EDGAR 10-K Filing

Company CIK: 1737927
Filing Year: 2025
Filename: 1737927_10-K_2025_0000950170-25-079317.json

---

ITEM 1. BUSINESS
Item 1. Business.
Our Vision and Purpose
Our vision is to unleash the power of cannabis to improve lives. As one of the first publicly traded, licensed cannabis producers in the world, our vision comes to life by harnessing the power of the plant, building a global cannabis company, and fostering a purpose-driven atmosphere for our employees. We are a collective of dynamic and engaged leaders, united by a passion for cannabis, focused on delighting our consumers and medical cannabis patients while creating value for our stakeholders and one another.
Canopy Growth is a world-leading cannabis company which produces, distributes, and sells a diverse range of cannabis and cannabis-related products. Cannabis products are principally sold for adult-use and medical purposes under a portfolio of distinct brands in Canada pursuant to the Cannabis Act, SC 2018, c 16 (the “Cannabis Act”), and globally pursuant to applicable international legislation, regulations, and permits.
Our core operations are in Canada, Germany and Australia and we hold a significant non-controlling, non-voting interest in Canopy USA, an entity that participates in the sale of cannabis and hemp derived products in the United States. Our branded product portfolio includes multiple cannabis formats, such as high-quality dried flower, pre-rolled joints (“PRJ”), oils, softgel capsules, and edibles including gummies, as well as industry-leading vaporizer devices designed to meet the needs of consumers worldwide.
Our vision is shaped by our principal values, and these values drive our organization through:
•Responsible Corporate Citizenship: We are serious about our responsibility to lead with purpose and show how cannabis can be a force for positive change. This is why we incorporate robust and stringent product safety measures and responsible-use education initiatives designed to create and sustain better places to live and work together.
•Engaged Leadership: We depend on the shared purpose, passion and leadership of world-class talent. We strive to live and lead by example by creating equity in our talent processes and encouraging an inclusive environment for all. Our guiding principles - own it, listen and share, catch people doing things right, grow good together and shatter barriers - keep us connected to each other and to the shared goals that are bigger than ourselves.
Our Company
Canopy Growth was incorporated pursuant to the Canada Business Corporations Act on August 5, 2009 and our common shares are listed and trade on both the TSX and The Nasdaq Global Select Market.
We are driven by an unwavering commitment to providing our consumers with the best possible experiences rooted in our vision of unleashing the power of cannabis to improve lives. From product and process innovation to market execution, we are driven by a commitment to drive the industry forward.
We were among the first companies to be permitted to cultivate and sell legal cannabis in Canada. Today, we supply high-quality medical cannabis products to patients in Canada, Europe, and Australia. We seek to continuously develop initiatives designed to help patients and consumers safely, effectively, and responsibly use cannabis.
We act upon our values by advancing community engagement where we have an active employee presence or operational footprint. This includes:
•Fostering employee volunteerism opportunities through Canopy ‘Days of Giving’ program which provided employees with paid time off to volunteer and giveback in their communities with charity organizations of their choice; and
•Hosting workplace fundraising events throughout the year in support of a range of grass-roots community support organizations.
Today, we are a leader in the medical and adult-use cannabis markets in Canada where we offer a broad portfolio of brands and products and continue to expand our portfolio to include new innovative cannabis products and formats. Our primary medical brand is Spectrum Therapeutics and we have also launched Canopy Medical, a medical cannabis brand in select international markets. Our curated cannabis product formats include dried flower, PRJ, oil, softgel capsules, edibles including gummies and vapes, as well as a wide range of cannabis accessories including our premier herbal vaporizer devices Storz & Bickel® (collectively with Storz & Bickel GmbH, “Storz & Bickel”).
For adult-use cannabis, we maintain agreements to supply all Canadian provinces and territories with our adult-use products for sale through their established retail distribution systems. Using a consumer-driven approach, we provide a portfolio of diverse products that offer experiences for a wide range of occasions that our consumers seek. Our distinct cannabis brands include Tweed® (“Tweed”), 7ACRES, Maitri, HiWay, Twd., Wana®, Claybourne™, and Deep Space in the adult-use channel.
Our Strategy and Outlook
We aspire to demonstrate how cannabis can be a force to improve lives and communities, and we have defined a clear strategy to bring this ambition to life. Our overall strategy is anchored in our commitment to building beloved consumer brands within an asset-right operating model, which focuses on driving efficiency for the greatest return on asset investment while owning the core capabilities that are critical to long-term sustainable success. We believe that this will enable us to compete more effectively, and lead, in today’s rapidly evolving market.
To achieve our vision, our strategy consists of five pillars:
•Furthering our Leadership Position with Medical Cannabis Patients Worldwide - We are committed to the high-quality production of medical cannabis products and are equally committed to helping medical professionals confidently prescribe and patients to responsibly use our products. Our unwavering commitment to the safety and effectiveness of our products is a critical strategic imperative which also helps differentiate us in the growing cannabis market. To remain successful, we consistently strive to make significant investments in our operations within Canada and Europe and we are well-positioned to pursue international growth opportunities with our strong medical cannabis brands and distribution networks. We intend to fuel the continued demand for our European Union Good Manufacturing Practices (“EU-GMP”) certified medical grade cannabis internationally with supply from within Europe and from our Canadian EU-GMP certified facility in Kincardine, Ontario. In addition, we will continue to maximize our existing routes to market to further our execution on our international growth plans, while leveraging our cannabis expertise and well-established medical brands.
•Leadership of Global Vaporization through Storz &Bickel - Vaporization is a consumption method that aligns with the desires of several of our medical cannabis patients and adult-use consumers. With an already extensive product portfolio, our focus is to continue to push for more impactful product innovations that allow for the expansion of new product formats. Like our cannabis, these devices are crafted with the same attention to quality, performance and safety and undergo rigorous manufacturing procedures and certification. While already internationally established, Storz & Bickel is focused on addressing consumer needs in the North American market and intends to continue to deliver its award-winning products to a broader audience.
•Focusing on Profitable Scale in Adult-Use Cannabis through our Powerhouse Brands Backed by Exceptional Product Quality - The heart of our business is in North America with our roots in Canada and investments in the U.S. Our brand portfolio includes Tweed, Claybourne™, HiWay, 7ACRES, Twd., Wana, and Deep Space in our Canadian adult-use market. As markets continue to evolve, we believe the role of brands will become more prominent in consumers’ desire for trustworthy products that deliver quality and consistency of experience. We are investing in our brands to further our position of leadership in the market and to continually strengthen their relationship with consumers. We understand that the success of our products and brands is only achievable with the support and buy-in of customers. As consumer needs and trends evolve, we are continuing to focus our efforts on product categories with the highest and most tangible profit opportunities that also align to customer needs and consumer desires. At the same time, we are significantly optimizing our wholesale capabilities to ensure that our products have the broadest distribution in our highest profit geographies.
•Leveraging Our Disciplined “Asset-Right” Model and Power Growth - As the cannabis market continues to rapidly evolve, we remain focused on driving efficiency for the greatest return on asset investments. Our objective is to excel at our own internal manufacturing capabilities by making selective investments in assets that will accelerate returns and secure long-term sustainable profitability. This means we will invest where necessary and continue to leverage local and/or regional suppliers for raw materials to complement our owned operations. We continually and consistently seek to optimize our operating footprint in order to achieve profitability and foster growth while retaining a steadfast commitment to the quality of our products and the integrity of our global supply chain.
•Unparalleled exposure to the expanding U.S. cannabis market - Unlike other cannabis businesses, our investment in Canopy USA provides a unique opportunity to maximize the value of our previously-held conditional U.S. THC investments. We have an unconsolidated and non-controlling interest in Canopy USA which is, and is expected to continue to be, accounted for as an equity method (fair value) investment until such time as a Stock Exchange Permissibility Date (as defined below) occurs. Canopy USA’s powerhouse brands, Wana and Jetty, establish a foundation for us to participate in the world’s largest and fastest growing cannabis market and to offer our shareholders unique exposure to this market’s growth.
Canopy USA and certain entities over which Canopy USA exercises control (such entities, the “Canopy USA LPs”) currently hold an ownership interest in the following assets, among others:
oWana - Canopy USA holds 100% of the membership interests of Wana Wellness, LLC, The Cima Group, LLC, and Mountain High Products, LLC (collectively, “Wana”).
oJetty - Canopy USA holds approximately 77% of the shares of Jetty.
oAcreage - Canopy USA holds 100% of the issued and outstanding shares of Acreage.
oTerrAscend - the Canopy USA LPs hold an aggregate of 64,564,487 TerrAscend common shares (the “TerrAscend Common Shares”) on an as-converted basis and 22,474,130 TerrAscend Common Share purchase warrants with a weighted average exercise price of $6.07 per TerrAscend Common Share and expiring on December 31, 2032 (the “TerrAscend Warrants”). Assuming full exercise of the TerrAscend Warrants, the Canopy USA LPs will hold an aggregate of 87,038,617 TerrAscend Common Shares on an as-converted basis assuming conversion of the TerrAscend exchangeable shares (the “TerrAscend Exchangeable Shares”) held by the Canopy USA LPs.
See “Risk Factors - Our expansion plans into the United States rely upon the continued operations and success of Canopy USA and its subsidiaries and the anticipated benefits of the strategy involving Canopy USA is uncertain and may not be realized; and the fair value of our equity method investment in Canopy USA is volatile” under Item 1A of this Form 10-K.
Our Brands and Products
Cannabis Products
We produce and sell a wide range of cannabis products, including dried cannabis flower, PRJ, extracts and concentrates, edibles including gummies and vapes in Canada and other locations where legally permissible to do so. Our cannabis products are sold both in the direct-to-patient markets for medicinal use, as well as in the adult-use market following the enactment of the Cannabis Act in Canada and the amendments thereto which provided for the legalization and regulation of cannabis products beyond cannabis flower and cannabis oils, to include products such as beverages, edibles including gummies and vapes (collectively, “Cannabis 2.0”). Our cannabis products are sold under a variety of brand names described under “Brand Portfolio” below and are intended to position us as a leader in both the medical and adult-use markets.
Our cannabis products include:
•Dried Flower: We pride ourselves on growing high-quality cannabis, which is packaged for sale as dried flower and PRJ. We sell dried flower and PRJ in both the medical and adult-use markets. Dried flower continues to be the core of all cannabis markets globally and accordingly our focus on consistent high quality cultivation is relentless. Further, as the PRJ category gains further momentum based on the convenience of consumption for these products, we will continue to seek an active role in the category’s growth through non-infused and infused PRJ products.
•Extracts and Concentrates: This category includes softgel capsules which offer a convenient, precise, and discrete dosing solution for those interested in consuming their cannabis in pill form and are available in a variety of concentrates, from micro to full doses. In addition to our historic experience in the softgel product category, which we feel is a competitive advantage, this category also represents a precise and low-cost consumption option for consumers while continuing to be attractive from a margin perspective for the Company.
•Cannabis Edibles: This category includes a range of ingestible products including gummies. We are the exclusive Canadian licensees of the Wana gummies, one of North America’s leading cannabis edible brands. Wana prides itself on consistency, quality, and cannabis-free taste in addition to a range of products with accelerated onset. Wana gummies are available in a range of cannabinoid ratios and values, and class-specific terpene formulations. Current products offer a discreet and dosable cannabis experience and are available in a variety of flavors and sizes. We continue to view the edibles category as one of the major long term growth drivers within the cannabis industry and believe we are well positioned to compete for leadership with Wana as our central edibles brand.
•Cannabis Vapes: Our vapes are designed to bring effective and reliable technology to the vaping category. Our “510” vape concentrate cartridges and all-in-one vape devices are available in a variety of Tweed and 7ACRES strains, with a range of THC and CBD levels. Our vapes are tamper-resistant, adhere to Health Canada’s regulations and we are continually reviewing and testing all inputs to ensure the highest quality and reliability of cannabinoids, terpenes and tamper-resistance features. Our vape cartridges are tested to the FDA standard for leachability to ensure the reduction of heavy metals and contaminants leaching into the extract. Our all-in-one vape products are produced using UL 8139 or equivalent Certified Safe Manufacturing standards which evaluate the safety of the integrated systems of a vape device and safety features and mechanisms that protect the user from harm when using the device. All of our vape battery cells are certified to UL 1642 or an equivalent safety standard.
Devices and Delivery Technology
In addition to the vape pens and cartridge products that we offer in the legal cannabis market in Canada, through Storz & Bickel we manufacture and sell medical cannabis vaporizer devices as well as dry herb vaporizers for recreational purposes. Storz & Bickel operates in an internationally certified facility dedicated to manufacturing medical devices. The certified medical vaporizers and dry herb vaporizers are exported to over 100 markets around the world. Storz & Bickel currently holds registrations to sell their medical devices Volcano Medic 2, and Mighty+ Medic in Australia, Canada, the European Union, Israel, Switzerland, and the United Kingdom and meet the country specific requirements including, but not limited to, electrical safety, biocompatibility, usability, as well
as clinical performance and general safety. The Storz & Bickel dry herb vaporizers are crafted with the same attention to performance and safety as their medical devices and they undergo rigorous manufacturing procedures and are either TÜV Süd-certified or UL listed (UL8139).
On October 17, 2023, Storz & Bickel unveiled the Venty™, an innovative, portable vaporizer for dry herbs. Its newly designed convection and conduction heater as well as the cutting-edge heating management and cooling technology enhance flavor to produce superior vapor quality on the go. The Venty successfully underwent conformity assessment procedure for CE certification in the European Union and is UL listed (UL 8139).
Brand Portfolio
Our diverse brand portfolio enables us to effectively reach a broad spectrum of consumers for a variety of needs and occasions throughout their day - whether for adult-use or for medical purposes. Our product portfolio consists of Adult-Use Brands, Medical Brands, and Devices - as well as brands that we license from others, referred to as our “Affiliated Brands” below.
Adult-Use Brands
Devices
Tweed is our flagship cannabis brand that proudly offers a wide range of easy to enjoy cannabis products across dried flower, pre-rolls, vapes, oils, softgels, and beverages.
Storz & Bickel
Based in Tuttlingen, Germany, Storz & Bickel are designers and manufacturers of medically approved herbal vaporizers, most notably the Volcano Medic 2 and the Mighty+ Medic.
7ACRES is a cannabis brand that appeals to the senses through thoughtfully selected aromatic cultivars and experiences. Offerings include flower, pre-rolls, vape, beverages and concentrates.
Affiliated Brands
Deep Space is a line of bold-flavored cannabis-infused soft drink beverages adding rocket-fuel to your space adventure with the maximum allowed 10mg THC per can. Looking for more fuel? Deep Space Propulsion offers 10mg THC, 10mg CBG and 30mg of naturally occurring caffeine per can.
Wana is one of North America's leading edibles brand that prides itself on consistency, quality and seriously great tasting gummies.
HiWay is a value brand that offers a variety of products, including dried flower, pre-rolls, and vapes at a convenient price point and level of trusted quality that our consumers rely on.
Claybourne™ is a California-based cannabis brand established in 2017, known for producing high-quality products with a focus on consistent, detail-oriented cultivation and processing.
Maitri is a Québec-centric brand focused on expertly-cultivated cannabis strains that are dominant in THC. Designed to bring the natural beauty of the province into your home.
Twd. is a simple brand with affordable, high-quality options that make shopping for cannabis easy. Offerings include flower, pre-rolls and oil.
Medical Brands
Spectrum Therapeutics is our brand of medical cannabis products designed to optimize the therapeutic benefits of medical cannabis as prescribed by a medical practitioner. Branded products include cannabis oils, softgels and dried flower. Spectrum Therapeutics is also an e-commerce, multi-brand platform within the Canadian medical cannabis market.
Canopy Medical is a leading pharmaceutical manufacturer for the production, import and release of medical cannabis products in Europe. Canopy Medical is committed to developing and delivering world-class medical cannabis solutions for patients to improve their quality of life through innovative and high-quality products. Current medical cannabis formats sold within the Canopy Medical cannabis brand today include dried flower and oil extracts.
Our Operations
Canadian Operations
Medical
Under the Cannabis Act, license holders are able to sell medical cannabis through the mail to registered patients. Through the Spectrum Therapeutics website, patients who have registered with Spectrum Therapeutics are able to purchase products online and have them shipped directly to the address indicated on their registration document.
We have developed several programs to improve access to medical cannabis for authorized patients. First, we provide an income-tested compassionate pricing program whereby eligible low-income patients may obtain a 20% discount on regular prices of medical cannabis. We also have multiple offerings for veterans of the Canadian Armed Forces, including a team of customer care agents dedicated to assisting veterans with registration, ordering and insurance coverage; pre-approval and direct billing of Veterans Affairs Canada (“VAC”) to ensure uninterrupted access to medication as well as full coverage (through VAC) of all cannabis products offered in our online Spectrum Therapeutics medical shop. Veterans do not have to pay out of pocket for any product; and can access special offers on our Storz & Bickel devices. For non-veterans, we also provide support through our customer care team to help patients identify if their medication is covered under the growing number of private health plans that have a medical cannabis component.
In our effort to drive awareness of our products and services, we work closely with patient educators of specialty medical cannabis clinics and continue to hold community events (to the extent allowable within the regulatory environment) to build relationships and education on the offerings from Spectrum Therapeutics.
Adult-Use
Our cannabis cultivation operations are focused in two facilities, our hybrid greenhouse facility in Kincardine, Ontario and the DOJA greenhouse facility in Kelowna, British Columbia. We believe that the capacity in the Kincardine facility and the DOJA facility, as well as externally sourced low cost cannabis flower supply, can meet the current demand for dried flower across our entire house of brands. Further, the receipt of EU-GMP certification at the Kincardine facility enables us to continue exporting certified medical cannabis to medical markets in Europe and Australia.
Our licensed operational capacity in Canada includes advanced manufacturing capability for oil and softgel encapsulation, PRJ (infused and non-infused) and hash production, which is primarily completed at our Smiths Falls, Ontario manufacturing facility. Through our in-house manufacturing capabilities of cannabis products, we can process and package bulk cannabis flower, whether internally or externally sourced, into high-quality cannabis flower products. Our remaining products are manufactured through an adaptive third-party sourcing model for all vapes, edibles and extracts. We are confident that our production and manufacturing capabilities and know-how are sufficient to meet the diverse needs of our adult-use and medical cannabis consumers in Canada.
Global Operations
In recent years, the actions of governments around the world have signaled a significant change in attitudes towards cannabis and have either formally legalized medical cannabis access, or established government efforts to explore the legalization of medical cannabis access. Therefore, opportunities continue to exist for us to operate in jurisdictions where governments have established, or are actively moving towards, a legal framework. To support our continued push toward profitability, and to continue to seize growth opportunities in the global markets, we have reduced investment and concentrated our operational footprint in incubator markets in favor of using our resources to broaden partnerships in markets where we can operate via third parties with local expertise. Our purpose is to grow our global medical cannabis portfolio profitably. Our present market approach remains focused on supporting immediate revenue and establishing us as a leader in these markets, as permitted by local law and regulations.
Europe
Canopy Growth’s production and distribution facility in Europe is in Sankt Leon-Rot, Germany. Our Canopy Medical and Spectrum Therapeutics brands continue to serve this medical market with operations in Germany and Poland. Our European medical cannabis business operates in accordance with the specific regulatory framework in place in the relevant jurisdictions, including supplying EU-GMP as applicable to medical cannabis products.
In addition to medical cannabis, our operations in Europe also include Storz & Bickel, the award-winning manufacturers of vaporizers and related accessories. The corporate offices and production facility of Storz & Bickel are located in Tuttlingen, Germany where we are focused on the production of the CRAFTY®, VENTY®, PLENTY® and MIGHTY+® and the classic VOLCANO®.
United States
We are not considered a U.S. Marijuana Issuer (as defined in the Canadian Securities Administrators Staff Notice 51-352 - Issuers with U.S. Marijuana-Related Activities (the “Staff Notice”) nor do we have material ancillary involvement in the U.S. cannabis industry in accordance with the Staff Notice. While we have an interest in Canopy USA, which is a platform that is intended to enable such U.S.-based companies that may themselves participate in the U.S. cannabis market to operate, the transaction structure was intended to ensure that we do not violate the federal laws of the United States respecting cannabis and do not allow us to participate in cannabis activities in the United States or direct the activities of Canopy USA. Where a non-controlled affiliate has expressed an intent to enter the U.S. cannabis market, we have taken steps to insulate ourselves from all economic and voting interests. See “Business - Our Company - Canopy USA” and “Business - Government Regulation - U.S. Regulatory Framework” for further discussion.
Australia and New Zealand
Early in fiscal 2018, we launched our Australian operations and Spectrum Therapeutics began selling medical cannabis to doctors prescribing its products. Spectrum Therapeutics continues to support Australian medical patients through imported products. Additionally, Storz & Bickel medical devices, notably the MIGHTY+®, is also available to patients in Australia. The MIGHTY+ is listed on the Australian Register of Therapeutic Goods since 2019.
For medical devices to be legally supplied in New Zealand, they must be notified to the New Zealand Medicines and Medical Devices Safety Authority’s Web Assisted Notification of Devices (“WAND”) database. The Storz & Bickel devices have been notified to the WAND database.
Credit Facility
On March 18, 2021, the Company entered into a term loan credit agreement (the “Credit Agreement”) providing for a five-year, first lien senior secured term loan facility in an aggregate principal amount of US$750.0 million (the “Credit Facility”).
The Company had the ability to obtain up to an additional US$500.0 million of incremental senior secured debt pursuant to the Credit Agreement. Pursuant to the balance sheet actions completed in connection with the Reorganization, on October 24, 2022, the Company entered into agreements with certain of its lenders under the Credit Agreement pursuant to which the Company agreed to purchase in the aggregate US$187.5 million of the principal amount outstanding under the Credit Facility at a discounted price of US$930 per US$1,000 or US$174.4 million in the aggregate. The first payment, which was oversubscribed, in the amount of approximately $117.5 million (US$87.9 million) was made on November 10, 2022 to reduce the principal indebtedness under the Credit Facility by approximately $126.3 million (US$94.4 million). The second payment of approximately $116.8 million (US$87.2 million) was made on April 17, 2023 to reduce principal indebtedness under the Credit Facility by approximately $125.6 million (US$93.8 million). Additionally, on October 24, 2022, the Company and certain of its lenders agreed to make certain amendments to the Credit Agreement which, among other things, resulted in: (i) a reduction to the minimum liquidity covenant to no less than US$100.0 million following completion of the second principal repurchase on April 17, 2023; (ii) certain changes to the application of net proceeds from asset sales; (iii) the establishment of a new committed delayed draw term credit facility in an aggregate principal amount of US$100.0 million; and (iv) the elimination of the additional US$500.0 million incremental term loan facility.
On July 13, 2023, as part of the Company's balance sheet deleveraging initiatives, the Company entered into agreements with certain of its lenders under the Credit Agreement pursuant to which certain additional amendments were made to the Credit Agreement (the Credit Agreement, as amended as of July 13, 2023, is referred to herein as the "Amended Credit Agreement"). The Amended Credit Agreement required the Company to prepay or repurchase principal indebtedness under the Credit Facility in an amount equal to the US dollar equivalent of $93.0 million at a discounted price of US$930 per US$1,000 (the "July 2023 Paydown"). In addition, the Amended Credit Agreement requires the Company to apply certain net proceeds from asset sales to prepay or repurchase principal indebtedness under the Credit Facility and receive principal reductions at, in certain circumstances, a discounted price of US$950 per US$1,000. The Amended Credit Agreement also includes, among other things, amendments to the minimum liquidity covenant such that the US$100.0 million minimum liquidity covenant ceased to apply concurrently with the July 2023 Paydown. The Company made the July 2023 Paydown on July 21, 2023.
On each of August 11, 2023 and September 14, 2023, pursuant to the terms of the Amended Credit Agreement, the Company repurchased additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the "Second Quarter 2024 Paydowns"). The Second Quarter 2024 Paydowns resulted in an aggregate principal reduction of $73.3 million (US$54.5 million) for a cash payment of $69.6 million (US$51.8 million).
On each of November 28, 2023 and December 27, 2023, pursuant to the terms of the Amended Credit Agreement, the Company repurchased and repaid, as applicable, additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the "Third Quarter 2024 Paydowns"). The Third Quarter 2024 Paydowns resulted in an aggregate principal reduction of $65.4 million (US$48.5 million) for a cash payment of $63.2 million (US$46.9 million).
On February 21, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the "Fourth Quarter 2024 Paydown"). The Fourth Quarter 2024 Paydown resulted in an aggregate principal reduction of $31.1 million (US$23.0 million) for a cash payment of $28.0 million (US$20.7 million).
On April 29, 2024 and June 28, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the “First Quarter 2025 Paydowns”). The First Quarter 2025 Paydowns resulted in an aggregate principal reduction of $11.2 million (US$8.2 million) for a cash payment of $11.2 million (US$8.2 million)
On August 8, 2024, the Company entered into an amendment (the “Amending Agreement”) with all of the lenders to the Credit Facility under the Credit Agreement dated March 18, 2021, as amended on October 24, 2022 and July 13, 2023, among the Company and 11065220 Canada Inc., as borrowers, the lenders party thereto and Wilmington Trust, National Association, as administrative and collateral agent. Pursuant to the terms of the Amending Agreement, the maturity date of the Credit Facility was extended to December 18, 2026 and a mandatory US$97.5 million prepayment of the Credit Facility at 97.5% of par thereby reducing the outstanding amount of the Credit Facility by US$100.0 million was required to be made by December 31, 2024. In addition, the Amending Agreement provided for a further extension to the maturity date of the Credit Facility to September 18, 2027 if an optional prepayment on the same terms was made on or before March 31, 2025 (the “Optional Prepayment”). The Amending Agreement also includes changes to certain negative covenants, repayment provisions in the event of divestitures and events of default.
Through August 8, 2024, the Credit Facility matured on March 18, 2026 and through December 26, 2023, had an interest rate of LIBOR + 8.50%. After August 8, 2024, the Credit Facility matured on December 18, 2026, and after December 26, 2023, interest on amounts outstanding under the Credit Facility is calculated at either the applicable prime rate plus 7.50% per annum, subject to a prime rate floor of 2.00%, or adjusted term SOFR plus 8.50% per annum, subject to an adjusted term SOFR floor of 1.00%. The Company’s obligations under the Credit Facility are guaranteed by material wholly-owned Canadian and U.S. subsidiaries of the Company. The Credit Facility is secured by substantially all of the assets of the Company and its material wholly-owned Canadian and U.S. subsidiaries, including material real property. The Amended Credit Agreement contains representations and warranties, and affirmative and negative covenants.
On September 27, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the “Second Quarter 2025 Paydown”). The Second Quarter 2025 Paydown resulted in an aggregate principal reduction of $1.1 million (US$0.9 million) for a cash payment of $1.1 million (US$0.9 million).
On October 16, 2024, the Company made an early prepayment under the Credit Facility in an aggregate principal amount equal to $137.7 million (US$100.0 million) of the principal amount outstanding thereunder at a discounted price of $134.3 million (US$97.5 million) (the “Third Quarter 2025 Paydown”). Pursuant to the Amending Agreement, the US$100.0 million prepayment of the Credit Facility was required to be made by December 31, 2024.
On March 31, 2025, the Company made the Optional Prepayment and, as a result, the maturity date under the Credit Agreement was extended to September 18, 2027. The Optional Prepayment resulted in an aggregate principal reduction of $143.9 million (US$100.0 million) for a cash payment of $140.3 million (US$97.5 million).
ATM Programs
On June 6, 2024, the Company established an at-the-market equity program that allowed it to issue and sell up to US$250 million of Canopy Shares to the public from time to time at the Company’s discretion (the “June 2024 ATM Program”) pursuant to an equity distribution agreement (the “2024 Equity Distribution Agreement”) entered into among the Company and BMO Nesbitt Burns Inc., as Canadian agent, and BMO Capital Markets Corp., as U.S. agent (together, the “Agents”).
On February 28, 2025, the Company established a new at-the-market equity program that allows it to issue and sell up to US$200 million of Canopy Shares to the public from time to time at the Company’s discretion (the “February 2025 ATM Program”, and together with the June 2024 ATM Program, the “ATM Programs”) pursuant to an equity distribution agreement (the “2025 Equity Distribution Agreement) entered into among the Company and the Agents. The February 2025 ATM Program will be effective until the earlier of (i) the issuance and sale of all of the Canopy Shares issuable pursuant to the February 2025 ATM Program; (ii) the date on which the Company receives notice from a securities regulatory authority that the Company’s Canadian short form base shelf prospectus dated June 5, 2024 and/or the Company’s registration statement filed with the SEC has ceased to be effective; and (iii) July
5, 2026, unless terminated earlier in accordance with the terms of the 2025 Equity Distribution Agreement. The 2025 Equity Distribution Agreement replaced the 2024 Equity Distribution Agreement.
