c)	 	  	 	243,493	 	  	 	2,398	 	  	 	(2,398	) 
	 Issuance of shares for Niagara asset acquisition - net of share issue costs of $8
	  	 	9	 	  	 	111,366	 	  	 	995	 	  	 	—  	 
	 Issuance of shares for acquired intangible - net of share issue costs of $14
	  	 	11	 	  	 	117,253	 	  	 	3,225	 	  	 	—  	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total other share issuances
	  				  	 	715,106	 	  	$	9,795	 	  	$	(5,575	) 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 During fiscal 2017 the Company other share issuances were comprised of: 

 

																	
	 	  	 	 	  	Number of
Shares	 	  	Share
Capital	 	  	Share
Based
Reserve	 
	 Shares released from escrow to LBC Holdings, Inc.
	  				  	 	138,032	 	  	$	639	 	  	$	(639	) 
	 Issuance of shares for 1 Hershey Drive purchase
	  	 	9	 	  	 	94,397	 	  	 	858	 	  	 	—  	 
	 Issuance of shares per service agreements
	  				  	 	156,240	 	  	 	1,333	 	  	 	—  	 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total other share issuances
	  				  	 	388,669	 	  	$	2,830	 	  	$	(639	) 
		  				  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 During fiscal 2018, 87,836 (fiscal 2017 – 138,032) common shares were released from escrow under the
agreement with LBC Holdings, Inc., a company controlled by the artist known as Snoop Dogg. The remaining 25,097 common shares are escrowed for release, subject to meeting certain service criteria. 

During fiscal 2017, the Company issued 72,418 common shares to XIB consulting Inc. (“XIB), to assist the Company with corporate
development initiatives and 83,822 common shares to satisfy $1,000 in acquisition costs related to the Mettrum acquisition. 

  
 Page 39 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

	 	(iv)	 Warrants 

 

																	
	 	  	Number of
whole
warrants	 	  	Average
exercise
price	 	  	Warrant
value	 	 	Expiry date	 
	 Balance at March 31, 2017
	  	 	—  	 	  	$	—  	 	  	$	—  	 	 			
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 			
	 Greenstar equity investment - net of warrant issue cost of $253
	  	 	18,876,901	 	  	 	12.98	 	  	 	70,265	 	 	 	May 1, 2020	 
	 rTrees acquisition
	  	 	242,408	 	  	 	3.83	 	  	 	1,302	 	 	 	April 30, 2018	 
	 Exercise of warrants
	  	 	(207,297	) 	  	 	3.72	 	  	 	(1,113	) 	 	 	N/A	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 			
	 Balance at March 31, 2018
	  	 	18,912,012	 	  	$	12.96	 	  	$	70,454	 	 			
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 			

 During the year ended March 31, 2018, 207,297 warrants were exercised at a weighted average price of
$3.72 (March 31, 2017- 213,104 warrants at an average price of $0.59). 
 (b) Omnibus plan 

On September 15, 2017, shareholders approved an Omnibus Incentive Plan (“Omnibus Plan”) pursuant to which it 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 10% 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 19,955,721 at March 31, 2018. As of March 31, 2018, the only Awards issued have been options under the ESOP, and 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 has 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 40 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

 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, 2016
	  	 	8,446,182	 	  	$	2.05	 
		  	  
	  
	 	  	  
	  
	 
	 Options granted
	  	 	4,337,701	 	  	 	6.23	 
	 Replacement options issued as a result of the Mettrum acquisition
	  	 	2,417,102	 	  	 	2.35	 
	 Options exercised
	  	 	(4,010,865	) 	  	 	1.74	 
	 Options forfeited/cancelled
	  	 	(1,146,008	) 	  	 	2.78	 
		  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at March 31, 2017
	  	 	10,044,112	 	  	$	3.97	 
		  	  
	  
	 	  	  
	  
	 
	 Options granted
	  	 	12,832,237	 	  	 	16.50	 
	 Replacement options issued as a result of the rTrees acquisition
	  	 	224,433	 	  	 	3.18	 
	 Options exercised
	  	 	(3,912,946	) 	  	 	2.82	 
	 Options forfeited/cancelled
	  	 	(1,942,001	) 	  	 	9.32	 
		  	  
	  
	 	  	  
	  
	 
	 Balance outstanding at March 31, 2018
	  	 	17,245,835	 	  	$	12.95	 
		  	  
	  
	 	  	  
	  
	 

 The following is a summary of the outstanding stock options as at March 31, 2018: 

 

																	
	 Options Outstanding
	 	  	Options Exercisable	 
	 Number Outstanding

at March 31, 2018
	  	Weighted Average
Remaining Contractual Life
(years)	 	  	Range of Exercise
Prices	 	  	Number Exercisable
at March 31, 2018	 	  	Range of
Exercise
Prices	 
	 3,471,904
	  	 	3.41	 	  	$	0.56 - $3.78	 	  	 	1,569,274	 	  	 	$0.56 - $3.78	 
	 5,731,691
	  	 	5.13	 	  	$	3.79 - $8.51	 	  	 	577,665	 	  	 	$3.79 - $8.51	 
	 2,712,240
	  	 	4.91	 	  	$	8.52 - $11.76	 	  	 	536,254	 	  	 	$8.52 - $11.76	 
	 1,540,000
	  	 	5.67	 	  	$	11.77 - $27.94	 	  	 	16,667	 	  	 	$11.77 - $27.94	 
	 3,790,000
	  	 	5.88	 	  	$	27.95 - $33.66	 	  	 	—  	 	  	 	$27.95 - $33.66	 
	  
	  	  
	  
	 	  				  	  
	  
	 	  			
	 17,245,835
	  	 	4.96	 	  				  	 	2,699,860	 	  			
	  
	  	  
	  
	 	  				  	  
	  
	 	  			

 At March 31, 2018, the weighted average exercise price of options outstanding and options exercisable was
$12.95 and $4.55, respectively. 
 The Company recorded $21,278 in share-based compensation expense related to options issued to employees
for the year ended March 31, 2018 (for the year ended March 31, 2017 - $7,650) and $4,774 in share-based compensation expense related to options issued to contractors. The fiscal 2018 compensation expense includes an amount related to
420,000 options being provided in exchange for services which are subject to performance conditions. 

  
 Page 41 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

 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 year ended March 31, 2018 and 2017 on their measurement date by applying the following assumptions: 

 

							
	 	  	March 31,	 	 	March 31,
	 	  	2018	 	 	2017
	 	  	(Weighted average)	 	 	(Range)
	 Risk-free interest rate
	  	 	1.54	% 	 	0.50% - 1.94%
	 Expected life of options (years)
	  	 	3 - 5	 	 	1 - 6
	 Expected annualized volatility
	  	 	64	% 	 	55% - 70%
	 Expected forfeiture rate
	  	 	11	% 	 	7%
	 Expected dividend yield
	  	 	nil	 	 	nil
	 Black-Scholes value of each option
	  	$	8.88	 	 	$0.20 - $6.09

 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. 

The Company recorded $3,579 (March 31, 2017 – $nil) in share-based compensation expense related to the issuance of shares and options in
Canopy Rivers to employees and consultants (refer to Note 12). 
 During fiscal 2018, 3,912,946 ESOP options were exercised ranging in price
from $0.43 to $11.71 for gross proceeds of $11,053. 
 (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	 
	 	  	Notes	 	 	Released during
fiscal 2018	 	  	Remaining shares to
be issued on
completion of
milestones*	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Apollo/Bodystream
	  	 	(i)	 	 	 	243,493	 	  	 	1,941,804	 	  	$	5,095	 	  	$	690	 
	 Spektrum Cannabis GmBH
	  	 	(ii)	 	 	 	—  	 	  	 	23,570	 	  	 	349	 	  	 	—  	 
	 Spot
	  	 	10(a)(v)	 	 	 	—  	 	  	 	30,658	 	  	 	330	 	  	 	—  	 
	 Spectrum Denmark
	  	 	10(a)(iii)	 	 	 	—  	 	  	 	1,906,214	 	  	 	7,206	 	  	 	—  	 
	 BC Tweed
	  	 	13	 	 	 	155,158	 	  	 	240,061	 	  	 	5,001	 	  	 	—  	 
	 Vert Mirabel
	  	 	10(a)(iv)	 	 	 	—  	 	  	 	84,903	 	  	 	1,131	 	  	 	—  	 
	 Green Hemp
	  	 	10(a)(v)	 	 	 	—  	 	  	 	24,567	 	  	 	167	 	  	 	—  	 
	 Intellectual property acquisition
	  	 	11	 	 	 	—  	 	  	 	33,804	 	  	 	196	 	  	 	—  	 
		  				 				  				  	  
	  
	 	  	  
	  
	 
		  				 				  				  	$	19,475	 	  	$	690	 
		  				 				  				  	  
	  
	 	  	  
	  
	 

  
 Page 42 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	20.	 SHARE CAPITAL (CONTINUED) 

 

	 	(i)	 The obligation for share-based compensation owing to former shareholders of Apollo Applied Research Inc., and
Apollo CRO Inc. (together “Apollo”) and 2344823 Ontario Inc., operating as Bodystream (“Bodystream”) was assumed by the Company in fiscal 2017 on the acquisition of Mettrum Health Corp. and its subsidiaries (“Mettrum”).
The maximum number of Company shares that would be issued with respect to the Apollo and Bodystream agreements is 1,111,702 and 1,073,595 shares, respectively. The Company has estimated the number of shares it expects to vest and is amortizing the
expense over the expected vesting period based on the fair value of the shares on the acquisition date. 

  

	 	(ii)	 The share-based compensation expense is related to a bonus that will be paid to a former shareholder of
Spektrum Cannabis GmbH within two years of the acquisition date if certain performance targets are met and the shareholder remains as an employee. 

(d) Other share based payments 

The Company also recorded a gain of $14 for the year ended March 31, 2018 (expense for the year ended March 31, 2017 - $396) in
share-based compensation expense for escrowed shares issued on the acquisition of MedCann Access that were related to employment. These shares were measured at fair value at the date of grant and expensed over their vesting period. 

In addition, the Company recorded share based payments of $1,151 (for the year ended March 31, 2017 - $1,307) related to shares provided
in exchange for sales and marketing services. The Company has determined that the sales and marketing services received are best measured by reference to the fair value of the equity granted as the services are rendered. This expense is recorded in
sales and marketing expenses. 
 On October 20, 2017, the Company agreed to issue 79,717 common shares in payment of royalties. The
Company will record the expense over the subsequent year. The Company recorded an expense of $920 in cost of sales for the fiscal year ended March 31, 2018 related to this arrangement (March 31, 2017 – $nil). 

 

	21.	 OTHER INCOME (EXPENSE) 

 

													
	 	  	 	 	  	March 31,	 	  	March 31,	 
	 	  	Notes	 	  	2018	 	  	2017	 
	 Fair value changes on financial assets
	  	 	16	 	  	$	78,172	 	  	$	5,702	 
	 Impairment of product rights
	  	 	11	 	  	 	(28,000	) 	  	 	—  	 
	 Fair value increase in BC Tweed Put Liability and Vert Mirabel Put Liability
	  	 	10(a),13	 	  	 	(21,000	) 	  	 	—  	 
	 Gain on disposal of consolidated entity
	  	 	10(c)	 	  	 	8,820	 	  	 	—  	 
	 Bargain purchase gain
	  	 	10(iii)	 	  	 	638	 	  			
	 Partner expense
	  				  	 	(4,995	) 	  	 	—  	 
	 Gain/loss disposal of property, plant and equipment
	  				  	 	(1,181	) 	  	 	—  	 
	 Increase in fair value of acquisition consideration related liabilities
	  				  	 	—  	 	  	 	(1,193	) 
	 Other expense, net
	  				  	 	(1,241	) 	  	 	(651	) 
		  				  	  
	  
	 	  	  
	  
	 
	 Total other income, net
	  				  	$	31,213	 	  	$	3,858	 
		  				  	  
	  
	 	  	  
	  
	 

 The partner expense represents a distribution to the Partner of BC Tweed. 

 

	22.	 EXPENSES BY NATURE 

Operating expenses are presented on the face of the consolidated statements of operations using a classification based on the functions
“Cost of sales (recovery),” “Sales and marketing,” “Research and development,” and “General and administration.” The Company also presents other material operating expenses separately as they were deemed to be
items of dissimilar function. 

  
 Page 43 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	22.	 EXPENSES BY NATURE (CONTINUED) 

 

 Operating expenses totalled $160,229 and $53,978 for the years ended March 31, 2018 and
2017. Total operating expenses were distributed by nature as follows: 
  

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Employee compensation and benefits
	  	$	49,971	 	  	$	21,726	 
	 Raw materials used and consumables
	  	 	13,286	 	  	 	8,105	 
	 Other costs of sales
	  	 	12,340	 	  	 	5,603	 
	 Net valuation gains related to inventory and biological assets
	  	 	(53,652	) 	  	 	(25,555	) 
	 Share-based compensation
	  	 	51,177	 	  	 	10,043	 
	 Acquisition-related costs
	  	 	3,406	 	  	 	7,369	 
	 Depreciation and amortization
	  	 	20,486	 	  	 	6,064	 
	 Legal and professional fees
	  	 	10,370	 	  	 	2,947	 
	 Royalties
	  	 	3,110	 	  	 	1,416	 
	 Consultants
	  	 	12,385	 	  	 	3,391	 
	 Facility expenses
	  	 	12,669	 	  	 	3,087	 
	 Patient assistance
	  	 	7,365	 	  	 	2,913	 
	 Marketing and promotion
	  	 	3,835	 	  	 	2,314	 
	 Office expenses
	  	 	6,454	 	  	 	1,986	 
	 Travel and other employee expenses
	  	 	5,141	 	  	 	1,672	 
	 Bank and payment processor fees
	  	 	1,886	 	  	 	897	 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	160,229	 	  	$	53,978	 
		  	  
	  
	 	  	  
	  
	 

  

	23.	 EARNINGS PER SHARE 

Net income per common share represents the net income attributable to common shareholders divided by the weighted average number of common
shares outstanding during the period. 
 Diluted net income per common share is calculated by dividing the applicable net income by the sum
of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period. As at March 31, 2018 and 2017, all
instruments were anti-dilutive. 
  

	24.	 INCOME TAXES 

Income tax expense varies from the amount that would be computed by applying the basic federal and provincial tax rates to loss before income
taxes, shown as follows: 
  

									
	 	  	March 31,
2018	 	 	March 31,
2017	 
	 Loss from operations
	  	 	(52,541	) 	 	 	(10,275	) 
	 Expected tax rate
	  	 	26.5	% 	 	 	26.5	% 
		  	  
	  
	 	 	  
	  
	 
	 Expected tax benefit resulting from loss
	  	$	13,923	 	 	$	2,723	 
	 Non-deductible expenses
	  	 	(19,310	) 	 	 	(2,156	) 
	 Increase in unrecognized temporary differences
	  	 	(5,506	) 	 	 	2,258	 
	 Non-taxable portion of capital gains and losses
	  	 	9,421	 	 	 	—  	 
	 Other
	  	 	(121	) 	 	 	(122	) 
		  	  
	  
	 	 	  
	  
	 
	 Income tax (expense) recovery
	  	$	(1,593	) 	 	$	2,703	 
		  	  
	  
	 	 	  
	  
	 

 Deferred income taxes reflect the impact of loss carry forwards and of temporary differences between amounts
of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. 

  
 Page 44 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	24.	 INCOME TAXES (CONTINUED) 

 

 The effect of temporary differences and loss carryforwards that give rise to significant
portions of the deferred tax liability, which has been recognized during the year ended March 31, 2018 are as follows: 
  

																													
	 	  	March 31,
2017	 	 	Recognized
in profit or
loss	 	 	Recognized
in equity	 	  	Recognized in
other
comprehensive
income	 	 	Disposal of
consolidated
entity	 	 	Business
combinations
and assets
held for sale	 	 	March 31,
2018	 
	 Deferred tax asset
	  				 				 				  				 				 				 			
	 Loss carryforwards
	  	$	30,494	 	 	$	5,677	 	 	$	—  	 	  	$	—  	 	 	$	(1,014	) 	 	$	—  	 	 	$	35,157	 
	 Other
	  	 	829	 	 	 	—  	 	 	 	4,511	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	5,340	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  	 	31,323	 	 	 	5,677	 	 	 	4,511	 	  	 	—  	 	 	 	(1,014	) 	 	 	—  	 	 	 	40,497	 
	 Deferred tax liability
	  				 				 				  				 				 				 			
	 Fixed assets
	  	 	(1,126	) 	 	 	3,577	 	 	 	—  	 	  	 	—  	 	 	 	(263	) 	 	 	(1,117	) 	 	 	1,071	 
	 Intangibles
	  	 	(42,703	) 	 	 	10,310	 	 	 	—  	 	  	 	—  	 	 	 	6,965	 	 	 	—  	 	 	 	(25,428	) 
	 Biological assets
	  	 	(20,615	) 	 	 	(9,460	) 	 	 	—  	 	  	 	—  	 	 	 	295	 	 	 	—  	 	 	 	(29,780	) 
	 Investments
	  	 	(3,184	) 	 	 	(13,558	) 	 	 	—  	 	  	 	(5,124	) 	 	 	—  	 	 	 	—  	 	 	 	(21,866	) 
	 Other long-term liabilities
	  	 	—  	 	 	 	2,783	 	 	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,783	 
	 Other
	  	 	381	 	 	 	(922	) 	 	 	—  	 	  	 	—  	 	 	 	(284	) 	 	 	12	 	 	 	(813	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  	 	(67,247	) 	 	 	(7,270	) 	 	 	—  	 	  	 	(5,124	) 	 	 	6,713	 	 	 	(1,105	) 	 	 	(74,033	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net deferred taxes
	  	$	(35,924	) 	 	$	(1,593	) 	 	$	4,511	 	  	$	(5,124	) 	 	$	5,699	 	 	$	(1,105	) 	 	$	(33,536	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The effect of temporary differences and loss carryforwards that give rise to significant portions of the
deferred tax liability, which has been recognized during the year ended March 31, 2017 are as follows: 
  

																									
	 	  	March 31,
2016	 	 	Recognized
in profit or
loss	 	 	Recognized
in goodwill	 	 	Recognized in
other
comprehensive
income	 	 	Liabilities
associated
with asset
held for
sale	 	  	March 31,
2017	 
	 Deferred tax asset
	  				 				 				 				 				  			
	 Loss carryforwards
	  	$	9,100	 	 	$	15,332	 	 	$	6,062	 	 	$	—  	 	 	$	—  	 	  	$	30,494	 
	 Other
	  	 	224	 	 	 	(62	) 	 	 	667	 	 	 	—  	 	 	 	—  	 	  	 	829	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
		  	 	9,324	 	 	 	15,270	 	 	 	6,729	 	 	 	—  	 	 	 	—  	 	  	 	31,323	 
	 Deferred tax liability
	  				 				 				 				 				  			
	 Fixed assets
	  	 	(1,097	) 	 	 	132	 	 	 	(161	) 	 	 	—  	 	 	 	—  	 	  	 	(1,126	) 
	 Intangibles
	  	 	(8,436	) 	 	 	479	 	 	 	(34,746	) 	 	 	—  	 	 	 	—  	 	  	 	(42,703	) 
	 Asset held for sale
	  	 	—  	 	 	 	—  	 	 	 	(820	) 	 	 	—  	 	 	 	820	 	  	 	—  	 
	 Biological assets
	  	 	(7,201	) 	 	 	(12,529	) 	 	 	(885	) 	 	 	—  	 	 	 	—  	 	  	 	(20,615	) 
	 Investments
	  	 	—  	 	 	 	(756	) 	 	 	—  	 	 	 	(2,428	) 	 	 	—  	 	  	 	(3,184	) 
	 Other
	  	 	(3	) 	 	 	107	 	 	 	277	 	 	 	—  	 	 	 	—  	 	  	 	381	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
		  	 	(16,737	) 	 	 	(12,567	) 	 	 	(36,335	) 	 	 	(2,428	) 	 	 	820	 	  	 	(67,247	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Net deferred taxes
	  	$	(7,413	) 	 	$	2,703	 	 	$	(29,606	) 	 	$	(2,428	) 	 	$	820	 	  	$	(35,924	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	  	  
	  
	 

 The unrecognized temporary differences of the Company are comprised of: 

 

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Losses carried forward
	  	$	30,041	 	  	$	2,792	 
	 Intangibles assets and fixed asset
	  	 	—  	 	  	 	9,906	 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	30,041	 	  	$	12,698	 
		  	  
	  
	 	  	  
	  
	 

  
 Page 45 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	24.	 INCOME TAXES (CONTINUED) 

 

 The Company has the following non-capital losses
available to reduce future years’ taxable income which expires as follows: 
  

					
	 2030
	  	$	40	 
	 2031
	  	 	123	 
	 2032
	  	 	376	 
	 2033
	  	 	3,195	 
	 2034
	  	 	7,258	 
	 2035
	  	 	18,196	 
	 2036
	  	 	29,806	 
	 2037
	  	 	29,202	 
	 2038
	  	 	79,301	 
	 Foreign - indefinite
	  	 	3,900	 
		  	  
	  
	 
		  	$	171,397	 
		  	  
	  
	 

  

	25.	 RELATED PARTIES 

Key management personnel compensation 

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling activities of the
entity, directly or indirectly. The key management personnel of the Company are the members of the Company’s executive management team and Board of Directors, who control approximately 5% of the outstanding shares of the Company. Compensation
provided to key management is as follows: 
  

									
	 	  	March 31, 2018	 	  	March 31, 2017	 
	 Short-term employee benefits
	  	$	3,746	 	  	$	1,420	 
	 Share-based compensation
	  	 	5,786	 	  	 	1,535	 
		  	  
	  
	 	  	  
	  
	 
		  	$	9,532	 	  	$	2,955	 
		  	  
	  
	 	  	  
	  
	 

 As of March 31, 2018, in the event that executive officers employment agreements were terminated by the
Company, other than due to a material breach of their employment agreements or in the event the Company becomes insolvent: the CEO is entitled to a severance amount equal to nine months of compensation based on the monthly contract work fee or
$300 in aggregate and all other Executive officers are entitled to a severance amount equal to at least thirty four week’s annual base salary and in some cases, inclusive of their annual bonus. 

Related party transactions 

On January 13, 2017, the Company acquired the entire building and land, known as 1 Hershey Drive, Smiths Falls, Ontario, from Tweed
Hershey which was related through common ownership (the Company’s CEO and chairman is a significant shareholder of the lessor) (refer to Note 8). The Company had previously been leasing a portion of this facility from Tweed Hershey. For the
year ended March 31, 2017 up until January 13, 2017, the acquisition date, the expense incurred under this lease including base rent and operating costs was $2,118. 

The Company leases premises for the two Bedrocan facilities in Toronto from a company controlled by a director of Canopy Growth Corporation.
The leases expire on October 15, 2018 (with 3 separate options to renew for an additional period of 5 years) and August 31, 2024. Included in the expenses for the year ended March 31, 2018 for rent and operating costs was $2,686 (for
the year ended March 31, 2017 - $785). In addition to the leased premises, consulting services of $159 was also provided to the Company (March 31, 2017 - $nil). The Company had $137 owing in accounts payable and accrued liabilities at
March 31, 2018 (March 31, 2017 - $nil). 

  
 Page 46 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	25.	 RELATED PARTIES (CONTINUED) 

 

 The Company leases premises for the Mettrum Hempworks Inc. (“Hempworks”) production
facility located in Barrie, Ontario from the former founder and shareholder of Hempworks and former officer of Mettrum, now an employee and shareholder of the Company. The lease has a term of five (5) years with an expiration date of
March 31, 2020 together with one (1) extension term of five (5) years. The lease has an identical term and extension term (each expiring one (1) day earlier). Included in the expenses for the year ended March 31, 2018 for
rent and operating costs was $131 (for the year ended March 31, 2017 from the date of the Mettrum acquisition - $8). At March 31, 2018, the Company had $24 owing related to rent associated with these leased premises (March 31, 2017 - $8).
All amounts exclude HST. 
 The CEO is providing consulting services to the Company at $55 per quarter and is eligible for up to an annual
$300 bonus, representing his sole cash compensation. For the year ended March 31, 2018 consulting expenses including travel totaled $531 (for the year ended March 31, 2017 - $400). The Company had $375 owing in accounts payable and accrued
liabilities at March 31, 2018 (March 31, 2017 - $255). All amounts exclude HST. 
 The Company currently has a loan payable to a
director of the Company. Included in interest expense for the year ended March 31, 2018 was an amount of $169 (for the year ended March 31, 2017 - $179). At March 31, 2018, the loan balance was $1,564 (March 31, 2017 - $1,724) (refer
to Note 18). 
 During the year ended March 31, 2018, $708 was expensed in director’s fees (for the year ended March 31, 2017
- $223). The Company had $nil owing in accounts payable and accrued liabilities to directors at March 31, 2018 (March 31, 2017 - $nil). 

Pursuant to the share purchase agreement with Hemp.CA, the Company entered into a lease for the Vert and Hemp.CA properties with a shareholder
of Hemp.CA who for a period of time following the acquisition was an employee of Canopy. The lease was to expire on November 1, 2036 and the Company had two automatic renewal terms of 10 years each. As of March 31, 2018, the related lease
was cancelled and the expense incurred under the lease including base rent, operating costs, and cancellation costs were $84 since acquisition. 

These transactions are in the normal course of operations and are measured at the exchange amounts being the amounts agreed to by the parties.

  

	26.	 COMMITMENTS AND CONTINGENCIES 

(a) The Company leases production and retail space under operating leases which range in expiration from April 2018 to October 2037 and also
has royalty, equipment and other commitments with varying terms. All production and retail operating leases have optional renewal terms that the Company may exercise at its option. 

(b) Future commitments which include minimum lease and royalty payments due in each of the next five years are as follows:  

 

					
	 2019
	  	$	21,767	 
	 2020
	  	 	21,712	 
	 2021
	  	 	21,017	 
	 2022
	  	 	21,076	 
	 2023
	  	 	19,366	 
	 Thereafter
	  	 	85,200	 
		  	  
	  
	 
		  	$	190,138	 
		  	  
	  
	 

 (c) 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 consolidated financial statements since the amount cannot be
reliably measured at this point. 
 (d) 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. 

  
 Page 47 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	26.	 COMMITMENTS AND CONTINGENCIES (CONTINUED) 

 

 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 consolidated financial statements since the amount cannot be reliably measured at this point. 
  

	27.	 SUPPLEMENTARY CASH FLOW INFORMATION 

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

 

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Amounts receivable
	  	$	(15,738	) 	  	$	(2,184	) 
	 Prepaid expenses and other assets
	  	 	(15,770	) 	  	 	(1,493	) 
	 Biological assets and inventory
	  	 	(24,493	) 	  	 	(12,270	) 
	 Accounts payable and accrued liabilities
	  	 	27,130	 	  	 	(200	) 
	 Deferred revenue
	  	 	312	 	  	 	55	 
	 Other liabilities
	  	 	40	 	  	 	(256	) 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	(28,519	) 	  	$	(16,348	) 
		  	  
	  
	 	  	  
	  
	 

 Non-cash transactions 

Excluded from the March 31, 2018 consolidated statements of cash flows was 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. Included for the March 31, 2018 consolidated statements of cash flows is a total of $3,860 in accounts payable and accrued
liabilities as follows: $3,770 of property, plant and equipment and assets in process purchases and $90 of share issue costs. 
 Excluded
from the March 31, 2017 consolidated statements of cash flows was a total of $3,860 in accounts payable and accrued liabilities as follows: $3,770 of property, plant and equipment and assets in process purchases and $90 of share issue costs.
Included for the March 31, 2017 consolidated statements of cash flows was a total of $946 in accounts payable and accrued liabilities as follows: $877 of property, plant and equipment and assets in process purchases and $69 of share issue
costs. 
 Cash and cash equivalents consist of the following: 
  

									
	 	  	March 31,
2018	 	  	March 31,
2017	 
	 Cash
	  	$	322,560	 	  	$	16,700	 
	 Short-term guaranteed investment certificates
	  	 	—  	 	  	 	85,100	 
		  	  
	  
	 	  	  
	  
	 
	 Total cash and cash equivalents
	  	$	322,560	 	  	$	101,800	 
		  	  
	  
	 	  	  
	  
	 

  

	28.	 FINANCIAL INSTRUMENTS 

(a) Market risk 
 Market
risk is defined as the risk that the fair value or future cash flows of a financial instrument held by the Company will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, currency exchange
rates and changes in market prices due to other factors including changes in equity prices. 
  

	 	(i)	 Currency risk 

As at March 31, 2018, less than 2% of the Company’s financial assets (as at March 31, 2017 – 1%) and less than 3% of the
Company’s financial liabilities (as at March 31, 2017 – 1%) for which cash flows are denominated in a foreign currency. The Company has very limited currency risk. No other financial assets and liabilities are denominated in a foreign
currency. 

  
 Page 48 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	28.	 FINANCIAL INSTRUMENTS (CONTINUED) 

 

	 	(ii)	 Interest rate risk 

The Company may invest surplus cash in highly liquid investments with short terms to maturity that would accumulate interest at prevailing
rates for such investments. Currently the Company’s short-term investments and restricted investments consist of $65,395 in guaranteed investment certificates which have fixed rates of interest. 

Interest rate risk on the long-term debt and capital lease obligations is limited due to the fact that they are both fixed rate of interest
instruments. 
 The Company is exposed to the risk that changes in interest rate will impact the fair value of financial instruments whose
cash flows are fixed in nature. 
  

	 	(iii)	 Other market risk 

The Company holds financial assets in the form of shares, warrants and options that are measured at FVTPL and FVOCI. The Company is exposed to
equity price risk on these financial assets. 
 (b) Credit risk 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Company’s trade accounts receivable. The Company is exposed to credit-related losses in the event of non-performance by the counterparties. 

The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to
mitigate credit risk, but has limited risk due to the fact that the majority of sales are transacted with credit cards. Trade accounts receivable are reported net of an allowance for doubtful accounts of $78. 

The carrying amount of cash and cash equivalents, short-term restricted investments and amounts receivable represents the maximum exposure to
credit risk and at March 31, 2018, this amounted to $344,659 (2017 - $108,165). Since the inception of the Company, no losses have been suffered in relation to cash held by the bank. 

As at March 31, 2018, the Company’s aging of receivables was approximately as follows: 

 

									
	 	  	March 31, 2018	 	  	March 31, 2017	 
	 0-60 days
	  	$	5,683	 	  	$	2,137	 
	 61-120 days
	  	 	258	 	  	 	909	 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	5,941	 	  	$	3,046	 
		  	  
	  
	 	  	  
	  
	 

 The Company’s accounts receivable are primarily driven by sales to government agencies and credit card
processors and timing of bill payments. At March 31, 2018, the receivables from government agencies and credit card processor and bill payment receivables accounted for 19% and 42%, respectively, of trade accounts receivable (2017 - 55% and
30%, respectively). 
 (c) Liquidity risk 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its
liquidity risk by reviewing on an ongoing basis its capital requirements. During the year ended March 31, 2018, the Company completed several equity financings for gross cash proceeds of $470,670. 

  
 Page 49 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	28.	 FINANCIAL INSTRUMENTS (CONTINUED) 

 

 In addition to the commitments disclosed in Note 17, the Company is obligated to the
following contractual maturities of undiscounted cash flows: 
  

																					
	 As at March 31, 2018
	  	Carrying
amount	 	  	Contractual
cash flows	 	  	Year 1	 	  	Years 2 - 3	 	  	Years 4 and
after - 5	 
	 Accounts payable and accrued liabilities
	  	$	89,571	 	  	$	89,571	 	  	$	89,571	 	  	$	—  	 	  	$	—  	 
	 Long-term debt
	  	 	8,422	 	  	 	9,522	 	  	 	1,899	 	  	 	5,082	 	  	 	2,541	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	97,993	 	  	$	99,093	 	  	$	91,470	 	  	$	5,082	 	  	$	2,541	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 (d) 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 and key inputs
	  	 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
			
	TerrAscend warrants	  	Black-Scholes option pricing model	  	Quoted prices in active market

 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

	JWC warrants	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in fair value
				
	JWC 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
				
	HydRx warrants	  	Black-Scholes option pricing model	  	Share price	  	Increase or decrease in share price will result in an increase or decrease in 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
				
	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 liability	  	Market approach	  	Appraised value of property	  	Increase or decrease in value will result in a increase or decrease in fair value

  
 Page 50 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	28.	 FINANCIAL INSTRUMENTS (CONTINUED) 

 

 During the year, there were no transfers of amounts between levels. 

(e) 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, short-term investments, and restricted investments and accounts payable and accrued liabilities approximate their
fair values due to their short-term to maturity. The fair value of the JWC repayable debenture, Agripharm royalty interest, Radicle repayable debenture, and mortgage payables approximate their fair value. 

 

	29.	 SEGMENTED INFORMATION 

The Company operates in one segment, the production and sale of medical cannabis. 

All property, plant and equipment and intangible assets are located in Canada, except for $6,242 which is located outside of Canada. 

All revenues were principally generated in Canada during the year ended March 31, 2018, except for $3,746, related to exported medical
cannabis generated outside of Canada (for the year ended March 31, 2017 - $35). 
  

	30.	 CAPITAL MANAGEMENT 

The Company’s objective is to maintain sufficient capital base so as to maintain investor, creditor and customer confidence and to sustain
future development of the business and provide the ability to continue as a going concern. Management defines capital as the Company’s shareholders’ equity and debt. The Board of Directors does not establish quantitative return on capital
criteria for management; but rather promotes year over year sustainable profitable growth. The Company currently has not paid any dividends to its shareholders. 

As at March 31, 2018 total managed capital was comprised of shareholders’ equity and debt of $1,251,660 (March 31, 2017 - $650,056).

 There were no changes in the Company’s approach to capital management during the year. 

The Company is subject to externally imposed restrictions related to covenants on its mortgage payable (refer to Note 18). 

 

	31.	 SUBSEQUENT EVENTS 

(a) Strategic agreement with LiveWell 

On April 2, 2018, the Company entered into a strategic agreement with LiveWell Foods Canada Inc. (“LiveWell”) and Artiva Inc.
(“Artiva”). Artiva is an ACMPR applicant operating as a subsidiary of LiveWell. 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 and for the offering of financial support, on April 15, 2018 Canopy Growth was issued 5,487,642 common shares and Canopy Rivers was issued 5,487,642 common shares of LiveWell
which represents a 10% equity interest in LiveWell. An additional 5,487,642 common shares were placed in escrow and will be released to the Company on the achievement of certain milestones. LiveWell has the option to draw on up to $20,000 of debt
financing from Canopy Rivers (subject to the completion of certain milestones). 
 (b) Investment in Civilized 

On April 17, 2018, the Company announced that Canopy Rivers had entered in to a strategic investment and collaboration agreement with
Civilized Worldwide Inc. (“Civilized”) pursuant to which Canopy Rivers, will invest $5,000 in Civilized via a debenture that is convertible into common shares of Civilized, and the companies will work together on various online, media and
event mandates relating to the cannabis industry. Canopy Rivers also received common share purchase warrants of Civilized with a total exercise price of $3,500 and a 24-month expiry. 

  
 Page 51 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	31.	 SUBSEQUENT EVENTS (CONTINUED) 

 

 (c) Investment in Good Leaf, Inc. 

On April 23, 2018, the Company invested $5,478 in Good Leaf, Inc. 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, Inc. is 8.8% on a fully diluted basis. 
 (d) Creation of joint venture 

On May 7, 2018, Canopy Rivers entered into a joint venture with principals and operators of a leading North American greenhouse produce
company, to finance and support the development and operation of a retrofitted 1.2 million square foot greenhouse for cannabis cultivation in Leamington, Ontario. 

(e) Option to acquire production assets 

On May 9, 2018 the Company entered into lease agreement for the lease of production assets and issued 332,009 common shares with a value
of approximately $10,000 in exchange for an option to purchase the building from the landlord. The Company also provided a loan of $10,000 to the landlord which will be used by the landlord to assist with the construction of the building. 

(f) Agreement to acquire non-controlling interest(s) in CHI 

On May 15, 2018 the Company announced that it had entered in to a definitive arrangement agreement (“Arrangement Agreement”)
pursuant to which the Company will acquire all of the non-controlling interests in CHI. Pursuant to the Arrangement Agreement, shareholders of CHI will receive 0.3790 common shares of the Company for each
common share of CHI held (the “Exchange Ratio”). In addition, Canopy Growth will issue options to purchase common shares of the Company in exchange for options previously issued by CHI and Canopy Animal Health based on the Exchange Ratio.
In aggregate Canopy Growth will issue 3,037,771 common shares, having a value of $91,573, along with options having an aggregate “in-the-money” value of $9,688
for aggregate consideration of $101,261. The transaction, which is expected to close on or before August 2018, will be undertaken by way of a plan of arrangement and is subject to a number of approvals. 

(g) Acquisition of Daddy Cann Lesotho PTY Ltd. 

On May 17, 2018 the Company acquired Daddy Cann Lesotho PTY Ltd., trading as Highlands (“Highlands”). Based in the Kingdom of
Lesotho, Highlands holds a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin. As consideration the Company issued 666,362 common shares in the capital of the Company on closing and, subject to
meeting certain milestones, the Company will issue up to an additional 333,281 common shares for a total of up to 999,643 common shares. The total value of the consideration payable by the Company under the terms of the agreement is approximately
$28.8 million. 
 (h) Bedrocan product rights 

On June 11, 2018 the Company announced that it had reached an agreement with Bedrocan International to bring the Parties’ licensing
arrangement to a close. As part of the Agreement, Bedrocan Canada and Bedrocan International will discontinue the previously announced arbitration proceedings. 

Under the terms of the Agreement, the Company 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. During the year ended March 31, 2018 the Company recorded an impairment loss in connection with these product rights in anticipation of the orderly termination of this agreement (Note 11). 

  
 Page 52 

 CANOPY GROWTH CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 FOR THE
YEARS ENDED MARCH 31, 2018 AND 2017 
 (Expressed in CDN $000’s except share amounts) 

 
  

	31.	 SUBSEQUENT EVENTS (CONTINUED) 

 

 (i) Convertible debt financing 

In June 2018, the Company issued $600,000 convertible senior notes, including the over-allotment option of $100,000. The notes are general
unsecured, senior obligations of Canopy Growth and interest will be payable semi-annually in arrears at a rate of 4.25% annually. The initial conversion rate for the notes will be 20.7577 common shares of the Company per $1 principal amount of
notes, subject to potential adjustments. The initial conversion rate is equivalent to an initial conversion price of approximately $48.18 per Company common share. The notes will mature on July 15, 2023, unless earlier converted, redeemed or
repurchased in accordance with their terms prior to such date. 
 Prior to January 15, 2023, the notes will be convertible at the option
of holders only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the business day immediately preceding the maturity date. Upon conversion, the notes may be settled in
cash, common shares of Canopy Growth or a combination of cash and common shares of Canopy Growth, at the election of Canopy Growth. 
 Canopy
Growth may not redeem the notes prior to July 20, 2021, except in the event of certain changes in Canadian tax law. Canopy Growth may redeem for cash all or any portion of the notes, at its option, on or after July 20, 2021 if the last
reported sale price of Canopy Growth’s common shares for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on the trading day immediately preceding the date on which Canopy Growth provides
notice of redemption has been at least 130% of the conversion price then in effect on each such trading day. Redemptions 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. 
 If Canopy Growth undergoes a fundamental change, holders of the notes
will have the right to require Canopy Growth to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Canopy Growth will
also be required, in certain circumstances, to increase the conversion rate for a holder who elects to convert its notes in connection with certain corporate events or during the related redemption period. 

 

	32.	 COMPARATIVE AMOUNTS 

Certain comparative amounts have been reclassified to conform to the current presentation. 

  
 Page 53EX-4.14

 Exhibit 4.14 

CANOPY GROWTH CORPORATION 
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 FOR THE THREE MONTHS AND YEAR ENDED MARCH 31, 2018 

JUNE 27, 2018 
  

 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 since
May 24, 2018 trade on the New York Stock Exchange (“NYSE”) under the symbol “CGC”. 
 This Management’s Discussion and
Analysis of the Financial Condition and Results of Operation (“MD&A”) is dated June 27, 2018. It should be read in conjunction with the Company’s audited consolidated financial statements (the “Annual Financial
Statements”) for the year ended March 31, 2018, including the accompanying notes. 
 This MD&A was prepared with reference to National
Instrument 52-109 – 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 months and year ended March 31, 2018 and up to and including June 27, 2018. 

The Annual Financial Statements and this MD&A have been reviewed by the Company’s Audit Committee and was approved by the Company’s Board of
Directors on June 27, 2018. 
 The accompanying Annual Financial Statements were prepared in compliance with International Financial Reporting
Standards as issued by the International Accounting Standards Board 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 filed by us with the Canadian Securities Administrators, including quarterly reports, annual
reports and annual information forms are available on-line at www.sedar.com or at www.sec.gov/edgar and also on the Company’s website at www.canopygrowth.com, and Short Form
Prospectus with respect to the bought deal dated January 31, 2018 is available on-line at www.sedar.com. 