During the fiscal year ended March 31, 2025, the Company sold 71,044,862 Canopy Shares for gross proceeds of $347.1 million (US$250 million) under the June 2024 ATM Program and 23,169,358 Canopy Shares for gross proceeds of $38.3 million (US$26.7 million) under the February 2025 ATM Program.
Government Contracts
In Canada, we sell cannabis and cannabis products to cannabis control authorities in all of the provinces and territories in Canada (other than Saskatchewan which does not have a central cannabis control authority), where each such cannabis control authority is the sole wholesale distributor and in certain provinces, the sole retailer, of cannabis and cannabis products in the relevant province. We sell these products to the various cannabis control authorities under supply agreements that are subject to terms that allow for renegotiation of sale prices and termination at the election of the applicable cannabis control authority. In particular, the cannabis control authorities may in the future choose to stop purchasing our products, may change the prices at which they purchase our products, may require that we provide them with the lowest purchase price in line with what we offer another third-party, may return our products to us and, in certain circumstances, may cancel purchase orders at any time including after products have been shipped. For the year ended March 31, 2025, we had approximately $101.3 million in gross sales to cannabis control authorities and one cannabis control authority accounted for at least 10% of our net consolidated revenue.
Intellectual Property and Product Safety
Intellectual Property
The proprietary nature of, and protection for, our products, technologies and processes are important to our business. We rely on a combination of patents (utility and design), trademarks, and know-how to establish and protect our intellectual property. We have established and will continue to build proprietary positions in all key aspects of our business. The duration of the protection afforded by our registered intellectual property varies by the nature of the registration, but we manage renewals and notices on an on-going basis to ensure that our intellectual property is protected in line with our strategic focus under applicable law in various jurisdictions.
Product Safety and Pharmacovigilance
In the interest of patient safety and good pharmacovigilance practices, we have continued to maintain a unique global pharmacovigilance and product safety program to capture, document and evaluate adverse events reported from the worldwide use of our medical cannabis products and our various Canadian adult-use cannabis brands, as well as products sold by Storz & Bickel.
Pharmacovigilance, also known as drug safety, is the science and activities relating to the detection, assessment, understanding and prevention of adverse effects or any other drug-related problems. Our regulatory affairs team works to ensure that new products are developed with consumer safety in mind.
The global pharmacovigilance program ensures that all employees are trained on how to identify and report adverse events. Data collected from various sources (including, but not limited to, spontaneous reporting, clinical trials, literature and health authorities’ databases) are processed and analyzed in a centralized global safety database by our regulatory affairs team, in compliance with global and local regulatory requirements.
Collected data is then used to perform signal detection activities (routinely, monthly and quarterly) and prepare periodic aggregate safety reports to evaluate the benefit-risk profile of our products.
Government Regulation
Canadian Regulatory Framework
On October 17, 2018, the Cannabis Regulations under the Cannabis Act came into force (the “Cannabis Regulations”). The Cannabis Regulations set out several classes of licenses that authorized activities in relation to cannabis, including:
•a license for cultivation;
•a license for processing;
•a license for analytical testing;
•a license for sale for medical purposes;
•a license for research; and
•a cannabis drug license.
Prior to October 17, 2018, cannabis was governed by the Controlled Drug and Substances Act (Canada) (“CDSA”). Under the CDSA, the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) set out a framework to provide individuals with access to cannabis for medical purposes and was the governing legislation in respect of the production, sale and distribution of medical
cannabis and related oil extracts in Canada. Although the ACMPR were repealed, the regulatory framework applicable to cannabis for medical purposes was substantially reproduced within the Cannabis Act with minimal changes.
Pursuant to the transitional provisions outlined in the Cannabis Act, we transitioned all licenses held under the ACMPR regulatory framework to the new Cannabis Act; therefore, all licenses remain active due to the regulatory change that occurred on October 17, 2018.
At the end of each term of their respective licenses, a license holder must submit an application for renewal to Health Canada containing information prescribed by the Cannabis Act.
The Cannabis Act legalized adult-use cannabis use nationwide in Canada. It creates a legal framework for controlling the production, distribution, sale and possession of cannabis across Canada for both medical and adult-use purposes. Subject to provincial or territorial restrictions, adults who are 18 years of age or older are legally able to:
•possess up to 30 grams of legal cannabis, dried or equivalent in non-dried form in public;
•share up to 30 grams of legal cannabis, dried or equivalent in non-dried form with other adults;
•buy dried or fresh cannabis and cannabis oil from a provincially licensed retailer;
•grow, from licensed seed or seedlings, up to four cannabis plants per residence for personal use; and
•make cannabis products, such as food and drinks, at home as long as dangerous organic solvents are not used to create concentrated products.
In the initial stage of the regulated adult-use cannabis market, products available for sale were the same as those permitted in the medical cannabis market (dried flowers, oils and softgels and dried cannabis products). On October 17, 2019, the second phase of adult-use cannabis products, specifically, edible cannabis products, cannabis extracts, and cannabis topical products, were legalized pursuant to certain amendments to the regulations under the Cannabis Act. Edible cannabis products, cannabis extracts, and cannabis topical products, which are now available for sale, are subject to additional regulatory requirements that include supplemental marketing and advertising rules, further restrictions on labelling and packaging, rules relating to ingredients of edible cannabis products and cannabis extracts, limits on THC content, and added production facility requirements.
Further, the current regime for medical cannabis will continue to allow access to cannabis to people who have the authorization of their healthcare provider.
Under the Cannabis Act, license holders are permitted to sell and distribute medical cannabis through the mail to registered patients. The Cannabis Act also provides provincial and municipal governments with the authority to prescribe regulations regarding retail and distribution of adult-use cannabis, as well as the ability to alter some of the existing baseline requirements, such as increasing the minimum age for purchase and consumption. As the distribution and sale of cannabis for adult-use purposes is regulated under the individual authority of each provincial and territorial government, regulatory regimes vary from jurisdiction to jurisdiction. In each of the provinces and territories, except for Saskatchewan, a provincial distributor is responsible for purchasing cannabis from producers and selling products to its regulated retail distribution channels.
With respect to retail sales of cannabis, other than online sales, the provincial and territorial regulations in Prince Edward Island, Nova Scotia and Quebec allow only for government-run cannabis stores, while the provincial and territorial regulations in Ontario, Alberta, Newfoundland and Labrador, Nunavut, Yukon, Saskatchewan and Manitoba leave the retail sale of cannabis, other than online sales, to the private sector. In New Brunswick, British Columbia and Northwest Territories, provincial and territorial regulations allow for a hybrid model in which both public and private stores can operate. In addition, in Ontario, British Columbia, Newfoundland and Labrador, Northwest Territories, New Brunswick, Nova Scotia, Prince Edward Island, Quebec and Yukon, the provincial body is solely responsible for online sales.
The Cannabis Act also includes several measures to help prevent youth from accessing cannabis, including both age restrictions and restrictions on the promotion of cannabis.
The Cannabis Act discourages youth cannabis use by prohibiting products that are appealing to youth, packaging or labeling cannabis in a way that makes it appealing to youth, selling cannabis through self-service displays or vending machines, or promoting cannabis, except in narrow circumstances, where young people cannot see the promotion. The new legislation also helps protect public health by creating strict safety and quality regulations.
In connection with the framework for regulating cannabis in Canada, the Canadian federal government introduced corresponding penalties under the Criminal Code (Canada), including penalties for the illegal sale of cannabis, possession of cannabis over the prescribed limit, production of cannabis beyond personal cultivation limits, taking cannabis across the Canadian border, giving or selling cannabis to a youth and involving a youth to commit a cannabis-related offense.
Following extensive engagement with stakeholders, universities, researchers, health authorities, cannabis industry associations, cannabis license holders, provinces, territories and the public, the Canadian federal government announced the following amendments to the Cannabis Act and its regulations:
•An increase in the public possession limit for cannabis beverages to a level that is similar to other forms of cannabis, such as solid edible cannabis products (i.e. gummies or chocolate). Adults in Canada are now able to possess up to 17.1 liters (equal to 48 cans of 355 ml each) of cannabis beverages in public for non-medical purposes, which is up from approximately 2.1 liters (equal to five cans of 355 ml each) under the previous rules. Existing controls that mitigate the risks of overconsumption and accidental consumption, such as child-resistant packaging and strict limits on the amount of THC per container, remain in place;
•Changing how the Canadian federal government regulates non-therapeutic cannabis research with human participants, helping make the process of conducting this research easier, while still maintaining appropriate public health and safety controls;
•Allowing for analytical testing license holders and federal and provincial government laboratories to produce, distribute and sell reference standards and test kits, to increase access to cannabis testing materials and thereby support access to a quality-controlled supply of cannabis; and
•Broadening the educational qualifications for the Head of Laboratory, a position that is required for an analytical testing license and is responsible for all cannabis testing activities that occur at the licensed site.
In December 2023, Health Canada released guidance on cannabis products deliberately made with intoxicating cannabinoids other than delta-9-THC. Health Canada defines “intoxicating cannabinoids” as cannabinoids that bind to and activate the CB1 receptor and the guidance includes a list that currently sets out 9 cannabinoids that qualify, however, that list is subject to Health Canada’s discretion to revise this list as new evidence becomes available about any of the current listed cannabinoids or any other potential intoxicating cannabinoids. This guidance recommends that license holders apply the regulatory controls (including limits on the amount of cannabinoids in certain products) currently applicable to delta-9-THC to all other cannabinoids that Health Canada considers to be “intoxicating cannabinoids” in order to minimize the risks of accidental consumption, overconsumption and adverse effects. This guidance comes at a time when various provincial regulators (such as those in Ontario, British Columbia and Alberta) are actively evaluating whether to permit the sale of or how to evaluate limits on the levels of certain cannabinoids (such as tetrahydrocannabivarin and cannabinol).
On March 12, 2025, the Regulations amending certain regulations concerning cannabis (streamlining of requirements) and the Order Amending Schedule 2 to the Cannabis Act came into force. These amendments are intended to reduce regulatory burden and support diversity and competition in the legal cannabis market while maintaining the public health and public safety objectives of the Cannabis Act.
The amendments include the following:
•Changes to the scope and presence of security clearance holders with respect to onsite monitoring of activities and destruction of cannabis;
•Creation of new waste categories and simplification of destruction records;
•No longer requiring the distribution of “consumer leaflets” to accompany the sale of adult use cannabis in provinces. However, a package insert or leaflet may be included in the packaging of a product;
•Simplification of the import/export permits and records, the package on dates and the shipment of cannabis both domestically and internationally;
•Permission to have as many alternate Quality Assurance Persons (“QAPs”) that are required to need to support the business, with clear detail denoting the tasks to be personally performed by the QAP;
•Increased capacity thresholds to be eligible for micro cultivation, nursery and micro-processing licenses;
•Simplification of the security measures including introduction detection, secure storage, and motion detection in areas where cannabis is being handled and processed;
•Packaging simplification to the immediate container for all classes of cannabis products except cannabis seeds;
•Removal of the requirement to submit a notice of new cannabis product for dried cannabis products;
•Cultivation license holders may sell pollen to other license holders;
•Health Canada being granted authority to suspend licenses for contravention of the Cannabis Fees Order;
•Derivatives may now be produced, exported, sold and processed from plant parts exempted under the Cannabis Act without a license;
•Pre-rolled dried cannabis no longer has a weight limit (formerly 1g);
•Ethyl alcohol (up to 10mg per activation) may be used in cannabis extracts intended for inhalation and denatured alcohol many now be used in cannabis topicals;
•Several consumer focused changes to packaging and labelling requirements, including:
oDried cannabis equivalency statement no longer required on the label;
oCannabis health warning messages on the label now vary based on the product class and route of ingestion;
oRemoval of the requirement to list the THC and CBD quantities on the label, only total THC and total CBD required;
oCo-packing for cannabis (dried, fresh, extracts, topicals and edibles) permitted with restrictions on properties and weight of cannabis and THC;
oWrapper (if used) on the outer container can now list more than just the THC Symbol;
oDried cannabis products may have transparent packaging or packaging with cut-outs;
oThe container and lid/cap can be a different color;
oPermission to use other images and information on wrappers if require by another act or regulation; and
oPermission to include product counterfeiting measures such as a barcode or quick response (QR) code; and
•Removing the requirements to file the annual reports of promotional expenses and activities and key investor reports for publicly traded entities.
European Union Regulatory Framework
While each country in the European Union (“EU”) has its own laws and regulations, many common practices are being adopted relative to the developing and growing medical cannabis market. For example, to ensure quality and safe products for patients, many EU countries only permit the import and sale of medical cannabis from EU-GMP certified manufacturers.
The EU requires adherence to EU-GMP standards for the manufacture of active substances and medicinal products, including cannabis products for medicinal purposes. Therefore, a system for certification of EU-GMP has been implemented, which allows the local competent Authority under the law of the respective EU member state to conduct inspections of manufacturing sites and, if the strict EU-GMP standards are met, to issue a certificate of EU-GMP compliance that is also accepted in other EU member countries.
As of April 1, 2024, the Law on the Controlled Use of Cannabis (Gesetz zum kontrollierten Umgang mit Cannabis, “Cannabis Law”) has led to the partial legalization of non-medicinal cannabis and a regulatory reform of cannabis for medicinal purposes in Germany. In terms of cannabis for medicinal purposes the Medicinal Cannabis Law (Medizinalcannabis-Gesetz), which is part of the Cannabis Law, works in unison with existing pharmaceutical laws and regulations in Europe. For example, the Medicinal Cannabis Law still requires that all cannabis for medicinal purposes must be EU-GMP certified, sold by EU-GMP certified manufacturers and prescribed by a physician. The Cannabis Law also permits the use of non-medicinal cannabis in Germany to a limited extent and its cultivation at home or together in so-called cannabis social clubs, the details of which are set out in the Recreational Cannabis Law (Konsumcannabis-Gesetz). Import of non-medicinal cannabis is not permitted in Germany. Although cannabis as of April 1, 2024 is no longer classified as a narcotic, regardless of whether for medicinal or non-medicinal purposes, cannabis remains a licensed and controlled use product in Germany.
Australia Regulatory Framework
Medicinal cannabis was federally legalized in Australia in 2016 under the Therapeutic Goods Act 1989. While adult-use cannabis is not currently permissible in Australia, the Australian Capital Territory has decriminalized the adult possession of up to 50 grams of cannabis in public. However, selling, supplying, or sharing cannabis remains illegal without federal licensing. The Office of Drug Control grants licenses for the cultivation, production, and manufacture of medicinal cannabis whereas the Therapeutic Goods Administration (“TGA”) regulates medicinal cannabis products and approvals for patient use pursuant to the Therapeutic Goods Act 1989. In addition, the Department of Agriculture, Fisheries, and Forestry manages import and export regulations, including issuing permits for plant materials. We hold the licensing for the registration of our cannabis products as well as the necessary permissions for the import and distribution of sale of medical cannabis in Australia.
With respect to the sale of vaporizers in Australia, the regulations have changed since implementation. On March 1, 2024 the importation of all non-therapeutic vapes or personal importation of all vapes became prohibited by the TGA. Our Storz & Bickel vapes, namely the MEDIC+, is registered as a medical device with the TGA and therefore is not subject to the limitations imposed by the ban.
As therapeutic vapes, the Storz & Bickel devices may still be lawfully supplied by pharmacists and physicians in Australia to patients, provided those vapes continue to meet the relevant applicable regulatory standards set forth by the TGA.
U.S. Regulatory Framework
Thirty-nine states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and Northern Mariana have passed legislation or legalized some form of cannabis use for certain medical purposes. Twenty-four of those states, the District of Columbia, Guam, and Northern Mariana, have also legalized cannabis for adults for non-medical purposes (sometimes referred to as adult or recreational use). Eight additional states have legalized forms of low-potency cannabis for select medical conditions. Only three states continue to prohibit cannabis entirely, although one of those states has decriminalized possession of small amounts, leaving only Idaho and Kansas with complete criminalization. Notwithstanding the permissive regulatory environment of cannabis in some states, cannabis other than hemp continues to be categorized as a Schedule I controlled substance under the Controlled Substances Act (21
U.S.C. § 811) (the “CSA”), making it illegal under federal law in the U.S. to cultivate, distribute, or possess cannabis. This means that while state law in certain U.S. states may take a permissive approach to medical and/or adult-use use of cannabis, the CSA may still be enforced by U.S. federal law enforcement officials against citizens and businesses of those states for activity that is legal under state law.
As a result of the conflicting views between state legislatures and the U.S. federal government regarding cannabis, the legality of investment in cannabis businesses in the U.S. is not fully settled and there can be no assurances that federal authorities will consider such investments to be compliant with applicable law and regulations.
The response to this inconsistency was first addressed in August 2013 when then Deputy Attorney General James Cole authored a memorandum (the “Cole Memorandum”), noting that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level.
In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the U.S. Department of Justice (the “DOJ”) should be focused on addressing only the most significant threats related to cannabis. The Cole Memorandum was later rescinded by U.S. Attorney General Jeff Sessions under the Trump Administration. Despite this rescission, the DOJ has not prioritized the enforcement of the CSA’s prohibition on cannabis against cannabis companies complying with the state law and their vendors for over nine years.
On March 11, 2021, Merrick Garland was appointed as U.S. Attorney General. At his confirmation hearing, he said, “It does not seem to me a useful use of limited resources that we have, to be pursuing prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise.” In April 2022, Attorney General Garland reiterated that prosecuting the possession of cannabis is “not an efficient use” of federal resources, especially “given the ongoing opioid and methamphetamine epidemics” facing the nation. In March 2023, Attorney General Merrick Garland testified in a Congressional hearing that the DOJ was continuing its work on a new memorandum regarding cannabis enforcement. Garland stated that the policy will be “very close to what was done in the Cole memorandum” but was yet to be finalized.
In the 2024 Consolidated Appropriations Act, Congress included a provision, known as the Joyce Amendment (previously the Rohrabacher-Farr Amendment) which prohibited the DOJ from spending funds to interfere with the implementation of state medical cannabis laws until September 30, 2024. The amendment, which had been renewed every year since 2015, has not been extended past its 2024 expiration.
In February 2014, the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury Department issued a memorandum on Bank Secrecy Act (“BSA”) Expectations Regarding Marijuana-Related Businesses (the “FinCEN Marijuana-Related Guidance”) providing instructions to banks seeking to provide services to cannabis-related businesses. The FinCEN Marijuana-Related Guidance states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. Despite this guidance, under U.S. federal law it may, under certain circumstances, be a violation of federal money laundering statutes for financial institutions to accept any proceeds from cannabis sales or any other Schedule I controlled substances. Banks and other financial institutions could be prosecuted and possibly convicted of money laundering for providing services to U.S. cannabis businesses. Under U.S. federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan or any other service could be found guilty of money laundering or conspiracy. Due to this uncertainty, many U.S. banks and certain Canadian banks are reluctant to transact business with U.S. cannabis companies. While the federal government has not initiated financial crimes prosecutions against state-law compliant cannabis companies or their vendors, the government theoretically could, at least against companies in the adult-use markets. Further, while the FinCEN Marijuana-Related Guidance is presumptively still in effect, FinCEN could elect to rescind the FinCEN Marijuana-Related Guidance at any time.
FinCEN, along with other federal banking regulators, released an interagency statement on Providing Financial Services to Customers Engaged in Hemp-Related Businesses in December 2019 (“FinCEN Hemp Statement”). In June 2020, FinCEN issued further guidance regarding Due Diligence Requirements under the BSA for Hemp-Related Business Customers (“FinCEN Hemp Guidance”). The FinCEN Hemp Statement and FinCEN Hemp Guidance provided financial institutions with anti-money laundering risk considerations for hemp-related businesses to ultimately enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in compliance with federal law. The FinCEN Hemp Statement and FinCEN Hemp Guidance do not replace or supersede the FinCEN Marijuana-Related Guidance.
In 2022, President Biden signed into law the “Medical Marijuana and Cannabidiol Research Expansion Act,” a bipartisan bill aimed at easing restrictions on cannabis research, and the first standalone cannabis reform bill to pass both the House and Senate. Additionally, on October 6, 2022, President Biden issued a presidential proclamation pardoning federal convictions for simple marijuana possession offenses, encouraging state governors to do the same on the state level where permissible, and requesting that the Secretary of Health and Human Services and the Attorney General initiate an administrative process to review cannabis’s Schedule I classification under the CSA. In response to this directive, the U.S. Department of Health and Human Services (the “HHS”) issued a
letter to the DEA on August 29, 2023, recommending that cannabis be reclassified as a Schedule III drug under the CSA. President Biden issued an additional proclamation on December 22, 2023 further expanding the list of pardoned offenses under federal law related to marijuana possession.
On May 16, 2024, the DEA issued a proposed rule to reclassify marijuana from its current classification as a Schedule I drug to a Schedule III drug. Schedule III classification represents a moderate to low potential for physical and psychological dependence and reclassification of marijuana from a Schedule I to a Schedule III drug would thereby loosen DEA restrictions. Nonetheless, the DEA has made clear that if reclassification were to take place, the “regulatory controls applicable to Schedule III controlled substances would apply” which includes controls related to the manufacture, distribution, dispensing, and possession of marijuana. Of note, the proposed rule applies only to marijuana as defined in the CSA, i.e., limited to the plant and derivatives of the plant. The proposed rule does not therefore apply to synthetically derived THC or hemp. The comment period to the proposed rule lasted 60 days from its publication in the Federal Register, which was on May 21, 2024. The comment period ended on July 22, 2024, yet the formal rulemaking process remains ongoing. The DEA will publish a final rule after considering all comments and other inputs received during this period. Additional proceedings were originally scheduled to run from January 21 to March 6, 2025. Proceedings in this matter have been postponed pending resolution on an appeal filed by a party in the proceedings.
Multiple legislative reforms related to cannabis and cannabis-related banking have been proposed by the federal government in the United States. Examples include the States Reform Act; the Cannabis Administration and Opportunity Act; the Marijuana Opportunity, Reinvestment and Expungement Act; the Secure and Fair Enforcement Regulation (“SAFER”) Banking Act; the Capital Lending and Investment for Marijuana Businesses Act; H.R. 9702 to amend the Internal Revenue Code of 1986 to allow deductions and credits relating to expenditures in connection with marijuana sales conducted in compliance with state law. On September 27, 2023, the Senate Finance Committee passed the SAFER Banking Act, which would protect financial institutions and other parties accepting money derived from the state-legal cannabis industry by “creat[ing] protections for financial institutions that provide financial services to [state-legal cannabis companies] and service providers for such businesses,” and also explicitly protects insurers. The provisions of the SAFER Banking Act are now pending a Senate floor vote and, if passed in both the Senate and the House, would impact the legal status of financial transactions involving cannabis or state-legal cannabis companies in the following years.
There can be no assurance administrative review of cannabis will result in rescheduling of cannabis under the CSA, or that any of the above pieces of legislation will ultimately be passed into law in the United States in the 119th Congress.
On December 20, 2018, the 2018 Farm Bill was signed into law in the United States. The 2018 Farm Bill, among other things, defines industrial hemp, removes industrial hemp and its cannabinoids, including CBD derived from industrial hemp but excluding THC, from the CSA and allows for industrial hemp production and sale in the United States. The passage of the 2018 Farm Bill has allowed the Corporation to advance its hemp interests in the United States. The United States FDA has retained authority over the addition of hemp-derived CBD and THC to products that fall within the Federal Food, Drug, and Cosmetic Act. So far, the FDA has stated that (a) to date, it has approved only one cannabis-derived drug product (a prescription drug to treat two forms of epilepsy and seizures associated with tuberous sclerosis) and three cannabis-related drug products (synthetically derived products), (b) it has seen only limited data about CBD safety and the data it has seen points to risks that need to be considered before taking CBD for any reason, (c) some CBD products are being marketed with unproven medical claims and are of unknown quality, and (d) it is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement and existing regulatory pathways for foods and dietary supplements are not appropriate for CBD. Since the passage of the 2018 Farm Bill, the FDA has periodically issued warning letters to CBD companies, which have been primarily sent to companies making unfounded medical claims related to major diseases regarding their products.
In light of the FDA’s statements, courts have found that the FDA’s position on CBD amounts to guidance and have stayed cases until FDA issues final regulations. Some states take the position that CBD products are not legally permitted to be sold, but increasingly, more states are allowing CBD foods, beverages, and supplements to be sold in-state and issuing more comprehensive regulations for the testing and labelling of those products.
In 2023, the FDA announced that it would not create a regulated pathway for CBD through traditional food or dietary supplement frameworks, and further legislation will be required. Following that announcement, two U.S. Representatives have introduced the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2023 and the CBD Product Safety and Standardization Act of 2023 to regulate such products. Neither piece of legislation has received a hearing in Congress, and while a stated priority for key members of Congress, there can be no assurance that any legislation regulating CBD will move or become law this Congress.
With the Trump Administration having taken office in January 2025, one of the most anticipated developments is still the potential rescheduling of cannabis from a Schedule I to a Schedule III drug, pending the DEA’s final rule. The Trump Administration has not taken a formal stance on the cannabis issue, though President Trump has indicated support for states’ rights in deciding legalization. The Trump Administration’s pick for U.S. Attorney General, Pam Bondi, has previously opposed cannabis legalization during her time as Florida’s attorney general. Finally, there are several cases pending in the Second, Fourth, and Ninth Circuits challenging state and local cannabis licensure programs as violative of the Dormant Commerce Clause doctrine, which generally restricts states from enforcing policies that impede interstate commerce.
Our objective is to capitalize on the opportunities presented as a result of the changing regulatory environment governing the cannabis industry in the United States. Unless and until the U.S. Congress amends the CSA with respect to medical and/or adult-use cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current federal law, and the business of these entities may be deemed to be producing, cultivating, extracting, or dispensing cannabis or the Corporation may be considered to be aiding or abetting or otherwise engaging in a conspiracy to commit such acts in violation of the CSA and other federal laws in the United States.
There is a risk that our interpretation of laws, regulations and guidelines, including, but not limited to, the CSA, the associated regulations, various state regulations and applicable stock exchange rules and regulations may differ from those of others, including those of such government authorities, securities regulators and stock exchanges. In addition, we have and will endeavor to cause the entities that we invest in to only conduct business in a state-law compliant manner by including appropriate representations, warranties and covenants in agreements with such entities. Any violation of these terms would result in a breach of the applicable agreement between us and such entity and, accordingly, may have a material adverse effect on our business, operations and financial condition. In particular, we may be required to divest its interest in an entity or risk significant fines, penalties, administrative sanctions, convictions, settlements or delisting from the TSX and/or Nasdaq and there is no assurance that any divestiture will be completed on terms favorable to us or at all.
For these reasons, our interests in the U.S. cannabis market may be subject to heightened scrutiny by regulators, stock exchanges, clearing agencies and other Canadian and U.S. authorities. Please refer to “Risk Factors” under Item 1A of this Form 10-K for further discussion.
We are not considered a U.S. Marijuana Issuer (as defined in the Staff Notice) nor do we have material ancillary involvement in the U.S. cannabis industry in accordance with the Staff Notice. While we have an interest in Canopy USA, which is a platform that is intended to enable such U.S.-based companies that may themselves participate in the U.S. cannabis market to operate, the transaction structure was intended to ensure that we do not violate the federal laws of the United States respecting cannabis and does not allow us to direct the activities of Canopy USA. Where a non-controlled affiliate has expressed an intent to enter the U.S. cannabis market, we have taken steps to insulate ourselves from all economic and voting interests.
Competition
Health Canada issues licenses to cultivate, process and/or sell cannabis under the Cannabis Act. According to the Health Canada website, as of the date of this Form 10-K, 1,032 licenses to cultivate, distribute or sell cannabis have been issued. When considering the competitive landscape for cannabis production, cultivation and sale, each license issued by Health Canada is connected to a specific entity and a specific property, so to commence a new production site, an entity must apply for a new license. Due to the number of licensees in Canada and the limited distribution channels for cannabis products, in the adult-use market, we compete on the basis of quality, price, brand recognition, consistency and variety of cannabis products. We take a similar approach in our strategy towards medical cannabis sales with a distinct focus on physician familiarity to instill confidence in the effectiveness of our medical product portfolio for their patients.
Certain companies in the Canadian cannabis market have elected to enter into contract manufacturing arrangements with license holders pursuant to which the license holder cultivates, processes and sells cannabis under the brand of the contracting company without the contracting company being required to own its own cannabis production assets. This can reduce the barriers to entry for branding companies and increase the number of cannabis products available to consumers; however, such arrangements are contingent on procuring favorable terms under manufacturing arrangements with license holders and are still subject to the ongoing requirements of maintaining cannabis production assets.