Canopy Growth does not engage in any U.S. marijuana-related activities as defined in Canadian Securities Administrators Staff Notice 51-352. While the Company has a number of 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. 
 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” and forward-looking information within the meaning of Canadian securities laws, 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 products by the Company’s wholly-owned subsidiaries; 

  

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

  

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

  

	•	 	 the potential time frame for the implementation of legislation to legalize regulated recreational cannabis use in
Canada and internationally and the potential form implementation of the final legislation will take, including the method of delivery and framework adopted or to be adopted by various Canadian provinces or other jurisdictions; 

 

	•	 	 the potential size of the regulated recreational cannabis market in Canada should regulated recreational use be
legalized; 

  

	•	 	 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 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 in light of 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. Such factors include, but are not limited to, the factors discussed in the section entitled “RISKS AND UNCERTAINTIES”. 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 the Canadian market, is a multi-brand cannabis company that believes its strong focus on and investment in brand, market and
product differentiation, increased cannabis supply through Company and partner cannabis production platforms, securing channels to market, and education, to help citizens safely, effectively and responsibly use cannabis, 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: 
  

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

 

	•	 	 Increase awareness of the healthcare community as to the potential applications of medical cannabis;

  

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

  

	•	 	 Increase the diversity, quality and inventory of products, across value and premium cannabis market segments,
through owned production capacity, partner or joint owned capacity as well as partner capacity offtake; 

  

	•	 	 Implement robust information technology systems including Enterprise Resources Planning; 

 

	•	 	 Drive automation into packaging and shipping to improved distribution capabilities; 

 

	•	 	 Drive production and yield efficiencies and focus on cost reduction efforts; 

 

	•	 	 Increase the sophistication, capacity and efficiency of the Company’s post-harvest processing capabilities
including trimming, drying and oil extraction; 

  

	•	 	 Implement effective sales management and market support capabilities in advance of launch of Canadian Regulated
Recreational, or Adult Access market; 

  

	•	 	 Drive growth in international markets in which cannabis is federally legal; 

 

	•	 	 Expand the Company’s business into the development of value-added products in preparation for, and the
marketing, production and sale of value-added products as permitted by regulations; 

  

	•	 	 Diversify the Company’s business in the distinct but complimentary legal cannabis markets; and

  

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

 The Company’s strategy is to focus on developing and scaling to be the world’s biggest multi-platform, creator of high value
branded offerings in multiple formats for medical cannabis markets in Canada and abroad where federally legal, and for regulated recreational markets when they are federally legal. 

During the fourth quarter of fiscal 2018 and since then, the Company has continued to direct significant effort on major expansion plans to increase both
capacity and capability and ensuring those plans are well funded as evidenced by the investment on November 2, 2017 of $244,990 by an affiliate of Constellation Brands (“Constellation”) (NYSE: STZ and STZ.B), gross proceeds of
$200,680 from the bought deal financing that closed on February 7, 2018 and gross proceeds of $500,000 from the convertible debenture financing that closed on June 20, 2018, including the over-allotment option. 

The Company’s expansion plans in Canada have more than tripled the Company’s licensed space in calendar 2018, to over 2.4 million sq. ft., with
an additional 3.2 million sq. ft. under development. The Company is also developing over 400,000 sq. ft globally. 
 Believing that distribution drives
revenue and capacity alone does not, Management has invested significant effort in securing channels into the future regulated recreational markets across Canada. This effort has resulted in the Company securing supply related agreements with all
five provinces that have announced to date (Newfoundland & Labrador, New Brunswick, Prince Edward Island, Quebec and Yukon), for a total multi-year commitment of 25,000 kg per annum. Negotiations with
remaining provinces are ongoing. 
 To further strengthen the Company’s channels to market, the Company has undertaken efforts to secure sales licenses
(both “brick & mortar” physical stores and online e-commerce) in provinces where private retail will be allowed. By developing and operating a Tweed “owned” retail channel, the
Company believes it will enable the capture of retail gross margin (incremental to wholesale margin), capture higher market share within the owned channel and establish a powerful marketing vehicle to build the Tweed brand in an environment where
opportunities to market and build brands is otherwise constrained by regulations. To date, the Company has secured retail locations in Newfoundland & Labrador and Manitoba as well as permits to apply for retail locations in Saskatchewan. In
addition, the Company has also secured the license to operate online sales of cannabis in Newfoundland & Labrador, Manitoba and Saskatchewan. The Company is also pursuing a strategic retail presence in Alberta and British Columbia, as
permitted by regulations in those provinces. 

  
 4 

 The Company has also committed to making investments in marketing, branding and sales functions
strengthening Canopy Growth’s position in Canadian and international medical markets, as well as for the coming Canadian regulated recreational market expected to commence in October 2018. 

The Company is also continuing to invest in its internal administrative and supporting infrastructure, including governance programs, to build a strong and
capable organization to maintain its market leadership and capture and scale into new market opportunities. 
 The Company’s operations are focused on
ensuring a consistent selection and availability of cannabis strains for sale in all formats. As at June 27, 2018, there were 41 offerings for sale on the Tweed Main Street online store including dry flower, oils, soft gel capsules across
multiple branded categories. 
 Investment for the Canadian Recreational Cannabis Market 

The Company continues to invest significant effort, capital and resources in activities and programs to prepare the Company to participate in and lead the
Canadian recreational cannabis market. These investments cover the Company’s entire business operations including production, fulfillment, marketing, sales and general administration. With the passing of Bill
C-45 (“The Cannabis Act”) on June 19, 2018 and the expected roll out of the recreational market in October 2018, Management believes the prudent investments being made by the Company will foster
strong demand for the Company’s products in the Canadian recreational cannabis market and prepare the Company to supply very large quantities of cannabis and generate significantly greater revenues beginning in the second quarter of fiscal
2019. 
 The Company continues to invest in the development of marketing and branding programs, the development of new permitted product SKUs, the
development of recreational product packaging, building the Company’s business to business sales functions, the development of cannabis retail and education programs as well as the ongoing investment in information technology. 

In the third quarter of fiscal 2018, the Company began implementing a series of changes to its operations, primarily at its facility in Smiths Falls, Ontario,
to better prepare the Company to become a trusted supplier to the Canadian recreational market. These changes included: 
  

	•	 	 The re-purposing of 4 of the 24 flower rooms to provide additional
mother/clone rooms for the purpose of cultivating 200,000 clones that helped plant over 1.7 million sq. ft of greenhouses in British Columbia and Quebec in the fourth quarter of fiscal 2018 and in the first quarter of fiscal 2019; and

  

	•	 	 The re-purposing of an additional 3 flower rooms to build a large
footprint pre-pack room that will help the Company ready a significant amount of product for shipment to provincial and territorial agencies beginning in the second quarter of fiscal 2019.

 These operational changes which decreased the amount of cannabis that the Company harvested, combined with higher overheads in the
fourth quarter of fiscal 2018, led to decreased gross margins in the fourth quarter of fiscal 2018. 
 Management Preamble 

The Company will no longer report on the weighted average cost per gram metric. There are three reasons for this. First, a gram is a measurement of the weight
of the plant only. Management believes it will be more meaningful in the future to consider milligrams of THC or CBD cannabinoid representing ingredients to new, evolving product formats as they are introduced beyond the traditional cannabis flower,
including oils and capsules. Second, management believes other key performance indicators will evolve as the legal recreational and retail market takes hold in Canada. Lastly, there is no industry standard for cost per gram components or
classification to draw a meaningful comparison. 

  
 5 

 CORPORATE STRUCTURE 

Controlled or jointly controlled subsidiaries 
  

									
	Legal entity	  	Defined as	  	 %

Ownership
	 	 	Accounting method
	 Tweed Inc.
	  	Tweed	  	 	100.0	% 	 	Consolidation
	 Tweed Farms Inc.
	  	Tweed Farms	  	 	100.0	% 	 	Consolidation
	 Bedrocan Canada Inc.
	  	Bedrocan Canada	  	 	100.0	% 	 	Consolidation
	 Spectrum Cannabis Canada Ltd. (formerly Mettrum Ltd.)
	  	Spectrum Cannabis	  	 	100.0	% 	 	Consolidation
	 Tweed Grasslands Cannabis Inc.
	  	Tweed Grasslands	  	 	100.0	% 	 	Consolidation
	 Mettrum Hempworks Inc.
	  	Mettrum Hempworks	  	 	100.0	% 	 	Consolidation
	 Groupe H.E.M.P.CA
	  	Group H.E.M.P.	  	 	75.0	% 	 	Consolidation
	 Spektrum Cannabis GmbH
	  	Spektrum Cannabis	  	 	100.0	% 	 	Consolidation
	 Vert Cannabis Inc.
	  	Vert Cannabis	  	 	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
	 Spot Therapeutics Inc.
	  	Spot	  	 	100.0	% 	 	Consolidation
	 Spectrum Cannabis Australia PTY Ltd.
	  	Spectrum Australia	  	 	100.0	% 	 	Consolidation
	 Annabis Medical s.r.o.
	  	Annabis Medical	  	 	100.0	% 	 	Consolidation
	 Spectrum Chile SpA
	  	Spectrum Chile	  	 	85.0	% 	 	Consolidation
	 Les Serres Vert Cannabis
	  	Vert Mirabel	  	 	66.7	% 	 	Consolidation
	 Spectrum Cannabis Denmark Aps
	  	Spectrum Cannabis
Denmark	  	 	62.0	% 	 	Consolidation
	 Grow House JA Limited
	  	Tweed JA	  	 	49.0	% 	 	Consolidation
	 Canopy Rivers Corporation
	  	Canopy Rivers	  	 	31.5	% 	 	Consolidation
	 BC Tweed Joint Venture Inc.
	  	BC Tweed	  	 	66.7	% 	 	joint operation

 Investments in affiliates 
  

									
	Legal entity	  	Defined as	  	 %

Ownership
	 	 	Accounting method
	 Agripharm Corp.
	  	Agripharm	  	 	40.0	% 	 	equity and FVTPL
	 Canopy Health Innovations Inc.
	  	Canopy Health	  	 	43.0	% 	 	Equity
	 Bedrocan Brasil S.A.
	  	Bedrocan Brasil	  	 	39.4	% 	 	Equity
	 Entourage Phytolab S.A.
	  	Entourage	  	 	38.5	% 	 	Equity
	 AusCann Group Holdings Ltd.
	  	AusCann	  	 	11.0	% 	 	FVTOCI and FVTPL
	 Vapium Incorporated
	  	Vapium	  	 	12.2	% 	 	Cost
	 HydRx Farms Ltd. (operating as Scientus Pharma Inc.)
	  	HydRx	  	 	8.7	% 	 	FVTOCI
	 TerrAscend Corp
	  	TerrAscend	  	 	24.0	% 	 	equity and FVTPL
	 James E. Wagner Cultivation Ltd.
	  	JWC	  	 	14.7	% 	 	FVTOCI
	 Radicle Medical Marijuana Inc.
	  	Radicle	  	 	23.8	% 	 	equity

  
 6 

 HIGHLIGHTS 

Fourth Quarter 2018 Revenue and Operational 
  

	•	 	 Total fourth quarter revenue was $22,806 representing a 55% increase over the quarter ended
March 31, 2017 when revenue totaled $14,661 and a 5% increase over revenues of $21,700 in the third quarter of fiscal 2018. 

  

	•	 	 Approximately 74,000 registered patients at March 31, 2018 compared to approximately 69,000 at
December 31, 2017. 

  

	•	 	 2,528 kilograms and kilogram equivalents1 sold in the fourth quarter ended March 31, 2018, representing an increase of 45% over the fourth quarter of last year, and an increase of 9% over the third quarter of fiscal 2018 in which
2,330 kilograms and kilogram equivalents were sold. 

  

	•	 	 Oil sales, including gel caps, accounted for 23% of fourth quarter product revenue (reported revenue net of
merchandise revenue, clinic revenue and shipping fees). Oil sales in the fourth quarter accounted for 2,152 litres (or approximately 268 kilogram equivalents) of the kilogram and kilogram equivalents stated above. 

 

	•	 	 Average sales price per gram was $8.43 for the fourth quarter, as compared to $8.03 last year in the same quarter
and $8.30 in the third quarter of fiscal 2018. 

  

	•	 	 Spektrum Cannabis sold 175 kilograms in Germany at an average price of $13.35 per gram, up from 78 kilograms
at an average price of $12.61 per gram in the third quarter of fiscal 2018, representing quarter over quarter growth of 124% and 5% respectively. 

  

	•	 	 Harvested 4,811 kilograms in the fourth quarter as compared to 7,961 kilograms in the third quarter of fiscal
2018 and 1,980 kilograms in the fourth quarter of fiscal 2017. 

  

	•	 	 At quarter end the Company held inventory of 15,726 kilograms of dry cannabis, 6,969 litres of cannabis oils,
ranging from concentrated resins, or refined oil, to finished oil, and 356 kilograms softgel capsules., inventories are continuing to be scaled to meet management’s expectation of market demands, including the legalized recreational market
expected later in calendar 2018. 

  

	•	 	 Consolidated cash and cash equivalents were $322,560 at March 31, 2018 

Corporate Initiatives 
 Securing Channels to
Market 
  

	•	 	 The Company entered a supply Memorandum of Understanding (“MOU”) with the Province of Prince Edward
Island to allocate a minimum supply of 1,000 kg of high-quality cannabis for the first year. The two-year supply agreement will renew for a third-year upon mutual agreement of the Company and Province; At the
time in the fourth quarter, the MOU was the fourth supply-related commitment entered into by the Company (joining commitments signed in prior quarters with Newfoundland & Labrador, New Brunswick, and Quebec.). 

 

	•	 	 The Company and partner Delta 9 Cannabis Inc. were conditionally selected by the Government of Manitoba to
operate cannabis retail stores in the province after a rigorous and highly competitive RFP process. 

 Capacity Expansion 

 

	•	 	 The Company’s majority owned BC Tweed Joint Venture Inc. (“BC Tweed”) received a cultivation
licence for its site in Aldergrove, BC. The initial license covered over 400,000 sq. ft. of growing space, allowing vegetative growth so that the mature plants can be spread into the full 1.3 million sq. ft. in the coming months for flowering
and ultimate harvest. 

 International Development 
  

	•	 	 Spectrum Cannabis Denmark’s 40,000 m2 facility in
Odense, Denmark received a cannabis production licence by Laegemiddelstyrelsen, Denmark’s Medicines Agency. 

  

	•	 	 The Company completed a transfer of 1,500 cannabis clones to its Madrid-based partner, Alcaliber SA
(“Alcaliber”), completing the first phase of a partnership announced on September 11, 2017. 

  

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

  
 7 

 Strategic 
  

	•	 	 Canopy Growth closed a short form prospectus offering on a bought deal basis. A total of 5,800,000 common shares
in the capital of Canopy Growth (the “Shares”) were sold at a price of $34.60 per Share, for aggregate gross proceeds of $200,680,000 (the “Offering”). 

Fiscal Year 2018 Revenue and Operational 
  

	•	 	 Total revenue in the fiscal year ended March 31, 2018 was $77,948 representing a 95% increase over the prior
fiscal year ended March 31, 2017 when revenue totaled $39,895. 

  

	•	 	 8,708 kilograms and kilogram equivalents sold in
fiscal 2018, representing an increase of 69% over the fiscal year ended March 31, 2017 in which 5,139 kilograms and kilogram equivalents were sold. 

  

	•	 	 Average sales price per gram was $8.24 for the fiscal year ended March 31, 2018, as compared to $7.40 in the
prior year. 

  

	•	 	 Spektrum Cannabis sold 254 kilograms in Germany at an average price of $13.16 per gram, up from 3 kilograms
at an average price of $11.93 in the prior fiscal year. 

  

	•	 	 Harvested 22,513 kilograms in the fiscal year ended March 31, 2018 as compared to 10,837 kilograms in the
prior year period. 

 SUBSEQUENT EVENTS 
  

	•	 	 Completed a three-year conditional supply agreement with the Société des alcools du Québec
(“SAQ”) for 12,000 kgs of cannabis products. 

  

	•	 	 Majority owned Serres Vert Cannabis Inc. (“Vert Mirabel”), received a cultivation license. The 700,000
sq. ft. Vert Mirabel greenhouse is licensed for an initial 40,000 sq. ft. of growing space. 

  

	•	 	 The Company’s majority owned BC Tweed Joint Venture Inc. received additional licensing at both greenhouse
facilities. The license of its greenhouse facility in Aldergrove, BC was increased to 840,000 sq. ft. The BC Tweed site in Delta, BC also received a cultivation license for its first 900,000 sq. ft. of growing space. 

 

	•	 	 Canopy Growth entered a non-binding agreement to purchase, subject to
certain conditions, the 33% stake of BC Tweed not currently owned by the Company. The transaction is anticipated to close in early July, following the negotiation of definitive agreements. 

 

	•	 	 Canopy Growth announced that the Company would acquire all of its unowned interest in Canopy Health Innovations
and Canopy Animal Health. The transaction is anticipated to close on or before July 31, 2018. 

  

	•	 	 The common shares of the Company began trading on the NYSE, under the symbol CGC. 

 

	•	 	 The Company was selected by the Saskatchewan Liquor and Gaming Authority (SLGA) to apply for five cannabis retail
permits and operate an online store serving the entire province. 

  

	•	 	 Canopy Health has been approved by Health Canada to proceed with Phase IIb
“in-human” clinical trials to evaluate the use of medical cannabis in the treatment of insomnia. 

DESCRIPTION OF THE BUSINESS 
 MEDICAL MARIJUANA
REGULATORY FRAMEWORK IN CANADA 
 On August 24, 2016, the Government of Canada introduced new regulations governing the use of cannabis for medical
purposes. These new regulations, known as the ACMPR, were introduced in response to the February 24, 2016 decision rendered by the Federal Court of Canada in the Allard et al v the Federal Government of Canada case. The
plaintiffs in the Allard case argued that the MMPR violates their Charter of Rights and the court, in a lengthy and detailed judgment, agreed with the plaintiffs. The court gave the Government of Canada until August 24, 2016 to determine how
existing regulations should be amended to ensure that patients have the access to medical cannabis that they need. 
 The ACMPR, remained largely consistent
with the former Marihuana for Medical Purposes Regulations (“MMPR”), but restores the ability of patients to grow their own cannabis at home, including the ability to designate a fourth-party grower through regulations akin to the former
Medical Marihuana Access Regulations (MMAR). Under the ACMPR, patients who choose to grow at home, subject to a maximum number of plants, will be required to register their production sites and provide copies of their medical authorization to
Health Canada to allow for monitoring and auditing of their activities. 

  
 8 

 Under the ACMPR, 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. Since the requirements under the new regulations are both simpler and involve fewer obstacles to access than the previous regulatory regime, it is
anticipated that the growth in the number of approved patients will accelerate. Moreover, the new system allows for competition among licensed producers on a host of factors including product quality, customer service, price, variety and brand
awareness, allowing for well-positioned and capitalized producers to leverage their position in the marketplace. 

Health Canada recently reported that over 269,000 patients had enrolled into the ACMPR program by December 31, 20172. 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 very conservative considering the growth in patient enrollment that has been experienced to date in the program. Eight Capital estimates that by 2024 the
medical cannabis market in Canada will be worth $3.0 billion4. 
 LEGALIZATION OF REGULATED
RECREATIONAL CANNABIS IN CANADA 
 Background 
 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. The lower market value of $5.0 billion per year translates into yearly
consumption of 770,000 kilograms of cannabis, assuming a price of approximately $6.50 per gram.5 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.6 
 On April 13, 2017, the
Canadian Federal Government tabled legislation (Bill C-45) which aims to legalize regulated recreational cannabis in Canada. Bill C-45 passed third reading in the Senate
and was referred to the House of Commons where the government rejected several non-technical amendments returning the Bill to the Senate on June 18, 2018. On June 19, 2018, the Bill passed the final
vote in the Senate. The Government is targeting implementation over eight to twelve weeks. As expected, Canadian Licensed Producers (“LP”), which currently supply the medical marijuana market, will also be responsible for supplying
marijuana to the regulated recreational market. 
 Canopy Growth looks forward to continued discussion on this topic as regulations are developed. The
legislation does not prescribe specific limitations other than details on overly promotional language or targeting youth. Prohibiting promotion aimed at children is a common-sense approach and Canopy applauds
these limitations as expressed in the bill. 
 Federal legislation, once created, will enable provinces to distribute and retail Cannabis. Each Canadian
province and territory is preparing for the sale and distribution of cannabis for regulated recreational. Management believes that the revenue generating opportunities and economic development potential of the control and sale of cannabis for
regulated recreational is not lost on provinces. 
 At the onset of the regulated recreational cannabis market, permitted products will be the same as what
is currently offered in the medical cannabis market – dried flowers, oils and soft-gel. 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. 

 
  

	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 

	4 	 Eight Capital “The Value Case for Investing in the Cannabis Sector”, market research report published
July 26, 2017 

	5 	 http://research.cibcwm.com/economic_public/download/eijan16.pdf 

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

  
 9 

 Provincial Distribution and Retail Frameworks 

To date, the provinces of Ontario7, New Brunswick8,
Quebec9, PEI10 and Nova Scotia11 have announced that their provincial liquor control
agencies will oversee the distribution and retail on non-medicinal cannabis. The provinces of Manitoba12, Newfoundland & Labrador13, Saskatchewan14, Alberta15, British
Columbia16 and the Yukon Territory17 have announced that the provincial liquor control agency will be responsible for distribution and oversee
the private retail of non-medicinal cannabis. 
 While responsible government agencies and/or designated private
companies in their respective provinces are likely to begin rolling out physical retail storefront locations in the months leading up to and after the legal regulated recreational market opens, Canopy Growth believes that, in certain provinces, it
will take two years and possibly longer to rollout the full network of regulated cannabis retail stores that is required to satisfy consumer demand. As such, Canopy Growth believes that a significant portion of sales in the first two years of the
regulated recreational market will go through provincial online sales. While the majority of provinces are expected to develop and operate ecommerce sites, select provinces are expected to outsource the development and operation of ecommerce sites
for the purpose of selling cannabis to their residents. 
 LEGALIZATION 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. 
 Figure 1: Map of countries with federally legal cannabis access regimes in 2014 

 
 

 
 Since 2014, the actions of governments around the world have signaled a significant change in attitudes towards cannabis.
To date, federal governments in at least 20 additional countries including Argentina, Austria, Australia, Brazil, Denmark, Chile, Columbia, Germany, Greece, Israel, Italy, Jamaica, 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. For example, on January 19,
2017, the German parliament passed legislation that legalized medical cannabis and included provisions for medical cannabis treatment expenses to be covered by health insurance. 

In addition, many other countries including Belgium, Ireland, England, France, Portugal, Spain and India have established formal government efforts to explore
the legalization of medicinal cannabis access. 
  
  

	7 	
https://news.ontario.ca/mof/en/2017/09/ontarios-cannabis-retail-and-distribution-model.html
 

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

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

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

	11 	
https://novascotia.ca/cannabis/#cannabis-retail-and-distribution

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

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

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

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

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

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

  
 10 

 To date, Uruguay is the only country in the world that has legalized both medical and adult access to
cannabis. 
 Figure 2: Map of countries with/exploring federally legal cannabis access regimes in 2018 

 
 

 
 Canopy Growth, with the assistance of international subsidiaries or partners, has secured the necessary agreements to
export medicinal cannabis to Australia, Brazil and Germany. 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. 
 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. With cannabis continuing to emerge from the shadows, 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. 

Eight Capital estimates that the total addressable market for medical cannabis globally will be approximately $180 billion over time.18 
 OVERVIEW OF CANOPY GROWTH CORPORATION 

At March 31, 2018, there were 1,033 full-time employees in the Company as compared to 546 at March 31, 2017. 

Canopy Growth is a multi-brand cannabis company that believes its strong focus on and investment in brand, market and product differentiation, increased
cannabis supply through Company and partner cannabis production platforms, and education, to help citizens safely, effectively and responsibly use cannabis, will create a dominant global business with the potential to generate a significant and
sustained return on invested capital over the long-term. 
 As discussed above (See Legalization of Cannabis in International Jurisdictions), many
countries around the world are moving to provide their citizens with legal access to cannabis products produced by a commercial regulated industry, similar to that pioneered in Canada. 

 
  

	18 	 Eight Capital, “The Value Case for Investing in the Cannabis Sector”, market research report
published July 26, 2017. 

  
 11 

 BRANDS 
  

 
 PLATFORMED USER EXPERIENCE – TWEED MAIN STREET 

The Company has established Tweed Main Street as the platform for its core customer experiences, both online and physical “brick and mortar”
locations. 
 With expected prominence of online sales during the initial rollout of the regulated recreational market and the continuation of the existing
ACMPR e-commerce-driven market for Canadian medical patients, Canopy Growth launched the Tweed Main Street online store in April 2017, a single online platform that enables registered patients to purchase
medicinal cannabis from multiple producers across numerous brands. 
 Further engagement between the Company’s brands and customers is facilitated by
the Company’s expanding network of Tweed Main Street Shops. These physical “brick and mortar” locations in Southern Ontario (Barrie, Guelph, Hamilton and Toronto) provide an opportunity for interested
individuals to learn about medical cannabis in a helpful, supportive and consumer-friendly environment. 
 Tweed Main Street offers an income-tested
Compassionate Pricing Promise whereby eligible patients may obtain a 20% discount off regular prices. 
 PRODUCTION BRANDS 

The Company’s core production brands are: 
 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. In support of its
brand, Tweed focuses heavily on its social media and earned media presence as an engagement strategy. Management believes Tweed has emerged as the most dynamic brand in the industry with exceptionally strong appeal and recognition in the medical
cannabis industry. Tweed is currently positioned as a diverse medical cannabis brand offering high-quality cannabis in multiple product forms – dried, oil and easy-to-consume soft gels. The Tweed brand will evolve towards an adult lifestyle brand to best serve the needs of the future regulated recreational market in Canada. 

Black Label 
 Black Label is Tweed’s premium sub-brand meant to carry innovative product types and delivery formats in addition to certain dried strains that warrant a premium price point. On June 19, 2017, Tweed launched the sale of the sector’s
first encapsulated cannabis oil soft gels under the Black Label brand. Black Label soft gels provide a very convenient delivery format that is easy to carry and easy to consume. 

  
 12 

 Spectrum Cannabis 

On February 1, 2017, the Company acquired ACMPR licensed producer Mettrum. As part of the acquisition, Canopy Growth acquired the trademarked Mettrum
Spectrum, which simplifies the dialogue around strength and dosage by categorizing medical cannabis using a straightforward colour-coded guide. 
 Figure 3:
Strain categorization by colour spectrum (and % of THC or CBD) 
  
 

 
 On June 19, 2017, Canopy Growth announced a new international medical brand that will serve as the Company’s
physician and patient-facing identity. Spectrum Cannabis, with roots in the Mettrum Spectrum, will focus on physician interactions, stakeholder outreach, and patient education. 

On September 18, 2017, the Company introduced Spectrum Cannabis to the medical market in Canada. As part of the introduction of Spectrum Cannabis to the
medical market in Canada, the Company rebranded Mettrum to Spectrum Cannabis. Utilizing Spectum Cannabis in Canada, Germany, Australia, Denmark, Chile and Czech Republic ensures a consistent and recognizable global brand across all federally legal
jurisdictions where Canopy Growth operates. 
 On June 18, 2018, Spectrum Cannabis announced the launch of Spectrum Softgells. Each coloured Softgel
aligns to the broader Spectrum Cannabis offering and contains a different ratio of THC and CBD to give patients clear options while also supporting healthcare professionals’ ability to make consistent treatment recommendations. 

Bedrocan Canada 
 The Bedrocan brand has been associated
with standardized cannabis to medical patients in the Netherlands for more than 20 years. The Company acquired the Bedrocan Canada brand in 2015 to strengthen the Company’s position in the Canadian medical cannabis market. On June 7, 2018,
the Company announced that under the terms of an agreement with Bedrocan International BV, the Company will cease the sale of Bedrocan products within the 2018 calendar year. 

AFFILIATED BRANDS 
 Leafs By Snoop 

Tweed has partnered with Snoop Dogg, a renowned cannabis connoisseur and business pioneer in the Cannabis sector. Snoop and business partner Ted Chung recently
launched online media platform MERRY JANE, the definitive cultural destination for news and original content. 
 Tweed and Snoop Dogg have partnered to
bring the Leafs By Snoop offering of diverse whole-flower and oil strains, including a high CBD option and mid to high-range THC options, to Canada and exclusively available to Tweed patients. 

  
 13 

 DNA-Certified 

DNA Genetics, world-renowned Cannabis breeders, have won awards in every category in the Cannabis Cup, the world’s preeminent cannabis competition. In
October 2015, Tweed and DNA Genetics announced an exclusive partnership that would see Tweed leverage DNA’s expertise in cannabis breeding to bring new, exclusive DNA Certified strains to Tweed patients. With an official certification on select
strains, DNA is adding a stamp of approval. DNA Certified cannabis has been personally bred, phenotyped and inspected by DNA Genetics. 
 On
October 23, 2017, the Tweed and DNA Genetics announced the renewal and expansion of their partnership through to October 2022. As part of the expansion, Tweed and DNA Genetics have expanded their exclusive licensing relationship into Jamaica,
where, so long as federally legal, Tweed JA and DNA will work similarly in the medical market to cultivate the best possible cannabis genetics. 
 Green
House Seeds Company and Organa Brands 
 For 30 years Green House Seeds Company (“Green House”) has been at the forefront of cannabis
legalization by advocating for its normalization and expansion into new territories. A leader in cannabis genetics, Green House has won many international awards including Cannabis Cups and Highlife Cups. Organa Brands Ltd. (“Organa
Brands”), founded in 2010, is a cannabis extract product innovator. Bringing together some of the best minds in the regulated cannabis market, Organa Brands operates one of the longest-running
CO2 extraction facilities – Organa Labs. 
 On November 16, 2017 and effective
December 1, 2017, the Company entered into an agreement with Green House and Organa Brands (see “Agripharm Cannabis Production – Partner Capacity offtake”) that will see Agripharm’s production facility in Creemore,
Ontario serve as the cultivation site of sought after cannabis genetics that are infused into consumer-friendly ingestion formats, and put them on stores shelves across the country, and abroad where federally legal. Agripharm will not conduct any
business in the United States. Products from the new Agripharm are expected to begin entering the market in the second half of calendar 2018. 

CraftGrow 
 Tweed’s curated CraftGrow collection
brings even more variety to registered patients by bringing otherwise unaffiliated partner’s products into the Tweed Main Street store. The model increases the SKU count available through the Tweed Main Street platform while in turn providing
partner’s customizable access to the Company’s platform including rigorous product Quality Assurance program, online market place, recognized customer care and call centre capabilities as well as Tweed’s large and growing customer
base. 
 DOMESTIC CANNABIS PRODUCTION 
 Through its
wholly-owned subsidiaries, Canopy Growth operates numerous state-of-the-art production facilities with over ● million sq.
ft. of licensed indoor and greenhouse production capacity. Under the ACMPR program, the Company has ten licenses to cultivate cannabis and 8 licenses to sell cannabis. 

As it relates to future production needs, Canopy Growth is a diversified cannabis producer. It 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. With that in mind, widespread capacity expansion totaling over
3.2 million sq. ft. of production space has been announced to date. 
 DOMESTIC CANNABIS PRODUCTION – COMPANY OWNED FACILITIES 

The Company’s wholly-owned subsidiaries operate licensed cannabis production facilities in locations across Canada as described below. 

Smiths Falls, Ontario 
 The license for this facility
covers 168,000 sq. ft, and covers 24 completed grow rooms and related vegetation, nutrient delivery and post-production infrastructure. On June 19, 2017, the Company announced that its Smiths Falls facility received a certificate of Good
Manufacturing Practices (GMP) as issued by the German authority, Regierungspräsidium Tübingen. 

  
 14 

 The Smiths Falls facility also includes an in-house laboratory and
R&D area, cannabis oil extraction infrastructure, a high-level security vault and a breeding facility that features several breeding rooms, phenotyping rooms, as well as male and female plant rooms. 

Tweed received a Dealer’s License pursuant to the provisions of the Controlled Drugs and Substances Act and its Regulations and has begun operating this
purpose-built area, built to Good Manufacturing Practice (“GMP”) specifications, within the Smiths Falls facility. As a licensed dealer, Tweed will be able to conduct research and possess cannabis and cannabis derivatives in forms that are
not currently covered by the ACMPR. Tweed can also begin development of innovative products for future market opportunities, and with necessary approvals, undertake the export of non-dried form of cannabis to
other jurisdictions. 
 In fiscal 2018, the Company began construction of new infrastructure in the approximately 300,000 sq. ft. unlicensed portion of the
original 472,000 sq. ft. building. New facilities being constructed include additional indoor growing rooms, post-harvest processing, security vault and a visitors centre. Construction of this extension is expected to be completed in the second half
of calendar 2018. 
 In the fourth quarter of fiscal 2018, the Company also began the construction of new building footprints and the redevelopment of
existing buildings that together will add over 300,000 sq. ft. to the campus in Smiths Falls. The additional footprint will include storage, an advanced manufacturing building built to GMP specifications and a dedicated distribution centre. The
distribution centre has been designed to significantly increase the capability and flexibility of the Company’s fulfillment resources in an effort to better and more efficiently serve the demands of the Canadian medicinal market, expected
demands of the Canadian recreational cannabis market and anticipated increase in cannabis exports to federally legal markets around the world. Construction of is expected to be completed in calendar 2018. 

Niagara-on-the-Lake, Ontario

 The current production facility in
Niagara-on-the-Lake, Ontario (“Niagara”) is comprised of a greenhouse facility that is 375,000 sq. ft., of which
350,000 sq. ft. represents the greenhouse and 25,000 sq. ft. is used for post-harvest processing storage, shipping and offices. Currently, all dried cannabis produced in the Niagara greenhouse is transferred
in bulk to the Company’s facility in Smiths Falls, Ontario for final processing and sale. All 350,000 sq. ft. of the greenhouse is utilized to produce medical cannabis. 

On June 19, 2017, the Company announced that its Niagara facility received a certificate of Good Manufacturing Practices (GMP) as issued by the German
authority, Regierungspraesidium Tübingen. 
 On September 27, 2017, the Company announced the expansion of this facility to over 1,000,000 sq. ft.
of greenhouse space under glass. The expansion of this site is expected to be completed in calendar 2018. 
 Scarborough, Ontario 

Canopy Growth’s indoor facility in the Greater Toronto Area leveraged over two decades of indoor standardized cannabis growing experience of
Netherlands-based Bedrocan International BV (“Bedrocan International”). This approximately 50,000 sq. ft. production facility is licensed, and includes 34 vegetative and growing rooms. The Toronto facility exclusively cultivates
Bedrocan strains. 
 The Company acquired its facility in Toronto on August 28, 2015 as part of the acquisition of Bedrocan Canada pursuant to a
definitive plan of arrangement, in which the Company acquired all of the issued and outstanding securities of Bedrocan Canada. 
 As part of an agreement
with Bedrocan International BV to discontinue previously announced arbitration proceedings, the Company announced on June 7, 2018 that the Company will cease the sale of Bedrocan products within the calendar year while retaining ownership of
licensed production and sales facilities in Scarborough, Ontario. Management will redeploy these facilities to develop new premium branded cannabis offerings. 

Bowmanville South, Ontario 
 The Bowmanville South
facility’s current license allows for the production, sale or provision, possession, shipping, transportation, delivery and destruction of dried marijuana and marijuana plants or seeds. The license covers approximately 75,000 sq. ft. and
includes 13 growing rooms as well as necessary vegetation, nutrient delivery and plant destruction infrastructure. 

  
 15 

 The Bowmanville South facility sits on a 7-acre site which provides
the opportunity for future expansion. The Company is currently planning the expansion of this location, by up to 100,000 sq. ft. of growing capacity, as the market for legal cannabis develops. In addition, on October 6, 2017, the Company
acquired a parcel of land next to the Bowmanville South location to add approximately 33 acres for future expansion. 
 Yorkton, Saskatchewan 

The Yorkton facility operates as Tweed Grasslands. Tweed Grasslands occupies a 60,000 sq. ft. facility, of which approximately 15,000 sq. ft. is currently
licensed, with the capacity to expand operations to over 300,000 sq. ft. on the parcel of land if necessary. This facility received it sales license under the ACMPR in January 2018. 

Saint-Lucien, Quebec 
 In November 2016, the Company
acquired a pre-license applicant, Vert Cannabis (formerly Vert Medical), and the lease on a relatively small production facility in Drummondville, Quebec. Since being acquired by Canopy Growth, the
Company has fully upgraded the site’s approximate 10,000 sq. ft. facility to the Company’s standards. On December 22, 2017, the Company announced that Vert Cannabis received its ACMPR production license. Considering the efficient use
of resources, the Company has re-located certain research and development activities to this location. 
 The
Company also has the right to purchase the 90 acres of leased land and building located in Saint-Lucien, Québec. 

Newfoundland & Labrador 
 On December 8,
2017, Canopy Growth announced that the Company had entered into a supply and production agreement. Under the terms of the agreement, Canopy Growth will supply up to 8,000 kg of high quality cannabis products annually for the first two years of the
deal and will establish a new production facility in Newfoundland and Labrador capable of producing 12,000 kg per year, bringing an expected 145 jobs in an emerging sector and major capital investment to the region. The new production facility is
being built in St. John’s. The expansion of this site is expected to be completed in calendar 2019. 
 DOMESTIC CANNABIS PRODUCTION –
PARTNER OR JOINTLY OWNED FACILITIES 
 The Company may enter into agreements with select partners for the development of additional facilities in Canada
and other international jurisdictions where cannabis is federally legal. For the select partners, the Company will look for partners that can bring specific capabilities, expertise and financial resources to the venture. 

Edmonton, Alberta 
 Canopy Growth announced on
June 24, 2017 that it will expand its footprint into Edmonton, Alberta with a 100,000 sq. ft. facility that will be leased to Canopy Growth by the Goldman Group, a related party, with an option to purchase the facility at the end of each 5-year quarter of the 20-year lease. The transaction closed in August 2017 with the existing tenants vacating October 1, 2017 so that expansion construction could
begin. The agreement and licensing are contingent upon Health Canada and municipal approvals. The development of this site is expected to be completed in calendar 2019. 

Fredericton, New Brunswick 
 On August 28, 2017, the
Company announced that it had acquired Spot Therapeutics Inc. (“Spot”), an ACMPR applicant based in Fredericton, New Brunswick. Additionally, Canopy Rivers, an affiliated entity of the Company, entered into a definitive agreement to
complete the purchase of an industrial building and property where the Company’s Fredericton-based production and distribution platform is being established. The Company will lease the building from Canopy Rivers. The facility will operate
under the Tweed brand and support the Company’s global operations with high quality, large scale cannabis production capabilities. The existing building and infrastructure is in excellent condition and includes almost 50,000 sq. ft. of
dedicated production space. The facility is anticipated to be ready for licensing and production before the end of calendar 2018. Once licensed, this initial footprint is anticipated to produce over 4,000 kg of dried cannabis annually. The
development of this site is expected to be completed in calendar 2018. The property is suited for expansion to over 100,000 sq. ft. 

  
 16 

 British Columbia 

On October 10, 2017, the Company entered into a definitive agreement to form a new company, BC Tweed Joint Venture Inc. (“BC Tweed”) together
with a large-scale greenhouse operator (“the Partner”) develop 1.3 million sq. ft. of greenhouse growing capacity in lower British Columbia with an option, since exercised, to develop a further 1.7 million sq. ft. of existing
greenhouse infrastructure at a second BC location. 
 On February 20, 2018, Canopy Growth announced that it had received a cultivation license for the
first of its two sites operated by BC Tweed. The initial licensing covered over 400,000 sq. ft. of growing space, allowing vegetative growth so that the mature plants can be spread into the full 1.3 million sq. ft. for flowering and ultimate
harvest. The Company also announced that the site received the largest single shipment of cannabis clones in the Company’s history, with over 100,000 live cannabis clones flying high from the Tweed Smiths Falls Campus to British Columbia. 

On April 14, 2018, Canopy Growth announced that it received additional licensing at both greenhouse facilities operated by BC Tweed. In particular, the
already operating 1.3 million sq. ft. greenhouse facility in Aldergrove, BC is licensed for 840,000 sq. ft. of growing space. The second BC Tweed site in Delta, BC, totaling 1.7 million sq. ft. of greenhouse production space, also received
a cultivation license for its first 900,000 sq. ft. of growing space. 
 On May 14, 2018, Canopy Growth announced that it had entered into a non-binding agreement (the “Agreement”) to purchase, subject to certain conditions, the remaining 33% stake of BC Tweed not currently owned by the Company. Canopy Growth, upon closing of the transaction,
will issue up to $374 million worth of shares in the Company, subject to the satisfaction of certain conditions, to the minority shareholders of BC Tweed (the “Operators”). Additional details of the agreement are provided in the press
release issued by the Company on May 14, 2018. 
 Mirabel, Quebec 

On December 18, 2017, the Company and its subsidiary Canopy Rivers entered into an agreement to form a new company, Les Serres Vert Cannabis Inc.
(“Vert Mirabel”), together with Les Serres Stéphane Bertrand Inc. (“Bertrand”), a largescale tomato greenhouse operator in Mirabel, Quebec. Bertrand operated a 700,000 sq. ft. of modern greenhouse, most of which was built
in 2015. Further details on the business formation are provided in the press release issued on December 18, 2017. On May 27, 2018, the Company and Bertrand announced that Vert Mirabel received a cultivation license from Health Canada. The
700,000 sq. ft. Vert Mirabel greenhouse is licensed for an initial 40,000 sq. ft. of growing space. 
 DOMESTIC CANNABIS PRODUCTION –
PARTNER CAPACITY OFFTAKE 
 The Company has established a number of 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 

On April 19, 2017, Canopy Growth announced the launch of Tweed’s curated CraftGrow line, which brings high quality cannabis grown by a diverse
set of producers to Tweed Main Street’s customers. To date, nine distinct partners including AB Laboratories Inc., Canada’s Island Garden, Delta 9 Cannabis Inc., JWC Ltd., PhyeinMed Inc., PUF Ventures Inc. SweetGrass Inc., TerrAscend
Corp. and Valens GroWorks, have joined CraftGrow, all with different growing styles and approaches to cannabis. Cannabis grown by Canada’s Island Garden and AB Laboratories Inc. have become available for sale in Tweed Main Street.