In addition, there are unlicensed growers and retailers of cannabis that, while operating illegally, still act as significant competitors by either diverting customers away due to product choice, perceived quality of product, convenience of access or price point.
Internationally, the capacity of cannabis companies to operate is limited to those countries which have legalized aspects of the production, distribution, sale and use of cannabis. To date, only a limited number of international jurisdictions currently allow the sale of medical cannabis to patients and even fewer have permitted non-medicinal use of cannabis.
Storz & Bickel is subject to its own unique competitive considerations but follows more traditional consumer packaged goods (“CPG”) market challenges than those observed within our primary cannabis activities and product portfolio.
Reportable Segments
We report our financial results for the following four reportable segments:
•Canada cannabis - includes the production, distribution and sale of a diverse range of cannabis, hemp and cannabis-related products in Canada pursuant to the Cannabis Act and cannabis-related areas such as merchandise and clinics;
•International markets cannabis - includes the production, distribution and sale of a diverse range of cannabis and hemp products internationally pursuant to applicable international legislation, regulations and permits. Priority markets include medical cannabis in Australia and Europe where the Company offers branded high-quality flower, oil and extract products under our recognized Spectrum Therapeutics and Canopy Medical brands, as well as the Company's Storz & Bickel line of medically approved vaporizers in Australia;
•Storz & Bickel - includes the production, distribution and sale of vaporizers and accessories; and
•This Works - includes the production, distribution and sale of beauty, skincare, wellness and sleep products, some of which have been blended with hemp-derived CBD isolate. On December 18, 2023, the Company completed the sale of This Works and as of such date, the results of This Works are no longer included in the Company's financial results.
These segments reflect how the Company’s operations are managed, how the Company’s Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), allocates resources and evaluates performance, and how the Company’s internal management financial reporting is structured. The Company’s CODM evaluates the performance of these segments, with a focus on (i) segment net revenue, and (ii) segment gross margin as the measure of segment profit or loss. The remainder of the Company’s operations include revenue derived from, and cost of sales associated with, the Company’s non-cannabis extraction activities and other ancillary activities; these are included within "other".
Canada Cannabis
Canadian Medical Cannabis Market
We are committed to science-based development and high-quality production of medical cannabis products and are equally committed to helping medical professionals responsibly authorize, and consumers to responsibly use, our products. Our commitment to addressing the safety and effectiveness of our products is a critical strategic imperative which helps to differentiate us in the growing cannabis market. We listen carefully to consumers and stay in close communication with regulatory agencies, governments and other stakeholders to identify new opportunities to deliver on consumer needs, enhance safety and support the growing industry.
Our Spectrum Therapeutics medical brand is a leader in medical cannabis. Spectrum Therapeutics produces and distributes a diverse portfolio of medical cannabis products to healthcare practitioners and medical customers in Canada. The sale of medical cannabis to patients in Canada is the only sales channel in which we are permitted to sell products directly to our consumer. Accordingly, we continue to invest in patient education, medical practitioner support and our broader medical cannabis network, solidifying our position as a trusted leader in the Canadian medical cannabis market. We serve the needs of medical patients through a wide range of cannabis products across a variety of brands, formats and strains, distributed through an e-commerce shop.
We also believe that everyone with a legal right to receive medical cannabis should have access to it, regardless of their income. We provide an income-tested compassionate pricing program, whereby eligible low-income patients can obtain a 20% discount on regular prices. Spectrum Therapeutics was the first in our industry to provide a compassionate pricing program, and today, we have several other programs to improve access to medical cannabis for authorized patients. As of March 31, 2025, there were 7,794 Spectrum Therapeutics patients accessing the compassionate pricing program. We offer support for our veterans of the Canadian Armed Forces, including a team of customer care agents dedicated to assisting veterans with registration, ordering and insurance coverage; pre-approval and direct billing of VAC to ensure uninterrupted access to medication as well as full coverage (through VAC) of all cannabis products offered in our online Spectrum Therapeutics medical shop. Veterans do not have to pay out of pocket for any product; and can access special offers on our Storz & Bickel devices. For non-veterans, we also provide support through our customer care team to help patients identify if their medication is covered under the growing number of private health plans that have a medical cannabis component.
Canadian Adult-Use Market
We are focused on leveraging our capabilities and scale in order to optimize our operating footprint and achieve profitability and growth. Our strategy in Canada includes:
•Continuing the launch of our portfolio of innovative, consumer-centric, premium-focused adult-use cannabis products, specifically: inhalable cannabis (whole and pre-rolled flower, vape and concentrates), ingestible cannabis (e.g. edible formats like Wana gummies) and cannabis extracts (predominantly oils, softgels and hash) across Canada.
•Strengthening our connection with consumers by offering brands and products that delight and drive consumer loyalty. Our goal is to educate consumers and normalize the use of cannabis on a variety of occasions, build brand awareness and recognition and establish direct connections with our consumers.
The sale of adult-use cannabis is conducted in accordance with applicable provincial and territorial legislation and through applicable local agencies and distributors.
International Markets Cannabis
European Medical Cannabis Market
Our primary strategy in the European medical cannabis market is to increase access to our medical cannabis products for patients in countries where it is legally permissible to do so, and to position ourselves as a trusted market leader. We provide raw material supply from our facility in Kincardine, Ontario to supply the European market in addition to entering partnerships with third party suppliers within the European Union.
Spectrum Therapeutics and Canopy Medical produces and distributes a diverse portfolio of medical cannabis products to healthcare practitioners and medical patients in Germany and Poland, and opportunistically where it is legally permissible to do so within Europe. Through our Spectrum Therapeutics and Canopy Medical brands, our strategy supports sales through our medical channels in Europe.
Australian Medical Cannabis Market
We provide raw material supply from our facility in Kincardine, Ontario to supply the Australian market. Medical cannabis patients in Australia can access our global portfolio of products, including Spectrum Therapeutics, as well as our Storz & Bickel line of medically approved vaporizers. Our strategy encompasses continuing the medical sales that began in Australia in May 2019 and supporting Australian patients through imports that are compliant with local regulations including an assortment of cannabis products, including oils, soft gels and flower.
Storz & Bickel
Storz & Bickel is widely recognized as the global leader in vaporizer design and manufacturing. From the brand’s home base in Tuttlingen, Germany, Storz & Bickel sets the standard for vaporizer excellence across a range of premium devices including the iconic tabletop Volcano vaporizer as well as a range of portable devices offering the same high-quality experience delivered by the Mighty, Mighty+, Crafty+, and Venty.
As a further testament to the brand’s relentless focus on quality and consistency, the Storz & Bickel Volcano Medic 2, Mighty Medic, and Mighty+ Medic are all certified as medical cannabis vaporizers, and all the brand’s devices for medical as well as home use are produced with the same rigorous quality control processes at the Company’s ISO 13485 certified factory.
Storz & Bickel continues to define the present and future of leading vaporizer technology with a relentless focus on quality and innovation.
Canopy USA
On October 24, 2022, we completed a number of strategic transactions (the “Reorganization”) in connection with the creation of Canopy USA, a U.S.-domiciled holding company wherein, as of October 24, 2022, Canopy USA holds certain U.S. cannabis investments previously held by us.
Following the creation of Canopy USA, the Nasdaq communicated its position to the Company stating that companies that consolidate “the assets and revenues generated from activities in violation under federal law cannot continue to list on Nasdaq”. Since the Company is committed to compliance with the listing requirements of the Nasdaq, the Company and Canopy USA effectuated certain changes to the initial structure of the Company’s interest in Canopy USA that were intended to facilitate the deconsolidation of the financial results of Canopy USA within the Company’s financial statements. These changes included, among other things, modifying the terms of the Protection Agreement (as defined below) between the Company, its wholly-owned subsidiary and Canopy USA as well as the terms of Canopy USA’s limited liability company agreement and amending the terms of certain agreements with third-party investors in Canopy USA to eliminate any rights to guaranteed returns (collectively, the “Reorganization Amendments”). On May 19, 2023, the Company and Canopy USA implemented the Reorganization Amendments, which included, entering into the First A&R Protection Agreement (as defined below) and amending and restating Canopy USA’s limited liability company agreement (the “A&R LLC Agreement”) in order to: (i) eliminate certain negative covenants that were previously granted by Canopy USA in favor of the Company as well as delegating to the managers of the Canopy USA Board (as defined below) not appointed by Canopy Growth the authority to approve the following key decisions (collectively, the “Key Decisions”): (a) the annual business plan of Canopy USA; (b) decisions regarding the executive officers of Canopy USA and any of its subsidiaries; (c) increasing the compensation, bonus levels or other benefits payable to any current, former or future employees or managers of Canopy USA or any of its subsidiaries; (d) any other executive compensation plan matters of Canopy USA or any of its subsidiaries; and (e) the exercise of the Wana Options (as defined below) or the Jetty Options, which for greater certainty means that the Company’s nominee on the Canopy USA Board will not be permitted to vote on any Key Decisions while the Company owns Non-Voting Shares; (ii) reduce the number of managers on the Canopy USA Board from four to three, including, reducing the Company’s nomination right to a single manager; (iii) amend the share capital of Canopy USA to, among other things, (a) create a new class of Canopy USA Class B Shares (as defined below), which may not be issued prior to the conversion of the Non-Voting Shares or the Class A shares of Canopy USA (the “Canopy USA Common Shares”) into Canopy USA Class B Shares; (b) amend the terms of the Non-Voting Shares such that the Non-Voting Shares will be convertible into Canopy USA Class B Shares (as opposed to Canopy USA Common Shares); and (c) amend the terms of the Canopy USA Common
Shares such that upon conversion of all of the Non-Voting Shares into Canopy USA Class B Shares, the Canopy USA Common Shares will, subject to their terms, automatically convert into Canopy USA Class B Shares, provided that the number of Canopy USA Class B Shares to be issued to the former holders of the Canopy USA Common Shares will be equal to no less than 10% of the total issued and outstanding Canopy USA Class B Shares following such issuance. Accordingly, as a result of the Reorganization Amendments, in no circumstances will the Company, at the time of such conversions, own more than 90% of the Canopy USA Class B Shares.
In connection with the Reorganization Amendments, on May 19, 2023, Canopy USA and Huneeus 2017 Irrevocable Trust (the “Trust”) entered into a share purchase agreement (the “Trust SPA”), which sets out the terms of the Trust’s investment in Canopy USA in the aggregate amount of up to US$20 million (the “Trust Transaction”). Agustin Huneeus, Jr. is the trustee of the Trust and is an affiliate of a shareholder of Jetty. Pursuant to the terms of the Trust SPA, the Trust was entitled, subject to certain terms and conditions contained in the Trust SPA, to be issued Canopy USA Common Shares in two tranches with an aggregate value of up to US$10 million along with warrants of Canopy USA to acquire additional Canopy USA Common Shares. In addition, subject to the terms of the Trust SPA, the Trust has also been granted options to acquire additional Voting Shares (as defined in the A&R LLC Agreement) with a value of up to an additional US$10 million and one such additional option includes the issuance of additional warrants of Canopy USA. On April 26, 2024, Canopy USA completed the first tranche closing of the Trust Transaction in accordance with the Trust SPA and pursuant to the Trust SPA, the timeline to complete the second tranche closing has lapsed. As of March 31, 2025, the Trust holds an aggregate 28,571,429 Canopy USA Common Shares and warrants to acquire up to 85,714,284 Voting Shares expiring on April 26, 2031.
In addition, subject to the terms and conditions of the A&R Protection Agreement (as defined below) and the terms of the option agreements to acquire Wana and Jetty, as applicable, Canopy Growth may be required to issue additional common shares in satisfaction of certain deferred and/or option exercise payments to the shareholders of Wana and Jetty. Canopy Growth will receive additional Non-Voting Shares from Canopy USA as consideration for any Company common shares issued in the future to the shareholders of Wana and Jetty.
On November 3, 2023, the Company received a letter from the staff of the SEC (the “Staff”) in which the Staff indicated that, despite the Reorganization Amendments, it would object to the deconsolidation of the financial results of Canopy USA from the Company's financial statements in accordance with U.S. GAAP once Canopy USA acquires Wana, Jetty or the Fixed Shares (as defined below) of Acreage. The Company subsequently had discussions with the Office of Chief Accountant of the SEC (the “OCA”) and determined to make certain additional amendments to the structure of Canopy USA (the “Additional Reorganization Amendments”) to facilitate the deconsolidation of Canopy USA from the financial results of Canopy Growth in accordance with U.S. GAAP upon Canopy USA’s acquisition of Wana, Jetty or Acreage. In connection with the Additional Reorganization Amendments, Canopy USA and its members entered into a second amended and restated limited liability company agreement (the “Second A&R LLC Agreement”). In accordance with the terms of the Second A&R LLC Agreement, the terms of the Non-Voting Shares have been amended such that the Non-Voting Shares are only convertible into Canopy USA Class B Shares following the date that the NASDAQ Stock Market or The New York Stock Exchange permit the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana (as defined in 21 U.S.C 802) in the United States (the “Stock Exchange Permissibility Date”). Based on the Company’s discussions with the OCA, upon effectuating the Additional Reorganization Amendments, the Company believes that the Staff would not object to the deconsolidation of the financial results of Canopy USA from the Company’s financial statements in accordance with U.S. GAAP.
Following the Reorganization, Reorganization Amendments and Additional Reorganization Amendments, on May 6, 2024, Canopy USA exercised the options (the “Wana Options”) to acquire Wana, a leading cannabis edibles brand in North America, and subsequently closed the transactions to acquire Wana Wellness, LLC and The Cima Group, LLC. On October 8, 2024, Canopy USA closed the acquisition of Mountain High Products, LLC. In addition, Canopy USA exercised the options (the “Jetty Options”) to acquire Lemurian, Inc. (“Jetty”) a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology and subsequently completed the first tranche closing to acquire Jetty. On June 4, 2024, the option to acquire the issued and outstanding Class E subordinate voting shares (the “Fixed Shares”) of Acreage, a leading vertically-integrated multi-state cannabis operator, with its main operations in densely populated states across the Northeast U.S., including New Jersey and New York (the “Acreage Option”) was exercised and on December 9, 2024, Canopy USA completed the acquisition of all of the issued and outstanding Fixed Shares and Class D subordinate voting shares (the “Floating Shares”) of Acreage (the “Acreage Acquisition”). The Canopy USA LPs also hold direct interests in the capital of TerrAscend Corp. (“TerrAscend”), a leading North American cannabis operator with vertically integrated operations and a presence in Pennsylvania, New Jersey, Michigan and California as well as licensed cultivation and processing operations in Maryland.
Canopy USA and the Canopy USA LPs currently hold an ownership interest in the following assets, among others:
•Wana - Canopy USA holds 100% of the membership interests of Wana.
•Jetty - Canopy USA holds approximately 77% of the shares of Jetty.
•Acreage - Canopy USA holds 100% of the issued and outstanding shares of Acreage.
•TerrAscend - the Canopy USA LPs hold an aggregate of 64,564,487 TerrAscend Common Shares on an as-converted basis and 22,474,130 TerrAscend Warrants. Assuming full exercise of the TerrAscend Warrants, the Canopy USA LPs will hold an aggregate of 87,038,617 TerrAscend Common Shares on an as-converted basis assuming conversion of the TerrAscend Exchangeable Shares held by the Canopy USA LPs.
Following the implementation of the Reorganization, Canopy USA was determined to be a variable interest entity pursuant to ASC 810 - Consolidations (“ASC 810”) and prior to the completion of the Reorganization Amendments and the Additional Reorganization Amendments, Canopy Growth was determined to be the primary beneficiary of Canopy USA. As a result of such determination and in accordance with ASC 810, Canopy Growth consolidated the financial results of Canopy USA up to April 30, 2024. As of April 30, 2024, as a result of the series of transactions related to the Additional Reorganization Amendments described above, Canopy Growth has deconsolidated the financial results of Canopy USA and has a non-controlling interest in Canopy USA as of such date.
Ownership of U.S. Cannabis Investments
Following the implementation of the Reorganization, the shares and interests in Acreage, Wana and Jetty are held, directly or indirectly, by Canopy USA and the shares and warrants in TerrAscend are held directly by the Canopy USA LPs, and Canopy Growth no longer holds a direct interest in any shares or interests in such entities. Canopy Growth holds non-voting and non-participating shares (the “Non-Voting Shares”) in the capital of Canopy USA and an interest in the Canopy USA LPs. The Non-Voting Shares do not carry voting rights, rights to receive dividends or other rights upon dissolution of Canopy USA. Following the Reorganization Amendments, the Non-Voting Shares are convertible into Class B shares of Canopy USA (the “Canopy USA Class B Shares”), provided that such conversion shall only be permitted following the Stock Exchange Permissibility Date. The Company also has the right (regardless of the fact that its Non-Voting Shares are non-voting and non-participating) to appoint one member to the Canopy USA board of managers (the “Canopy USA Board”).
On October 24, 2022, Canopy USA and the Company also entered into an agreement with, among others, Nancy Whiteman, the controlling shareholder of Wana, which was amended and restated on May 19, 2023 and on April 30, 2024, whereby subsidiaries of Canopy USA agreed to pay additional consideration in order to acquire the Wana Options and the future payments owed in connection with the exercise of the Wana Options were reduced to US$3.00 in exchange for the issuance of Canopy USA Common Shares and Canopy Shares (the “Wana Amending Agreement”). In accordance with the terms of the Wana Amending Agreement, on April 30, 2024, (i) Canopy USA issued 60,955,929 Canopy USA Common Shares and (ii) Canopy Growth issued 1,086,279 Canopy Shares to the shareholders of Wana. The Canopy USA Common Shares issued to Ms. Whiteman, or entities controlled by Ms. Whiteman, are subject to a repurchase right exercisable at any time after April 30, 2027, being the 36 month anniversary of the closing of the transaction contemplated by the Wana Amending Agreement (the “Wana Repurchase Right”) to repurchase all Canopy USA Common Shares that have been issued at a price per Canopy USA Common Share equal to the fair market value as determined by an appraiser. As part of this agreement, Canopy USA has granted Ms. Whiteman the right to appoint one member to the Canopy USA Board and a put right on the same terms and conditions as the Wana Repurchase Right.
As of March 31, 2025, the Trust holds 28,571,429 Canopy USA Common Shares, the shareholders of Wana collectively hold 60,955,929 Canopy USA Common Shares and a wholly-owned subsidiary of the Company holds all of the issued and outstanding Non-Voting Shares in the capital of Canopy USA, representing approximately 84.4% of the issued and outstanding shares in Canopy USA on an as-converted basis.
Canopy Growth and Canopy USA are also party to a protection agreement (the “Protection Agreement”) to provide for certain covenants in order to preserve the value of the Non-Voting Shares held by Canopy Growth until such time as the Non-Voting Shares are converted in accordance with their terms, provided that, such conversion shall only be permitted following the Stock Exchange Permissibility Date, but does not provide Canopy Growth with the ability to direct the business, operations or activities of Canopy USA. The Protection Agreement was amended and restated in connection with: (a) the Reorganization Amendments (the “First A&R Protection Agreement”); and (b) the Additional Reorganization Amendments (the “Second A&R Protection Agreement” and together with the First A&R Protection Agreement, the “A&R Protection Agreement”).
Upon Canopy USA completing the Acreage Acquisition on December 9, 2024, Canopy Growth received additional Non-Voting Shares from Canopy USA in consideration for the issuance of (i) Canopy Shares to the former shareholders of Acreage in accordance with the terms of the Existing Acreage Arrangement Agreement (as defined below) and the arrangement agreement among Canopy Growth, Canopy USA and Acreage, as amended (the “Floating Share Arrangement Agreement”); (ii) Canopy Shares to an eligible participant pursuant to the then existing tax receivable bonus plans of High Street Capital Partners, LLC, a subsidiary of Acreage (“HSCP”); (iii) Canopy Shares in connection with Canopy USA’s acquisition of the minority interests of certain subsidiaries of Acreage; (iv) the issuance of Canopy Shares and warrants to certain securityholders of Acreage in order to satisfy an outstanding liability; and (v) Canopy Shares, warrants and other replacement securities in connection with the Acreage Acquisition.
Until such time as Canopy Growth converts its Non-Voting Shares into Canopy USA Class B Shares following the Stock Exchange Permissibility Date, Canopy Growth will have no economic or voting interest in Canopy USA, Wana, Jetty, TerrAscend, or Acreage. Canopy USA, Wana, Jetty, TerrAscend, and Acreage will continue to operate independently of Canopy Growth.
Acreage Agreements
On June 4, 2024, the Acreage Option was exercised in accordance with the terms of the arrangement agreement dated April 18, 2019, as amended on May 15, 2019, September 23, 2020 and November 17, 2020 (the “Existing Acreage Arrangement Agreement”). Concurrently with the closing of the acquisition of the Fixed Shares pursuant to the exercise of the Acreage Option, on December 9, 2024, the Fixed Shares were issued to Canopy USA upon closing of the Acreage Acquisition. Accordingly, Canopy Growth does not hold any Fixed Shares or Floating Shares. The acquisition of the Floating Shares pursuant to the court-approved plan of arrangement (the “Floating Share Arrangement”) occurred immediately prior to the acquisition of the Fixed Shares pursuant to the Existing Acreage Arrangement Agreement such that 100% of the issued and outstanding shares of Acreage are owned by Canopy USA. For additional details, see “Acreage Acquisition” under Item 7 of this Form 10-K.
On June 3, 2024, the Company exercised its option to acquire certain outstanding debt of Acreage (the “Debt Acquisition”) in connection with the option agreement dated November 15, 2022 (the “Option Agreement”) among a wholly-owned subsidiary of Canopy Growth (the “Optionor”) and the lenders (the “Lenders”) party to Acreage’s credit agreement dated as of December 16, 2021, as amended by the first amendment to credit agreement dated as of October 24, 2022 and the second amendment to credit agreement dated as of April 28, 2023.
The Optionor entered into various agreements in connection with the Debt Acquisition in order to acquire approximately US$99.8 million of Acreage’s outstanding debt (the “Acquired Debt”) from certain Lenders in exchange for US$69.8 million in cash and the release of approximately US$30.1 million (the “Option Premium”) that was held in escrow pursuant to the Option Agreement. The Option Premium was not included in Canopy Growth’s cash and cash equivalents as of March 31, 2024.
The Optionor subsequently transferred approximately US$2.2 million of the Acquired Debt to the other Lender (the “Rolling Lender”) and entered into a series of agreements with the Rolling Lender and Acreage, among others, including an amended and restated credit agreement (the “First ARCA”), which provided for, among other things, the Acquired Debt, certain interest payments to be paid-in-kind, revisions to certain financial covenants and, following certain events, an extension to the maturity date thereunder.
On September 13, 2024, the Optionor entered into a series of transactions with, among others, Acreage, the Rolling Lender and an arm’s length third-party lender (the “Other Lender”). Pursuant to such transactions, all of Acreage’s indebtedness held by the Rolling Lender was acquired by the Other Lender. Following the acquisition by the Other Lender, the Optionor, the Other Lender and Acreage, among others, amended and restated the First ARCA pursuant to a second amended and restated credit agreement dated as of September 13, 2024 (the “Second ARCA”). Pursuant to the Second ARCA and an agreement among lenders entered into on September 13, 2024 between, among others, the Optionor and the Other Lender, all interest owing to the Optionor under the Second ARCA is, subject to the consent of the Other Lender, to be paid-in-kind and not in cash. Under the Second ARCA, as of September 13, 2024, the Optionor was owed an aggregate principal amount equal to approximately US$102 million which is subordinate to approximately US$65 million owed to the Other Lender.
As of March 31, 2025, the aggregate principal amount owing to the Optionor was approximately US$110 million and the aggregate principal amount owing to the Other Lender was approximately US$65 million. Acreage is currently in default under the Second ARCA and the Lenders have agreed to forebear exercising any remedies with respect to such default until June 1, 2025 while the parties discuss potential solutions, including a potential debt extension. If an event of default continues to occur under the Second ARCA after June 1, 2025, the portion of the Acquired Debt owing to the Other Lender would rank in priority to the portion of the Acquired Debt owing to the Company. See “Risk Factors - Risks related to Canopy USA - Acreage’s last publicly available financial statements expressed doubt about its ability to continue as a going concern, which could have a negative impact on Canopy USA’s business, financial results and operations and have an adverse impact on the Company’s U.S. strategy, and, ultimately, the Company’s financial results and operations, and, in the event Acreage cannot satisfy its debt obligations as they become due, the Acquired Debt may not be repaid and the Company may lose the entirety of its investment”.
CBI Exchange and Note Exchange
On April 18, 2024, Greenstar Canada Investment Limited Partnership (“Greenstar”) and CBG Holdings LLC (“CBG”), indirect, wholly-owned subsidiaries of Constellation Brands, Inc. (“CBI”, and together with its affiliates, the “CBI Group”), exchanged all 17,149,925 Canopy Shares they collectively held for 17,149,925 Exchangeable Shares for no consideration (the “CBI Exchange”). As a result of the CBI Exchange, the CBI Group no longer holds any Canopy Shares. On April 18, 2024, the Company also entered into an exchange agreement with Greenstar, pursuant to which Greenstar converted approximately $81.2 million of the principal amount of the promissory note issued to Greenstar by the Company in the aggregate amount of $100 million (the “CBI Note”) into 9,111,549 Exchangeable Shares (the “Note Exchange”), calculated based on a price per Exchangeable Share equal to $8.91. All accrued but unpaid interest on the CBI Note together with the remaining principal amount of the CBI Note was cancelled and forgiven for no additional consideration by Greenstar. Following the closing of the Note Exchange, the CBI Note was cancelled.
In connection with the Reorganization, on October 24, 2022, Canopy Growth entered into a consent agreement with CBG and Greenstar (the “Third Consent Agreement”), and pursuant to the terms thereof, following the CBI Exchange, other than Third Consent Agreement, and the termination rights contained therein, all agreements between Canopy Growth and CBI, including the second amended and restated investor rights agreement dated as of April 18, 2019, by and among certain wholly-owned subsidiaries of CBI
and Canopy Growth, were terminated. Pursuant to the terms of the Third Consent Agreement, all nominees of CBI that were sitting on the board of directors of Canopy Growth (the “Board”) immediately prior to the CBI Exchange resigned as directors of Canopy Growth.
As of May 28, 2025, the CBI Group holds, in the aggregate, 26,261,474 Exchangeable Shares. The Exchangeable Shares held by the CBI Group represent approximately 12.4% of the issued and outstanding Canopy Shares on a non-diluted basis (assuming conversion of the Exchangeable Shares and assuming no other changes to the issued and outstanding Canopy Shares or Exchangeable Shares), calculated in accordance with applicable securities laws.
Human Capital Resources
As of March 31, 2025, Canopy Growth had 960 total employees, including 728 employees in Canada, as compared to 1,029 total employees as of March 31, 2024 including 790 employees in Canada. As of March 31, 2025, the Company had 232 employees outside of Canada (principally supporting our international medical cannabis business and Storz & Bickel businesses). Our employee concentration has been adjusted to primarily focus on production, distribution, sales enablement and commercial execution.
Our human resources department strives to make Canopy Growth a first-choice employer within the cannabis industry. In fiscal 2025, we continued to focus on the following priorities: (1) offering a market competitive employee value proposition inclusive of unique rewards that align to our strategy; (2) creating talent density with a focus on employee development and; (3) fostering employee enthusiasm and commitment towards their role and Canopy’s vision of unleashing the power of cannabis to improve lives. The ways in which we are driving these three key priorities are highlighted below.
Our employee value proposition includes rewarding employees competitively, treating our employees fairly, and providing the flexibility needed to cultivate greatness. In fiscal 2025, we continued to execute against our road map of programs designed to attract, motivate, recognize, reward, and retain the talent we need to realize our vision and deliver on our growth expectations, while holistically supporting total employee well-being. We greatly advanced our technical capabilities, making rewards easily accessible to our employees and making data readily available to our leaders
Our talent management strategy included formal succession planning resulting in the development of our internal workforce through skill development classes, leadership education, and talent rotations. We also implemented 360 assessments and leadership coaching for all senior leaders. This has allowed us to access our bench strength and continually adjust our workforce strategy to ensure we are filing talent gaps with high performing and diverse external talent, while also preparing for future challenge that may arise.
Our culture is our key differentiator and what we believe makes us a first-choice employer in the cannabis industry. We also believe that employee engagement is critical to our success and therefore we gather employee feedback on a regular basis through surveys. This allows us to access our employees understanding of business progress, the sentiment around our culture, and to identify areas for improvement. The results of these surveys are incorporated in the development of the human capital priorities as well as the overall company priorities.