 Agripharm 
 Agripharm holds the lease and Health
Canada license for a 15,000 sq. ft. facility at Creemore, Ontario. Prior to December 1, 2017 Agripharm was a wholly owned subsidiary of the Company. On December 1, 2017, the Company’s interest in Agripharm was diluted from 100% to 40%
under a collaborative agreement whereby in exchange for the issuance of shares, Green House and Organa Brands have granted an exclusive, royalty-free license in Canada to certain proprietary technology, trademarks, genetics, know-how and other intellectual property to Agripharm, subject to compliance with applicable law. The agreement will create a new Canadian home-base for Green House and Organa Brands where they will work together
with Canopy Growth to produce cannabis products for the Canadian market. Green House will oversee day-to-day operations and bring their own expertise into cultivation,
while Organa Brands will implement world-class extraction functions as new and novel value-add products become part of the regulatory environment. 

  
 17 

 Pursuant to the agreement, the Company has the right to purchase all of 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. In addition, the Company will sublicense the proprietary technology, trademarks, genetics, know-how and other intellectual property from Agripharm to ensure that Canopy Growth is able to satisfy consumer demand across Canada for the suite of Green House and Organa Brands products. Agripharm will not do
business in the United States. 
 Canopy Rivers 
 On
April 27, 2017, Canopy Growth announced the commitment of $20,000 in seed capital funding for a unique investment and operating platform structured to pursue opportunities in the emerging global cannabis sector. Canopy Rivers is managed by an
experienced team of qualified financial and technical professionals with deep industry experience and relationship networks. 
 Canopy Rivers 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 and 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. 
 On May 12, 2017, the Company
advanced $20,000 in the form of a convertible debenture. On June 16, 2017, Canopy Rivers closed an offering to raise aggregate gross proceeds of $36,230, at which time the convertible debenture including interest was converted to
equity. This offering increased the cash resources available for Canopy Rivers to provide growth capital and strategic support within the regulated cannabis industry to approximately $56,000. 

January 10, 2018, the Company announced that Canopy Rivers has closed a non-brokered private placement offering
that raised aggregate gross proceeds of approximately $26,000. Canopy Growth invested $5,141 in the round and 9 employees and a director of Canopy Growth invested $2,357. 

To date, in collaboration with Canopy Growth, Canopy Rivers has quickly 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 May 30, 2018, AIM2 Ventures Inc. (TSXV:AIMB.P) (“AIM2”) and Canopy Rivers announced that
they had entered into a binding letter of intent dated May 30, 2018 (the “LOI”), which outlines the terms and conditions pursuant to which AIM2 and Canopy Rivers will complete a transaction that will result in a reverse take-over of
AIM2 by Canopy Rivers (the “Proposed Transaction”). The Proposed Transaction will be an arm’s length transaction, and, if completed, will constitute AIM2’s “Qualifying Transaction” (as such term is defined in Policy 2.4
of the TSX Venture Exchange (the “TSXV”)). 
 Also on May 30, 2018, Canopy Rivers announced that it had entered into an engagement letter
with CIBC Capital Markets (“CIBC”) and GMP Securities L.P. (“GMP”), as joint book runners and together with Eight Capital (collectively with CIBC and GMP, the “Co-Lead Agents”) as
co-lead agents, on behalf of a syndicate of agents (together with the Co-Lead Agents, the “Agents”) pursuant to which Canopy Rivers proposes to issue and sell,
on a private placement basis, subscription receipts (the “Subscription Receipts”) at a price of $3.50 per Subscription Receipt (the “Issue Price”) for aggregate gross proceeds of up to $60,000 (the “Offering”).

 On May 31, 2018, Canopy Rivers announced its newly appointed, majority independent Board of Directors, as well as a number of strategic appointments
to its management team. 
 On June 18, 2018, Canopy Rivers announced the upsizing of its previously announced private placement offering by
subscription receipts. Pursuant to the revised terms of the offering, Canopy Rivers proposes to issue and sell Subscription Receipts at a price of $3.50 per Subscription Receipt for aggregate gross proceeds of up to $104,125,00. CIBC Capital
Markets, GMP Securities L.P. and Eight Capital are acting as co-lead agents, on behalf of a syndicate of agents including Cormark Securities Inc., INFOR Financial Inc. and PI Financial Corp. The Offering is
expected to close on or about July 5, 2018. 

  
 18 

 DOMESTIC CANNABIS PRODUCTION SUMMARY 

Table 1 below provides a summary of the Company’s licensed facilities and the facility development projects in Canada, including their approximate size
and the calendar year in which completion of the development projects is anticipated. 
  

													
	 Facility
	  	Type	 	  	 Status
	  	Approx. Size
(sq. ft.,
rounded)	 	  	Anticipated
Development
Project
Completion
	 Smiths Falls, Ontario
	  	 	Indoor	 	  	168,000 sq. ft. licensed Project Underway	  	 	730,000	 	  	CY2018
	
Niagara-on-the-Lake,
 Ontario
	  	 
	Hybrid
Greenhouse	 
 	  	350,000 sq. ft. licensed Project Underway	  	 	1,000,000	 	  	CY2018
	 Aldergrove, British Columbia
	  	 
	Hybrid
Greenhouse	 
 	  	840,000 sq. ft. licensed Project Underway	  	 	1,300,000	 	  	CY2018
	 Delta, British Columbia
	  	 
	Hybrid
Greenhouse	 
 	  	 900.000 sq. ft. licensed Project

Underway
	  	 	1,700,000	 	  	CY2018
	 Mirabel, Quebec
	  	 
	Hybrid
Greenhouse	 
 	  	40,000 sq. ft. licensed Project Underway	  	 	700,000	 	  	CY2018
	 Newfoundland & Labrador
	  	 	Indoor	 	  	Project Underway	  	 	150,000	 	  	CY2019
	 Edmonton, Alberta
	  	 	Indoor	 	  	Project Underway	  	 	100,000	 	  	CY2019
	 New Brunswick
	  	 	Indoor	 	  	Project Underway	  	 	50,000	 	  	CY2018
	 Yorkton, Saskatchewan
	  	 	Indoor	 	  	15,000 sq. ft. licensed	  	 	60,000	 	  	
	 Bowmanville, Ontario
	  	 	Indoor	 	  	Licensed	  	 	75,000	 	  	
	 Creemore, Ontario19
	  	 	Indoor	 	  	Licensed	  	 	15,000	 	  	
	 St. Lucien, Quebec
	  	 	Indoor	 	  	Licensed	  	 	10,000	 	  	
	 Scarborough, Ontario
	  	 	Indoor	 	  	Licensed	  	 	50,000	 	  	
		  				  		  	  
	  
	 	  	
	 Total:
	  				  		  	 	5,675,000	 	  	
		  				  		  	  
	  
	 	  	

 Table 1: Domestic Cannabis Production Summary 
  

 

	19 	 Agripharm facility 40% owned by the Company for which the Company has an
off-take arrangement for between 75%-100% of production 

  
 19 

 CANOPY GROWTH’S POSITIONING FOR THE CANADIAN REGULATED RECREATIONAL MARKET 

Early in the development of the Company’s plan to enter the future Canadian Regulated Cannabis Market, management realized that securing channels to
market was equally, if not more, important than licensed cultivation capacity, as distribution drives revenue while capacity alone does not. Management has invested significant effort in securing channels into the future regulated recreational
markets across Canada. With the provincial liquor agencies being given responsibility for establishing distribution and retail frameworks focused the majority of its management outreach on building relationships with these agencies. To aid in this
effort, the Company hired a government relations team with significant direct liquor agency experience. 
 It is worthwhile noting that the Company has
engaged in outreach to other retail networks including national pharmacy chains in Canada. As it remains unclear as to when other retail networks, including pharmacies, will be permitted to sell cannabis, the Company determined that efforts to
secure supply related agreements with pharmacy chains in Canada would provide limited value to the Company in the short-term. 
 When selecting Licensed
Producers to supply cannabis for recreational retail sales, provincial governments and/or their liquor control agencies, management believes that many factors, including cannabis inventory and production capacity, product quality, product variety,
product branding, price, sales support and economic commitments to the provinces, will influence product demand and supplier selection. 
 In preparation
for the launch of a regulated recreational cannabis market expected in October 2018, the provincial liquor agencies are actively seeking multi-year supply arrangements with a limited number of licensed producers that they believe can provide them
supply certainty. Management believes that most provinces are likely to enter into supply arrangements with 4 to 6 primary suppliers. 
 Management believes
that cannabis producers positioning to become primary provincial suppliers will need to demonstrate that they have sufficient inventory levels and in production capacity. The supply related agreements established by the provincial liquor agencies in
Newfoundland & Labrador, New Brunswick, Prince Edward Island, Quebec and the Yukon Territory contemplate supply contracts of a minimum two years in length. Management believes that many, if not all, of the remaining provincial and
territorial liquor agencies will enter similar supply agreements with primary suppliers. 
 For Licensed Producers that meet the inventory and capacity
requirements sought by the provinces and who successfully secure a primary supplier relationship, management believes the two-year supply contracts can be expected to provide certainty of business operation
and secure a channel to market for additional capacity that the selected producers may bring into production as well as partner capacity offtake. 
 To
position the Company to confidently secure primary supplier contracts with all of the provincial liquor agency, the Company has invested significant resources to establish the largest cannabis inventory and
in-production licensed capacity by early calendar 2018. At March 31, 2018, management believes the Company had the largest inventory of harvested product and biological assets with a value exceeding
$118,000. As of June 27, 2018, management believes the Company has the largest licensed and in production platform in Canada, at over 2.4 million sq. ft. In addition, the Company expects to have up to an additional
3.2 million sq. ft. to enter production over the next year ended. With the combination of the sector’s largest inventory and the Company’s vast production platform, management believes the Company is well positioned to
secure large supply channels into the regulated recreational market and ultimately supply a significant portion of that market. 
 The Company’s
CraftGrow program discussed elsewhere, which assists smaller local/regional Licensed Producers in getting their product to market, provides additional value-added consideration should provincial liquor control agencies seek the flexibility to
showcase products of local/regional Licensed Producers within a trusted supply agreement with a larger producer. 
 With renowned cannabis brands (Tweed,
Leafs By Snoop & DNA Genetics), strong customer and online communication, substantial product variety, investment in the development and execution of marketing, and retail programs and investment in a business to business sales
function, management believes consumer demand for the Company’s products will be strong. 

  
 20 

 With licensed cultivation and production operations in Ontario, Saskatchewan, Quebec and British Columbia as
well as announced development plans spanning Alberta, New Brunswick and Newfoundland & Labrador, Canopy Growth has made meaningful economic development commitments in various provinces. Management believes that economic development
commitments will be one of the many factors that influence cannabis supply related decisions made by the provinces. 
 Management believes large scale
Licensed Producers are well positioned to support the provinces in their efforts to establish, oversee and implement physical and online cannabis retail. The Company, with comprehensive standard operating procedures for secure cultivation,
production, storage and transportation of Cannabis and significant, highly secure vault storage capacity in place or under development in multiple locations across the country, is well positioned to assist provincial agencies with the provisioning
of secure cannabis storage and transportation. With the largest customer base in the legal Canadian cannabis market and broadest product portfolio in the sector, the Company can offer provincial agencies/crown corporations/retailers with significant
consumer product demand intelligence to assist with product selection. 
 Management believes Licensed Producers will be required to have operational
information technology systems, including Enterprise Resource Planning systems, to interface with the sophisticated inventory management, ordering and billing systems in operation at the various liquor boards. Canopy Growth has invested
significantly in the upgrading of our IT infrastructure, including the implementation of an Enterprise Resource Planning application. 
 Management believes
the large product volumes that will shipped to the provincial and territorial agencies will require large capacity and increasingly efficient cannabis packing and shipping capabilities. In the fourth quarter of fiscal 2018, the Company began the
development of a dedicated distribution centre. This centre has been designed to significantly increase the capability and flexibility of the company’s fulfillment resources. The Company is also investing significant resources in the research
and development of automated systems. 
 The provincial and territorial agencies are being tasked with implementing and managing the distribution and, in
many cases, the retail of cannabis products. As management functions within the liquor agencies and new staff being hired to support the rollout of cannabis distribution and retail likely have limited previous experience/knowledge of the product,
Management believes significant in market sales support and education will be required. The Company has established a sales management and in market support team and programs to educate and prepare retail staff. To date, the Company has entered into
agreements with the liquor agencies in New Brunswick and Prince Edward Island for the development and delivery of education programs. 
 As highlighted
earlier, Canopy Growth believes that, in certain provinces, it will take two years and possibly longer to rollout the full network of regulated cannabis retail stores that is required to satisfy consumer demand. As such, Canopy Growth believes that
most of the sales in the first two years of the regulated recreational market will go through provincial online sales. With less than 6 months to establish a robust online retail system and cannabis marketplace, management expects that certain, if
not many, provinces could benefit from leveraging the existing online ecommerce, customer demand data and transactional information technology systems that have been deployed by the Company. The Company’s Tweed Main Street online store (See
Overview of Canopy Growth Corporation, Tweed Main Street), a single online marketplace offering cannabis for sale from multiple producers across numerous brands – delivering a shopping experience that consumers expect, is uniquely suited
to deliver the online retail experience that provincial agencies/crown corporations/retailers will be expected to deliver. 

  
 21 

 CANADIAN REGULATED RECREATIONAL CANNABIS MARKET - PRIMARY PROVINCIAL CANNABIS SUPPLY ARRANGEMENTS

 Leveraging the combined strength of the Company’s cannabis inventory, in production and future capacity, branding and substantial economic
commitments, Canopy Growth is the sole licensed producer to have entered into cannabis-related supply agreements with each announcing provincial agency. Table 2 below provides a summary of provincial cannabis supply agreements signed to date. 

 

											
	 Province/Territory
	  	Annual Quantity (Kilograms)	 	 	 Term (Years)
	  	Additional Details	 
	 Newfoundland & Labrador
	  	 	8,000	 	 	2	  	 	Press Release on December 8, 2017	 
	 New Brunswick
	  	 	4,000	 	 	2	  	 	Press Release on September 15, 2017	 
	 Prince Edward Island
	  	 	1,000	 	 	2	  	 	Press Release on January 16, 2018	 
	 Quebec
	  	 	12,000	 	 	3	  	 
	Press Releases on February 14, 2018
and April 11, 2018	 
 
	 Yukon
	  	 	300	 	 	3	  	 	Press Release on April 18, 2018	 
		  	  
	  
	 	 		  			
	 Total:
	  	 	25,000	 	 		  			
		  	  
	  
	 	 		  			

 Table 2: Provincial Cannabis Supply Agreement Summary 

CANADIAN REGULATED RECREATIONAL CANNABIS MARKET - PROVINCIAL RETAIL 

As highlighted earlier, the Provinces of Newfoundland & Labrador, Manitoba, Saskatchewan, Alberta and British Columbia are permitting the sale of
recreational cannabis products through private retail. The Company is pursuing a cannabis retail presence in these provinces to capture retail gross margin (incremental to wholesale margin), capture higher market share within the owned channel and
establish a powerful marketing vehicle to build the Tweed brand in an environment where opportunities to market and build brands is constrained by regulations. 

To date, the Company has received licenses or permits to apply for licenses to operate private retail and online sites in the three of these provinces that
have announced private retail operations – Newfoundland & Labrador, Manitoba and Saskatchewan. The Company is pursuing retail licenses in a select number of communities in Alberta and British Columbia. Figure 4 below provides a summary
of provincial retail licenses secured by the Company. 
 Figure 4: Provincial Cannabis Retail Summary 

 
  
 

 

  
 22 

 INTERNATIONAL DEVELOPMENT 

Management believes that a significant opportunity exists today to leverage the Company’s expertise, financial strength and business model in federally
legal 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 medical cannabis in countries outside of Canada; and 

 

	•	 	 Ownership of cannabis cultivation and sales operations in countries outside of Canada, where it is federally
legal to do so. 

 Canopy Growth, with the assistance of international subsidiaries or partners, has secured the necessary agreements to
export medicinal cannabis to Australia, Brazil and Germany. Canopy Growth believes that an opportunity will exist, for some time to come, to export medical cannabis to countries who wish to secure a supply of medicinal cannabis but have yet to
develop domestic production capabilities. To date, the Company has announced subsidiaries, partnerships or business activities in Germany, Chile, Denmark, Jamaica, Lesotho, Australia, Brazil, Czech Republic and Spain as described below. 

Canopy Growth does not engage in any U.S. marijuana-related activities as defined in Canadian Securities Administrators Staff Notice 51-352. While the Company has a number of 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. 
 Figure 5:
International subsidiaries, partnerships or business activities 
  
 

 
 Spektrum Cannabis GmbH 

Spektrum Cannabis GmbH (“Spektrum” and formerly MedCann GmbH Pharma and Nutraceuticals) is a German-based pharmaceutical distributor that was
acquired by the Company on December 12, 2016. 
 On July 25, 2016, the Corporation announced that Tweed had received necessary approvals in Canada
and Germany to begin export of medical cannabis for sale to German patients, and will be working with Spektrum, a then privately held pharmaceutical importer and manufacturer in Germany. Since then, Spektrum has placed Tweed-branded cannabis strains
in hundreds of German pharmacies. 
 To date, Spektrum distributes cannabis products to over 1200 pharmacies across Germany. Spektrum’s processing
facility is GMP certified by Regierungspraesidium Tübingen. 

  
 23 

 Spectrum Chile SpA 

The Company announced on June 20, 2017 its complementary expansion into South America with Spectrum Chile. Medical 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 Denmark ApS 
 On
September 20, 2017 the Company formed Spectrum Denmark. Spectrum Denmark will 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. The Company owns 62% of the issued shares of Spectrum Denmark and Danish Cannabis ApS (“Danish Cannabis”) owns the remaining 38% of shares. A principal in Danish Cannabis, Moellerup Estate, has for years
been one of the largest hemp producers in Europe. Moellerup Brands include a wide range of hemp food products from gin, beer, granola, oil, to flour, cosmetics and hemp for CBD oil production. The Company will fund the operation of Spectrum Denmark
through loan of up to $10 million to be released in tranches, bearing interest at 5%. Upon achievement of defined milestones Danish Cannabis will exchange its shares in Spectrum Denmark for up to 1,906,214 common shares in Canopy Growth. 

On December 5, 2017, Spectrum Denmark purchased a 430,000 sq. ft. operating greenhouse facility in Odense, Denmark (“Odense”) for cash
consideration of $3,241. On December 18, 2017, the Company announced that Spectrum Denmark had been issued 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. High quality oils and dried cannabis flowers will be produced in Odense and sold under the Spectrum Cannabis brand using
the proprietary Spectrum colour-coded strain classification system. The license announced today is valid through 2021. 
 Spectrum Czech ApS 

On April 15, 2018, Canopy Growth announced that it had signed a definitive agreement to acquire Annabis Medical s.r.o (“Annabis Medical”). The
transaction closed on Monday, April 16, 2018. 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. 
 Spectrum Australia 

On April 25, 2018, Canopy Growth and the Victoria State Government announced the launch of Spectrum Australia. The Victoria facility 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. 
 Spectrum
Lesotho 
 On May 30, 2018, Canopy Growth announced that it had acquired Daddy Cann Lesotho PTY Ltd., trading as Highlands (“Highlands”).
Based in the Kingdom of Lesotho (“Lesotho”), Highlands holds a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin. 

Combining the domestic and regional knowledge of Highlands 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 Highlands’s management team will continue to lead the organization. Additional details on the acquisition are provided in the press release issued by the Company on May 30, 2018. 

  
 24 

 Tweed JA 

On September 6, 2017, the Company subscribed for 49% of the issued and outstanding shares of Grow House JA Limited (now operating as Tweed JA), for $3,769
payable in cash. Tweed JA is a Jamaican company that had received a provisional license to cultivate and sell medical cannabis and has already begun construction of its greenhouse facility. 

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. 
 AusCann Group Holdings Ltd. 
 On May 20,
2016, the Company closed a minority stake with AusCann (ASX:AC8), in exchange for consultation in a number of areas including production, quality assurance and operations, and strategic advisory services. In exchange for these services, the Company
initially received a 15% interest and options in Auscann, but, following subsequent dilutive financings, now owns an 11.01% interest in AusCann, including its pro rata participatory investment of $1,214 in AusCann’s last financing which closed
in May 2017. At March 31, 2018, the AusCann investment was valued at $49,573. 
 The expertise and advisory services offered or performed by
Canopy Growth subsidiaries will be exclusively carried out by Tweed Inc. and Tweed Farms Inc. 
 On September 13, 2017, the Company announced that it
had entered into a 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. 
 Victoria Agriculture 

On January 16, 2018, Canopy Growth and the Victorian State Government announced the signing of 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. 

Alcaliber S.A. 
 On September 11, 2017, 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. 
 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”). Last year, Alcaliber exported 125 tonnes of alkaloids to 40 countries
around the world, representing a 20% market share for NRMs. 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. 
 On March 19, 2018, Canopy Growth confirmed that the Company had completed a transfer of 1,500 cannabis
clones Alcaliber completing the first phase of the partnership announced on September 11, 2017. 
 Bedrocan Brasil S.A. and Entourage Phytolab S.A.