We remain committed to our diversity, equity & inclusion (“DEI”) efforts by embedding equity into every part of the organization and creating an inclusive organizational environment. To accomplish this, we continue to build upon the extensive audit of DEI practices, policies and processes that was completed in fiscal year 2022. This includes fostering active participation in our employee resource groups, which help people from historically marginalized groups to build community internally, and we provide learning and development opportunities to support people leaders’ ability to mitigate biases, as well as having established initiatives to support people with disabilities.
We have learned the importance of providing flexibility and well-being resources to our employees. We consistently provide access to wellness webinars, assistance programs, and a variety of supplementary resources. In addition, we continue to support remote work and our focus is on fostering a culture of accountability and connection which is at the core of our engagement with employees. Furthermore, all of our employees complete annual training on applicable corporate policies including our Code of Business Conduct and Ethics, Whistleblower Protection Policy, Insider Trading Policy and Anti-Bribery and Anti-Corruption Policy.
Website Access to Reports
We maintain a website at www.canopygrowth.com. We are providing the address to our website solely for the information of investors. The information contained on our website is not a part of, nor is it incorporated by reference into this Form 10-K. Through our website, we make available, free of charge, our annual proxy statement, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish them to the SEC. The SEC maintains a website that contains these reports at www.sec.gov.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
An investment in us involves a number of risks. In addition to the other information contained in this Form 10-K and in other filings we make, investors should give careful consideration to the following risk factors. Any of the matters highlighted in these risk factors could adversely affect our business, results of operations, financial condition and growth prospects, causing an investor to lose all, or part of, their investment. The risks and uncertainties described below are those we currently believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, actually occur or become material risks, our business, prospects, financial condition, results of operations and cash flows and consequently the price of our securities could be materially and adversely affected.
Risks Relating to Our Growth Strategy
We may not be able to achieve or maintain profitability and may continue to incur losses in the future.
We have incurred significant losses in recent periods and have negative operating cash flow for each of our fiscal years since 2019, including the fiscal year ended March 31, 2025. We may not be able to achieve or maintain profitability and may continue to incur significant losses in the future. In addition, we expect to continue to invest in our business and incur operating expenses as we implement initiatives to continue to improve our business. If our revenues do not increase to offset these expenses, we will not be profitable. If our revenue declines or fails to grow at a rate faster than our expenses, and we are unable to secure funding under terms that are favorable or acceptable to us, or at all, we will not be able to achieve and maintain profitability in future periods. As a result, we may continue to generate losses. We may not achieve profitability in the future and, even if we do become profitable, we might not be able to sustain that profitability. There is no assurance that future revenues will be sufficient to generate the funds required to continue operations without external funding.
We are in the early stages of developing global infrastructure in a new industry and therefore we are subject to many risks common in developing companies.
We are in the early stages of developing a global infrastructure to capitalize on the opportunity in the cannabis industry. Accordingly, we are subject to many of the risks common to developing enterprises, including under-capitalization, limitations with respect to personnel, other resources and lack of revenue. Accordingly, investors may find it difficult to evaluate our prospects for success. There is no assurance that we will be successful and our likelihood of success must be considered in light of our stage of operations. Further, we are subject to a variety of business risks generally associated with developing companies. Our ability to manage growth effectively will require us to continue to implement and improve our operational and financial systems and to train and manage our employee base. There can be no assurances that we will be able to manage growth successfully. Our inability to manage growth successfully could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In the past, we have identified conditions and events that raised substantial doubt about our ability to continue as a going concern and it is possible that we may identify conditions and events in the future that raise substantial doubt about our ability to continue as a going concern.
We have previously identified conditions and events that raised substantial doubt about our ability to continue as a going concern. As of the date of the 2024 Annual Report (as defined below), we were able to successfully mitigate the substantial doubt by completing several balance sheet actions, as described in the 2024 Annual Report. During the fiscal year ended March 31, 2025, we experienced recurring losses from operations and required additional capital to fund our operations, which raised substantial doubt about our ability to continue as a going concern. However, we also completed additional actions during the fiscal year ended March 31, 2025, which included: (i) establishing our ATM Programs, pursuant to which an aggregate of 71,044,862 Canopy Shares were issued and sold for gross proceeds of $347.1 million under the June 2024 ATM Program and an aggregate of 23,169,358 Canopy Shares were issued and sold for gross proceeds of $38.3 million under the February 2024 ATM Program; (ii) entering into the Second ARCA as well as making a mandatory US$100.0 million prepayment of the Credit Facility and the Optional Prepayment in connection therewith, which significantly reduced our short-term debt obligation and extended the maturity date of the Credit Facility; (iii) receiving additional proceeds from the liquidation and sale of assets of BioSteel Sports Nutrition Inc. (“BioSteel Canada”); and (iv) completing the Lease Renegotiation (as defined below), which is expected to reduce our potential lease payment obligation. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements more than one year from the date of this Form 10-K. Consequently, the substantial doubt as to the Company's ability to continue as a going concern has been alleviated. However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. In the future, if we are unable to obtain sufficient funding to support our operations, our financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. In the future, reports from our independent registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
We have been and may in the future be required to write down intangible assets, including goodwill, due to impairment, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. We are also subject to the risk of defects or impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions.
We have in the past and may in the future be required to write down acquired assets and intangible assets, including goodwill, due to impairment, which would reduce earnings. We periodically calculate the fair value of our reporting units and intangible assets to test for impairment. This calculation may be affected by several factors, including general economic conditions, regulatory developments, changes in category growth rates as a result of changing adult consumer preferences, success of planned new product introductions, and competitive activity. Certain events can also trigger an immediate review of goodwill and intangible assets. If the carrying value of our reporting unit and other intangible assets exceeds their fair value and the loss in value is other than temporary, the goodwill and other intangible assets are considered impaired, which would result in impairment losses and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. For a discussion of intangible assets and goodwill, see Note 15, “Intangible Assets” and Note 16, “Goodwill” to the consolidated financial statements in Item 8 of this Form 10-K.
In addition, a defect in any business arrangement, including the acquisitions of Acreage, Wana and the majority interest of Jetty by Canopy USA, may arise to defeat or impair our claim to such transaction, which may have a material adverse effect on our business, financial condition, results of operations and growth prospects. It is possible that material changes could occur that may adversely affect management’s estimate of the recoverable amount for any agreement we enter into. Impairment estimates, based on applicable key assumptions and sensitivity analysis, will be based on management’s best knowledge of the amounts, events or actions at such time, and the actual future outcomes may differ from any estimates that are provided by us. Any impairment charges on our carrying value of business arrangements could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
As a result of self-reporting the BioSteel Review, the Company is the subject of a regulatory investigation and inquiry in connection with the BioSteel Review, and it cannot predict the timing of developments, and any adverse outcome of these continuing matters could have a material adverse effect on the Company.
The Company is the subject of a regulatory investigation and inquiry which relate to the Company’s accounting policies and related matters. The Company cannot predict when the regulatory investigation and inquiry will be completed or the further timing of any other developments in connection with the regulatory investigation and inquiry. The Company also cannot predict their results or outcomes.
While the Company is fully cooperating with the regulatory investigation and inquiry, it cannot predict when such matters will be completed, the further timing of any other developments in connection with these matters, or the outcome and potential impact. Such matters may be closed without any action taken against the Company, or conversely may ultimately have a material adverse effect on the Company, the trading price of the Canopy Shares, and our ability to raise additional capital, among other consequences. If a civil enforcement proceeding is initiated against the Company for alleged violations of securities laws or regulations, the Company may face a variety of civil sanctions and penalties, including, but not limited to, financial penalties and awards, injunctive relief and compliance conditions, which may have a material adverse effect on the financial condition or results of operations of the Company. As with any regulatory investigation and inquiry, the expense of cooperating and responding and the distraction to management may have a material adverse effect on the Company even if the regulatory investigation and inquiry is ultimately closed or resolved in a manner favorable to the Company.
There can be no assurance that our current and future acquisitions, investments or expansions of scope of existing relationships will have a beneficial impact on our business, financial condition and results of operations.
We have entered into, and may in the future enter into additional acquisitions or investments with third parties that we believe will complement or augment our existing business. Our ability to complete acquisitions or investments is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, acquisitions or investments could present unforeseen integration or operational obstacles or costs, may not enhance our business, and/or may involve risks that could adversely affect us, including by diverting significant amounts of management time from operations in order to pursue and complete such transactions or maintain such relationships. Future acquisitions or investments could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future acquisitions or investments will achieve, the expected benefits to our business or that we will be able to consummate future acquisitions or investments on satisfactory terms, or at all. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The success of our acquisitions depends upon our ability to integrate any businesses that we acquire. The integration of acquired business operations could disrupt our business by causing unforeseen operating difficulties, diverting management’s attention from day-to-day operations and requiring significant financial resources that would otherwise be used for the ongoing development of our business. The difficulties of integration could be increased by the necessity of coordinating geographically dispersed organizations, coordinating personnel with disparate business backgrounds, managing different corporate cultures, or discovering
previously unknown liabilities. In addition, we could be unable to retain key employees or customers of the acquired businesses. We could face integration issues, including those related to operations, internal controls, information systems and operational functions of the acquired companies and we also could fail to realize cost efficiencies or synergies that we anticipated when selecting our acquisition candidates or these acquisitions could fail to compete successfully and may not produce the anticipated revenues and profits. Any of these items could adversely affect our financial condition, results of operations or growth prospects.
We may not be able to secure adequate or reliable sources of funding required to operate our business.
There is no guarantee that we will be able to achieve our business objectives. Our continued development may require additional financing. The failure to raise such capital could result in a delay or indefinite postponement of our current business objectives or in our inability to continue to operate our business. 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 favorable to us. If additional funds are raised through issuances of equity or convertible debt securities or we exchange outstanding debt for such securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of Canopy Shares. In addition, from time to time, we may enter into transactions to acquire assets or the equity of other companies. These transactions may be financed wholly or partially with debt, which may temporarily increase our debt levels above industry standards. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions or other strategic joint venture opportunities.
Controlled substance and other legislation and treaties may restrict or limit our ability to research, manufacture and develop a commercial market for our products outside of the jurisdictions in which we currently operate and our expansion into additional jurisdictions is subject to risks.
Our ability to expand internationally is also contingent, in part, upon compliance with applicable regulatory requirements enacted by governmental authorities and obtaining all requisite regulatory approvals. We cannot predict the impact of the compliance regime that governmental authorities may implement to regulate the adult-use or medical cannabis industry. Similarly, we cannot predict how long it will take to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by governmental authorities.
Approximately 250 substances, including cannabis, are listed in the Schedules annexed to the UN Single Convention on Narcotic Drugs (New York, 1961), the Convention on Psychotropic Substances (Vienna, 1971) and the Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (introducing control on precursors) (Vienna, 1988). The purpose of these listings is to control and limit the use of these drugs according to a classification of their therapeutic value, risk of abuse and health dangers, and to minimize the diversion of precursor chemicals to illegal drug manufacturers. The 1961 UN Single Convention on Narcotic Drugs, as amended in 1972, classifies cannabis as a Schedule I (substances with addictive properties, presenting a serious risk of abuse) narcotic drug. The 1971 UN Convention on Psychotropic Substances classifies tetrahydrocannabinol, which includes delta-9 THC as a Schedule I psychotropic substance (substances presenting a high risk of abuse, posing a particularly serious threat to public health, which are of very little or no therapeutic value). Many countries are parties to these conventions, which govern international trade and domestic control of these substances, including cannabis. They may interpret and implement their obligations in a way that creates legal obstacles to our obtaining manufacturing and/or marketing approval for our products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be manufactured and/or marketed, and achieving such amendments to the laws and regulations may take a prolonged period of time. There can be no assurance that any market for our products will develop in any jurisdiction in which we do not currently have operations. We may face new or unexpected risks or significantly increase our exposure to one or more existing risk factors, including economic instability, political instability, changes in laws and regulations and the effects of competition. These factors may limit our capability to successfully expand our operations into such jurisdictions and may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Investments outside of Canada are subject to the risks normally associated with any conduct of business in foreign countries, including varying degrees of political, legal, regulatory and economic risk.
Much of our exposure to markets in jurisdictions outside of Canada is through strategic investments. These investments are subject to the risks normally associated with any conduct of business in foreign and/or emerging countries, including political risks; civil disturbance risks; changes in laws, regulations or policies of particular countries, including those relating to royalties, duties, tariffs, imports, exports and currency; the cancellation or renegotiation of contracts; the imposition of royalties, net profits payments, tax increases or other claims by government entities, including retroactive claims; a disregard for due process and the rule of law by local courts; the risk of expropriation and nationalization; delays in obtaining or the inability to obtain necessary governmental permits or the reimbursement of refundable tax from fiscal authorities.
Threats or instability in a country or region caused by political events, including elections, changes in government, changes in personnel or legislative bodies, foreign relations or military control present serious political and social risk and instability causing interruptions to the flow of business negotiations and influencing relationships with government officials. Changes in policy or law
may have a material adverse effect on our business, financial condition, results of operations and growth prospects. The risks include increased “unpaid” state participation, higher energy costs, higher taxation levels, higher import and export costs and potential expropriation.
Other risks include the potential for forced labor or child labor, fraud and corruption by suppliers, government officials, or our personnel that may implicate us. Company policies, including the Company’s Code of Business Conduct and Ethics, Whistleblower Protection Policy, Insider Trading Policy and Anti-Bribery and Anti-Corruption Policy mandate compliance with applicable laws, including but not limited to Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act, the U.S. Foreign Corrupt Practices Act (“FCPA”), the Corruption of Foreign Public Officials Act (Canada), and other anti-bribery laws. However, we cannot provide complete assurance that our policies, procedures, and internal controls will always prevent violations of applicable laws. If we are found liable for violations of applicable laws, we could suffer from a range of criminal or civil penalties or other sanctions. Violations or allegations of violations could have a material adverse effect on our business.
There is also the risk of increased disclosure requirements; currency fluctuations; restrictions on the ability of local operating companies to hold Canadian dollars, U.S. dollars or other foreign currencies in offshore bank accounts; import and export restrictions; increased regulatory requirements and restrictions; increased health-related regulations; limitations on the repatriation of earnings or on our ability to assist in minimizing our expatriate workforce’s exposure to double taxation in both the home and host jurisdictions; and increased financing costs.
These risks may limit or disrupt our investments, restrict the movement of funds, cause us to have to expend more funds than previously expected or required or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation, and may have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, the enforcement by us of our legal rights in foreign countries, including rights to exploit our properties or utilize our permits and licenses and contractual rights may not be recognized by the court systems in such foreign countries or enforced in accordance with the rule of law.
It is difficult to predict the future political, social and economic direction of the countries in which we operate, and the impact government decisions may have on our business. Any political or economic instability in the countries in which we operate could have a material and adverse effect on our business, financial condition, results of operations and growth prospects.
We are subject to risks relating to our current and future operations in emerging markets.
We have operations in various emerging markets. Such operations expose us to the socio-economic conditions as well as the laws governing the cannabis industry in such countries. Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labor unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, banking and currency controls and governmental regulations that favor or require us to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
Governments in certain foreign jurisdictions intervene in their economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Changes, if any, in cannabis industry policies or shifts in political attitude in the countries in which we operate may adversely affect our business, financial condition, results of operations and growth prospects. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, maintenance of licenses, approvals and permits, environmental matters, land use, land claims of local people, water use and workplace safety. Failure to comply strictly with applicable laws, regulations and local practices could result in loss, reduction or expropriation of licenses, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
We continue to monitor developments and policies in the emerging markets in which we operate and assess the impact thereof to our operations; however, such developments cannot be accurately predicted and could have an adverse effect on our business, financial condition, results of operations and growth prospects.
Risks related to Canopy USA
Our expansion plans into the United States rely upon the continued operations and success of Canopy USA and its subsidiaries and the anticipated benefits of the strategy involving Canopy USA is uncertain and may not be realized; and the fair value of our equity method investment in Canopy USA is volatile.
Our expansion plans into the United States primarily rely on the continued operations and success of Canopy USA and its subsidiaries. See “Business - Canopy USA” for additional information regarding Canopy USA and its acquisitions of Acreage, Wana and the majority interest of Jetty, each of which is a subsidiary of Canopy USA.
We cannot provide any assurance that the acquisitions of Acreage and/or Wana, and/or the majority interest of Jetty will be beneficial to Canopy USA or to us in the near term or at all. Furthermore, if Canopy USA fails to realize the intended benefits of any or all such acquisitions, the market price of the Canopy Shares could decline to the extent that the market price reflects those expected benefits.
Achieving the benefits anticipated through Canopy USA depends in part on the ability of Canopy USA to effectively capitalize on its scale, to realize the anticipated capital and operating synergies, to profitably sequence the growth prospects and to maximize the potential of its growth opportunities. The ability to realize these benefits from the acquisitions of Acreage, Wana and the majority interest of Jetty by Canopy USA will depend, in part, on successfully consolidating certain functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as on Canopy USA’s ability to realize the anticipated growth opportunities and synergies. The integration of Acreage, Wana and the majority interest of Jetty by Canopy USA will require the dedication of substantial effort, time and resources on the part of Canopy USA’s management which may divert Canopy USA’s management’s focus and resources from other strategic opportunities available to Canopy USA and from operational matters during this process. In addition, the integration process could result in disruption of existing relationships with suppliers, employees, customers and other constituencies of each entity. There can be no assurance that Canopy USA’s management will be able to integrate the operations of each of the businesses successfully or achieve any of the synergies or other benefits that are anticipated.
Operational and strategic decisions with respect to the integration of Acreage, Wana and the majority interest of Jetty are ongoing and have and may continue to present challenges in the future. It is possible that the integration process could result in the loss of key employees, the disruption of the respective ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of management to maintain relationships with clients, suppliers, employees or to achieve the anticipated benefits. As a result of these factors, it is possible that certain benefits expected from the formation of Canopy USA may not be realized. Any inability of Canopy USA’s management to successfully integrate the operations could have a material adverse effect on the financial condition and results of operations of Canopy USA and, ultimately, our business.
Through our ownership in the Non-Voting Shares, we own a non-participating and non-voting interest in Canopy USA and we classify such interest in Canopy USA as an equity method investment. The fair value of our equity investment in Canopy USA is subject to certain assumptions and accordingly such valuation is uncertain and highly volatile. For example, from June 30, 2024 to March 31, 2025, the fair value of our equity investments in Canopy USA and the Canopy USA LPs declined by 78%. A significant reduction in the value of Canopy USA could have a material adverse effect on our financial condition and future prospects as a result of our equity and loan receivable interests in Canopy USA.
Acreage’s last publicly available financial statements expressed doubt about its ability to continue as a going concern, which could have a negative impact on Canopy USA’s business, financial results and operations and have an adverse impact on the Company’s U.S. strategy, and, ultimately, the Company’s financial results and operations, and, in the event Acreage cannot satisfy its debt obligations as they become due, the Acquired Debt may not be repaid and the Company may lose the entirety of its investment.
Acreage’s last publicly available financial statements as of and for the three and nine months ended September 30, 2024 filed with the SEC on November 14, 2024 (“Acreage’s September 30, 2024 Financial Statements”) expressed doubt about Acreage’s ability to continue as a going concern. In particular, Acreage’s September 30, 2024 Financial Statements state: “[Acreage] had an accumulated deficit as of September 30, 2024, as well as a net loss and negative cash flow from operating activities for the nine months ended September 30, 2024. These factors raise substantial doubt about [Acreage]’s ability to continue as a going concern for at least one year from the issuance of these financial statements.” In the event Acreage is unable to continue as a going concern, this would have a negative impact on Canopy USA’s business, financial results and operations and have an adverse impact on the Company’s U.S. strategy, and, ultimately, the Company’s financial results and operations.
On June 3, 2024, the Company closed the Debt Acquisition pursuant to the credit agreement dated as of December 16, 2021, as amended by the first amendment to credit agreement dated as of on October 24, 2022, and the second amendment to credit agreement dated as of April 28, 2023. The Company entered into various agreements in connection with the Debt Acquisition in order to, among other things, acquire the Acquired Debt in exchange for US$69.8 million in cash and the release of approximately US$30.1 million that was held in escrow pursuant to the Option Agreement
As of March 31, 2025, an aggregate principal amount of approximately US$175 million was outstanding pursuant to the Second ARCA, of which approximately US$110 million is owing to the Company and such amount is subordinate to approximately US$65 million owed to the Other Lender.
In view of the foregoing, Acreage’s continuation as a going concern is dependent upon its continued operations, which in turn is dependent upon, among other things, Acreage’s ability to meet its financial requirements. There is no assurance that Acreage will be successful in its plans to fund its operations and debt obligations as they become due and payable, which for greater certainty includes its debt obligations in favor of the Company in connection with the Acquired Debt. We have recognized a $140 million non-cash fair value adjustment to reduce the fair value of the Acquired Debt to zero as of March 31, 2025. The fair value adjustment was driven by Acreage's current business performance.
In addition, Acreage is currently in default under the Second ARCA and the Lenders have agreed to forebear exercising any remedies with respect to such default until June 1, 2025 while the parties discuss potential solutions, including a potential debt extension. If an event of default continues to occur under the Second ARCA after June 1, 2025, the portion of the Acquired Debt owing to the Other Lender would rank in priority to the portion of the Acquired Debt owing to the Company. Accordingly, in the event Acreage cannot satisfy its debt obligations as they become due, the Acquired Debt may not be repaid and the Company may lose the entirety of its investment. In addition, Acreage may be required to terminate or significantly curtail its operations or enter into arrangements with third parties that may require Acreage to relinquish rights to certain aspects of its business and/or dispose of certain assets, which would have a negative impact on Canopy USA’s business, financial results and operations and have an adverse impact on the Company’s U.S. strategy, and, ultimately, the Company’s financial results and operations.
The Trust’s total ownership interest in Canopy USA is not quantifiable, including whether the Canopy USA warrants issued to the Trust in connection with the first tranche closing of the Trust Transaction are exercised or not, and the Trust may have significant ownership and influence over Canopy USA upon completion of the Trust Transaction.
In connection with the Trust Transaction, the Trust was entitled, subject to the terms and conditions of the Trust SPA, to be issued Canopy USA Common Shares in two tranches with an aggregate value of up to US$10 million along with warrants of Canopy USA to acquire additional Canopy USA Common Shares or Canopy USA Class B Shares. In addition, subject to the terms of the Trust SPA, the Trust has also been granted options to acquire additional Voting Shares (as defined in the Second A&R LLC Agreement) with a value of up to an additional US$10 million and one such additional option includes the issuance of additional warrants of Canopy USA. On April 26, 2024, Canopy USA completed the first tranche closing of the Trust Transaction in accordance with the Trust SPA and pursuant to the Trust SPA, the timeline to complete the second tranche closing has lapsed. As of March 31, 2025, the Trust holds an aggregate of 28,571,429 Canopy USA Common Shares and warrants to acquire up to 85,714,284 Voting Shares expiring on April 26, 2031. The number of additional Voting Shares and/or warrants of Canopy USA that remain issuable to the Trust in accordance with the Trust SPA will be determined by a future fair market valuation and accordingly, the number of such additional shares of Canopy USA to be issued to the Trust pursuant to the terms of the Trust SPA is currently not known and is not quantifiable as of the date hereof. Upon completion of the Trust Transaction, including the issuance of additional Voting Shares and/or additional Canopy USA warrants upon exercise of the options granted pursuant to the Trust SPA, the Trust may hold a significant ownership interest in Canopy USA and as a result, shareholders of Canopy USA, including Canopy Growth, may be significantly diluted following the completion of the Trust Transaction. Further, if the Trust holds a significant ownership interest in Canopy USA, the Trust will be in a position to exercise significant influence over matters requiring Canopy USA shareholder approval, subject to the terms of the Second A&R Protection Agreement. In addition, pursuant to the Second A&R LLC Agreement, (i) the Trust has designated one individual (the “Trust Nominee”) to the Canopy USA Board and the Trust will continue to hold such nomination right so long as the Trust holds at least 4.4% of the issued and outstanding Canopy USA Common Shares and (ii) the Trust Nominee, together with the individual designated to the Canopy USA Board by Ms. Whiteman, have approval rights over Key Decisions. There can be no assurance that the Trust’s interests will align with the interests of other shareholders of Canopy USA, including our interest.
We are unable to control Canopy USA.
By virtue of the Company holding Non-Voting Shares and the implementation of the Reorganization Amendments and the Additional Reorganization Amendments, we are unable to control Canopy USA. In these circumstances, we will not have the power to control, direct or exercise decisive influence over Canopy USA. There are no guarantees that Canopy USA’s interests will align with the interests of the Company or the interests of our shareholders. As a result, Canopy USA’s board of managers could take actions that are contrary to the interests of the Company or our shareholders, including preventing Canopy USA from entering into transactions that could be beneficial to the Company or our shareholders.
Canopy USA may divert the attention of our management or impact our ability to attract or retain key personnel.
The attention of our management may be diverted from the day-to-day operations of Canopy Growth in connection with the transactions that may be entered into between us and Canopy USA. These disruptions could be exacerbated by delays in completing certain transactions and could result in lost opportunities or negative impacts on performance, which could have a material and adverse effect on our current and future business, operations, financial condition and results of operations or prospects. As a result of the uncertainty, certain of our officers and employees may experience uncertainty about their future roles, which may adversely affect our ability to attract or retain key management and personnel.
Canopy USA may impact our third party business relationships.
Third parties with which we currently have business relationships, including banks, industry partners, customers and suppliers, may experience uncertainty associated with our U.S. strategy, including with respect to maintaining current or future relationships with us. While we believe, based on the advice of our legal advisors, that we currently comply with all applicable laws and regulations and that we will remain in compliance in the event that Canopy USA exercises the right to acquire 19.99% of the membership interests of Cultiv8 Interests, LLC (the “Cultiv8 Option”) or in the event that the Canopy USA LPs convert the TerrAscend Exchangeable Shares into TerrAscend Common Shares, there is a risk that our interpretation of laws, regulations, and guidelines, may
differ from those of others, including those of our banks, industry partners, customers and suppliers. Such uncertainty could have a material and adverse effect on our current and future business, operations, results of operations, financial condition and prospects.
Risks Relating to Our Products
We are subject to risks and uncertainty regarding future product development.
We expect to derive a portion of our future revenues from the sale of new products, including Cannabis 2.0 products, some of which are still being actively developed and put into production. If we fail to adequately meet market demand for such products in a timely fashion, it may adversely affect our profitability.
We may not be successful in maintaining the consumer brand recognition and loyalty of our products.
We compete in a market that relies on innovation and the ability to react to evolving consumer preferences. Consumers in the cannabis market have demonstrated a degree of brand loyalty, but suppliers must continue to adapt their products in order to maintain their status among customers as the market evolves. Our continued success depends in part on our ability and our suppliers’ ability to continue to differentiate the brand names we represent, own or license and maintain similarly high levels of recognition with target consumers. Trends within the cannabis industry change often and our failure to anticipate, identify or react to changes in these trends could, among other things, lead to reduced demand for our products.
Regulations have recently been and are likely to continue to be enacted in the future that would make it more difficult to appeal to consumers or to leverage the brands that we distribute, own or license. For example, the Canadian federal regulatory regime requires plain packaging on cannabis products in order to prohibit testimonials, lifestyle branding and packaging that is appealing to youth. The restriction on the use of logos and brand names on cannabis products could have a material adverse effect on our business, financial condition, results of operations and growth prospects, as it may be difficult to establish brand loyalty.
Furthermore, even if we are able to continue to distinguish our products, there can be no assurance that the sales, marketing and distribution efforts of our competitors will not be successful in persuading consumers of our products to switch to their products. Some of our competitors have greater access to resources than we do, which better positions them to conduct market research in relation to branding strategies or costly marketing campaigns. Any loss of consumer brand loyalty to our products or in our ability to effectively brand our products in a recognizable way could have a material adverse effect on our ability to continue to sell our products and maintain our market share, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our products have in the past and may in the future be subject to recalls.
Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including, among other things, product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure.
While we have not experienced any recalls since 2019, if any of our products are recalled in the future for any reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. All customers who are potentially impacted would be notified, corrective actions would be put in place, and existing product and procedures would be re-tested and examined. We may also lose a significant amount of sales and may not be able to replace those sales at an acceptable margin, or at all. In addition, product recalls have in the past and may in the future require significant management attention. Although we have detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if one or more of our products were subject to recall, our reputation and the reputation of that product could be harmed. A recall of one of our products could lead to decreased demand for that product or our other products and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Additionally, product recalls may lead to increased scrutiny of our operations by Health Canada or other regulatory agencies, requiring further management attention and potential legal fees and other expenses. Furthermore, any product recall affecting the cannabis or hemp industries more broadly could lead consumers to lose confidence in the safety and security of the products sold by participants in these industries generally, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
There is limited long-term data with respect to the efficacy, side effects and safety of our products, and future clinical research studies on the effects of cannabis, hemp, cannabinoids and cannabis-based products may lead to conclusions that dispute or conflict with our understanding and belief regarding their benefits, commercial viability, safety, efficacy, dosing and social acceptance.
Research in Canada and internationally regarding the benefits, commercial viability, safety, efficacy, dosing and social acceptance of cannabis, hemp or isolated cannabinoids (such as CBD and THC) inhaled in dietary supplements, food or cosmetic products remains in early stages. There have been relatively few clinical trials or other controlled studies on the potential benefits of cannabis, hemp or isolated cannabinoids in dietary supplements, food, or cosmetic products and there is limited long-term data with respect to efficacy, side effects and/or interaction of these substances with human or animal biochemistry. As a result, our products
could have unexpected side effects or safety concerns, the discovery of which could lead to civil litigation, regulatory actions and even possibly criminal enforcement actions. In addition, if the products we sell do not or are not perceived to have the effects intended by the end user, this could have a material adverse effect on our business, financial condition and results of operations. See also “-We are and may become subject to, or prosecute, litigation in the ordinary course of our manufacturing, marketing, distribution and sale of our products”, “-We may be subject to product liability claims.” and “-Our products have in the past and may in the future be subject to recalls.”
The statements made by us, including in this Form 10-K, concerning the potential benefits of cannabis, hemp and isolated cannabinoids are based on published articles and reports and therefore are subject to the experimental parameters, qualifications and limitations in such studies that have been completed. Although we believe that the existing public scientific literature generally supports our beliefs regarding the benefits, commercial viability, safety, efficacy, dosing and social acceptance of cannabis, hemp and cannabinoids, future research and clinical trials may cast doubt or disprove such beliefs, or could raise or heighten concerns regarding, and perceptions relating to, cannabis, hemp and cannabinoids, which could have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on business, financial condition, results of operations and growth prospects. Given these risks, uncertainties and assumptions, undue reliance should not be placed on such literature.
The controversy surrounding vapes and vaporizers and vaporizer products and government regulations of vapes and vaporizers and vaporizer products may materially and adversely affect the market for vapes and vaporizer products and expose us to litigation and additional regulation.
There have been a number of highly publicized cases involving lung and other illnesses and deaths that appear to be related to vapes and vaporizer devices and/or products used in such devices (such as vape or vaporizer liquids). During this time, the focus has been on vapes and vaporizer devices, the manner in which the devices were used and the related vape and vaporizer device products - THC, nicotine, other substances in vapes and vaporizer liquids, possibly adulterated products and other illegal unlicensed cannabis vape and vaporizer products. Some provinces, territories and municipalities in Canada have taken steps to prohibit the sale or distribution of vapes and vaporizers, restrict the sale and distribution of such products or impose restrictions on flavors, substances and concentration of substances used, or use of such vapes and vaporizers, however some Canadian provinces have already taken steps to reduce such restrictions.
Cannabis vapes and vaporizers in Canada are regulated under the Cannabis Act, Cannabis Regulations and other laws and regulations of general application. Negative public sentiment may prompt regulators to decide to further limit or defer the industry’s ability to sell cannabis vapes and vaporizer products, and may also diminish consumer demand for such products. For instance, Health Canada enacted regulations that place stricter limits on the advertising and promotion of vaping products and make health warnings on vaping products mandatory, although such regulations explicitly exclude cannabis and cannabis accessories. Health Canada and the province of Quebec are seeking to limit the flavors of inhaled cannabis extracts. The Cannabis Regulations prohibit promoting a cannabis extract or associated cannabis accessories in a manner that could cause a person to believe that it has the flavor of a confectionery, dessert, soft drink or energy drink. These actions, together with potential deterioration in the public’s perception of cannabis containing vaping liquids, may result in a reduced market for our vaping products. There can be no assurance that we will be able to meet any additional compliance requirements or regulatory restrictions, or remain competitive in face of unexpected changes in market conditions.
Litigation pertaining to vapes and vaporizer products for nicotine is ongoing and that litigation could potentially expand to include our products, which would have a material adverse effect on our business, financial condition, operating results, liquidity, cash flow and operational performance.
Future research may lead to findings that vaporizers, electronic cigarettes and related products are not safe for their intended use.
Vaporizers, electronic cigarettes and related products were recently developed and therefore the scientific or medical communities have had a limited period of time to study the long-term health effects of their use. Currently, there is limited scientific or medical data on the safety of such products for their intended use and the medical community is still studying the health effects of the use of such products, including the long-term health effects. If a consensus were to develop among the scientific or medical community that the use of any or all of these products pose long-term health risks, market demand for these products and their use could materially decline. Such a development could also lead to litigation, reputational harm and significant regulation. Loss of demand for our products, product liability claims and increased regulation stemming from unfavorable scientific studies on vaporizer products could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, the FDA may assert jurisdiction if a vaporizer is promoted for an “intended use” that involves the diagnosis, cure, mitigation, or treatment of disease. Our vaporizer products may also be subject to additional regulation by the U.S. Consumer Product Safety Commission (CPSC), which has in the past overseen recalls of vaporizer devices. We continue to monitor our regulatory obligations and may adjust our product claims and marketing accordingly.
In the United States, our advertising is also subject to regulation by the FTC under the Federal Trade Commission Act. The FTC requires that all advertising, including for vaporizers, be truthful, not misleading, and substantiated by reliable evidence. We continue to be subject to general FTC advertising standards, and depending on the nature of the claims made, vaporizer marketing
could fall within the scope of FTC oversight. If the FTC were to bring administrative proceedings, the Company would be required to incur expenses to defend its labeling and could be required to develop additional supporting evidence or to change its advertising and labeling. To date, we have not received any FTC requests.
Risks Relating to Regulation and Compliance
Cannabis is a controlled substance in the United States and therefore subject to the CSA.
We are indirectly involved in ancillary activities related to the cannabis industry in jurisdictions in the United States where local state law permits such activities and, by virtue of Canopy USA and Canopy USA LPs' holdings of shares and warrants of TerrAscend, we may be indirectly associated with the cultivation, processing or distribution of cannabis in the United States. In the United States, cannabis is regulated at both the federal and state levels. To our knowledge, there are to date a total of 39 states, and the District of Columbia, that have now legalized or passed legislation decriminalizing cannabis in some form, including California, Nevada, New York, New Jersey, Washington and Florida. Although several states allow the sale of cannabis at the state level, cannabis continues to be categorized as a controlled substance under the CSA and, as such, cultivation, distribution, sale and possession of cannabis violates federal law in the United States. The inconsistency between federal and state laws and regulations may result in a loss of the value of our investments and alliances in these businesses.
While state regulation in certain U.S. states may take a permissive approach to medical and/or adult-use of cannabis, the CSA may still be enforced by U.S. federal law enforcement officials against individuals and companies operating in those states for activity that is legal under state law. If the DOJ opted to pursue a policy of aggressively enforcing U.S. federal law against financiers or equity owners of cannabis-related businesses, then Canopy USA, Acreage, TerrAscend, Wana and Jetty, for instance, could face (i) seizure of their cash and other assets used to support or derived from their business activities; and/or (ii) the arrest of its employees, directors, officers, managers and/or investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis.
Based on the advice of our legal advisors with respect to the formation of Canopy USA, the transaction structure was intended to (i) permit us to remain able to represent that we comply with U.S. federal criminal law, particularly direct or indirect violations of the CSA (collectively, “Applicable Federal Law”); and (ii) ensure that (a) we do not, directly or indirectly, violate Applicable Federal Law; (b) we will not directly violate U.S. federal law as we do not cultivate, distribute, sell, or possess cannabis in the United States; (c) we do not violate indirect federal law (such as aiding and abetting, conspiracy, or Racketeer Influenced and Corrupt Organizations (RICO) Act) because we do not control or profit from companies that cultivate, distribute, sell, or possess cannabis in the United States; and (d) we do not violate anti-money laundering laws because no funds will flow from entities that cultivate, distribute, sell, or possess cannabis in the United States to us. While we believe, based on the advice of our legal advisors, that we currently comply, and will continue to comply (in the event that Canopy USA exercises the Cultiv8 Option or in the event that the Canopy USA LPs convert the TerrAscend Exchangeable Shares into TerrAscend Common Shares), with all applicable laws and regulations by virtue of our ownership interest in the Non-Voting Shares of Canopy USA, there is a risk that our interpretation of laws, regulations, and guidelines, may differ from those of others, including those of shareholders, government authorities, securities regulators, and stock exchanges. In the event of an aggressive enforcement policy, the DOJ could allege that we and the Board, and potentially our shareholders, “aided and abetted” violations of U.S. federal law as a result of our ownership interest in the Non-Voting Shares of Canopy USA and the activities of Canopy USA. In these circumstances, we may lose our entire investment and directors, officers and/or our shareholders may be required to defend any criminal charges against them at their own expense and, if convicted, be sent to federal prison.
Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on us, including our reputation and ability to conduct business, the listing of our securities on the TSX, Nasdaq or other exchanges, our financial position, operating results, profitability or liquidity or the market price of our listed securities. Overall, an investor’s contribution to and involvement in our activities may result in federal civil and/or criminal prosecution, including forfeiture of his or her entire investment.
We operate in highly regulated industries where the regulatory environments are rapidly developing and we may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.
Our business and activities are heavily regulated in all jurisdictions where we carry on business. Our operations are subject to various laws, regulations and guidelines by governmental authorities (including, in Canada, Health Canada and other federal, provincial, state and local regulatory agencies) relating to, among other things, the cultivation, manufacture, processing, marketing, labeling, packaging, management, transportation, distribution, import, export, storage, sale, pricing and disposal of cannabis, hemp and cannabis-based products, and also including laws, regulations and guidelines relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment (including relating to emissions and discharges to water, air and land, and the handling and disposal of hazardous and non-hazardous materials and wastes). Our operations may also be affected in varying
degrees by government regulations with respect to, among other things, price controls, import or export controls, controls on currency remittance, increased income taxes, restrictions on foreign investment and government policies rewarding contracts to local competitors or requiring domestic producers or vendors to purchase supplies from a particular jurisdiction. Laws, regulations and guidelines, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services, as well as on our personnel (including management and the Board).
Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the cultivation, production, processing, storage, transportation, distribution, sale, import and export, as applicable, of our products. The cannabis and hemp industries are still new, and in Canada, in particular, the Cannabis Act has no close precedent in Canadian law. Similarly, the regulatory regimes in the jurisdictions in which we and our strategic investments operate outside of Canada are new and are still being developed without close precedent in such jurisdictions. The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, necessary regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
The regulatory environment for our products is rapidly developing, and the need to build and maintain robust systems to comply with different and changing regulations in multiple jurisdictions increases the possibility that we may violate one or more applicable requirements. While we endeavor to comply with all relevant laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations could subject us to negative consequences, including, but not limited to, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, asset seizures, revocation or imposition of additional conditions on licenses to operate our business, the denial of regulatory applications (including, in the U.S., by other regulatory regimes that rely on the positions of the DEA, FDA and USDA in the application of their respective regimes), the suspension or expulsion from a particular market or jurisdiction or of our key personnel, or the imposition of additional or more stringent inspection, testing and reporting requirements, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Additionally, scheduled or unscheduled inspections of our facilities or facilities of our strategic investments or third party suppliers by applicable regulatory agencies could result in adverse findings that could require significant remediation efforts and/or temporary or permanent shutdown of our facilities or those of our strategic investments or third party suppliers. The outcome of any regulatory or agency proceedings, investigations, inspections, audits, and other contingencies could harm our reputation, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our results of operations, financial condition and cash flows. Increasingly, communication and coordination among regulators has led in other industries to coordinated responses to regulatory and licensure applications. To the extent that regulators coordinate responses to license applications and regulatory conditions, limitations or denials of licenses in one jurisdiction may lead to denials in other jurisdictions. There can be no assurance that any pending or future regulatory or agency proceedings, investigations, inspections and audits will not result in substantial costs or a diversion of management’s attention and resources, adversely impact our future growth plans and opportunities or have a material adverse effect on our business, financial condition and results of operations.
If any part of our business activities are found to be in violation of any of federal, state, provincial or local laws or any other governmental regulations, in addition to the items described above:
•we may be subject to “Warning Letters,” untitled letters, fines, penalties, administrative sanctions, settlements, injunctions, product recalls and/or other enforcement actions arising from civil, administrative or other proceedings initiated that could adversely affect our business, financial condition, operating results, liquidity, cash flow and operational performance;
•the profits or revenues derived therefrom could be subject to anti-money laundering statutes, including the Money Laundering Control Act, which could result in significant disruption to our business operations and involve significant costs, expenses or other penalties; and
•our suppliers, service providers and distributors may elect, at any time, to breach, terminate or otherwise cease to participate in supply, service or distribution agreements, or other relationships, on which our operations rely.
We are reliant on required licenses, authorizations, approvals and permits issued by Canadian and foreign governmental authority for our ability to grow, process, store and sell cannabis, hemp and cannabinoids which are subject to ongoing compliance, reporting and renewal requirements.
We are dependent on our existing licenses from governmental authorities in order to grow, store, process and sell cannabis. These licenses are subject to ongoing compliance and reporting requirements. Failure to comply with the requirements of these licenses or failure to maintain these licenses could have a material adverse effect on our business, financial condition, results of operations and growth prospects. There can be no guarantee that a license will be extended or renewed or, if extended or renewed, that it will be extended or renewed on terms that are favorable to us or that a governmental authority will not revoke the licenses. Should
we fail to comply with requirements of the licenses, should the applicable governmental authority not extend or renew the licenses, should they be renewed on different terms (including not allowing for anticipated capacity increases) or should the licenses be revoked or suspended, our business, financial condition, results of operations and growth prospects will be materially adversely affected.
In addition, our ability to grow our business may be dependent on securing and maintaining certain new licenses. Failure to comply with the requirements of any license application or failure to obtain and maintain the appropriate licenses with the relevant authorities would have a material adverse effect on our business, financial condition, results of operations and growth prospects. There can also be no guarantees that regulatory authorities will issue the required licenses to us.
Changes in the laws, regulations and guidelines governing cannabis and hemp may adversely affect our business and that of our investments.
Our current operations are subject to various laws, regulations and guidelines promulgated by governmental authorities relating to the marketing, acquisition, manufacture, packaging/labeling, management, transportation, storage, sale and disposal of cannabis or hemp. We are also subject to laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment (including relating to emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes). Additionally, our growth strategy continues to evolve as regulations governing the cannabis industry in the jurisdictions in which we operate become more fully developed. Interpretation of these laws, rules and regulations and their application to our operations is ongoing. No assurance can be given that new laws, regulations and guidelines will not be enacted or that existing laws, regulations and guidelines will not be amended, repealed or interpreted or applied in a manner which could require extensive changes to our operations, increase compliance costs, give rise to material liabilities or a revocation of our licenses and other permits, restrict the growth opportunities that we currently anticipate or otherwise limit or curtail our operations. Amendments to current laws, regulations and guidelines governing the production, sale and use of cannabis and cannabis-based products, more stringent implementation or enforcement thereof or other unanticipated events, including changes in political conditions and/or regimes or political instability, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation, governmental regulations relating to foreign investment and the cannabis business more generally, and changes in attitudes toward cannabis, are beyond our control and could require extensive changes to our operations, which in turn may result in a material adverse effect on our business, financial condition, results of operations and growth prospects.
While the production of cannabis in Canada is under the regulatory oversight of the Canadian federal government, the distribution and retail sale of adult-use cannabis in Canada falls within the jurisdiction of the provincial and territorial governments. The impact of the legislation regulating adult-use cannabis passed in such provinces and territories on the cannabis industry and on our business plans and operations is uncertain. Certain Canadian provinces and territories have announced certain restrictions that are more stringent than the federal rules or regulations such as retail sale and marketing restrictions, bans on certain types of cannabis products, raising minimum age of purchase and flavor restrictions. For example, Quebec limits the sale of other high THC non-edible cannabis products. In April 2023, the Supreme Court of Canada affirmed the provinces’ power to enact regulations that are more restrictive than the federal regime. In addition, the distribution and retail channels and applicable rules and regulations in the provinces continue to evolve, and our ability to distribute and retail cannabis products in Canada is dependent on the ability of the provinces and territories of Canada to establish licensed retail networks and outlets. There is no guarantee that the applicable legislation regulating the distribution and sale of cannabis for adult-use purposes will allow for the growth opportunities we currently anticipate and may result in a material adverse effect on our business, financial condition and results of operations. In December 2023, Health Canada released guidance on cannabis products deliberately made with intoxicating cannabinoids other than delta-9-THC. Health Canada defines “intoxicating cannabinoids” as cannabinoids that bind to and activate the type 1 cannabinoid receptor (CB1 receptor) and the guidance includes a list that currently sets out 9 cannabinoids that qualify, however, that list is subject to Health Canada’s discretion to revise this list as new evidence becomes available about any of the current listed cannabinoids or any other potential intoxicating cannabinoids. This guidance recommends that cannabis license holders apply the regulatory controls (including limits on the amount of cannabinoids in certain products) currently applicable to delta-9-THC to all other cannabinoids that Health Canada considers to be “intoxicating cannabinoids” in order to minimize the risks of accidental consumption, overconsumption and adverse effects. This guidance comes at a time when various provincial regulators (such as those in Ontario, British Columbia and Alberta) are actively evaluating whether to permit the sale of or how to evaluate limits on the levels of certain cannabinoids (such as tetrahydrocannabivarin and cannabinol). Provincial and territorial distributors may take different positions on the sale and distribution of products with various cannabinoids and may decide to ban, limit or implement new guidance on the types of cannabis products permitted for sale in each of their jurisdictions (including in response to Health Canada’s guidance on intoxicating cannabinoids) which may result in some or all of our products being viewed as non-compliant with applicable law or non-binding policy guidance.
Furthermore, additional countries continue to pass laws that allow for the production and distribution of cannabis in some form or another. We have some subsidiaries, investments and strategic alliances in place outside of Canada, which may be affected if more countries legalize cannabis. Increased international competition and limitations placed on us by Canadian regulations might lower the demand for our products on a global scale. We also face competition in each jurisdiction outside of Canada where we have subsidiaries, investments and strategic alliances with local companies that have more experience, more in-depth knowledge of local markets or applicable laws, regulations and guidelines or longer operating histories in such jurisdictions.
We are subject to certain restrictions of the TSX and Nasdaq, which may constrain our ability to expand our business in the United States.
The Canopy Shares are currently listed on the TSX and Nasdaq, and accordingly, so long as we choose to continue to be listed on these exchanges, we must comply with the TSX and Nasdaq requirements or guidelines when conducting business, especially when pursuing opportunities in the United States.
On October 16, 2017, the TSX provided clarity regarding the application of Sections 306 (Minimum Listing Requirements) and 325 (Management) and Part VII (Halting of Trading, Suspension and Delisting of Securities) of the TSX Company Manual (collectively, the “TSX Requirements”) to 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 TSX Requirements. The TSX reminded issuers that, among other things, should the TSX find that a listed issuer is engaging in activities contrary to the TSX Requirements, the TSX has the discretion to initiate a delisting review. Although we believe that we currently comply with all applicable laws and regulations, including the TSX Requirements, there is a risk that our interpretation may differ from the TSX and failure to comply with the TSX Requirements could result in a delisting of the Canopy Shares from the TSX or the denial of an application for certain approvals, such as to have additional securities listed on the TSX, which could have a material adverse effect on the trading price of the Canopy Shares and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
While Nasdaq has not issued official rules specific to the cannabis or hemp industry, stock exchanges in the United States, including Nasdaq, have historically refused to list certain cannabis-related businesses, including cannabis retailers, that operate primarily in the United States. In connection with our creation of Canopy USA, Nasdaq Regulation indicated its position that companies that consolidate “the assets and revenues generated from activities in violation under federal law cannot continue to list on Nasdaq.” Canopy USA exercised its options to acquire Wana and Jetty on May 6, 2024. As of April 30, 2024, Canopy Growth has deconsolidated the financial results of Canopy USA and has a non-controlling interest in Canopy USA as of such date, which will be accounted for as an equity method (fair value) investment until such time as a Stock Exchange Permissibility Date occurs. Based on our discussions with the OCA, we continue to believe that the SEC would not object to the deconsolidation of the financial results of Canopy USA from the Company’s financial statements in accordance with U.S. GAAP now that Canopy USA has acquired Acreage, Wana and the majority interest of Jetty. However, there can be no assurance that the SEC will agree with the Company’s accounting treatment of Canopy USA in the future. Failure to comply with any requirements imposed by Nasdaq could result in the delisting of the Canopy Shares from Nasdaq or denial of any application to have additional securities listed on Nasdaq, which could have a material adverse effect on the trading price of the Canopy Shares.
Federal law in the United States may impose restrictions on our ability to bank with certain institutions, repatriate funds to Canada or pay dividends to shareholders.
The U.S. federal prohibitions on the sale of cannabis may result in us or Canopy USA being restricted from accessing the U.S. banking system, and we or Canopy USA may be unable to deposit funds in federally insured and licensed banking institutions. Banking restrictions could be imposed due to institutions not accepting payments and deposits. We are, and Canopy USA is at risk that any of our and Canopy USA’s bank accounts could be closed at any time. Such risks increase our costs and our ability to handle any revenue received. In addition, activities in the U.S., and any proceeds derived thereof, may be considered proceeds of crime due to the fact that cannabis remains federally illegal in the U.S. This may restrict our ability to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada.
We may be subject to heightened scrutiny by regulatory authorities.
Any future investments, joint ventures or operations in the United States, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and/or the United States. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to invest in the United States or any other jurisdiction, in addition to those described herein.
We are constrained by law in our ability to market and advertise our products.
Our marketing and advertising are subject to regulation by various regulatory bodies in the jurisdictions we operate. In Canada, the development of our business and related results of operations may be hindered by applicable regulatory restrictions on sales and marketing activities. For example, the regulatory environment in Canada limits our ability to compete for market share in a manner similar to other industries. Furthermore, the applicable regulatory restrictions on sales and marketing activities are not always clear, may be subject to interpretation and have in the past, and may in the future, be interpreted or applied inconsistently by the applicable Canadian regulatory agencies, which have broad interpretative and enforcement discretion with respect to such activities. This may result in such restrictions on sale and marketing activities being interpreted unfavorably by a regulatory agency against some market participants, including us, but not others. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and results of operations could be adversely affected. See “Business - Canadian Regulatory Framework.”
We are subject to a number of federal, state, and foreign environmental and safety laws and regulations that may expose us to significant costs and liabilities.
Our 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. Accordingly, we will incur ongoing costs and obligations related to compliance with environmental and employee health and safety matters. In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Further, compliance with EU-GMP requires satisfying additional standards for the conduct of our operations and subjects us to ongoing compliance inspections in respect of these standards in connection with our EU-GMP certified facilities. Compliance with safety, health and environmental laws and regulations can require significant expenditures, and failure to comply with such safety, health and environmental laws and regulations may result in the imposition of fines and penalties, the temporary or permanent suspension of operations, the imposition of clean-up costs resulting from contaminated properties, the imposition of damages and the loss of or refusal of governmental authorities to issue permits or licenses to us or to certify our compliance with EU-GMP standards. Exposure to these liabilities may arise in connection with our existing operations, our historical operations and operations that we may undertake in the future. We could also be held liable for worker exposure to hazardous substances and for accidents causing injury or death. There can be no assurance that we will at all times be in compliance with all safety, health and environmental laws and regulations notwithstanding our attempts to comply with such laws and regulations.
Anti-money laundering and other banking laws and regulations can limit our ability to access financing and hamper our growth.
We are subject to a variety of domestic and international laws and regulations pertaining to money laundering, financial recordkeeping and proceeds of crime, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and the rules and regulations thereunder, the Criminal Code (Canada) and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities internationally.
In the event that any of our operations or investments, any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations or investments were found to be in violation of money laundering legislation, such transactions may be viewed as proceeds of crimes under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize our ability to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while we have no current intention to declare or pay dividends in the foreseeable future, in the event that a determination was made that proceeds obtained by us could reasonably be shown to constitute proceeds of crime, we may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.
In February 2014, FinCEN of the U.S. Department of the Treasury issued the FinCEN Marijuana-Related Guidance. The FINCEN Marijuana-Related Guidance states that in some circumstances, it may not be appropriate to prosecute banks that provide services to marijuana-related businesses for violations of federal money laundering laws. It refers to supplementary guidance that then Deputy Attorney General Cole issued to federal prosecutors relating to the prosecution of money laundering offenses predicated on Cannabis-related violations of the CSA. It is unclear at this time whether the current or future administrations will follow the guidelines of the FINCEN Marijuana-Related Guidance.
Following the passage of the 2018 Farm Bill, FinCEN, along with other federal banking regulators, released the FinCEN Hemp Statement. In June 2020, FinCEN issued the FinCEN Hemp Guidance. The FinCEN Hemp Statement and FinCEN Hemp Guidance provided financial institutions with anti-money laundering risk considerations for hemp-related businesses to ultimately enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in compliance with federal law. The FinCEN Hemp Statement and FinCEN Hemp Guidance do not replace or supersede the FinCEN Marijuana-Related Guidance.
Under U.S. federal law, banks or other financial institutions that provide a Cannabis-related business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering, aiding and abetting, or conspiracy. As a result, we may have limited or no access to banking or other financial services in the United States and we may be unable to deposit funds in federally insured and licensed banking institutions. Banking restrictions could be imposed due to institutions not accepting payments and deposits. We are at risk that any of our bank accounts and/or the bank accounts of Canopy USA could be closed at any time. The inability or limitation on our ability to open or maintain bank accounts in the United States, to obtain other banking services and/or accept credit card and debit card payments may make it difficult to operate and conduct our business as planned in the United States. Such risks increase our costs and our ability to handle any revenue received. Although multiple legislative reforms related to cannabis and cannabis-related banking are currently being considered by the federal government in the United States, such as the Secure and Fair Enforcement Banking Act, there can be no assurance that this or any similar legislation will become law in the United States.
We could be adversely affected by violations of the Corruption of Foreign Public Officials Act (Canada), the U.S. Foreign Corrupt Practices Act and other similar anti-bribery laws.
Our business is subject to the Corruption of Foreign Public Officials Act (Canada), the FCPA and other similar laws which generally prohibit companies and employees from engaging in bribery or other prohibited payments to government officials for the purpose of obtaining or retaining business. In addition, we are or will be subject to the anti-bribery laws of any other countries in which we conduct business now or in the future. Our policies mandate compliance with these anti-corruption and anti-bribery laws. Our employees or other agents may, without our knowledge and despite our efforts, engage in conduct prohibited under our policies and procedures and under anti-bribery laws, for which we may be held responsible. There can be no assurance that our internal control policies and procedures will always protect us from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees, contractors or agents. If our employees or other agents are found to have engaged in such practices, we could suffer severe criminal and/or civil penalties and other consequences that may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We must rely on local counsel and consultants with respect to laws and regulations in countries outside of Canada.
The legal and regulatory requirements in the foreign countries in which we operate with respect to the cultivation and sale of cannabis, banking systems and controls, as well as local business culture and practices are different from those in Canada. Our officers and directors must rely, to a great extent, on local legal counsel and consultants in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect our business, financial condition, results of operations and growth prospects, and to assist with governmental relations. We must rely, to some extent, on those members of management and our 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. We also rely 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 cannabis as well as in respect of banking, financing, labor, 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 our control. The impact of any such changes may adversely affect our business, financial condition, results of operations and growth prospects.
Any rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business.
In August 2023, the HHS recommended that the DEA move marijuana from Schedule I to Schedule III under the CSA and on May 16, 2024, the DEA issued a proposed rule to reclassify marijuana from its current classification as a Schedule I drug to a Schedule III drug. There can be no assurance that the proposed DEA rule will go into effect in its present form or at all, and the impacts of any such adoption on our business and competitive position are unclear. For example, rescheduling marijuana from Schedule I to Schedule III may be accompanied by additional regulatory obligations as prerequisite to participate in the U.S. market, and it may provide a greater benefit to the businesses of our competitors than our business, including by providing favorable tax treatment to their U.S. operations. The rescheduling of marijuana from Schedule I to Schedule III could result in significant volatility in the market for the Canopy Shares. To the extent that market speculation results in an increase in the price of the Canopy Shares, the price of the Canopy Shares could decline significantly thereafter if the DEA fails to act on the recommendation or investor optimism fades.