 On June 28, 2016, the Company announced an agreement with São Paulo, Brazil-based Entourage. Under
the agreement, wholly-owned subsidiary Bedrocan Canada, Bedrocan International BV (formerly Bedrocan Beheer BV) and local Brazilian partners created a new company called Bedrocan Brasil, which will facilitate the importation of
Bedrocan’s proprietary standardized cannabis varieties and know-how into the Brazilian market. Additionally, Canopy Growth will partner with Entourage to develop
cannabis-based pharmaceutical medical products for the Brazilian and international markets and launch a clinical research plan. 

  
 25 

 Canopy Growth’s holding in Entourage is 38.5% and its holding in Bedrocan Brasil is 39.4%. 

CORPORATE POSITION ON CONDUCTING BUSINESS IN THE UNITED STATES AND OTHER INTERNATIONAL JURISDICTIONS WHERE CANNABIS IS FEDERALLY-ILLEGAL 

As cannabis is federally illegal in the US., Canopy Growth does not engage in any U.S. cannabis- related activities as defined in Canadian Securities
Administrators Staff Notice 51-352. While the Company has a number of 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. 

Canopy Growth will only conduct business activities related to growing or processing cannabis, in jurisdictions where it is federally legal to do so. Canopy
Growth believes that conducting activities which are federally-illegal, or investing in companies which do, puts the company at risk of prosecution, puts at risk its ability to operate freely, and potentially
could jeopardize its listing on major exchanges now and in the future, limiting access to capital from large and reputable global funds. 
 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. The Company has entered into option agreements to purchase certain cultivation infrastructure (for capped capital investment amounts) should cannabis be rescheduled to become a legal substance in the
U.S. 
 PRODUCT DIVERSIFICATION 
 Management also
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. 
 Development of
Cannabis-Based Medical Therapies - Canopy Health Innovations 
 Canopy Growth established the cannabis research incubator, Canopy Health Innovations Inc.
(“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 subsidiary Canopy Animal Health (“CAH”) to create Cannabis-derived products for applications in veterinary medicine. CAH
intends to adapt Cannabis extracts to develop formulations that can be used to create pharmaceutical products for pets. As in the human market, there is a great unmet medical need in the veterinary market to provide effective therapeutics with
acceptable safety profiles. CAH is in the process of developing Cannabis-based products that veterinarians can provide via a prescription drug process. 

The development and maintenance of a robust IP program is a key element of the Company Health’s strategy. The purpose of the program is to build, or
otherwise secure, protected status, through patents and otherwise (trademarks, trade secrets, plant breeders rights, copyrights, and other forms of intellectual property). 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. 
 On April 9, 2018, the Company announced the launch of
Beckley Canopy Therapeutics (“Beckley Canopy”), a partnership between Canopy Health and drug research pioneer Lady Amanda Feilding and the Beckley Foundation (“Beckley”). The partnership will combine Amanda Feilding’s 20+
year track record of groundbreaking research and network of world-renowned scientific collaborators with Canopy Health’s leadership in the commercial cannabis and pharmaceutical industries, bringing together European and North-American based
research leaders in cannabis. 

  
 26 

 To date, Canopy Health has filed thirty-nine (39) US provisional patent applications, across a range of
cannabis and cannabinoid uses, compositions, formulations, indications, methods of delivery, and dosing regimens, including the following areas: 
  

	•	 	 Insomnia and its various sub-groups 

 

	•	 	 Amyotrophic Lateral Sclerosis (“ALS”) 

 

	•	 	 Fibromyalgia 

  

	•	 	 Anxiety and its various sub-groups (in humans and animals, in conjunction
with Canopy Animal Health) 

  

	•	 	 Cognitive enhancement (in humans and animals, in conjunction with Canopy Animal Health) 

 

	•	 	 Pain and various sub-groups (in humans and animals, in conjunction with
Canopy Animal Health) 

  

	•	 	 Opioid sparing, pain management, and addiction (through Beckley Canopy Therapeutics) 

 

	•	 	 Addiction and smoking cessation (through Beckley Canopy Therapeutics) 

 

	•	 	 A platform and method for delivery of cannabis-based compositions 

US provisional patent applications are commonly used to establish a priority date for the protection of novel inventions. As is common practice globally,
Canopy Health has used the United States as its “first to file” jurisdiction, affording protection of its provisional patent application priority dates in that jurisdiction and others through the ordinary course patent process. From the
point of such a US provisional patent application filing, the filer then has one year from the filing date to add additional disclosure to the confidential application and determine whether to (a) file a
non-provisional, utility patent application and proceed through prosecution with a view to patent issuance, or (b) abandon the provisional patent application. At the same time, the filer must determine
whether to file what is commonly called a PCT (Patent Co-operation Treaty) patent to pursue registration in other countries. The PCT application process preserves the original US provisional patent application
filing date and allows the filer approximately 30 months from the filing of the US provisional patent application filing date to select and file in the individual contracting states of its choosing. 

It is the intention of Canopy Health to continue to build its intellectual property base through a range of strategies and tactics, including but not limited
to, filing additional provisional applications, conversion of those provisional applications into non-provisional utility filings, prosecution of utility filings through to issuance, and extending filings into
various additional countries. 
 Canopy Health plans to graduate product offering over time to higher order formulations and advanced delivery methods,
enrich the composition of matter with actives, and ultimately combine cannabis/cannabinoid-based actives with other active pharmaceutical ingredients. This additional breadth and sophistication in offering would allow precision in delivery and
innovation in content to better serve the nuanced needs of patients and address additional disease areas with increased specificity. 
 To date, Canopy
Health has raised over $15,800 in development capital, including $4,000 from the Company. The Company’s interest in Canopy Health common shares is 43.9%. 

On May 15, 2018, Canopy Growth announced that the Company would acquire all of its unowned interest in Canopy Health and CAH. The Canopy Health
management team will remain in place to continue pursuing IP protection, clinical work, and product formulation for both human and animal cannabinoid programs alongside Canopy Growth’s team. Pursuant to the Arrangement Agreement, shareholders
of Canopy Health (other than Canopy Growth) will receive 0.3790 common shares of the Company for each common share of CHI held (the “Exchange Ratio”). In addition, Canopy Growth will issue options to purchase common shares of Canopy Growth
in exchange for options previously issued by Canopy Health and CAH, based on the Exchange Ratio. In the aggregate, Canopy Growth will issue 3,037,771 common shares, having a value of $91,574 (based on the
5-day volume weighted average price of Canopy Growth’s common shares on the TSX as of May 11, 2018 (the “5-day VWAP)), along with options having an
aggregate “in-the-money” value of $9,688 (based on the 5-day VWAP) for aggregate transaction consideration of $101,262.
The transaction will be undertaken by way of a plan of arrangement and is subject to a number of customary conditions including the approval of the Ontario Superior Court, CHI shareholders and the Toronto Stock Exchange. The transaction is
anticipated to close on or before July 31, 2018. 
 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 will be conducted in collaboration with a leading Canadian
research institution. 

  
 27 

 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 and the acquisition its select technologies. 
 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 similar to that of traditional sugar-based alcoholic beverages, specifically, a rapid on-set
and shorter duration. Similar to the IP program at Canopy Health, Canopy Growth has built, or otherwise secured, protected status, through patents and other IP forms. 

Development of Cannabis-based Beverages – Strategic Relationship with Constellation Brands 

October 30, 2017, Canopy Growth announced that it had entered a strategic relationship with the leading total beverage alcohol supplier in the United
States, Constellation Brands (“Constellation”) (NYSE: STZ and STZ.B). Constellation is a leading international producer and marketer of a fast-growing, high-performing portfolio of beer, wine and spirits brands. 

In the strategic relationship, Constellation is providing broad support in the areas of consumer analytics, market trending, marketing and brand development
to Canopy Growth. In addition, Canopy Growth and Constellation intend to collaborate to develop and market cannabis-based beverages that can be marketed as regulated recreational products in markets where and when such products are federally legal.

 As part of the strategic relationship, an affiliate of Constellation invested approximately $245 million in Canopy Growth in exchange for common
shares that, following the transaction which closed on November 2, 2017, represents a 9.9% equity share in the Company as at such date. 
 In exchange
for the investment, a total of 18,876,901 Canopy Growth common shares were issued on November 2, 2017 at a price of $12.9783 per share based on a 5-day volume weighted average price (VWAP) as of the close
of markets on October 27, 2017. An equal number of common share purchase warrants will be issued at the same price, subject to certain restrictions, expiring 30 months from the closing date. The common shares and warrants will have a hold
period of four months and one day from the closing date, with the warrants being exercisable in two equal tranches, with the first exercisable tranche date being August 1, 2018 and the second exercisable tranche date being February 1,
2019. The Company will principally use the proceeds to fund the expansion of its growing platform and to support ongoing investments in value-add processing and new product development and research. 

Cannabis-based Consumer Recreational Products – Strategic Licensing 

On July 20, 2017, Isodiol International Inc. (“Isodiol”) announced it had signed a licensing agreement with the Company. Under this licensing
agreement, Canopy Growth will have the right to manufacture and distribute Isodiol’s “Pot-O-Coffee” and “Pot-O-Tea” branded cannabis infused single serve K-Cup products in Canada and certain other markets internationally as federal regulations allow. Licensed
products include caffeinated and de-caffeinated product lines as well as Isodiol’s single serve “Pot-O-Coco”. In
addition to the Canadian rights, Canopy Growth shall have the right of first refusal to sell the “Pot-O” brand products in any territory outside of the US, Mexico and Puerto Rico. 

  
 28 

 On September 28, 2017, the Company and Skinvisible Pharmaceuticals, Inc. (“Skinvisible”), a
research and development company with a patented drug delivery system, announced they have signed a definitive license agreement for Skinvisible’s patented topical formulations. Per the agreement, Canopy Growth is exclusively licensed to
distribute Skinvisible’s topical products in Canada and shall have a first right of refusal for all other countries, excluding China and the United States. The agreement covers two distinct product lines made with Skinvisible’s Invisicare® technology. Skinvisible will first develop unique topical hemp-based products that will be launched by Canopy Hemp Corporation in Canada. The agreement also includes potential cannabis-based
topical products using the Invisicare® technology, when and if federal regulations permit CBD or THC infused topical products for sale in Canada. 

On November 7, 2017, the Company announced it had signed a definitive licensing agreement with Farm to Farma Inc. (“FTF”) for FTF’s
innovative Trokie® lozenges. Under this licensing agreement, Canopy Growth will have the exclusive right to manufacture and distribute FTF’s Trokie® lozenges through its subsidiaries in Canada, as permitted by federal regulations, and shall have a first right of offer for all other countries where federally legal and excluding the United
States. 
 HEMP-Based 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. 
 On
January 25, 2018, the Company announced that it has closed the acquisition of assets and intellectual property from Green Hemp Industrie Ltd. (“Green”). Combining the Company’s expertise in large-scale cannabinoid extraction
processes with Green’s unique whole-plant hemp harvesting knowledge and library of stable CBD-rich hemp genetics to positions Canopy Growth leader in low-cost, high
yield CBD production. On closing, the Company issued 24,576 common shares. The Company may issue up to another 24,576 common shares if certain production related milestones are achieved. 

  
 29 

 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	 	 	Year Ended	 
	 	 	March 31,	 	 	March 31,	 	 	March 31,	 	 	March 31,	 
	 	 	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Revenue
	 	 	22,806	 	 	 	14,661	 	 	 	77,948	 	 	 	39,895	 
	 Gross margin before fair value impacts in cost of sales
	 	 	8,517	 	 	 	9,058	 	 	 	40,158	 	 	 	24,602	 
	 Gross margin before fair value impacts in cost of sales %
	 	 	37	% 	 	 	62	% 	 	 	52	% 	 	 	62	% 
	 Gross margin
	 	 	7,177	 	 	 	2,499	 	 	 	74,192	 	 	 	38,714	 
	 Gross margin %
	 	 	31	% 	 	 	17	% 	 	 	95	% 	 	 	97	% 
	 Operating expenses before acquisition costs and
non-cash operating expenses
	 	 	32,173	 	 	 	9,509	 	 	 	114,103	 	 	 	36,141	 
	 Total operating expenses
	 	 	58,209	 	 	 	23,415	 	 	 	156,473	 	 	 	52,797	 
	 Loss from operations
	 	 	(51,032	) 	 	 	(20,916	) 	 	 	(82,281	) 	 	 	(14,083	) 
	 Net loss after taxes
	 	 	(54,361	) 	 	 	(12,029	) 	 	 	(54,134	) 	 	 	(7,572	) 
	 Net loss attributable to Canopy Growth Corporation
	 	 	(61,544	) 	 	 	(11,994	) 	 	 	(70,353	) 	 	 	(7,521	) 
	 Net loss per share - basic and diluted
	 	$	(0.31	) 	 	$	(0.08	) 	 	$	(0.40	) 	 	$	(0.06	) 
	 Weighted average shares - basic and diluted
	 	 	196,571,715	 	 	 	147,060,478	 	 	 	177,301,767	 	 	 	118,989,713	 

 Selected statements of financial position information 

 

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Cash and cash equivalents
	  	 	322,560	 	  	 	101,800	 
	 Biological assets
	  	 	16,348	 	  	 	14,725	 
	 Inventory
	  	 	101,607	 	  	 	45,981	 
	 Other working capital
	  	 	(49,209	) 	  	 	(5,874	) 
	 Current and long-term debt
	  	 	8,422	 	  	 	10,330	 
	 Other long-term liabilities
	  	 	61,150	 	  	 	766	 
	 Deferred tax liability
	  	 	33,536	 	  	 	35,924	 
	 Shareholders’ equity
	  	 	1,243,238	 	  	 	639,726	 

  
 30 

 FOURTH QUARTER REVIEW 

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

 
 

 
  
 

 

  
 31 

 SELECTED QUARTERLY INFORMATION 

 

																	
	 	  	Q4’18	 	  	Q3’18	 	  	Q2’18	 	  	Q1’18	 
	 Revenue
	  	$	22,806	 	  	$	21,700	 	  	$	17,569	 	  	$	15,873	 
	 Net income (loss) attributable to Canopy Growth Corporation
	  	 	(61,544	) 	  	 	1,583	 	  	 	(1,338	) 	  	 	(9,054	) 
	 Net income (loss) per share - basic
	  	$	(0.31	) 	  	$	0.01	 	  	$	(0.01	) 	  	$	(0.06	) 
	 Weighted average shares - basic
	  	 	196,571,715	 	  	 	182,029,481	 	  	 	167,226,218	 	  	 	163,884,269	 
	 Net income (loss) per share - diluted
	  	$	(0.31	) 	  	$	0.01	 	  	$	(0.01	) 	  	$	(0.06	) 
	 Weighted average shares - diluted
	  	 	196,571,715	 	  	 	194,739,044	 	  	 	167,226,218	 	  	 	163,884,269	 
					
	 	  	Q4’17	 	  	Q3’17	 	  	Q2’17	 	  	Q1’17	 
	 Revenue
	  	$	14,661	 	  	$	9,752	 	  	$	8,498	 	  	$	6,984	 
	 Net income (loss) attributable to Canopy

Growth Corporation
	  	 	(11,994	) 	  	 	2,992	 	  	 	5,430	 	  	 	(3,949	) 
	 Net income (loss) per share - basic
	  	$	(0.08	) 	  	$	0.03	 	  	$	0.05	 	  	$	(0.04	) 
	 Weighted average shares - basic
	  	 	147,060,478	 	  	 	116,813,261	 	  	 	108,872,770	 	  	 	103,663,724	 
	 Net income (loss) per share - diluted
	  	$	(0.08	) 	  	$	0.02	 	  	$	0.05	 	  	$	(0.04	) 
	 Weighted average shares - diluted
	  	 	147,060,478	 	  	 	123,034,872	 	  	 	112,254,363	 	  	 	103,663,724	 

 REVENUE 
 Total revenue
for the three months ended March 31, 2018 was $22,806 representing a 55% increase over the quarter ended March 31, 2017. 
 The Company believes
the sale of cannabis oils will represent a significant revenue stream going forward. In the three months ended March 31, 2018 and 2017, oils, including gel caps, both accounted for 23% of product revenue for each respective period. 

The total quantity of cannabis sold during the three months ended March 31, 2018 was 2,528 kilograms and kilogram equivalents at an average price of
$8.43 per gram, up from 1,740 kilograms and kilogram equivalents at an average price of $8.03 in same period last year due to changes in the mix of product sold and increasing sales in Germany. 

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 medical 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. As they continue to grow through the pre-harvest stages, a corresponding
non-cash unrealized gain is recognized in income through cost of sales, 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. Together, the inventory production costs expensed, the fair value changes in biological assets included in inventory sold and other inventory 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. 
 During the three months ended March 31, 2018,
the Company harvested 4,811 kilograms. In comparison, during the three months ended March 31, 2017, the Company harvested 1,980 kilograms. The Company is ramping up production and inventories for later in calendar 2018 when the legalized
recreational market is expected to commence to meet expected demand from consumers and the provinces. 
 The net cost of sales of $15,629 during the three
months ended March 31, 2018 was comprised of inventory production costs expensed to cost of sales of $14,289, fair value changes in biological assets included in inventory sold and other inventory charges of $19,929 offset by the unrealized
gain on changes in the fair value of biological assets of $18,589. The impact of changes in the fair value of biological assets recorded during the quarter was due in large part to the full utilization of Tweed Farms in Niagara-on-the-Lake and part utilization of BC Tweed offset by a lower amount of biological assets at Smiths Falls, Ontario as 7 of the
24 flower rooms at that facility were re-purposed, for clone propagation for other sites and the preparation of a large footprint pre-pack room, which reduced growing
capacity for commercial harvest. In the quarter ended March 31, 2017, the 

  
 32 

 
net recovery to cost of sales was $12,162 with inventory production costs expensed amounting to $5,603 fair value changes in biological assets included in inventory sold and other inventory
charges of $9,363 offset by the unrealized gain on changes in the fair value of biological assets of $2,804. 
 The inventory production costs expensed to
cost of sales of $14,289 is principally comprised of the cash costs of the inventory sold in the period of $8,397 and $5,892 of cash operating costs of subsidiaries not yet cultivating or selling cannabis, such as BC Tweed, Vert Mirabel, Tweed 53
(Edmonton, Alberta) and Spot Therapeutics (Fredericton, New Brunswick). This compares to the same period last year when the inventory production costs expensed to cost of sales of $5,603 was comprised of the cash costs of inventory sold in the
period of $5,514 and $89 of cash operating costs of subsidiaries not yet cultivating or selling cannabis. 
 Management has made the decision to no longer
report the weighted average cost per gram metric. There are three reasons for this change. First, there is no industry standard for cost per gram components or classification, a situation that management believes may cause investor confusion.
Second, consistent with our long held and communicated view that the cannabis market will move beyond traditional dried flower products to cannabis as an ingredient in branded consumer products and medical therapies, management believes the sector
will move away from measurements of the weight of the plant only, to milligram measurements of THC, CBD and other cannabinoid ingredients as new product formats are introduced. Lastly, management believes other key performance indicators will evolve
as the legal recreational and retail market takes hold in Canada. 
 GROSS MARGIN 

The fourth quarter Fiscal 2018 gross margin before the effects of IFRS fair value impacts in cost of sales and other inventory charges, and excluding the costs
of non-cultivating subsidiaries and assets, totaling $5,892, was $14,409 or 63% of sales. 
 The fourth quarter
Fiscal 2018 gross margin before the effects of the IFRS fair value impacts in cost of sales and other inventory charges was $8,517 or 37% of sales, as compared to $9,058 or 62% of sales in the fourth quarter of last year. The lower gross margin
percentage was due primarily to the impact of cash operating costs of subsidiaries not yet cultivating or selling cannabis, described earlier in this MD&A. 

The IFRS reported gross margin was $7,177 or 31% of revenue, for the three-month period ended March 31, 2018. In the comparative period ended
March 31, 2017, the gross margin on the same basis was $2,499 or 17% of revenue. Gross margin includes the fair value changes in biological assets included in inventory sold and other inventory charges and unrealized gain on changes in fair
value of biological assets. 
 The IFRS gross margin was mostly impacted by the full utilization of Tweed Farms greenhouse, partial utilization of BC Tweed
facilities, full operation of the Bowmanville facility partially offset by a lower amount of biological assets at the Company’s Smiths Falls facility which resulted in a higher gain on changes in the fair value of biological assets relative to
the fourth quarter of last year. 
 As noted earlier in this MD&A, beginning in the third quarter of Fiscal 2018, 7 of 24 flower rooms in the
Company’s Smiths Falls, Ontario facility were repurposed for mother/clone rooms to produce over 200,000 clones deployed in the planting of over 1.7 million sq. ft. of additional greenhouse space in the first half of calendar 2018 and
additional fulfillment capability, was necessary and worthwhile as it positions the Company to supply larger quantities of cannabis and generate increasing revenues beginning in the second quarter of fiscal 2019. 

The Company’s announced production expansion plans, which will add up to 3.2 million sq. ft. over the next 12 months, 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. 