Risks Relating to Competition, Performance and Operations
We may not successfully execute our business strategy.
We may be unable to pursue our business strategy in the future at the desired pace or at all. We may be unable to, among other things, identify suitable companies to acquire or invest in; complete acquisitions on satisfactory terms; successfully expand our infrastructure and sales force to support growth; achieve satisfactory returns on acquired companies, particularly in countries where we do not currently operate; or enter into successful business arrangements for technical assistance or management expertise outside of North America.
In addition, the process of integrating acquired businesses, particularly in new markets, may involve unforeseen difficulties, such as loss of key employees, and may require a disproportionate amount of management’s attention and financial and other resources. We can give no assurance that we will ultimately be able to effectively integrate and manage the operations of any acquired business or realize anticipated synergies. The failure to successfully integrate the cultures, operating systems, procedures and information technologies of an acquired business could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
If we succeed in expanding our existing businesses, such expansion may place increased demands on management, operating systems, internal controls and financial and physical resources. If not managed effectively, these increased demands may adversely affect the services provided to customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations, particularly with respect to operations in countries outside of North America. Consequently, in order to manage growth effectively, we may be required to increase expenditures to increase our physical resources, expand, train and manage our employee base, improve management, financial and information systems and controls, or make other capital expenditures. Our
business, financial condition, results of operations and growth prospects could be adversely affected if we encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by future growth.
We have been and may in the future be required to write down inventory due to downward pressure on market prices, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
At the end of each reporting period, management performs an assessment of inventory obsolescence, prices and demand to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We also consider factors such as slow-moving or non-marketable products in our determination of obsolescence. As a result of this assessment, inventory write-downs have occurred on a few occasions in the past and may occur from period to period in the future. Continued pricing pressures in the markets in which we operate may result in further inventory write-downs. We have had a series of inventory write-downs due to price compression in the cannabis market. We expect these write-downs to continue as pricing pressures remain elevated. These inventory write-downs have in the past and may in the future have a material adverse effect on our results of operations and financial position.
We may not be able to supply the provincial purchasers in various provinces and territories of Canada with our products in the quantities or prices anticipated, or at all.
A significant component of our current revenues are dependent upon our supply contracts with the various Canadian provinces and territories. There are many factors which could impact our contractual agreements with the provinces and territories, including but not limited to availability of supply, product selection and the popularity of our products with retail customers. If our supply agreements with certain Canadian provinces are amended, terminated or otherwise altered, our sales and operating results could be adversely affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our supply arrangements with provincial purchasers, each of which we understand to be substantially similar in all material respects with the supply arrangements entered into with the other license holders in the Canadian cannabis industry, do not contain any binding minimum purchase obligations on the part of the relevant provincial purchaser.
We expect purchase orders to be primarily driven by end-consumer demand for our products and the relevant provincial purchaser supply at the relevant time. Accordingly, we cannot predict the quantities of our products that will be purchased by the provincial purchasers, or if our products will be purchased at all. Provincial purchasers may change the terms of the supply agreements at any time during the supply relationship including on pricing, have broad rights of return of products and are under no obligation to purchase our products or maintain any listings of our products for sale. As a result, provincial purchasers have a significant amount of control over the terms of the supply arrangements.
The adult-use cannabis market in Canada has in the past been and may in the future become oversupplied.
Numerous additional cannabis producers have and may continue to enter the Canadian market. We and such other cannabis producers have in the past produced and may in the future produce more cannabis than is needed to satisfy the collective demand of the Canadian medical and adult-use markets, and we may be unable to export that over-supply into other markets. As a result, the available supply of cannabis could exceed demand, which has in the past, and may in the future, result in significant inventory write downs and downward pressure on wholesale prices of our products.
We must rely largely on our own market research and internal data to forecast sales and market demand and market prices, which may differ from our forecasts.
Given the early stage of the cannabis and hemp industries, we rely largely on our own market research and internal data to forecast industry trends and statistics as detailed forecasts are, with certain exceptions, not generally available from other sources. A failure in the demand for our products to materialize as a result of competition, technological change, change in the regulatory or legal landscape or other factors could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We may be unsuccessful in competing in the legal cannabis market in Canada and in international markets.
We face competition from a large number of existing license holders licensed under the Cannabis Act. Certain of these competitors may have significantly greater financial, production, marketing, research and development and technical and human resources than we do. As a result, our competitors may be more successful than us in gaining market penetration and market share in cannabis industry in Canada. Our commercial opportunity in the cannabis market in Canada could be reduced or eliminated if our competitors produce and commercialize products that, are safer, more effective, more convenient or less expensive than the products that we produce, have greater sales, marketing and distribution support than our products, enjoy enhanced timing of market introduction and perceived effectiveness advantages over our products or receive more favorable publicity than our products. If our products do not achieve an adequate level of acceptance by the market, we may not generate sufficient revenue from these products, and our business may not become profitable.
The Cannabis Act allows individuals over the age of 18 to legally cultivate up to four cannabis plants per household provided that each plant meets certain requirements, subject to any restrictions on these activities imposed in certain provinces and territories. If we are unable to effectively compete with other suppliers to the cannabis market, or a significant number of individuals take advantage of the ability to cultivate and use their own cannabis, our business may be adversely affected.
In addition, the Cannabis Act allows for licenses to be granted for outdoor cultivation, which may reduce start-up capital required for new entrants in the cannabis industry. It may also ultimately lower prices, as capital expenditure requirements related to outdoor growing are typically much lower than those associated with indoor growing. Such results may also have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Similar to the Canada, Germany now allows for limited household cultivation of cannabis and the personal possession of cannabis for medical consumption. As is the potential risk in Canada, if we are unable to effectively compete with other suppliers to the cannabis market in Germany, or a significant number of individuals take advantage of the ability to cultivate and use their own cannabis, our business may be adversely affected.
We face competition from the illegal cannabis market in every market we sell our products.
We face competition from illegal market participants that are unlicensed and unregulated, and that are selling cannabis and cannabis products, including products with higher concentrations of active ingredients, using flavors or other additives or engaging in advertising and promotion activities that we are not permitted to. As these illegal market participants do not comply with the regulations governing the cannabis industry, their operations may also have significantly lower costs and they may be able to sell products with significantly higher cannabinoid potencies or which include ingredients that are prohibited by law. The perpetuation of the illegal market for cannabis may have a material adverse effect on our business, financial condition, results of operations and growth prospects, as well as the perception of cannabis use.
Regulatory non-compliance by licensed cannabis competitors may have an adverse effect on our business, results of operations and financial condition.
In addition to competition from illegal market participants, we may also face competition from licensed cannabis competitors that fail to comply with the regulations governing the cannabis industry when developing and selling cannabis products. These competitors may be able to produce and sell products with significantly higher cannabinoid potencies or which include ingredients that are prohibited by law. If regulatory authorities are delayed in, or fail to, effectively restrict the sale and distribution of such non-compliant cannabis products by our competitors, there may be a material adverse effect on our business, results of operations and financial condition, as well as the perception of cannabis use.
The Canadian excise duty framework affects our profitability.
Canada’s excise duty framework imposes an excise duty and various regulatory-like restrictions on cannabis products sold in Canada. We currently hold licenses issued by the Canada Revenue Agency (“CRA”) required to comply with this excise framework. Currently, the excise tax significantly increases the cost of cannabis to consumers in Canada. Any change in the rates or application of excise duty to cannabis products sold by us in Canada, and any restrictive interpretations by the CRA or the courts of the provisions of the Excise Act, 2001 (which may be different than those contained in the Cannabis Act) may affect our profitability and ability to compete in the market.
Failure to establish and maintain effective internal control over financial reporting may result in us not being able to accurately report our financial results, which could result in a loss of investor confidence and adversely affect the market price of the Canopy Shares.
We are responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP (as defined below). Our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A failure to prevent or detect errors or misstatements may result in a decline in the price of the Canopy Shares and harm our ability to raise capital in the future.
If our management is unable to certify the effectiveness of our internal controls or if material weaknesses or significant deficiencies in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in the price of the Canopy Shares. Although we do not currently have any material weaknesses and ineffectiveness to report of the Company’s internal control over financial reporting and disclosure controls and procedures, there can be no assurance that we will not identify material weaknesses in our internal control over financial reporting in the future.
In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in the price of the Canopy Shares and harm
our ability to raise capital. Failure to accurately report our financial performance on a timely basis could also jeopardize our listing on the TSX and/or Nasdaq. Delisting of the Canopy Shares on any stock exchange would have implications pursuant to our Credit Agreement, including interest rate increases and/or an event of default and reduce the liquidity of the market for the Canopy Shares, which would likely reduce the price of, and increase the volatility of, the price of the Canopy Shares.
We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all error or fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization will be detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely affected, which could also cause investors to lose confidence in our reported financial information, which in turn could result in a reduction in the price of the Canopy Shares.
In addition, acquisitions can pose challenges in implementing the required processes, procedures and controls in the new operations. Companies that are acquired by us may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by the securities laws that currently apply to us.
We rely on third-party manufacturers and distributors to manufacture and distribute certain of our products, and those third parties may not perform their obligations.
We rely on third-party manufacturers, distributors and other courier services, and may in the future rely on other third parties, to manufacture and distribute certain of our products. If these third-parties do not successfully carry out their contractual obligations or terminate or suspend their contractual arrangements with us, if there is a delay or interruption in the manufacture distribution of our products or if these third parties damage our products, it could adversely affect our revenue and may require significant management attention. As we rely more heavily on third-party manufacturing, our success may be contingent on procuring favorable terms under manufacturing arrangements with license holders. In addition, any damage to our products due to acts or omissions of our third-party distributors, such as product spoilage or improper storage or handling, could expose us to potential product liability, damage our reputation and the reputation of our products or brands or otherwise harm our business.
We are vulnerable to third-party transportation risks.
We depend on fast and efficient courier services to distribute our products to our customers. Any prolonged disruption of this courier service could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Rising costs associated with the courier services that we use to ship our products may also adversely affect our business and our ability to operate profitably.
Due to the nature of our products, security of the product during transportation to and from facilities is of the utmost concern. A breach of security during transport or delivery could have a material and adverse effect on our business, financial condition, results of operations and growth prospects. Any breach of the security measures during transport or delivery, including any failure to comply with applicable recommendations or requirements, could also have an impact on our ability to continue operating under our current licenses or impact the prospects of renewing our licenses.
The inability of our customers or suppliers to meet their financial or contractual obligations to us may result in disruption to our supply chain and operations and could result in financial losses.
We have exposure to several customers who are license holders and, at least some of these customers are experiencing financial difficulties. In addition, we also face exposure to our third-party hemp, cannabis products and non-cannabis product suppliers who may face financial difficulties, which would impact our supply of cannabis products and non-cannabis products. We have in the past, and may in the future, have disruptions in our supply chain and need to take allowances against and need to write off receivables due to the creditworthiness of these customers.
Further, the inability of these customers to purchase our products could have a material adverse effect on our results of operations.
Our business may be impacted as a result of increased rates of inflation.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including changes in inflation, interest rates and overall economic conditions and uncertainties. We have experienced significant inflationary pressures, including, in particular, on wages, and pricing with third-party suppliers and manufacturers. Increased inflation could reduce our purchasing power and result in negative impacts on the ability to obtain goods and services required for the operation of our business or to pass on rising costs to our customers. To the extent that we are unable to offset such
cost inflation through higher prices of our offerings or other cost savings, there could be a negative impact on our business, sales and margin performance, net income, cash flows and the trading price of the Canopy Shares.
Our cannabis cultivation operations are vulnerable to rising energy costs and dependent upon key inputs.
Our cannabis cultivation operations consume considerable energy, making us vulnerable to rising energy costs. Rising or volatile energy costs may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, our business is dependent on a number of key inputs and their related costs, including raw materials and supplies related to our growing operations, as well as electricity, water and other utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We, or the cannabis industry more generally, may receive unfavorable publicity or become subject to negative consumer perception.
We believe that the cannabis industry is highly dependent upon broad social acceptance and consumer perception regarding the safety, efficacy and quality of the cannabis products, as well as consumer views concerning regulatory compliance. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory inquiries, litigation, media attention, market rumors or speculation and other publicity regarding the consumption or effects thereof 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 favorable to the cannabis markets or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the cannabis industry, and therefore demand for our products and services, our business, financial condition, results of operations and cash flows.
Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the demand for our products, and our business, financial condition, results of operations and cash flows. Further, adverse publicity, reports or other media attention regarding the safety, efficacy and quality of cannabis or hemp in general, or our products specifically, or associating the consumption or use of cannabis with illness or other negative effects or events, could have such a material adverse effect on us. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products legally, appropriately or as directed.
The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views on our operations and activities and the cannabis and hemp industries in general, whether true or not. Social media permits user-generated content to be distributed to a broad audience which can respond or react, in near real time, with comments that are often not filtered or checked for accuracy. In most cases, we do not have the ability to filter such comments or verify their accuracy. Accordingly, the speed with which negative publicity (whether true or not) can be disseminated has increased dramatically with the expansion of social media. The dissemination of negative or inaccurate posts, comments or other user-generated content about us on social media (including those published by third-parties) could damage our brand, image and reputation or how the cannabis industries are perceived generally, which could have a material adverse effect on the market for our products and thus on our business, financial condition and results of operations.
In addition, certain businesses may have strong economic opposition to the cannabis industry. Lobbying by such groups, and any resulting inroads they might make in halting or rolling back the cannabis movements, could affect how the cannabis industry is perceived by others and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Moreover, the non-cannabis third parties with whom we do business may perceive that they are exposed to reputational risk as a result of our cannabis related business activities. Failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Any third-party service provider or supplier could suspend or withdraw its services to us if it perceives that the potential risks exceed the potential benefits to such services. For example, we face challenges making U.S. dollar wire transfers or engaging any third-party service provider or supplier with a substantial presence where cannabis is not federally legal (including the United States). In these circumstances, while we believe that such services can be procured from other institutions, we may in the future have difficulty maintaining existing, or securing new, bank accounts or clearing services, service providers or other suppliers.
Although we take care in protecting our image and reputation, we do not ultimately have control over how we or the cannabis industry is perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our business strategy and realize on our growth prospects, thereby having a material adverse effect on our business, financial condition, results of operations and growth prospects.
The markets that we operate in are increasingly competitive, and we may compete for market share with other companies, both domestically and internationally, that may have longer operating histories and more financial resources, manufacturing and marketing experience than us.
The markets for cannabis and hemp are competitive and evolving and we face intense competition from both existing and emerging companies that offer similar products. Some of our current and potential competitors may have longer operating histories, greater financial, marketing and other resources and larger customer bases than we have. In addition, there is potential that the cannabis industry will undergo consolidation, creating larger companies with financial resources, manufacturing and marketing capabilities and product offerings that are greater than ours. As a result of this competition, we may be unable to maintain our operations or develop them as currently proposed on terms we consider acceptable, or at all. Increased competition by larger, better-financed competitors with geographic advantages could adversely affect our business, financial condition, results of operations and growth prospects. For example, we may not be able to enter into supply agreements or negotiate favorable prices. In addition, competitive factors may result in us being unable to enter into desirable arrangements with new partners, to recruit or retain qualified employees or to acquire the capital necessary to fund our capital investments.
Given the rapid changes affecting global, national and regional economies generally, and the cannabis and hemp industries in particular, we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on our ability to respond to, among other things, changes in the economy, regulatory conditions, market conditions and competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material and adverse effect on our business, financial condition, operating results, liquidity, cash flow and operational performance.
In Canada, the number of licenses granted, and the number of license holders ultimately authorized by Health Canada, could also have an impact on our business, financial condition, results of operations and growth prospects. We expect to face additional competition from new market entrants that are granted licenses under the Cannabis Act or existing license holders which are not yet active in the industry. If a significant number of new licenses are granted by Health Canada, we may experience increased competition for market share and may experience downward price pressure on our products as new entrants increase production. We also face competition from illegal cannabis dispensaries that are selling cannabis to individuals despite not having a valid license. A significant number of illegal dispensaries are still in operation, providing additional competition.
If the number of users of medical and/or adult-use cannabis increases, the demand for products will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, we will require a continued high level of investment in research and development, sales and customer support. We may not have sufficient resources to maintain research and development, sales and customer support efforts on a competitive basis, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Furthermore, the Canadian federal authorization of home cultivation, outdoor grow, and the easing of other barriers to entry into a Canadian adult-use cannabis market, could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Additionally, the legal landscape for medical and adult-use cannabis is changing internationally. More countries have passed laws that allow for the production and distribution of medical cannabis in some form or another, and some of these countries may pass laws allowing for the production and distribution of adult-use cannabis as well. Increased international competition could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We are subject to liability arising from any fraudulent or illegal activity by our employees, contractors and consultants.
We are exposed to the risk that our employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, fraudulent, reckless and/or negligent conduct or unauthorized activity that violates: (i) applicable laws and regulations; (ii) manufacturing standards and healthcare requirements; (iii) federal and provincial healthcare fraud and abuse of federal, state and provincial laws and regulations; or (iv) laws and regulations that require the true, complete and accurate reporting of financial, personal, medical and/or insurance information or data. It is not always possible for us to identify and deter misconduct by our employees and other third parties, and the precautions taken by us to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws, regulations or standards. If any such actions are brought against us, whether or not we are successful in defending us or asserting our rights, those actions could have a material adverse effect on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment of our operations, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Any allegation of impropriety alone may have a material reputational impact on our business, which could result in a material adverse effect on our financial condition or results of operations.
Our production facilities are integral to our operations and any adverse changes or developments affecting our facilities may affect our business, financial condition, results of operations and growth prospects.
Our activities and resources are focused on various production and manufacturing facilities. The licenses held by us are specific to individual facilities. Adverse changes or developments affecting any facility, including but not limited to a breach of security, an inability to successfully grow cannabis plants or produce finished goods, unanticipated cost overruns in growing or producing products, an outbreak of a communicable illness or a force majeure event, could have a material and adverse effect on our business, financial condition, results of operations and growth prospects. Any breach of the security measures and other facility requirements, including any failure to comply with recommendations or requirements arising from inspections by regulatory agencies, could also have an impact on our ability to continue operating under our licenses or the prospect of renewing our licenses or could result in a revocation of our licenses.
All facilities continue to operate with routine maintenance. We bear many, if not all, of the costs of maintenance and upkeep at our facilities, including replacement of components over time. Our operations and financial performance may be adversely affected if we and our facilities are unable to keep up with maintenance requirements.
Certain contemplated capital expenditures in Canada, including the upgrade of our physical infrastructure, the maintenance and reassignment of cultivation rooms or cannabis storage areas, may require Health Canada approval. There is no guarantee that Health Canada will approve expansions and/or renovations, which could adversely affect our business, financial condition, results of operations and growth prospects.
We are subject to risks inherent in an agricultural business, including the risk of crop failure.
We grow cannabis, which is an agricultural process. As such, our business is subject to the risks inherent in the agricultural business, including risks of crop failure presented by weather, insects, plant diseases and similar agricultural risks. Although we primarily grow our products indoors under climate-controlled conditions, we also have certain outdoor cultivation capacity and there can be no assurance that natural elements, such as insects and plant diseases, will not interrupt our production activities or have an adverse effect on our business, financial condition, results of operations and growth prospects.
The majority of our assets are the capital stock of our material subsidiaries; therefore our investors are subject to the risks attributable to our material subsidiaries, which generate substantially all of our revenues.
The majority of our assets are the capital stock of our material subsidiaries. We conduct substantially all of our business through our subsidiaries, which generate substantially all of our revenues. Consequently, our cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of our subsidiaries and the distribution of those earnings to us. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of our material subsidiaries, holders of indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries before us.
We are and may become subject to a variety of privacy and data security laws and contractual obligations, which could increase compliance costs and our failure to comply with them could subject us to potentially significant fines or penalties and otherwise harm our business.
We maintain an array of sensitive information, including confidential business and personal information in connection with our operations, and are subject to laws and regulations governing the privacy and security of such information. The global data protection landscape is rapidly evolving, and we may be affected by or subject to new, amended or existing laws and regulations in the future, including as our operations continue to expand and we operate in foreign jurisdictions. These laws and regulations may be subject to differing interpretations, which adds to the complexity of collecting, using, disclosing and processing personal information. Guidance on implementation and compliance practices are often updated or otherwise revised.
In the United States, there are numerous federal and state privacy and data security laws and regulations governing the collection, use, disclosure and protection of personal information, including federal and state health information privacy laws, state laws addressing sensitive data, such as biometric information, federal and state security breach notification laws and federal and state consumer protection laws. Each of these laws is subject to varying interpretations and constantly evolving. While the United States lacks a nationwide privacy law of general applicability, certain state laws govern the privacy and security of personal information, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Certain U.S. States, including, but not limited to, California, Colorado, Virginia, Connecticut, Indiana, Iowa, Tennessee, Texas and Utah, have adopted state-specific privacy regimes similar to legal regimes in place outside the United States. In addition to state laws, the FTC takes the view that failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer
information it holds, the size and complexity of its business and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
Outside the United States, numerous countries have adopted generally applicable data privacy regimes at the national level. For example, the European Parliament, the European Commission and the Council of the European Union adopted a comprehensive General Data Protection Regulation (“GDPR”) in 2016 to replace the then-current European Union Data Protection Directive and related country-specific legislation. The GDPR took effect in May 2018 and governs the processing of personal data of European Union residents. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the lawful bases to rely upon to process personal data, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification, broadened data subject rights, and the use of third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union, enhances enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the infringer, whichever is greater. The withdrawal of the United Kingdom from the European Union further complicated European data protection compliance obligations, as we must also comply with data privacy and security laws in effect in the UK that are substantially similar to the GDPR, but may diverge over time.
In Canada, the Personal Information Protection and Electronics Documents Act (Canada) (“PIPEDA”), the Personal Information Protection Act (Alberta), the Personal Information Protection Act (British Columbia), and the Act respecting the protection of personal information in the private sector (Quebec) govern the collection, use, and disclosure of personal information by private sector organizations. The Office of the Privacy Commissioner of Canada (“OPC”) has stated that it considers the personal information of cannabis users is to be considered sensitive. Canadian privacy jurisprudence regarding the obligations that private sector organizations have to individual data subjects is constantly evolving. Privacy laws in Canada are also changing at the legislative level in an effort to modernize laws to keep up with technological changes and to align with the international standards such as the GDPR. In Quebec, the passage of Law 25, An Act to modernize legislative provisions as regards the protection of personal information (formerly Bill 64) (“Law 25”), which gradually came into effect between September 2022 and 2024, modernized the obligations incumbent on private sector organizations in relation to the collection, use, and disclosure of personal information within Quebec, including, without limitation, by providing individuals with more significant rights and control over their personal information and imposing more accountability and transparency related obligations (e.g., privacy-by design, data breach notifications) that are in many ways similar to the GDPR. Law 25 enhanced the Commission d’accès à l’information’s powers, including by providing new powers of investigation and the ability to impose administrative monetary penalties (of up to $10 million or the amount corresponding to 2% of worldwide turnover for the preceding fiscal year, whichever is greater) and penal fines (of up to $25 million or the amount corresponding to 4% of worldwide turnover for the preceding fiscal year, whichever is greater). On June 17, 2021, the Province of Ontario commenced a public consultation on modernizing Ontario’s legislative framework focusing on strengthening privacy laws in Ontario. On November 25, 2024, the Government of Ontario passed Bill 194, the Strengthening Cyber Security and Building Trust in the Public Sector Act, 2024 (“Bill 194”), which significantly reformed the Freedom of Information and Protection of Privacy Act (“FIPPA”). Bill 194 amended FIPPA to, among other things, require certain public sector entities to report certain privacy breaches to the Information and Privacy Commissioner of Ontario (the “IPC”), require privacy assessments to be conducted before collecting personal information and increase the IPC’s investigative powers. In Alberta, on November 6, 2024, the provincial government introduced legislation to modernize the province’s access to information and public sector privacy regime. Specifically, Alberta’s government is proposing to divide the existing Freedom of Information and Protection of Privacy Act into two acts: the Protection of Privacy Act (“Bill 33”) and the Access to Information Act (“Bill 34”). In December 2024, Alberta’s government passed Bill 33 and Bill 34. The acts and associated regulations will come into force in Spring 2025. While Bill 33, Bill 34 and Bill 194 do not directly impact private sector organizations, the Company plans to continue to monitor developments regarding privacy law amendments and any forthcoming regulations. On the federal level, on June 16, 2022, the Canadian Federal Government introduced Bill C-27, the Digital Charter Implementation Act, 2022 (“Bill C-27”) which would replace PIPEDA with consumer privacy-specific legislation. Additionally, Bill C-27, would have introduced the Artificial Intelligence Data Act. Similar to Quebec’s Law 25, Bill C-27’s consumer privacy-specific legislation significantly enhances penalties and enforcement measures available to the OPC. Bill C-27 died on the order table when the Canadian Parliament was prorogued in January 2025. It is expected that a version of Bill C-27 will be introduced in the new Canadian Parliament, regardless of who the next governing party is.
In addition, with respect to consumer health information, there are a number of federal, state and provincial laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. For example, the privacy rules under PIPEDA and other applicable privacy laws protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose and apply to our operations globally. In Canada, we may also be required to retain certain customer personal information for prescribed periods of time pursuant to the Cannabis Act.
In the United States, the Health Insurance Portability and Accountability Act (“HIPAA”) imposes privacy and security requirements and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf
of a covered entity. HIPAA mandates the reporting of certain breaches of health information to the HHS, affected individuals and if the breach is large enough, the media. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. In addition, provisions of the Americans with Disabilities Act require confidential treatment of employee medical records.
If we were found to be in violation of the privacy or security rules under PIPEDA, HIPAA, or other applicable laws protecting the confidentiality of health information in jurisdictions we operate in, we could be subject to sanctions and civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Additional jurisdictions in which we operate or which we may enter also have data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of sensitive personal information. Data privacy and security are rapidly developing areas of law, as well, and imposition of new requirements is common. The interpretation and enforcement of such laws and regulations are uncertain and subject to change, and may require substantial costs to monitor and implement compliance. Failure to comply with data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), litigation, business disruption, and/or adverse publicity and could negatively affect our business, financial condition, results of operations and growth prospects.
We may experience breaches of security at our facilities or fraudulent or unpermitted data access or other cyber-security breaches, which may cause our customers to lose confidence in our security or data protection measures and may expose us to risks related to breaches of applicable privacy and data security laws, regulations and requirements.
Given the nature of our products and our products’ lack of legal availability outside of certain legalized or regulated retail or distribution channels, as well as the concentration of inventory in our facilities, despite meeting or exceeding the applicable security requirements under applicable law, there remains a risk of theft. A security breach at one of our facilities could expose us to liability and to potentially costly litigation, increase expenses and business disruptions relating to the resolution and future prevention of these breaches and may deter potential customers from choosing our products.
Our information systems and any of our third-party service providers and vendors are vulnerable to an increasing threat of continually evolving cybersecurity risks. These risks may take the form of malware, computer viruses, cyber threats, extortion, employee error, malfeasance, system errors or other types of risks, and may occur from inside or outside of the respective organizations. Cybersecurity risk is increasingly difficult to identify and quantify and cannot be fully mitigated because of the rapidly evolving nature of the threats, targets and consequences. Additionally, unauthorized parties may attempt to gain access to these systems through fraud or other means of deceiving third-party service providers, employees or vendors. Our operations depend, in part, on how well networks, equipment, IT systems and software are protected against damage from a number of threats. These operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. If we are unable or delayed in maintaining, upgrading or replacing IT systems and software, the risk of a cybersecurity incident could materially increase. Any of these and other events could result in information system failures, delays and/or increases in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact our business reputation and results of operations.