  
 33 

 OPERATING EXPENSES 

Sales and marketing expenses include staffing levels in marketing and sales functions needed to service the coming regulated recreational and international
markets, costs associated with the development of marketing and branding programs, 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 and the growing customer care center which interfaces directly with the Company’s growing base of patients. Since March 31, 2017, the number of patients has grown from over
55,000 to over 74,000 at March 31, 2018. The outreach program is targeted towards ensuring that healthcare practitioners understand how they can incorporate medical cannabis into their practices. These expenditures are consistent with the
Company’s view that strong brand recognition is essential to the Company’s successful ongoing customer acquisition strategy, particularly in the coming recreational market in Canada. These costs represent a strategic investment, which
management believes will have a future benefit in 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 were up significantly relative to the same periods last year for the purpose of being ready for the recreation market while
currently still operating in a medical market in the fourth quarter and through the first half of fiscal 2019. Specifically, sales and marketing expenses for the three months ended March 31, 2018 were $14,751 or 65% of revenue. In comparison,
sales and marketing expenses for the three months ended March 31, 2017 were $4,110 or 28% of revenue. 
 Research and development (“R&D”)
expenses for the three months ended March 31, 2018 and 2017 were $539 or 2% of revenue and ($535) or 4% of revenue, respectively. 
 The Company’s
R&D team is researching a variety of intellectual property opportunities, 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. 
 General and administrative (“G&A”) expenses for the
three months ended March 31, 2018 and 2017 were $16,883 and $5,934, respectively and 74% and 40% of sales, respectively. 
 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. 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 for the three-month period ended March 31, 2018 and 2017 were $915 and $5,394, respectively. Acquisition-related expenses in
the fourth quarter period ended March 31, 2017 were primarily related to the Mettrum acquisition of $4,581. The remaining $813 was 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. 
 Share-based compensation expense
for the three month period ended March 31, 2018 and 2017 related to options granted to employees and consultants of the Company and to acquisition-related milestones, of $20,170 

  
 34 

 
and $5,391, respectively. The acquisition-related milestone share based compensation during the three months ended March 31, 2018 primarily related to Spectrum Denmark, BC Tweed, Apollo and
Bodystream and to other affiliates, as summarized in Note 20 to the Annual Financial Statements. 
 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 other non-cash items, including the share-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 adjusted basis before the impact of non-cash items and acquisition activities. 

Adjusted EBITDA in the fourth quarter fiscal 2018 amounted to a loss of $22,898 compared to a loss of $146 in the same period last year. 

CANOPY GROWTH CORPORATION 
  

									
	Adjusted EBITDA1 Non-GAAP Measure	  	Three Months Ended	 
	(In CDN$000’s)	  	 March 31,

2018
	 	  	 March 31,

2017
	 
	 Adjusted EBITDA1
Reconciliation
	  				  			
	 Loss from operations - as reported
	  	$	(51,032	) 	  	$	(20,916	) 
		  	  
	  
	 	  	  
	  
	 
	 IFRS non-cash accounting related to
biological assets and inventory
	  

	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	19,929	 	  	 	9,363	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(18,589	) 	  	 	(2,804	) 
		  	  
	  
	 	  	  
	  
	 
		  	 	1,340	 	  	 	6,559	 
	 Share-based compensation expense (per statement of cash flows)2
	  	 	20,928	 	  	 	5,696	 
	 Acquisition Costs
	  	 	915	 	  	 	5,394	 
	 Depreciation and amortization
	  	 	4,951	 	  	 	3,121	 
		  	  
	  
	 	  	  
	  
	 
		  	 	26,794	 	  	 	14,211	 
	 Adjusted EBITDA
	  	$	(22,898	) 	  	$	(146	) 
		  	  
	  
	 	  	  
	  
	 

  

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

	2 -	 Includes $8,247 and $690 for the three months ended March 31, 2018 and 2017, respectively, in
share-based compensation expense related to acquisition milestones 

 OTHER EXPENSES AND NET INCOME 

Other expenses are made up of fair value changes on financial assets of $46,169 for the three months ended March 31, 2018, which is recognized primarily
from the strategic agreement with TerrAscend. The warrants represent a derivative financial instrument that is initially measured at fair value and subsequently remeasured to its fair value at the end of each reporting period with changes in fair
value recorded in the consolidated statement of operations through profit and loss. The Company also recognized $5,776 for the three months ended March 31, 2018, which is recognized from the strategic agreement with AusCann. Under the
agreement, the Company obtained shares and options. The options represent a derivative financial instrument that is initially recognized at fair value and subsequently remeasured to its fair value at the end of each reporting period. The Company
also recognized $5,210 related to the Company’s ownership in HydrRx. In the quarter ended March 31, 2018 HydRx completed a financing that provided a measure of the fair value of the warrants. The difference between the carrying amount of
the warrants and this fair value for the warrants was recorded in the consolidated statement of operations through profit and loss. 
 The above was more
than offset by an impairment loss of $28,000 related to the arbitration proceedings against Bedrocan International BV, fair value increases on BC Tweed and Vert Mirabel put liabilities of $21,000, and a partner sharing expense of $4,995 related to
the BC Tweed partners. Please refer to the Annual Financial Statements for more information. 

  
 35 

 The Company recorded an income tax expense of $8,042 for the three months ended March 31, 2018 relating
to changes in the deferred tax liability. In the comparative period last year, the Company recorded income tax expense of $3,566. 
 Net earnings for the
three months ended March 31, 2018 was $54,361 compared to net loss of $12,029 in the comparative period last year. 
 ANNUAL REVIEW 

Results of Operations for the year ended March 31, 2018 as compared to the year ended March 31, 2017. 

REVENUE 
 Total revenue for the year ended March 31,
2018 was $77,948 representing a 95% increase over the year ended March 31, 2017. 
 The Company believes the sale of cannabis oils will represent a
significant revenue stream going forward. In the year ended March 31, 2018 and 2017, oils, including gel caps, accounted for 22% and 12% of product revenue, respectively. 

The total quantity of cannabis sold during the year ended March 31, 2018 was 8,708 kilograms and kilogram equivalents at an average price of $8.24 per
gram, up from 5,139 kilograms and kilogram equivalents at an average price of $7.40 in same period last year due to an increasing mix of oil products and oil-based soft gel caps being sold as well as the
increasing Germany sales. 
 COST OF SALES 
 During the
year ended March 31, 2018, the Company harvested 22,513 kilograms. In comparison, during the twelve ended March 31, 2017, the Company harvested 10,837 kilograms. The Company is ramping up production and inventories for later in calendar
2018 when the legalized recreational market is expected to commence to meet expected demand from consumers and the provinces. 
 The net cost of sales of
$3,756 during the year ended March 31, 2018 was comprised of inventory production costs expensed to cost of sales of $37,790, fair value changes in biological assets included in inventory sold and other inventory charges of $66,268 offset by
the unrealized gain on changes in the fair value of biological assets of $100,302. The impact of changes in the fair value of biological assets recorded during the year was due in large part to the full utilization of Tweed Farms in Niagara-on-the-Lake, part utilization of BC Tweed, the new grow rooms fully operating at Smiths Falls, and to the refitted former
Mettrum Bowmanville facility back in full production. In the year ended March 31, 2017, the net cost of sales was $1,181 with inventory production costs expensed amounting to $15,293 fair value changes in biological assets included in inventory
sold and other inventory charges of $34,978 offset by the unrealized gain on changes in the fair value of biological assets of $49,090. 
 The inventory
production costs expensed to cost of sales of $37,790 is principally comprised of the cash costs of the inventory sold in the period of $26,415 $11,375 related to cash operating costs of subsidiaries not yet cultivating or selling cannabis, such as
BC Tweed, Vert Mirabel (Quebec), Tweed 53 (Edmonton, Alberta) and Spot Therapeutics (Fredericton, New Brunswick). This compares to the same period last year when the inventory production costs expensed to cost of sales of $15,293 was comprised of
the cash costs of inventory sold in the period of $15,154 and $139 of cash operating costs of subsidiaries not yet cultivating or selling cannabis. 

  
 36 

 GROSS MARGIN 

The fiscal year 2018 gross margin before the effects of the IFRS fair value impacts in cost of sales and other inventory charges was $40,158 or 52% of sales,
as compared to $24,602 or 62% of sales in fiscal 2017. The lower gross margin percentage was due primarily to the impact of cash operating costs of subsidiaries not yet cultivating or selling cannabis, described earlier in this MD&A. Excluding
the costs of the non-cultivating subsidiaries totaling $11,375, the gross margin before non-cash gains and losses would have been $51,533 or 66% of sales. 

The IFRS reported gross margin was $74,192 or 95% of revenue, for the twelve-month period ended March 31, 2018. In the comparative period ended
March 31, 2017, the gross margin on the same basis was $38,714 or 97% of revenue. Gross margin includes the fair value changes in biological assets included in inventory sold and other inventory charges and unrealized gain on changes in fair
value of biological assets. 
 The IFRS gross margin was mostly impacted by the full utilization of Tweed Farms, part utilization of BC Tweed, the new grow
rooms in use at Smiths Falls and Bowmanville fully operating again to result in a higher gain on changes in the fair value of biological assets relative to fiscal 2017. 

The Company’s announced production expansion plans, which will add up to 3.2 million sq. ft. over the next 12 months, 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 
 Sales and marketing expenses include
staffing levels in marketing and sales functions needed to service the coming regulated recreational and international markets, costs associated with the development of marketing and branding programs, 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 and the growing customer care center which interfaces directly
with the Company’s growing base of patients. As a result, sales and marketing were up significantly relative to last year for the purpose of being ready for the recreation market while currently still operating in a medical market.
Specifically, sales and marketing expenses for the year ended March 31, 2018 were $38,203 or 49% of revenue. In comparison, sales and marketing expenses for the year ended March 31, 2017 were $12,960 or 32% of sales. 

Research and development (“R&D”) expenses for the year ended March 31, 2018 and 2017 were $1,453 or 2% of revenue and $810 or 2% of
revenue, respectively. 
 The Company’s R&D team is researching a variety of intellectual property opportunities, 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. 

General and administrative (“G&A”) expenses for the year ended March 31, 2018 and 2017 were $43,819 and $16,858, respectively and 56% of
sales and 42% of sales, respectively. 
 The G&A expenses include 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. 

  
 37 

 Acquisition-related expenses for the year ended March 31, 2018 and 2017 were $3,406 and $7,369,
respectively. Acquisition-related expenses in the fiscal year ended March 31, 2018 were primarily related 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. Acquisition related expenses for the year ended March 31, 2017 included $5,190 related to the acquisition of Mettrum, $630 related to M&A advisory services, $372 related
to the acquisition of Spektrum and $94 related to the acquisition of Vert. 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. 
 Share-based compensation expense related to options
granted to employees and consultants of the Company and to acquisition-related milestones, of $29,631 and $19,475, respectively (year ended March 31, 2017 - $8,046 and $690, respectively). The acquisition-related milestone share based
compensation primarily related to Spectrum Denmark, BC Tweed, Apollo and Bodystream and to other affiliates, as summarized in Note 20 (c) to the financial statements. 

ADJUSTED EBITDA (NON-GAAP MEASURE) 

Adjusted EBITDA in the fiscal year 2018 amounted to a loss of $41,246 compared to a loss of $4,719 in the same period last year. 

CANOPY GROWTH CORPORATION 
  

									
	Adjusted EBITDA1 Non-GAAP Measure	  	Year Ended	 
	(In CDN$000’s)	  	 March 31,

2018
	 	  	 March 31,

2017
	 
	 Adjusted EBITDA1
Reconciliation
	  				  			
	 Loss from operations - as reported
	  	$	(82,281	) 	  	$	(14,083	) 
		  	  
	  
	 	  	  
	  
	 
	 IFRS non-cash accounting related to
biological assets and inventory
	  

	 Fair value changes in biological assets included in inventory sold and other inventory
charges
	  	 	66,268	 	  	 	34,978	 
	 Unrealized gain on changes in fair value of biological assets
	  	 	(100,302	) 	  	 	(49,090	) 
		  	  
	  
	 	  	  
	  
	 
		  	 	(34,034	) 	  	 	(14,112	) 
	 Share-based compensation expense (per statement of cash flows)2
	  	 	51,177	 	  	 	10,043	 
	 Acquisition Costs
	  	 	3,406	 	  	 	7,369	 
	 Depreciation and amortization
	  	 	20,486	 	  	 	6,064	 
		  	  
	  
	 	  	  
	  
	 
		  	 	75,069	 	  	 	23,476	 
	 Adjusted EBITDA
	  	$	(41,246	) 	  	$	(4,719	) 
		  	  
	  
	 	  	  
	  
	 

  

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

	2 -	 Includes $19,475 and $690 for the year ended March 31, 2018 and 2017, respectively, in share-based
compensation expense related to acquisition milestones 

 OTHER EXPENSES AND NET INCOME 

Other expenses are made up of fair value changes on financial assets of $78,172 for the year ended March 31, 2018, which is recognized primarily from the
strategic agreement with TerrAscend. The warrants represent a derivative financial instrument that is initially measured at fair value and subsequently remeasured to its fair value at the end of each reporting period with changes in fair value
recorded in the consolidated statement of operations through profit and loss. The Company also recognized $5,210 related to the Company’s ownership in HydrRx. In the quarter ended March 31, 2018 HydRx completed a financing that provided a
measure of the fair value of the warrants. The difference between the carrying amount of the warrants and this fair value for the warrants was recorded in the consolidated statement of operations through profit and loss. The Company also recognized
$4,785 for the three months ended March 31, 2018, which is recognized from the strategic agreement with AusCann. Under the agreement, the Company obtained shares and options. The options represent a derivative financial instrument that is
initially recognized at fair value and subsequently remeasured to its fair value at the end of each reporting period. In connection with the Agripharm agreement entered into with Green House and Organa Brands where the Company’s ownership
interest was reduced to 40%, the Company recognized a gain of $8,820 during the year ended March 31, 2018. 

  
 38 

 The above was offset by an impairment loss of $28,000 related to the arbitration proceedings against
Bedrocan International BV, fair value increases on BC Tweed and Vert Mirabel put liabilities of $21,000, and a partner sharing expense of $4,995 related to the BC Tweed partners. Please refer to the Annual Financial Statements for more information.

 The Company recorded an income tax recovery of $1,593 for the year ended March 31, 2018 relating to changes in the deferred tax liability. In the
comparative period last year, the Company recorded income tax expense of $2,703. 
 Net loss for the year ended March 31, 2018 amounted to $54,134
compared to net loss of $7,572 in the comparative period last year. 
 LIQUIDITY 

As at March 31, 2018, the Company had cash and cash equivalents available of $322,560, up from $101,800 at the end of fiscal 2017. The increase from the
end of fiscal 2017 was mainly due to the cash received from the Canopy Rivers private placement of $36,320 in June 2017, a $25,000 private placement common share issuance in July 2017, investment of approximately $245,000 by an affiliate of
Constellation Brands, gross proceeds of $200,700 from a bought deal financing that closed on February 7, 2018 and the exercise of options and warrants totaling $11,823 offset by cash used to fund operations of $92,516 and investments in
facility enhancements totaling $212,573. The Company’s cash and cash equivalents includes cash held by Canopy Rivers, amounting to $322,560 at March 31, 2018. 

While the Company has incurred cash 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 March 31, 2018 and March 31, 2017. 
  

									
	 (CDN $000’s)
	  	March 31,
2018	 	  	March 31,
2017	 
	 Cash & cash equivalents
	  	$	322,560	 	  	$	101,800	 
	 Biological assets
	  	 	16,348	 	  	 	14,725	 
	 Inventory
	  	 	101,607	 	  	 	45,981	 
	 Other working capital
	  	 	(49,209	) 	  	 	(5,874	) 
	 Current and long-term debt
	  	 	8,422	 	  	 	10,330	 
	 Other long-term liabilities
	  	 	61,150	 	  	 	766	 

 The increase in total working capital to $389,749 (March 31, 2017 - $154,941) was primarily due to the increase in inventory,
the investment in the Company by an affiliate of Constellation Brands, gross proceeds of $200,700 from the February 2018 bought deal financing and the cash raised by Canopy Rivers which was consolidated in the financial statements. 

As at March 31, 2018, on average, the biological assets were 12% complete as to the next expected harvest date, compared to 43% average stage of
completion as at March 31, 2017. 
 At March 31, 2018, inventory quantities amounted to 15,726 kilograms of dry cannabis. Of this amount, 2,982
kilograms was finished goods available for sale; 3,480 kilograms of product in process of testing and awaiting release for sale, and 9,264 kilograms of extract-grade cannabis held for conversion to oils and capsules. This compares to March 31,
2017 when a total of 8,360 kilograms of dry cannabis was in inventory, comprised of 377 kilograms of finished goods, 3,173 kilograms of product awaiting approvals to be released for sale, and 4,810 kilograms of extract-grade cannabis being held
for conversion to oils and to capsules. In addition, the Company had a total of 6,969 litres of cannabis oil, ranging from concentrated resins, or refined oil, to oil in its finished state and available for sale, up from 1,799 litres held at
March 31, 2017, also ranging from concentrated resins to finished oils available for sale. The Company also had 356 kilograms of capsules on hand at March 31, 2018. 

  
 39 

 Inventory at March 31, 2018 amounted to $101,607 (March 31, 2017 - $45,981) and biological assets
amounted to $16,348 (March 31, 2017 - $14,725), together totaling $117,955 (March 31, 2017 - $60,706) all of which Management believes is required to meet expected market demands, including the legalized recreational market expected later in
calendar 2018. 
 The increase in inventory since March 31, 2017 was due to the new grow rooms coming on line at Smiths Falls, having Spectrum
operations integrated and online, and the harvests at the Company’s greenhouse in Niagara-on-the-Lake. Harvested plants were
added to inventories during the quarter and quantities maintained to meet the growth in sales expected and meet strain availability requirements, and the expansion of oils. 

The long-term assets which total $955,040 (March 31, 2017 - $523,934) were comprised principally of intangible assets and goodwill of $416,449, property,
plant and equipment and assets in process of $303,682, investments in associates of $63,106 and investments in other financial assets of $163,463 which are comprised of various investments the Company and its subsidiaries have made, and other
long-term assets of $8,340 which mainly consists of deposits on property, plant and equipment. 
 The chart below highlights the Company’s cash flows
during the year ended March 31, 2018 and 2017. 
  

									
	(CDN $000’s)	  	Year Ended	 
	 Net cash provided by (used in)
	  	March 31,
2018	 	  	March 31,
2017	 
	 Operating activities
	  	$	(81,506	) 	  	$	(27,093	) 
	 Investing activities
	  	 	(223,583	) 	  	 	(18,602	) 
	 Financing activities
	  	 	525,849	 	  	 	132,098	 
	 Cash and cash equivalents, beginning of year
	  	 	101,800	 	  	 	15,397	 
		  	  
	  
	 	  	  
	  
	 
	 Cash and cash equivalents, end of year
	  	$	322,560	 	  	$	101,800	 
		  	  
	  
	 	  	  
	  
	 

 CASH USED IN OPERATING ACTIVITIES 

The cash used in operating activities prior to changes in working capital during the year ended March 31, 2018 amounted to $52,987, with a net loss of
$54,134, which included the IFRS accounting unrealized gain on biological assets of $100,302 and the non-cash other income and expenses of $78,172 more than offset the fair value changes in biological assets
included in inventory sold and other inventory charges of $66,268 and other non-cash items such as depreciation and amortization of $20,486, total share-based compensation of $51,177, and income tax expense of
$1,593. The cash used in operating activities after changes in working capital during the year ended March 31, 2018 amounted to $81,506. 
 In
comparison, the cash used in operating activities prior to changes in working capital during the year ended March 31, 2017 amounted to $10,745, with net loss of $7,572 which included the non-cash
unrealized gain on biological assets of $35,807, the non-cash other income and expenses of $5,702 and income tax recovery of $2,703 to more than offset net changes in inventory and biological assets of $21,695
and other non-cash items such as depreciation and amortization of $6,064, and total share-based compensation of $10,043. The cash used in operating activities after changes in working capital during the year
ended March 31, 2017 amounted to $27,093. 
 CASH USED IN INVESTING ACTIVITIES 

The cash used in investing activities during the twelve-months ended March 31, 2018 of $223,583 was primarily due to the expansion of growing capacity at
Tweed and Tweed Farms, and the development of Tweed BC amount to investments of $176,037, investments made by the Company and its subsidiaries of $48,618, partially offset by proceeds on the sale of Bennett North of $7,000. 

In comparison, the cash used in investing activities during the year ended March 31, 2017 of $18,602 was primarily due to the expansion of growing
capacity at Tweed, acquisition of the Smiths Falls facility from the landlord, improvements at Vert, and investments made to improve production efficiencies such as high capacity oil extraction and new offerings such as soft-gel capsules amounting together to $29,391, partially offset by the cash and cash equivalents acquired, net of the cash paid for the acquisitions of Mettrum, Vert, Hemp and MedCann GmbH of $11,193. 