We are dependent upon information technology systems in the conduct of our operations and we collect, store and use certain data, intellectual property, our proprietary business information and certain personal information of our employees and customers on our computer systems. A data security breach may occur in a variety of ways, including, without limitation, a procedural or process failure, information technology malfunction, supply chain vulnerability, computer virus, cybersecurity threat (such as denial-of-service attacks, direct or indirect cyber-attacks or cyber-intrusions over the Internet, hacking, ransomware, phishing and other social engineering attacks), unauthorized access or use, natural disasters, terrorism, war, and telecommunication and electrical failures. In addition, theft of data such as customer lists and preferences and other consumer and employee personal information, for competitive, fraudulent, or other unauthorized purposes, is an ongoing and growing risk. Any such theft, data security breach or other incident may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Many highly publicized data security incidents and attacks have occurred to other companies over the last several years, and we expect such attacks to continue. We have been, and expect to continue to be, subject to various cyberattacks and phishing schemes. Any fraudulent, malicious or accidental breach of our data security could result in unintentional disclosure of, or unauthorized access to, third-party, customer, vendor, employee or other confidential or sensitive data or information, which could potentially result in business disruptions and additional costs to us, including, without limitation, to repair or replace damaged systems, remediate issues, enhance security or respond to occurrences, lost sales, violations of data privacy and security laws, regulations, and requirements, violations of other laws, penalties, fines, regulatory action or litigation. We also rely on third-party service providers for certain information technology systems, such as payment processing, and any data security breach at a third-party service provider could have similar effects. In addition, media or other reports of perceived security vulnerabilities to our systems or those of our third-party suppliers, even if no breach has been attempted or occurred, could adversely impact our brand and reputation and customers could lose
confidence in our security measures and reliability, which would harm our ability to retain customers and gain new ones. If any of these events were to occur, it could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We are and may become subject to, or prosecute, litigation in the ordinary course of our manufacturing, marketing, distribution and sale of our products.
We may from time to time be subject to litigation, claims, other legal and regulatory proceedings and disputes arising in the ordinary course of our manufacturing, marketing, distribution and sale of our products, some of which may adversely affect our business, financial condition, results of operations and growth prospects. Should we face class actions filed against us, plaintiffs in such class action lawsuits, as well as in other lawsuits against us, may seek very large or indeterminate amounts, including punitive damages, which may remain unknown for substantial periods of time. Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating, adversely affect the market price for the Canopy Shares and require the use of significant resources.
Even to the extent we ultimately prevail in litigation, litigation can consume and redirect significant resources. Litigation may also create a negative perception of us and our brands, which could have an adverse effect on our business, financial condition, results of operations and growth prospects. Please refer to “Part 1 - Legal Proceedings” under Item 3 of this Form 10-K for further discussion.
We may be subject to product liability claims.
As a manufacturer and distributor of products designed to be topically applied, ingested or inhaled by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss, injury, or death. In addition, the manufacture and sale of cannabis products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from consumption of cannabis products alone or in combination with other medications or substances could occur as described under “ - There is limited long-term data with respect to the efficacy, side effects and safety of our products, and future clinical research studies on the effects of cannabis, hemp, cannabinoids and cannabis-based products may lead to conclusions that dispute or conflict with our understanding and belief regarding their benefits, commercial viability, safety, efficacy, dosing and social acceptance.” We may be subject to various product liability claims, including, among others, that our products caused injury or illness, are incorrectly labeled, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances.
A product liability claim or regulatory action against us could result in increased costs to us, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Please refer to “Part 1 - Legal Proceedings” under Item 3 of this Form 10-K for further discussion. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products.
We rely on third-party testing and analytical methods which are validated but still being standardized.
We are required to test our cannabis products, as well as cannabis accessories, in many of our active markets, with independent third-party testing laboratories for, among other things, cannabinoid levels. However, testing methods and analytical assays for cannabinoid levels of detection vary among different testing laboratories. There is currently no industry consensus on standards for testing methods or compendium of analytical assays or standard levels of detection. The detected and reported cannabinoid content in our cannabis and hemp products therefore can differ depending on the laboratory and testing methods (analytical assays) used. Variations in reported cannabinoid content will likely continue until the relevant regulatory agencies and independent certification bodies (e.g., ISO, USP) collaborate to develop, publish and implement standardized testing approaches for cannabis (including hemp), cannabinoids and their derivative products. Until such standardized analytical assays and levels of detection are developed, the existing differences could cause confusion with our consumers, which could lead to a negative perception of us and our products, increase the risk of litigation and regulatory enforcement action regarding cannabinoid content and could make it more difficult for us to comply with regulatory requirements regarding contents of ingredients and packaging and labeling.
We may decide, or be required, to divest or restructure certain of our interests.
In certain circumstances, we may decide, or be required, to divest certain of our interests. In particular, if any of our interests give rise to a violation of any applicable laws and regulations, including U.S. federal law, we may be required to divest our interest or risk significant fines, penalties, administrative sanctions, convictions, settlements or delisting from the TSX and/or Nasdaq. For instance, if we determine that our operations are not compliant with U.S. laws or the policies of the TSX and Nasdaq, we will use commercially reasonable best efforts to divest our interest in the event that we cannot restructure our holdings. There is no assurance that these divestitures will be completed on terms favorable to us, or at all. Any opportunities resulting from these divestitures, and the
anticipated effects of these divestitures on us, may never be realized or may not be realized to the extent we anticipate. Not all of our interests are liquid, and such interests may be difficult to dispose of and subject to illiquidity discounts on divestiture. Any required divestiture or an actual or perceived violation of applicable laws or regulations by us could have a material adverse effect on us, including on our reputation and ability to conduct business, the listing of the Canopy Shares on the TSX and Nasdaq, our financial position, operating results, profitability or liquidity or the market price of the Canopy Shares. In addition, it is difficult for us to estimate the time or resources that may be required for the investigation of any such matter or its final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.
If we decide, or are required, to restructure our interests to remain in compliance with laws or stock exchange requirements, such restructuring could result in the write-down of the value of our interests, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Fluctuations in wholesale and retail prices could result in earnings volatility.
The cannabis industry is a margin-based business in which gross profits depend on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale, retail and supplier prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation and demand), taxes, government programs and policies for the cannabis industry (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the sale of cannabis), and other market conditions, all of which are factors beyond our control. Our operating income may be materially adversely affected by a decline in the price of cannabis and will be sensitive to changes in the price of cannabis and the overall condition of the cannabis industry, as our profitability is directly related to the price of cannabis. There is currently not an established market price for cannabis and the price of cannabis is affected by numerous factors beyond our control. Any price decline may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our Credit Facility contains restrictive covenants that may limit our operating flexibility.
Our Credit Facility contains various restrictive covenants that limit, among other things, our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, open new offices that contain a material amount of assets, pay dividends, incur additional indebtedness and liens, enter into new businesses and amend, modify or otherwise supplement or restrict certain terms or conditions relating to our interests in Canopy USA. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the applicable lenders or terminate the Credit Facility, which may limit our operating flexibility. In addition, our Credit Facility is secured by substantially all of our assets, including our intellectual property, and requires us to satisfy certain financial covenants including certain minimum liquidity requirements. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt. Any inability to make scheduled payments or meet the financial covenants on our Credit Facility would adversely affect our business, financial condition, results of operations and growth prospects.
We may be unable to attract or retain skilled labor and personnel with experience in our various areas of business, or to obtain adequate equipment, parts and components, and we may be unable to attract, develop and retain additional employees required for our operations and future developments.
We may be unable to attract or retain employees with sufficient experience in our various areas of business, and may prove unable to attract, develop and retain additional employees required for our development and future success.
Our success is currently largely dependent on the performance of our skilled employees. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. There is an inherent risk of attrition amongst those employees who were not directly affected by our previous reductions in headcount, and we may not be successful at retaining such employees or attracting new employees, which may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, our ability to compete and grow will be dependent upon having access, at a reasonable cost and in a timely manner, to skilled labor, adequate equipment, parts and components. No assurances can be given that we will be successful in maintaining the required supply of skilled labor, adequate equipment, parts and components. It is also possible that the final costs of the major equipment contemplated by our capital expenditure programs may be significantly greater than anticipated or available, in which circumstance there could be a material adverse effect on our financial results.
We are exposed to counterparty risks and liquidity risks that may impact our ability to obtain loans and other credit facilities on favorable terms.
We are exposed to counterparty risks and liquidity risks, including, but not limited to, through: (i) financial institutions that may hold our cash and cash equivalents; (ii) companies that will have payables to us; (iii) our insurance providers; and (iv) our
lenders, if any. These factors may impact our ability to obtain loans and other credit facilities in the future and, if obtained, on terms favorable to us. If these risks materialize, our operations could be adversely impacted and the price of the Canopy Shares could be adversely affected.
Risks Relating to Our Intellectual Property
We are subject to risks related to the protection and enforcement of our intellectual property rights, and we may be unable to protect or enforce our intellectual property rights.
We currently rely on trade secrets, technical know-how, proprietary information, trademarks, copyrights, designs and certain patent filings to maintain our competitive position. We try to protect our intellectual property by strategically seeking and obtaining registered protection where appropriate, developing and implementing standard operating procedures to protect trade secrets, technical know-how and proprietary information, and entering into agreements with parties that have access to our inventions, trade secrets, technical know-how and proprietary information, such as our partners, collaborators, employees and consultants, to protect confidentiality and ownership. We also seek to preserve the integrity and confidentiality of our inventions, trade secrets, technical know-how and proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, and we seek to protect our trademarks and the goodwill associated therewith by monitoring and enforcing against unauthorized use of our trademarks.
It is possible that we will inadvertently disclose or otherwise fail or be unable to protect our inventions, trade secrets, technical know-how or proprietary information, or will fail to identify our inventions or trademarks as patentable or registrable intellectual property, or fail to obtain patent or registered trademark protection therefor. Any such disclosure or failure could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our intellectual property rights may be invalid or unenforceable under applicable laws, and we may be unable to have issued or registered, and unable to enforce, our intellectual property rights.
The laws regarding intellectual property rights relating to cannabis and cannabis-related products, and the positions of intellectual property offices administering such laws, are constantly evolving, and there is uncertainty regarding which countries will permit the filing, prosecution, issuance, registration and enforcement of intellectual property rights relating to cannabis and cannabis-related products.
Specifically, we have sought trademark protection in many countries, including Canada and the European Union. Our ability to obtain registered trademark protection for cannabis and cannabis-related goods and services (including hemp and hemp-related goods and services), may be limited in certain countries outside of Canada and Europe, where laws on the legality of cannabis use are not uniform, and trademarks cannot be obtained for products that are “contrary to public policy or accepted principles of morality.” Accordingly, our ability to obtain intellectual property rights or enforce intellectual property rights against third-party uses of similar trademarks may be limited in certain countries.
Moreover, in any infringement proceeding, some or all of our current or future trademarks, patents or other intellectual property rights or other proprietary know-how, or arrangements or agreements seeking to protect the same for our benefit, may be found invalid, unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could put one or more of our current or future trademarks, patents or other intellectual property rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We cannot offer any assurances about which patent applications, if any, will issue, the breadth of any such patent or whether any issued patents will be found invalid or unenforceable or which of our products or processes will be found to infringe upon the patents or other proprietary rights of third parties. Any successful opposition to future issued patents could deprive us of rights necessary for the successful commercialization of any new products or processes that we may develop.
In addition, there is no guarantee that any patent or other intellectual property applications that we file will result in registration or any enforceable intellectual property rights or the breadth of such protection. Further, with respect to any patent applications that we file, there is no assurance that we will find all potentially relevant prior art relating to such applications, which may prevent a patent from issuing from such application or invalidate any patent that issues from such application. Even if patents do successfully issue, and cover our products and processes, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, any patent applications and future patents may not adequately protect our intellectual property rights, provide exclusivity for our products or processes or prevent others from designing around any issued patent claims. Any of these outcomes could impair our ability to prevent competition from third parties, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We may be subject to allegations that we are in violation of third-party intellectual property rights, and we may be found to infringe third-party intellectual property rights, possibly without the ability to obtain licenses necessary to use such third-party intellectual property rights.
Other parties may claim that our products infringe on their intellectual property rights, including with respect to our operation of our business, including our development, manufacture and sale of our goods and services, may be found to infringe third-party intellectual property rights. There may be third-party patents or patent applications with claims to products or processes related to the manufacture, use or sale of our products and processes. There may be currently pending patent applications, some of which may still be confidential, that may later result in issued patents that our products or processes may infringe. In addition, third parties may obtain patents in the future and claim that use of our inventions, trade secrets, technical know-how and proprietary information, or the manufacture, use or sale of our products infringes upon those patents. Third parties may also claim that our use of our trademarks infringes upon their trademark rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders, other equitable relief, and/or require the payment of damages, any or all of which may have an adverse effect on our business, financial condition, results of operations and growth prospects. In addition, we may need to obtain licenses from third parties who allege that we have infringed on their purported rights, whether or not such allegations have merit. Such licenses may not be available on terms acceptable to us, and we may be unable to obtain any licenses or other necessary or useful rights to such third-party intellectual property.
We receive licenses to use some third-party intellectual property rights, and the failure of the owner of such intellectual property to properly maintain or enforce the intellectual property underlying such licenses, or our inability to obtain or maintain such licenses, could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We are party to licenses granted by third parties, that give us rights to use third-party intellectual property that is necessary or useful to our business. Our success will depend, in part, on the ability of the applicable licensor to maintain and enforce its licensed intellectual property against other third parties, particularly intellectual property rights to which we have secured exclusive rights. Without protection for the intellectual property we have licensed, other companies might be able to offer substantially similar products for sale, or utilize substantially similar processes or publicity and marketing rights, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Our success will also depend, in part, on our ability to obtain licenses to certain intellectual property that we believe are necessary or useful for our business. Such licenses may not be available on terms acceptable to us, or at all, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Any of our licensors may allege that we have breached our license agreements with those licensors, whether with or without merit, and accordingly seek to terminate our applicable licenses. If successful, this could result in our loss of the right to use applicable licensed intellectual property, which could adversely affect our ability to commercialize our products or services, as well as have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Risks Relating to the Canopy Shares and the Exchangeable Shares
The market price for the Canopy Shares has in the past been volatile and may continue to be volatile and subject to significant fluctuation.
The market prices for the securities of cannabis companies, including the Company, have historically been, and may in the future be, subject to large fluctuations. For example, during the period from January 1, 2024 through May 28, 2025, the closing price of the Canopy Shares on Nasdaq ranged from a low of US$0.83 to a high of US$14.88. The market price for the Canopy Shares may be volatile and subject to wide fluctuations in response to many factors, including:
•actual or anticipated fluctuations in our results of operations;
•changes in estimates of our future results of operations by us or securities research analysts;
•changes in the economic performance or market valuations of other companies that investors deem comparable to us;
•additions or departures of our executive officers and other key employees;
•transfer restrictions on outstanding Canopy Shares;
•equity issuances by us (including through the sale of securities convertible into equity securities) or resales of Canopy Shares by our stockholders or the perception in the market that such issuances or resales might occur;
•significant acquisitions or business combinations, strategic partnerships, investments or capital commitments by or involving us, Canopy USA or our competitors;
•increases in speculative trading activity by investors targeting publicly traded cannabis companies, which can further contribute to the volatility of the market price for the Canopy Shares if aggregate short exposure exceeds the number of the Canopy Shares available for purchase;
•news reports relating to trends, concerns or competitive developments, regulatory changes or enforcement actions and other related issues in our industry or target markets;
•the prospect of actual or perceived future changes to the legal and regulatory regimes that govern our products and our industries and/or government actions, rulings or policies;
•changes in financial estimates and recommendations by securities analysts or rating agencies;
•investors’ general perception of us and the public’s reaction to our press releases, our other public announcements and our filings with the SEC and Canadian securities regulators;
•our ability to remediate our material weaknesses and otherwise maintain effective internal control over financial reporting;
•our failure to timely file our public filings with the SEC and Canadian securities regulators;
•our failure to comply with the Nasdaq and TSX rules;
•reports by industry analysts, investor perceptions, and market rumors or speculation;
•general market, economic and political conditions (including rising geopolitical tensions as a result of, among other things, the conflict between Russia and Ukraine and the Israeli-Palestinian conflict);
•negative announcements by our customers, competitors or suppliers regarding their own performance; and
•the realization of any of the other risk factors set forth herein.
For example, reports by industry analysts, investor perceptions, market rumors or speculation could trigger a sell-off in the Canopy Shares. Any sales of substantial numbers of Canopy Shares in the public market or the perception that such sales might occur may cause the market price of the Canopy Shares to decline. In addition, to the extent that other large companies within our industries experience declines in their stock price, the share price of the Canopy Shares may decline as well. Moreover, if the market price of the Canopy Shares drops significantly, shareholders may institute securities class action lawsuits against us. Lawsuits against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
Securities markets have a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. Securities of companies in the cannabis industry have experienced substantial volatility often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include global economic developments and market perceptions of the industry. There can be no assurance that continuing fluctuations in price will not occur. The market price of the Canopy Shares is also likely to be affected by changes in our financial condition or results of operations. In addition, certain institutional investors may base their investment decisions on consideration of our environmental, governance, diversity and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet such criteria may result in limited or no investment in the Canopy Shares by those institutions, which could adversely affect the trading price of the Canopy Shares. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the trading price of the Canopy Shares may be adversely affected.
In addition, our shareholders may be unable to sell significant quantities of the Canopy Shares into the public markets without a significant reduction in the price of the Canopy Shares, or at all. There can be no assurance that there will be sufficient liquidity of the Canopy Shares, nor that we will continue to meet the listing requirements of the TSX or Nasdaq or achieve listing on any other recognized stock exchange.
The financial reporting obligations of being a public company and maintaining a dual listing on the TSX and on Nasdaq requires significant company resources and management attention.
We are subject to the public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Act, and the listing requirements of Nasdaq. We incur significant legal, accounting, reporting and other expenses in order to maintain a dual listing on both the TSX and Nasdaq. Moreover, our listing on both the TSX and Nasdaq may increase price volatility due to various factors, including the ability to buy or sell Canopy Shares, different market conditions in different capital markets and different trading volumes. In addition, low trading volume may increase the price volatility of the Canopy Shares.
If we are deemed to be an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”), as a result of our unconsolidated interest in Canopy USA and certain other financial assets, we would likely either (i) be required to institute burdensome compliance requirements and restrict our activities to comply with the 1940 Act, which may make it difficult for us to continue operating our business or (ii) take actions to consolidate the financial results of Canopy USA into our financial statements, which would likely result in the loss of our listing on the Nasdaq.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, absent the ability to rely on another exclusion under the 1940 Act. Such “investment companies” are required to register and meet other requirements promulgated under the 1940 Act.
As of March 31, 2025, as a result of our unconsolidated interest in Canopy USA and certain other financial assets, we believe we own investment securities having a value of less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, we do not currently believe that we are an “investment company,” as such term is defined in the 1940 Act. However, if, in the future, this percentage exceeds 40%, absent the reliance on another exclusion, which may not be available and would depend on circumstances at that time, or some sort of relief from the SEC, which likely would not be available, we would be deemed to be an “investment company” for purposes of the 1940 Act. If this were to occur, we would likely either (i) be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to continue operating our business or (ii) take actions to consolidate the financial results of Canopy USA into our financial statements, which would likely result in the loss of our listing on the Nasdaq.
If we were deemed to be an “investment company” under the 1940 Act, our future activities may be restricted, including:
•restrictions on the nature of our investments; and
•restrictions on the issuance of securities, each of which may make it difficult for us to conduct our business and raise working capital.
In addition, we may be required to comply with burdensome requirements, including:
•registration as an investment company with the SEC;
•adoption of a specific form of corporate structure different from our current operating structure; and
•limits on borrowing, extensive compliance program requirements, reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations to which we are currently not subject.
Compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to operate our business, and make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
If we determined to avoid compliance with 1940 Act by taking actions to consolidate the financial results of Canopy USA into our financial statements, we would likely lose our listing on the Nasdaq. As we have previously disclosed, the Nasdaq has advised us that companies that consolidate “the assets and revenues generated from activities in violation under federal law cannot continue to list on Nasdaq”. Because cannabis, other than hemp, continues to be categorized as a Schedule I controlled substance under the CSA, it is illegal under federal law in the United States to cultivate, distribute, or possess cannabis. Accordingly, Canopy USA’s activities violate federal law and, if its financial results were consolidated into our financial results, the Canopy Shares would likely be delisted from the Nasdaq.
It is not anticipated that any dividend will be paid to holders of the Canopy Shares for the foreseeable future.
No dividends on the Canopy Shares have been paid to date. We currently intend to retain future earnings, if any, for future operations and expansion. Our board of directors has the discretion to declare dividends and to prescribe the timing, amount and payment of such dividends. Such decision will depend upon our future earnings, cash flows, acquisition capital requirements and financial condition, and other relevant factors that our board of directors may deem relevant. Further, our Credit Facility and certain other financial arrangements provide for certain restrictions on our ability to pay dividends and there can be no assurance that we will declare a dividend on a quarterly, annual or other basis, or at all. We have no plans to pay any dividends, now or in the near future.
Investors in the United States may have difficulty bringing actions and enforcing judgments against us and others based on securities law civil liability provisions.
We are incorporated under the federal laws of Canada and our head office is located in the Province of Ontario. Some of our directors and officers and some of the experts named in this Form 10-K are residents of Canada or otherwise reside outside of the
United States and a substantial portion of their assets and our assets are located outside the United States. Consequently, it may be difficult for investors in the United States to bring an action against such directors, officers or experts or to enforce against those persons or us a judgment obtained in a U.S. court predicated upon the civil liability provisions of U.S. federal securities laws or other U.S. laws. In addition, while statutory provisions exist in Ontario for derivative actions to be brought in certain circumstances, the circumstances in which a derivative action may be brought, and the procedures and defenses that may be available in respect of any such action, may be different than those of shareholders of a company incorporated in the United States.
There can be no assurance that we will not become a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors.
A non-U.S. corporation, like us, will be classified as a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes for any tax year in which (a) 75% or more of the corporation’s gross income for such tax year is passive income or (b) 50% or more of the corporation’s gross assets by value either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets. We believe that we are not a PFIC for our most recently completed tax year. However, no assurance can be provided that we will not be classified as a PFIC for our current tax year or in the foreseeable future. Whether we are treated as a PFIC is fundamentally a factual determination that is made on an annual basis and depends, in part, on the nature and composition of our income and assets from time to time. Fluctuations in the market price of the Canopy Shares may cause us to be classified as a PFIC for the current or future tax years, because the value of our assets for purposes of the PFIC “asset test” (described below), including the value of our goodwill and other intangibles, may be determined by reference to the market price of the Common Shares, which could be volatile. In particular, declines in the market price of the Canopy Shares, and the manner in which we deploy cash (including cash raised in the Offering), could increase our risk of becoming a PFIC. No opinion of legal counsel or ruling from the IRS concerning our status as a PFIC has been obtained or is currently planned to be requested. PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question and is determined annually. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. Consequently, there can be no assurance that we will never be, are not, and will not become a PFIC for any tax year during which U.S. investors hold Canopy Shares.
Future sales or issuances of securities could adversely affect the prevailing market price of our securities.
We may issue and sell additional equity securities in subsequent offerings (including through the sale of securities convertible into equity securities and/or in connection with conversions or exchanges to retire outstanding debt). In addition, we are required to issue Canopy Shares pursuant to certain of our agreements. For example, additional Canopy Shares may be issued by us as consideration for the acquisition by Canopy USA of the remaining interests in Jetty, and the number of such additional Canopy Shares is currently not known, is not quantifiable as of the date hereof and may be material. In addition, we may issue additional Canopy Shares to satisfy any deferred payments to the shareholders of Wana, and additional Canopy Shares may be issued under the February 2025 ATM Program from time to time, each of which could result in dilution to our shareholders. We cannot predict the size of future issuances of equity securities or the size and terms of future issuances of debt instruments or other securities convertible into equity securities or the effect, if any, that future issuances and sales of our securities will have on the market price of the Canopy Shares.
Additional issuances of our securities may involve the issuance of a significant number of Canopy Shares at prices less than the current market price for the Canopy Shares. Issuances of a substantial number of Canopy Shares, or the perception that such issuances could occur, may adversely affect prevailing market prices of the Canopy Shares. Any transaction involving the issuance of Canopy Shares, or securities convertible into Canopy Shares, would result in dilution, possibly substantial, to security holders.
Sales of substantial amounts of our securities by our shareholders, including the CBI Group, or the availability of such securities for sale, could adversely affect the prevailing market prices for the securities and dilute investors’ earnings per share.
Exercises of presently outstanding share options or warrants or conversion of Exchangeable Shares may also result in dilution to security holders. For example, as of May 28, 2025, we had outstanding:
•26,261,474 Canopy Shares issuable upon conversion of the issued and outstanding Exchangeable Shares.
•15,483,580 warrants exercisable into 15,483,580 Canopy Shares at an average exercise price of $10.47 per Canopy Share.
•3,542,716 options exercisable into 3,542,716 Canopy Shares at an average exercise price of $31.08 per Canopy Share.
Exercises of these options or warrants or conversion of the Exchangeable Shares into Canopy Shares will result in dilution to our shareholders. In addition, sales of the Canopy Shares underlying these options or warrants could adversely affect the prevailing market price of the Canopy Shares. A decline in the market prices of the Canopy Shares could impair our ability to raise additional capital through the sale of securities should we desire to do so.
The Exchangeable Shares have different rights from the Canopy Shares and there may never be a trading market for the Exchangeable Shares.
Our shareholders now have the option to convert their Canopy Shares into Exchangeable Shares in accordance with their terms. There are important differences between the rights of the Canopy Shares and the Exchangeable Shares. While each Exchangeable Share is convertible into a Canopy Share, the Exchangeable Shares do not carry voting rights, rights to receive dividends or other rights upon dissolution of Canopy Growth. For example, holders of Exchangeable Shares are not able to exercise voting rights at meetings of shareholders and will not receive distributions if dividends are declared by our Board. The differences between the rights of holders of the Exchangeable Shares and Canopy Shares are significant and may materially and adversely affect the market value of your investment.
Presently, there are no plans to list the Exchangeable Shares on a securities exchange or in the over-the-counter market, and there is not expected to be a market for trading of the Exchangeable Shares. Thus, persons holding Exchangeable Shares will likely have no ability to sell their Exchangeable Shares and will likely have to exchange them for Canopy Shares in order to have any liquidity. In addition, any sale of Exchangeable Shares will require the holder thereof to deliver a certification to us that such holder reasonably believes that such transfer is occurring in compliance with the Canadian take-over bid requirements as though the Exchangeable Shares were voting securities or equity securities of the Company (the “Shareholder Certification”).
Future sales of the Canopy Shares and/or Exchangeable Shares by the CBI Group could cause the market price for the Canopy Shares to fall.
The CBI Group holds a significant number of Exchangeable Shares, is not contractually committed to maintaining an equity stake in us nor are they contractually limited from (i) selling their Exchangeable Shares; provided that any sale of their Exchangeable Shares will require the holder of such Exchangeable Shares to deliver the Shareholder Certification or (ii) converting their Exchangeable Shares into Canopy Shares. Subject to compliance with applicable securities laws, the CBI Group may convert some or all of their Exchangeable shares into Canopy Shares at any time and sell some or all of their Canopy Shares underlying such Exchangeable Shares at any time. Such sales, or the market perception of such sales, could significantly reduce the market price of the Canopy Shares. We cannot predict the effect, if any, that future public sales of Canopy Shares beneficially owned by the CBI Group or the availability of these Canopy Shares for sale will have on the market price of the Canopy Shares. If the market price of the Canopy Shares were to drop as a result, this might impede our ability to raise additional capital and might cause a significant decline in the value of the investments of our other shareholders.
The intentions of the CBI Group regarding its long-term economic ownership of Exchangeable Shares and/or Canopy Shares are subject to change as a result of changes in the circumstances of the CBI Group or its affiliates, changes in our management and operation and changes in laws and regulations, market conditions and our financial performance.
The CBI Group, our sole holder of Exchangeable Shares, has the ability to convert its Exchangeable Shares into Canopy Shares and accordingly, may be in a position to exercise significant influence over us.
The CBI Group may have the ability to exercise significant influence over us if they convert their Exchangeable Shares into Canopy Shares and, if they were to do so, as of May 28, 2025, would hold approximately 12.4% of the issued and outstanding Canopy Shares on a non-diluted basis. Accordingly, in light of such beneficial ownership, the CBI Group is in a position to exercise significant influence over us, including matters affecting shareholders or requiring shareholder approval, such as the election of directors, change of control transactions, amendments to our articles and bylaws and the determination of other significant corporate actions. Additionally, upon potential conversion of the Exchangeable Shares held by the CBI Group into Canopy Shares, the CBI Group’s significant voting interest in us may discourage transactions involving a change of control of us, including transactions in which an investor, as a shareholder, might otherwise receive a premium for its Canopy Shares over the then-current market price.
General Risks
We are dependent on our senior management.
Our success is dependent upon the ability, expertise, judgment, discretion and good faith of our senior management. Our future success depends on our continuing ability to attract, develop, motivate and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. The loss of the services of a member of senior management, or an inability to attract other suitably qualified persons when needed, could have a material adverse effect on our ability to execute our business plan and strategy, and we may be unable to find adequate replacements on a timely basis, or at all. While employment and consulting agreements are customarily used as a primary method of retaining the services of certain employees, these agreements cannot assure the continued services of such individuals and consultants. We do not maintain key-person insurance on the lives of any of our officers or employees.