  
 40 

 CASH FROM FINANCING ACTIVITIES 

The cash provided by financing activities during the year ended March 31, 2018 of $470,670 due to investment by an affiliate of Constellation of
approximately $245,000, net proceeds of $192,514 from a bought deal in the fourth quarter of fiscal 2018, $35,135 raised by Canopy Rivers and net proceeds from July private placement of $24,160 and the exercise of stock options and warrants
amounting to $11,823, which were partially offset by the repayment of long-term debt amounting to $1,195 and payment of share issue costs of $10,008. 
 In
comparison, the cash provided by financing activities during the year ended March 31, 2017 of $132,098 mainly resulted from the bought deal financings which closed on April 15, 2016, August 24, 2016 and December 22, 2016 for
combined net proceeds of $99,026, private placement closed on March 22, 2017 for net proceeds of $24,160, the proceeds from the issuance of new mortgage debt of $3,500, and the proceeds from the exercise of warrants and stock options amounting
to $7,087. The cash proceeds were partially offset by the repayment of long-term debt amounting to $959. 
 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 $91,649, share capital of
$1,076,838 and working capital of $389,749 as at March 31, 2018. This compares to an accumulated deficit of $21,296, share capital of $621,541 and working capital of $154,941 as at March 31, 2017. See below under the heading “Risk
Factors”. 
 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 makes adjustments to 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 expand its growing rooms, ancillary rooms, strategic acquisitions, and general working capital requirements to fund operations and to support growth including new opportunities to produce and sell cannabis oil and dry
cannabis buds. Since its formation, the Company has financed its cash requirements primarily through the issuance of capital stock with the following exceptions. 

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 (March 31, 2018 - $1,089) 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 $3,500 (March 31, 2018 – $2,777) with 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 $2,648, also with the same Canadian 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. Through the acquisition of
Bedrocan on August 28, 2015, the Company has a long-term debt facility totaling $1,564 with an interest rate of 10%, due on July 1, 2024, payable in blended monthly payments (See “Transactions with Related Parties”). 

The Company also has revolving lines of credit for up to $5,500 with the same Canadian financial institution holding the three mortgages, with variable
interest rates based on the CIBC prime 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 March 31, 2018. 

  
 41 

 The Company’s authorized share capital is an unlimited number of common shares of which 199,557,208
common shares were issued and outstanding as at March 31, 2018, after including 236,227 escrowed shares to be released after meeting certain conditions (March 31, 2017 – 162,187,262 common shares). 

The Company has 17,245,835 options outstanding at March 31, 2018 under the Company employee stock option plan (“ESOP”) at prices between $0.56
and $33,66 per share (March 31, 2017 – 10,044,112 option shares). 
 At March 31, 2018 the Company also had 18,912,012 warrants for common shares
outstanding. This includes 18,876,901 warrants held by an affiliate of Constellation with an exercise price of $12.9783 which expire on May 1, 2020 and 35,111 warrants with exercise prices between $3.80 and $4.56 which expire on April 30,
2018. 
 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 

The Company had previously been leasing office premises from Tweed Hershey Drive Inc., which was related through common ownership (the Company’s CEO and
chairman is a significant shareholder of the lessor). On January 13, 2017, the Company acquired the land and buildings at 1 Hershey Drive in Smiths Falls, Ontario. Details of the amounts expensed and owing related to these premises are detailed
in Note 25 Related Parties in the Annual Financial Statements. 
 The Company leases premises for the two Bedrocan facilities in Toronto and a facility in
Edmonton from a company controlled by Murray Goldman, a director of Canopy Growth Corporation. The Bedrocan facility leases expire on October 15, 2018 and August 31, 2024 and the Edmonton facility lease expires on July 31, 2037.
Details of the amounts expensed and owing related to these premises are described in Note 25 Related Parties in the Annual Financial Statements. 
 The
Company leases premises for the Mettrum Hemp’s production facility located in Barrie, Ontario from Greg Herriott, the former founder and shareholder of Mettrum Hemp and former officer of Mettrum, now the president of Mettrum Hemp and a
shareholder of the Company. The lease has a term of five (5) years with an expiration date of March 31, 2020 together with one (1) extension term of five (5) years. Details of the amounts expensed and owing related to these
premises are described in Note 25 Related Parties in the Annual Financial Statements. 
 The Chief Executive Officer has been engaged to provide services to
the Company at $55 per quarter and is eligible for up to a $300 annual bonus. Details of the amounts expensed and owing are described in Note 25 Related Parties in the Annual Financial Statements. 

The Company currently has a loan payable to Murray Goldman, a director of the Company. Included in interest expense for the year ended March 31, 2018 was
an amount of $169 (for the year ended March 31, 2017 - $179). At March 31, 2018, the loan balance was $1,564 (March 31, 2017 - $1,724). 

Pursuant to the share purchase agreement with Hemp.CA, the company entered into a lease for the Vert and Hemp.CA properties with Dany Lefebvre, a shareholder
of Hemp.CA who for a period of time following the acquisition was an employee of Canopy. The lease was to expire on November 1, 2036 and the Company had two automatic renewal terms of 10 years each. As of March 31, 2018, the related lease
was cancelled and the expense incurred under the lease including base rent, operating costs, and cancellation costs were $84 since acquisition. 

  
 42 

 During the year ended March 31, 2018, $708 was expensed in director’s fees (for the year ended
March 31, 2017 - $203). The Company had $nil owing in accounts payable and accrued liabilities to directors at March 31, 2018 and 2017. 
 At
March 31, 2018 the Company had loans receivable from six officers and two directors (see below) relating to the share purchase loan described in the Annual Financial Statements. At March 31, 2018, the total loans receivable was $503 with
the balance due from employees of or consultants to the Company. The loans receivables relating to officers and directors of $288 were discharged in full on May 8, 2018 (March 31, 2017 - $nil). 

 

							
	 Name
	  	 Title
	  	Loan
amount	 
	 Bruce Linton
	  	Chief Executive Officer	  	$	83	 
	 Tim Saunders
	  	Chief Financial Officer	  	 	42	 
	 Dave Pryce
	  	VP, International Market Expansion and Government Relations	  	 	4	 
	 John Bell
	  	Independent Director	  	 	33	 
	 Mark Zekulin
	  	President	  	 	63	 
	 Murray Goldman
	  	Director	  	 	21	 
	 Phil Shaer
	  	Chief Legal Officer	  	 	25	 
	 Ru Wadasinghe
	  	Chief Information Officer	  	 	17	 
		  		  	  
	  
	 
		  		  	$	288	 

 These transactions are in the normal course of operations and are measured at the exchange amounts being the amounts agreed to
by the parties. 
 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, our Chief Executive Officer and Chief Financial Officer concluded that,
because of the material weakness in our internal control over financial reporting described below, our Disclosure Controls were not effective as at March 31, 2018. 

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. 

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. 

As of March 31, 2018, the Company did not maintain effective internal controls over Corporate-wide EUC spreadsheets, the accounting complexities
encountered in the financial reporting relies on equally complex spreadsheets. 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. 
 Because of the
material weakness described above, management concluded that the Company’s internal controls over financial reporting were not effective as at March 31, 2018. Accordingly, a reasonable possibility exists that material misstatements in the
Company’s financial statements will not be prevented or detected on a timely basis. 

  
 43 

 Remediation of material weaknesses previously identified as not remediated and related material
changes in internal control over financial reporting 
 Reliance on End User Computing (“EUC”) – Throughout fiscal 2018 Management
continued 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 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. 

The material weakness related to reliance on EUC has not been fully remediated as at March 31, 2018. Remediation is expected to be completed in fiscal
2019 with the implementation of the ERP system. 
 IT General Controls - Management previously concluded that, as of March 31, 2017, the
Company’s IT general controls, specifically user access and change management processes, were determined to be a material weakness in the Company’s internal control over financial reporting. Management implemented process improvements in
both the areas of user access and change management. A revalidation of information technology user access and refresher training was undertaken. Additionally, tools to allow for tighter management of user access were implemented on key systems.
Management considers the previously identified material weakness related to IT General Controls to be remediated as at March 31, 2018. 
 Other than
those described above, there have been no changes in the Company’s internal control over financial reporting during the three months ended March 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 Tweed Grasslands
Cannabis Inc. (acquired May 1, 2017), Spot Thrapeutics Inc (acquired on August 28, 2017), Grow House JA Limited (acquired 49% on September 6, 2017), Spectrum Cannabis Denmark ApS (acquired control on September 20, 2017), Les
Serres Vert Cannabis (acquired 66.7% interest on December 18, 2017) and BC Tweed Joint Venture Inc (acquired 66.7% interest on October 10, 2017). The operations of Tweed Grasslands Cannabis Inc., Spot Therapeutics Inc., Grow House JA
Limited, Spectrum Cannabis Denmark ApS , Les Serres Vert Cannabis and BC Tweed Joint Venture Inc combined, represent approximately 12% of the Company’s assets (approximately 1% of current assets and 21% of
non-current assets); they also represent approximately 26% of current liabilities and 6% of long-term liabilities, 0% of the Company’s revenues and 7% of operating expenses for the year ended
March 31, 2018 and 0% of the Company’s revenues and 24% of operating expenses for the three months ended March 31, 2018. 

  
 44 

 ADDITIONAL GAAP MEASURES 

The Company uses “Income 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. 
 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 Prospectuses dated December 16, 2016, August 18, 2016, and April 8, 2016 and 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 has a history of losses, may incur significant losses in the future and may not achieve or maintain
profitability; 

  

	•	 	 The Company’s ability to grow, store and sell medical cannabis in Canada are dependent upon licenses from
Health Canada which are subject to ongoing compliance and reporting requirements; 

  

	•	 	 The activities of the Company are subject to regulation by governmental authorities, particularly Health Canada;

  

	•	 	 The laws, regulations and guidelines generally applicable to the cannabis industry domestically and
internationally may change in ways currently unforeseen by the Company; 

  

	•	 	 Any amendment to or replacement of the ACMPR may cause adverse effects to the Company’s operations. The
risks to the business of the Company represented by this decision and subsequent regulatory changes could reduce the addressable market for the Company’s products and could materially and adversely affect the business, financial condition and
results of operations of the Company; 

  

	•	 	 On April 13, 2017, the Government of Canada released the proposed Cannabis Act to regulate the production,
distribution and sale of cannabis for unqualified adult use. On November 27, 2017, the House of Commons passed the proposed Cannabis Act, and on December 20, 2017, the Prime Minister communicated that the Canadian Federal Government
intends to legalize cannabis in the summer of 2018. The proposed Cannabis Act is currently before the Senate. It is unknown whether the Cannabis Act will be passed. Several recommendations from the Task Force reflected in the Cannabis Act including,
but not limited to, permitting home cultivation, potentially easing barriers to entry into the Canadian recreational cannabis market and restrictions on advertising and branding, could materially and adversely affect the business, financial
condition and results of operations of the Company; 

  

	•	 	 The proposed Cannabis Act is not yet in force, and the regulations to the Cannabis Act have not yet been
published. There can be no assurance that the legalization of recreational cannabis by the Canadian Federal Government will occur on the terms in the proposed Cannabis Act or at all, and the legislative framework pertaining to the Canadian
recreational cannabis market is uncertain; 

  

	•	 	 The governments of British Columbia, Alberta, Manitoba, Ontario, Québec and New Brunswick have also made
varying announcements on the proposed regulatory regimes for the distribution and sale of 

  
 45 

	 	 
cannabis for recreational purposes. There is no guarantee that provincial legislation regulating the distribution and sale of cannabis for recreational purposes will be enacted according to the
terms announced by such provinces, or at all, or that any such legislation, if enacted, will create the growth opportunities that the Corporation currently anticipates; 

 

	•	 	 The Company’s operations are subject to various laws, regulations and guidelines relating to the
manufacture, management, transportation, storage and disposal of medical cannabis but also including laws and regulations relating to health and safety, the conduct of operations and the protection of the environment; 

 

	•	 	 Third parties with which the Company does business may perceive that they are exposed to reputational risk
because of the Company’s cannabis business activities; 

  

	•	 	 The operation of the Company can be impacted by adverse changes or developments affecting the facilities of the
Company’s wholly-owned subsidiaries; 

  

	•	 	 The Company’s ability to recruit and retain management, skilled labour and suppliers is crucial to the
Company’s success; 

  

	•	 	 The Company’s growth strategy contemplates outfitting its facilities with additional production resources. A
variety of factors could cause these activities to not be achieved on time, on budget, or at all. As a result, there is a risk that the Company may not have product or sufficient product available to meet the anticipated demand or to meet future
demand when it arises; 

  

	•	 	 The Company and its wholly-owned subsidiaries have limited operating histories; 

 

	•	 	 Even if its financial resources are sufficient to fund its current operations, there is no guarantee that the
Company will be able to achieve its business objectives. The continued development of the Company may require additional financing and there can be no assurance that additional capital or other types of financing will be available if needed or that,
if available, the terms of such financing will be favourable to the Company; 

  

	•	 	 There is potential that the Company will face intense competition from other companies, some of which can be
expected to have longer operating histories and more financial resources and manufacturing and marketing experience than the Company; 

  

	•	 	 The Company believes the cannabis industry is highly dependent upon consumer perception regarding the safety,
efficacy and quality of the cannabis produced. Consumer perception of the Company’s products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity
regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the medical
cannabis market or any product, or consistent with earlier publicity; 

  

	•	 	 The Company and its wholly-owned subsidiaries face an inherent risk of exposure to product liability claims,
regulatory action and litigation if its products are alleged to have caused significant loss or injury; 

  

	•	 	 The products of the Company’s wholly-owned subsidiaries could be subject to the recall or return of their
products for a variety of reasons. If a product recall or return should happen, the Company could be required to incur unexpected expenses and divert management attention and could see harm caused to its image and product sales decline. In addition,
as result of the product recall or return, the Company and its wholly-owned subsidiaries could face increase operational scrutiny by Health Canada or other regulatory agencies, requiring further management attention and potential legal fees and
other expenses; 

  

	•	 	 The introduction of home and designated growing may have a negative impact on the Company’s sales and
infringe on the Company’s market; 

  

	•	 	 Greater access to medical cannabis, through home and designated growing and illegal dispensaries, may decrease
the number of patients registering with the Company and may cause registered patients to leave the Company and grow for themselves; 

  

	•	 	 Home and designated growing may increase access to cannabis in the illegal market, potentially impacting the
public’s perception of the Company, and the cannabis industry as a whole; 

  
 46 

	•	 	 Any significant interruption or negative change in the availability or economics of the supply chain for key
inputs could materially impact the business, financial condition and operating results of the Company; 

  

	•	 	 The Company is largely reliant on its own market research to forecast sales as detailed forecasts are not
generally obtainable from other sources at this early stage of the medical cannabis industry in Canada. A failure in the demand for its products to materialize because of competition, technological change or other factors could have a material
adverse effect on the business, results of operations and financial condition of the Company; 

  

	•	 	 The Company may be subject to growth-related risks including capacity constraints and pressure on its internal
systems and controls; 

  

	•	 	 The Company may engage in acquisitions or other strategic transactions or make investments that could result in
significant changes or management disruption; 

  

	•	 	 The Company could fail to integrate acquired companies into the business of the Company; 

 

	•	 	 Completed acquisitions, strategic transaction or investments could fail to increase shareholder value;

  

	•	 	 Certain of the Directors and Officers of the Company are also directors and officers of other companies, and
conflicts of interest may arise between their duties as officers and directors of the Company and as officers and directors of such other companies; 

  

	•	 	 The Company may become party to litigation, mediation and/or arbitration from time to time in the ordinary course
of business which could adversely affect its business; 

  

	•	 	 The market price for the common shares may be volatile and subject to wide fluctuations in response to numerous
factors, many of which are beyond the Company’s control; 

  

	•	 	 There can be no assurance that an active and liquid market for the common shares will be maintained and an
investor may find it difficult to resell any securities of the Company; 

  

	•	 	 Prior to the start of trading on March 20, 2017, the Company was the first cannabis company to be added to
the health care section of the S&P/TSX Composite Index. In order to be added to the Composite Index, the Company had to meet certain market capitalization, liquidity, and domicile requirements. Big institutional investors and index funds use the
Composite Index to guide buying decisions, which could influence the trading price of the Company’s shares; 

  

	•	 	 October 16, 2017, the TSX provided clarity regarding the Requirements to applicants and TSX-listed issuers with business activities in the cannabis sector. In TSX Staff Notice 2017-0009, the TSX notes that issuers with ongoing business activities that violate U.S. federal law regarding cannabis are not
in compliance with the Requirements. These business activities may include (i) direct or indirect ownership of, or investment in, entities engaging in activities related to the cultivation, distribution or possession of cannabis in the U.S.,
(ii) commercial interests or arrangements with such entities, (iii) providing services or products specifically targeted to such entities, or (iv) commercial interests or arrangements with entities engaging in providing services or
products to U.S. cannabis companies. The TSX reminded issuers that, among other things, should the TSX find that a listed issuer is engaging in activities contrary to the Requirements, the TSX has the discretion to initiate a delisting review. If
the TSX were to initiate a delisting review in respect of the Company, there could be an adverse effect on the trading price of the Company’s shares; 

  

	•	 	 The Company does not anticipate paying any dividends on the common shares in the foreseeable future. Dividends
paid by the Company would be subject to tax and, potentially, withholdings; 

  

	•	 	 The Company’s operations are subject to environmental and safety laws and regulations concerning, among
other things, emissions and discharges to water, air and land; the handling and disposal of hazardous and non-hazardous materials and wastes, and employee health and safety; 

 

	•	 	 The Company has, and will have, certain business arrangements with third parties, the breakdown/loss of which
could impact its operations; 

  

	•	 	 On October 30, 2017, The Company announced that it entered into a strategic relationship with an affiliate
of Constellation. The Company and the affiliate of Constellation entered into an Investor Rights Agreement pursuant to which the Company granted registration rights to the affiliate of Constellation and certain
pre-emptive rights whereby, subject to certain exceptions, the affiliate of Constellation may 

  
 47 

	 	 
maintain its pro rata ownership in the Company or cause the Company to take steps to assist it in selling some or all of the Common Shares it holds. In addition, in connection with the
Constellation transaction, the Company is subject to a number of restrictions on activities that the Company cannot undertake without consent of the Constellation affiliate. These restrictions limit the Company’s ability to conduct certain
business, and it is possible that such restrictions could significantly adversely affect the business, financial condition and results of operations of the Company; 

 

	•	 	 An affiliate of Constellation owns a substantial number of the outstanding common shares of the Company (on a
fully diluted basis) and, through its pre-emptive rights, has the ability to maintain its ownership level. As such, this shareholder is in a position to exercise significant influence over matters requiring
shareholder approval, including the election of directors and the determination of significant corporate actions. As well, this shareholder could delay or prevent a change in control of the Company that could otherwise be beneficial to the
Company’s shareholders; 

  

	•	 	 The Company currently has, and may in the future enter into further, strategic alliances with third parties that
it believes will complement or augment its existing business. The Company’s ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances
could present unforeseen integration obstacles or costs, may not enhance the Company’s business, and may involve risks that could adversely affect the Company, including significant amounts of management time that may be diverted from
operations to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future
strategic alliances will achieve, or that the Company’s existing strategic alliances will continue to achieve, the expected benefits to the Company’s business or that the Company will be able to consummate future strategic alliances on
satisfactory terms, or at all. Any of the foregoing risks and uncertainties could have a material adverse effect on the Company’s business, financial condition and results of operations; 

  
 48 

	•	 	 The Company’s expansion into jurisdictions outside of Canada is subject to risks. In addition, in
jurisdictions outside of Canada, there can be no assurance that any market for the Company’s products will develop. The Company may face new or unexpected risks or significantly increase its exposure to one or more existing risk factors,
including economic instability, changes in laws and regulations, and the effects of competition. These factors may limit the Company’s ability to successfully expand its operations into such jurisdictions and may have a material adverse effect
on the Company’s business, financial condition and results of operations; 

  

	•	 	 The Company’s operations in emerging markets are subject to political and other risks associated with
operating in a foreign jurisdiction; 

  

	•	 	 The Company continues to monitor developments and policies in the emerging markets in which it operates and
assess the impact thereof to its operations; however, such developments cannot be accurately predicted and could have an adverse effect on the Company’s operations or profitability; 

 

	•	 	 Corruption and fraud in certain emerging markets relating to ownership of real property may adversely affect the
Company’s business; 

  

	•	 	 Inflation in emerging markets, along with governmental measures to combat inflation, may have a significant
negative effect on local economies and also on the Company’s financial condition and results of operations; 

  

	•	 	 The Company’s operations may be impaired as a result of restrictions on the acquisition or use of properties
by foreign investors or local companies under foreign control; 

  

	•	 	 The legal and regulatory requirements in the foreign countries in which the Company operates with respect to the
cultivation and sale of marijuana, banking system and controls, as well as local business culture and practices are different from those in Canada. The officers and directors of the Company must rely, to a great extent, on the Company’s local
legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its
governmental relations. The Company must rely, to some extent, on those members of management and the Company’s board of directors who have previous experience working and conducting business in these countries, if any, in order to enhance its
understanding of and appreciation for the local business culture and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of the cultivation and
sale of marijuana as well as in respect of banking, financing, labour, litigation and tax matters in these jurisdictions. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond
the control of the Company. The impact of any such changes may adversely affect the business of the Company; 

  

	•	 	 The Company may expand into other geographic areas, which could increase the Corporation’s operational,
regulatory and other risks; and 

  

	•	 	 The Company may be responsible for corruption and anti-bribery law violations. 

  
 49

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