Further, certain shareholders, directors, officers and employees in our Canadian operations may require security clearance from Health Canada. Under the Cannabis Act, a security clearance cannot be valid for more than five years and must be renewed before the expiry of a current security clearance. There is no assurance that any of our existing personnel who presently or may in the future require a security clearance will be able to obtain or renew such clearances or that new personnel who require a security clearance will
be able to obtain one. A failure by an employee to maintain or renew his or her security clearance may impair our operations. In addition, if an employee with security clearance leaves and we are unable to find a suitable replacement who has a security clearance required by the Cannabis Act in a timely manner, or at all, there could occur a material adverse effect on our business, financial condition, results of operations and growth prospects.
We may be negatively impacted by challenging global economic conditions and the evolving regulatory landscape in the United States.
Our business, financial condition, results of operations and cash flow may be negatively impacted by challenging global economic conditions.
A global economic slowdown would cause disruptions and extreme volatility in global financial markets, increased rates of default and bankruptcy and declining consumer and business confidence, which can lead to decreased levels of consumer spending. These macroeconomic developments could negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result, in the event of a global economic slowdown, we may not be able to maintain our existing customers or attract new customers, or we may be forced to reduce the price of our products. We are unable to predict the likelihood of the occurrence, duration or severity of such disruptions in the credit and financial markets or adverse global economic conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations and cash flow.
Additionally, the U.S. has imposed and may impose additional quotas, duties, tariffs, retaliatory or trade protection measures or other restrictions or regulations and may adversely adjust prevailing quota, duty or tariff levels, which can affect both the materials that we use to package our products and the sale of finished products. For example, the tariffs imposed by the U.S. on goods produced in Europe may impact products that we import from Germany in connection with our Storz & Bickel products sold in the U.S. The imposition of such tariffs, if not suspended or repealed, may increase the cost of our Storz & Bickel products, which could lead to reduced margins and decreased consumer demand. While our core business is more insulated from the effects of tariffs, measures to reduce the impact of tariff increases or trade restrictions, including geographical diversification of our sources of supply, adjustments in packaging design and fabrication or increased prices, could increase our costs, delay our time to market and/or decrease sales. The uncertainty related to whether and when tariffs will be imposed make measures to mitigate the impact of tariffs more costly and difficult to plan. Other governmental action related to tariffs or international trade agreements has the potential to adversely impact demand for our products and our costs, customers, suppliers and global economic conditions and cause higher volatility in financial markets. While we actively review existing and proposed measures to seek to assess the impact of them on our business, changes in tariff rates, import duties and other new or augmented trade restrictions could have a number of negative impacts on our business, including higher consumer prices and reduced demand for our products and higher input costs.
Further, the Trump Administration has established the Department of Government Efficiency, which implemented a federal government hiring freeze and announced certain additional efforts to reduce federal government employee headcount and the size of the federal government. It is unclear how these executive actions or other potential actions by the Trump Administration or other parts of the federal government will impact the DEA or other regulatory authorities. These budgetary pressures may reduce the DEA’s ability to perform its responsibilities. If a significant reduction in the DEA’s workforce occurs, the DEA’s budget is significantly reduced or a prolonged government shutdown occurs, it could significantly impact the ability of the DEA to timely reschedule cannabis from a Schedule I controlled substance under the CSA to a Schedule III controlled substance under the CSA, which could have an adverse impact on the Company’s U.S. strategy, and, ultimately, the Company’s financial results and operations.
Natural disasters, pandemic outbreaks, boycotts and geopolitical events or acts of terrorism could adversely affect our operations and financial results.
The occurrence of one or more natural disasters, such as hurricanes, floods and earthquakes, unusually adverse weather, pandemic or epidemic outbreaks, of highly communicable diseases or viruses, boycotts and geopolitical events, such as civil unrest in countries in which our operations are located and acts of terrorism, or similar disruptions could adversely affect our business, financial condition, results of operations and growth prospects. These events could result in physical damage to one or more of our properties, increases in fuel or other energy prices, the temporary or permanent closure of one or more of our facilities, the temporary lack of an adequate workforce in a market, the temporary or long-term disruption in the supply of products from suppliers, the temporary disruption in the transport of goods, delay in the delivery of goods to our facilities, and disruption to our information systems. Such events could also adversely impact consumer sentiment, reduce demand for consumer products like ours and cause general economic slowdown. These factors could otherwise disrupt our operations and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In February 2022, following Russia’s invasion of Ukraine, the United States and the European Union imposed various economic sanctions against Russia. Such sanctions may result in restrictions on the sale of oil or other energy resources from Russia to other countries and could result in an increase in our global shipping expenses, reduce our sales, or otherwise have an adverse effect on our European operations. Additionally, escalation by Russia beyond Ukraine and into other countries within the region could also reduce our sales and have a negative effect on our European operations.
Moreover, future events could cause global financial conditions to suddenly and rapidly destabilize, and governmental authorities may have limited resources to respond to such future crises. Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability, changes to energy prices or sovereign defaults. Any sudden or rapid destabilization of global economic conditions could adversely impact our ability to obtain equity or debt financing or make other suitable arrangements to finance our projects and would likely have a material adverse effect on our business, financial condition, results of operations, growth prospects and the value of the Canopy Shares.
Our business may be negatively affected by climate change, weather conditions and the availability of natural resources.
There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, water levels, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products. Unfavorable growing conditions can reduce both crop size and crop quality. In addition, there is an increased focus by foreign, federal, state and local regulatory and legislative bodies regarding environmental policies relating to climate change, regulating greenhouse gas emissions, energy policies, and sustainability. Increased compliance costs and expenses due to the impacts of climate change and additional legal or regulatory requirements regarding climate change or designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment may cause disruptions in, or an increase in the costs associated with, the running of our manufacturing facilities and our business, as well as increase distribution and supply chain costs.
Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance matters, which could expose us to numerous risks.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC, Canadian securities regulators, Nasdaq, the TSX and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity. In addition, increasingly regulators, customers, investors, employees and other stakeholders are focusing on environmental, social and governance (“ESG”) matters and related disclosures. For example, in Canada, we are required to comply with the Fighting Against Forced Labour and Child Labour in Supply Chains Act, which came into force on January 1, 2024. Under the provisions of this legislation, corporate entities that meet certain criteria are required to examine their supply chains and file public reports to the Minister of Public Safety and Emergency Preparedness on measures they have taken to identify, address and reduce the risk that forced labour, prison labour and child labour are used in their supply chains, such report must be submitted before May 31st of each year starting in 2024. Other mandatory ESG-related disclosures include the Conflict Minerals Reporting in U.S. and the Modern Slavery Act in the UK. There are also a number of voluntary reporting schemes that provide a framework to report ESG-related information. Failure to comply with these rules and regulations could have a material adverse effect on the Company’s reputation, business, results of operations and financial condition.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments and other ESG related matters, in our SEC filings, Canadian public filings or in other public disclosures. These initiatives and goals within the scope of ESG could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further, statements about our ESG related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our initiatives or goals within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
We may be unable to obtain insurance coverage at acceptable rates and there may be coverage limitations and other exclusions which may not be sufficient to cover our potential liabilities.
While we have insurance to protect our assets, operations and employees, such insurance is subject to deductibles, coverage limits and exclusions and may not be available or adequate for the risks and hazards to which we are exposed in our current state of operations. For example, certain wholesalers, distributors, retailers and other service providers may require suppliers of hemp products to provide indemnification in connection with such products, which may not be covered by insurance. No assurance can be given that insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums and deductibles will be commercially justifiable. If we were to incur substantial liability claims and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, financial condition, results of operations and growth prospects may be adversely affected.
Tax and accounting requirements may change or be interpreted in ways that are unforeseen to us and we may face difficulty or be unable to implement and/or comply with any such changes or interpretations.
We are subject to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on our financial results, the manner in which we conduct our business or the marketability of any of our products. In many countries, including the U.S., we are subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned and are taxed accordingly. Although we believe that we are in substantial compliance with all applicable regulations and restrictions, we are subject to the risk that governmental authorities could audit our transfer pricing and related practices and assert that additional taxes are owed or that various jurisdictions could assert that we should file tax returns in jurisdictions where we do not file and subject us to additional tax. In the future, the geographic scope of our business may expand, and such expansion will require us to comply with the tax laws and regulations of additional jurisdictions. Requirements as to taxation vary substantially among jurisdictions. Complying with the tax laws and regulations of these jurisdictions can be time consuming and expensive and could potentially subject us to penalties and fees in the future if we failed to comply. In the event that we failed to comply with applicable tax laws, regulations and accounting requirements, this could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable.

---

ITEM 2. PROPERTIES
Item 2. Properties.
Our corporate headquarters is located in Smiths Falls, Ontario, Canada. Our primary cultivation facilities are located in Ontario and British Columbia. Outside Canada, we maintain a production and distribution facility for the European market in Sankt Leon-Rot, Germany. Further, the corporate offices and production facility of Storz & Bickel are located in Tuttlingen, Germany.
We believe that our facilities, taken as a whole, are in good condition and working order. We also believe we have adequate capacity to meet our current needs for the foreseeable future.
As of March 31, 2025, our material owned or leased properties consisted of the following:
Facility Location
Type
Segment
Property Owned/Leased
Utilization
(Full or Partial)
CANADA
Smiths Falls, Ontario
Production / processing, manufacturing, distribution, research and development, corporate
Licensed for cultivation
Canada Cannabis
Owned, subject to mortgage in favor of Wilmington Trust, National Association, in connection with the Credit Facility
Full
Kincardine, Ontario
Cultivation
Canada Cannabis
Owned, subject to mortgage in favor of Wilmington Trust, National Association, in connection with the Credit Facility
Full
Kelowna, British Columbia
Micro-cultivation and micro-processing
Canada Cannabis
Owned
Full
EUROPE
Tuttlingen, Germany
Corporate, manufacturing (Storz & Bickel)
Storz & Bickel
Owned
Full
Sankt Leon-Rot, Germany
Production, distribution
European - Medical
Leased
Full

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
Other than as disclosed below, we are not aware of: (a) any legal proceedings to which we are a party, or to which any of our properties is subject, which would be material to us or of any such proceedings being contemplated, (b) any penalties or sanctions imposed by a court relating to securities legislation, or other penalties or sanctions imposed by a court or regulatory body against us that would likely be considered important to a reasonable investor making an investment decision, and (c) any settlement agreements that we have entered into before a court relating to securities legislation or with a securities regulatory authority.
On June 27, 2023, an ostensible shareholder commenced a putative class action (Dziedziejko v. Canopy Growth Corporation et al., Court File No. CV-23-00701769-00CP) in the Ontario Superior Court of Justice against the Company, two of its officers, and the Company’s auditor on behalf of a putative class of all persons or entities who acquired Canopy Growth’s securities in the secondary market between June 1, 2021 to June 22, 2023 and held some or all of those securities until the close of trading on May 10, 2023 or June 22, 2023. The plaintiff alleges that the Company’s disclosures contained misrepresentations within the meaning of the Securities Act (Ontario), that certain officers authorized, permitted, or acquiesced in the release of the impugned disclosures, that the Company and one of its officers acted in a manner that was oppressive or unfairly prejudicial to the proposed class members by failing to remedy alleged deficiencies in the Company’s internal controls, and that all of the defendants are liable for damages to the putative class. The action seeks an unspecified amount of damages, interest, legal fees, and the costs of administering a plan of distribution of the recovery. The Company was also named in two other putative class proceedings that were commenced between May 2023 and July 2023 in the Ontario Superior Court of Justice alleging that the Company’s disclosures contained misrepresentations. However, on November 10, 2023, the Ontario Superior Court of Justice decided a carriage motion staying those actions (Leonard v. Canopy Growth Corporation et al., Court File No. CV-23-00702281-00CP and Twidale v. Canopy Growth Corporation et al., Court File No. CV-23-00700135-00CP), and allowing Dziedziejko v. Canopy Growth Corporation et al., Court File No. CV-23-00701769-00CP to proceed to a hearing of the plaintiff’s motions for leave to proceed under the Securities Act and class certification.
On June 15, 2023, an ostensible shareholder commenced a putative class action (Asmaro v. Canopy Growth Corporation et al., Court File No. VLC-S-S-234351) against the Company and two of its officers in the Supreme Court of British Columbia on behalf of a putative class of all persons and entities who purchased or otherwise acquired securities of the Company between August 6, 2021 and May 10, 2023. The lawsuit alleges that the Company’s disclosures contained misrepresentations within the meaning of the Securities Act (British Columbia), that certain officers authorized, permitted, or acquiesced in the release of the impugned disclosures, and that all of the defendants are liable for damages to the putative class. The plaintiff seeks an unspecified amount of damages.
In May 2023, in connection with the Company’s internal review of the financial reporting matters related to BioSteel Canada (the “BioSteel Review”), as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “2024 Annual Report”), the Company voluntarily self-reported to the SEC that the timing and amount of revenue
recognition in the BioSteel Canada segment were under review. As a result of self-reporting the BioSteel Review, the Company is the subject of an ongoing investigation by the SEC. Although the Company is fully cooperating with the SEC and continues to voluntarily respond to requests in connection with this matter, it cannot predict when such matters will be completed or the outcome and potential impact. Any remedial measures, sanctions, fines or penalties, including, but not limited to, financial penalties and awards, injunctive relief and compliance conditions, imposed on the Company in connection with this matter could have a material adverse impact on our business, financial condition and results of operations. See “Risk Factors - As a result of self-reporting the BioSteel Review, the Company is the subject of a regulatory investigation and inquiry in connection with the BioSteel Review, and it cannot predict the timing of developments, and any adverse outcome of these continuing matters could have a material adverse effect on the Company” under Item 1A of this Form 10-K.
In response to a private arbitration commenced by the Company on or about March 8, 2024, on February 4, 2025, a payment guarantor under a share purchase agreement commenced a counterclaim against the Company within the arbitration seeking general damages of $6,399,700, plus aggravated damages of $1,000,000 and costs arising from alleged breaches of the share purchase agreement.
On April 4, 2025, an ostensible shareholder commenced a putative class action (Baron v. Canopy Growth Corporation et al. Case 1:25-cv-01877) against the Company and two of its officers in the U.S. District Court Eastern District of New York on behalf of all persons and entities that purchased or otherwise acquired Company securities between May 30, 2024 and February 6, 2025, alleging violations of U.S. federal securities laws. The claim alleges that the Company made false and/or misleading statements and/or failed to disclose that: (i) the Company had allegedly incurred significant costs producing Claybourne™ pre-rolled joints in connection with the Claybourne™ product launch in Canada; (ii) the foregoing costs, in addition to certain indirect costs that the Company incurred in connection with its Storz & Bickel vaporizer devices, were likely to have a significant negative impact on the Company’s gross margins and overall financial results; and (iii) accordingly, the Company had allegedly overstated the efficacy of its cost reduction measures and the health of its gross margins while downplaying issues with the same. The plaintiff seeks an unspecified amount of damages, attorneys’ fees and costs, and other relief.
The Company denies any alleged misconduct and liability for each of the claims asserted in the above-noted Court and arbitration proceedings, believes that the defendants/respondents have meritorious defenses to the claims, and expects to vigorously defend the claims, although the Company cannot predict when or how they will be resolved or estimate what the potential loss or range of loss would be, if any.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any other legal proceedings other than described above, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, results of operations or prospects. Please refer to “Risk Factors” under Item 1A of this Form 10-K for further discussion.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Canopy Shares are traded on Nasdaq under the symbol “CGC” and the TSX under the symbol “WEED.”
Holders
As of May 28, 2025, there were approximately 778 registered holders of record of Canopy Shares. This number of holders of record does not represent the actual number of beneficial owners of Canopy Shares because shares are frequently held in “street name” by securities dealers and others for the benefit of individual owners who have the right to vote their shares.
Dividends
As of the date of this Form 10-K, we have not declared any dividends or made any distributions on the Canopy Shares. Furthermore, we have no current intention to declare dividends on the Canopy Shares in the foreseeable future. Any decision to pay dividends on the Canopy Shares in the future will be at the discretion of our board of directors and will depend on, among other things, our results of operations, current and anticipated cash requirements and surplus, financial condition, any contractual restrictions and financing agreement covenants, our ability to meet solvency tests imposed by corporate law and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Persons
We did not purchase any of the Canopy Shares during the three months ended March 31, 2025.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This Management’s Discussion and Analysis of our financial condition and results of operations (“MD&A”), which should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this Form 10-K (the “Financial Statements”), provides additional information on our business, current developments, financial condition, cash flows and results of operations. It is organized as follows:
•Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.
•Part 2 - Results of Operations. This section provides an analysis of our results of operations for (1) fiscal 2025 in comparison to fiscal 2024; and (2) fiscal 2024 in comparison to fiscal 2023.
•Part 3 - Financial Liquidity and Capital Resources. This section provides an analysis of our cash flows and outstanding debt and commitments for fiscal 2025. Included in this analysis is a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments.
•Part 4 - Critical Accounting Policies and Estimates. This section identifies those accounting policies that are considered important to our results of operations and financial condition, require significant judgment and involve significant management estimates. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 3 of the Financial Statements.
We prepare and report our Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our Financial Statements, and the financial information contained herein, are reported in thousands of Canadian dollars, except share and per share amounts or as otherwise stated. We have determined that the Canadian dollar is the most relevant and appropriate reporting currency as, despite continuing shifts in the relative size of our operations across multiple geographies, the majority of our operations are conducted in Canadian dollars and our financial results are prepared and reviewed internally by management in Canadian dollars.
In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part 1, Item 1A, “Risk Factors” in this Form 10-K.
Part 1 - Business Overview
We are a world-leading cannabis company which produces, distributes, and sells a diverse range of cannabis and cannabis related products. We are a collective of dynamic and engaged leaders, united by a passion for cannabis, focused on delighting our consumers and medical cannabis patients while creating value for our stakeholders and one another. Above all else, we are driven by an unwavering commitment to providing our consumers with the best possible experiences rooted in our vision of unleashing the power of cannabis to improve lives. From product and process innovation to market execution, we are driven by a commitment to drive the industry forward.
Our cannabis products are principally sold for adult-use and medical purposes under a portfolio of distinct brands. Our core operations are in Canada, Europe and Australia and we hold a significant non-controlling, non-voting interest in an entity that participates in the sale of cannabis and hemp derived products in the United States.
Today, we are a leader in the medical as well as adult use cannabis market in Canada where we offer a broad portfolio of brands and products and continue to expand our portfolio to include new innovative cannabis products and formats. Our primary medical brand is Spectrum Therapeutics and we have also launched Canopy Medical, a medical cannabis brand in select international markets. Our curated cannabis product formats include dried flower, pre-rolled joints (“PRJ”), oil, softgel capsules, edibles including gummies, vapes and beverages, as well as a wide range of cannabis accessories including our premier herbal vaporizer devices Storz & Bickel®(collectively with Storz & Bickel GmbH, “Storz & Bickel”).
Our cannabis cultivation operations are focused in two facilities, our greenhouse facility in Kincardine, Ontario and the DOJA facility in Kelowna, British Columbia. We believe that the cultivation capacity in the Kincardine facility and the DOJA facility, as well as externally sourced cannabis flower supply can meet the current demand for our premium dried flower. The receipt of our European Union Good Manufacturing Practices (“EU-GMP”) certification at the Kincardine facility enables us to continue exporting certified medical cannabis to medical markets in Europe as well as other medical cannabis markets around the world.
Our licensed operational capacity in Canada includes advanced manufacturing capability for oil and softgel encapsulation, PRJ (infused and non-infused), and hash production, which is primarily completed at our Smiths Falls, Ontario facility. Through our in-house manufacturing capabilities of adult-use cannabis products, we can process and package bulk cannabis flower, PRJ and vape products, whether internally or externally sourced, into high quality cannabis products. Our remaining products are manufactured
through an adaptive third-party sourcing model for all edibles and extracts. We are confident that our production and manufacturing capabilities and know-how are sufficient to meet the diverse needs of our adult-use and medical cannabis consumers in Canada.
Today, we offer a broad portfolio of brands and products and continue to expand our portfolio to include new innovative cannabis products and formats. We maintain agreements to supply all Canadian provinces and territories with our adult-use products for sale through their established retail distribution systems. Through our Spectrum Therapeutics website, patients who have registered with Spectrum Therapeutics are able to purchase products online and have them shipped directly to the address indicated on their registration document. We have developed several programs to improve access to medical cannabis for authorized patients through income-tested compassionate pricing program whereby eligible low-income patients may obtain a 20% discount on regular prices of medical cannabis. We also provide support through our customer care team to help patients identify if their medication is covered under the growing number of private health plans that have a medical cannabis component.
Segment Reporting
We report our financial results for the following four reportable segments:
•Canada cannabis - includes the production, distribution and sale of a diverse range of cannabis, hemp and cannabis-related products in Canada pursuant to the Cannabis Act and cannabis-related areas such as merchandise and clinics;
•International markets cannabis - includes the production, distribution and sale of a diverse range of cannabis and hemp products internationally pursuant to applicable international legislation, regulations and permits. Priority markets include medical cannabis in Australia and Europe where the Company offers branded high-quality flower, oil and extract products under our recognized Spectrum Therapeutics and Canopy Medical brands, as well as the Company's Storz & Bickel line of medically approved vaporizers in Australia;
•Storz & Bickel - includes the production, distribution and sale of vaporizers and accessories; and
•This Works - includes the production, distribution and sale of beauty, skincare, wellness and sleep products, some of which have been blended with hemp-derived CBD isolate. On December 18, 2023, the Company completed the sale of This Works and as of such date, the results of This Works are no longer included in the Company's financial results.
These segments reflect how our operations are managed, how our Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), allocates resources and evaluates performance, and how our internal management financial reporting is structured. Our CODM evaluates the performance of these segments, with a focus on (i) segment net revenue, and (ii) segment gross margin as the measure of segment profit or loss. The remainder of our operations include revenue derived from, and cost of sales associated with, our non-cannabis extraction activities and other ancillary activities; these are included within "other".
Recent Developments
Balance Sheet Deleveraging Initiatives
On April 18, 2024, the Company entered into an exchange agreement (the “April 2024 Exchange Agreement”) with Greenstar Canada Investment Limited Partnership (“Greenstar”), an affiliate of Constellation Brands, Inc. (“CBI”), pursuant to which Greenstar converted approximately $81.2 million of the principal amount of the $100 million principal amount of a promissory note (the “CBI Note”) into 9,111,549 Exchangeable Shares (the “Note Exchange”), calculated based on a price per Exchangeable Share equal to $8.91. Pursuant to the terms of the April 2024 Exchange Agreement, all accrued but unpaid interest on the CBI Note together with the remaining principal amount of the CBI Note was cancelled and forgiven for no additional consideration by Greenstar. Following the closing of the Note Exchange, there is no outstanding balance owing under the CBI Note and the CBI Note has been cancelled.
On April 29, 2024 and June 28, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the “First Quarter 2025 Paydowns”). The First Quarter 2025 Paydowns resulted in an aggregate principal reduction of $11.2 million (US$8.2 million) for a cash payment of $11.2 million (US$8.2 million).
On August 20, 2024, the Company entered into an exchange and subscription agreement (the “August 2024 Supreme Convertible Debt Exchange”) with a single institutional investor (the “August 2024 Investor”) pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $2.7 million of aggregate principal amount of outstanding Supreme Debentures (as defined below) in exchange for 291,351 common shares of the Company and $0.03 million in cash for accrued interest.
On September 27, 2024, the Company repurchased additional outstanding principal amounts under the Credit Facility (the “Second Quarter 2025 Paydown”). The Second Quarter 2025 Paydown resulted in an aggregate principal reduction of $1.1 million (US$0.9 million) for a cash payment of $1.1 million (US$0.9 million).
On October 16, 2024, the Company made an early prepayment under the Credit Facility in an aggregate principal amount equal to US$100.0 million of the principal amount outstanding thereunder at a discounted price of US$97.5 million (the “Third Quarter
2025 Paydown”). Pursuant to the Amending Agreement (as defined below), the US$100.0 million prepayment of the Credit Facility was required to be made by December 31, 2024.
On March 31, 2025, the Company made an optional prepayment under the Credit Facility in an aggregate principal amount equal to US$100.0 million of the principal amount outstanding thereunder at a discounted price of US$97.5 million (the “Optional Prepayment”), and as a result, the maturity date under the Credit Facility was further extended to September 18, 2027.
Facility Lease Renegotiation
In December 2024, the Company renegotiated the terms of a long-term facility lease, resulting in a short-term to long-term reclassification of its lease liabilities (the “Lease Renegotiation”). The renegotiated terms result in changes to future cashflows associated with the lease.
ATM Programs
On June 6, 2024, the Company established an at-the-market equity program that allowed it to issue and sell up to US$250 million of Canopy Shares to the public from time to time at the Company’s discretion (the “June 2024 ATM Program”) pursuant to an equity distribution agreement (the “2024 Equity Distribution Agreement”) entered into among the Company and BMO Nesbitt Burns Inc., as Canadian agent, and BMO Capital Markets Corp., as U.S. agent (together, the “Agents”).
On February 28, 2025, the Company established a new at-the-market equity program that allows it to issue and sell up to US$200 million of Canopy Shares to the public from time to time at the Company’s discretion (the “February 2025 ATM Program”, and together with the June 2024 ATM Program, the “ATM Programs”) pursuant to an equity distribution agreement (the “2025 Equity Distribution Agreement) entered into among the Company and the Agents. The February 2025 ATM Program will be effective until the earlier of (i) the issuance and sale of all of the Canopy Shares issuable pursuant to the February 2025 ATM Program; (ii) the date on which the Company receives notice from a securities regulatory authority that the Company’s Canadian short form base shelf prospectus dated June 5, 2024 and/or the Company’s registration statement filed with the SEC has ceased to be effective; and (iii) July 5, 2026, unless terminated earlier in accordance with the terms of the 2025 Equity Distribution Agreement. The 2025 Equity Distribution Agreement replaced the 2024 Equity Distribution Agreement.
During the fiscal year ended March 31, 2025, the Company sold 71,044,862 Canopy Shares for gross proceeds of $347.1 million (US$250 million) under the June 2024 ATM Program and 23,169,358 Canopy Shares for gross proceeds of $38.3 million (US$26.7 million) under the February 2025 ATM Program.
Acreage Acquisition
On December 9, 2024, Canopy USA completed its acquisition of Acreage (the “Acreage Acquisition”) and now owns 100% of the issued and outstanding shares of Acreage. In connection with: (i) the arrangement agreement dated April 18, 2019, as amended on May 15, 2019, September 23, 2020 and November 17, 2020 (the “Existing Acreage Arrangement Agreement”) and restated plan of arrangement (the “Acreage Amended Arrangement”); and (ii) the arrangement agreement among Canopy Growth, Canopy USA and Acreage, as amended (the “Floating Share Arrangement Agreement”), Canopy USA acquired all of the issued and outstanding Class D subordinate voting shares (the “Floating Shares”) of Acreage on the terms and conditions set forth in the court-approved plan of arrangement (the “Floating Share Arrangement”). Immediately following the implementation of the Floating Share Arrangement, Canopy USA acquired all of the issued and outstanding Class E subordinate voting shares (the “Fixed Shares”) of Acreage (the “Fixed Share Acquisition”).
In accordance with the Floating Share Arrangement, registered holders of Floating Shares received 0.045 of a common share of Canopy Growth for each Floating Share (the “Floating Share Exchange Ratio”). In connection with the Fixed Share Acquisition, each of the outstanding Fixed Shares was exchanged for 0.00000000617 of a common share of Canopy Growth for each Fixed Share, as adjusted pursuant to the terms and conditions set forth in the Existing Acreage Arrangement Agreement (the “Fixed Share Exchange Ratio”). In aggregate, Canopy Growth issued 5,888,291 common shares to former shareholders of Acreage.
Pursuant to the Floating Share Arrangement, (i) each outstanding stock option to acquire Floating Shares was exchanged for a replacement option exercisable for Canopy Growth common shares, with the number of underlying Canopy Growth common shares and exercise price of such options adjusted by the Floating Share Exchange Ratio; (ii) each outstanding warrant to acquire Floating Shares was exchanged for a replacement warrant to acquire Canopy Growth common shares, with the number of underlying Canopy Growth common shares and exercise price of such warrants adjusted by the Floating Share Exchange Ratio; and (iii) each outstanding restricted share unit, performance share and performance unit, as applicable, that vested into Floating Shares was exchanged for a replacement restricted share unit, performance share or performance unit, as applicable, that vests into Canopy Growth common shares, with the number of underlying Canopy Growth common shares adjusted by the Floating Share Exchange Ratio.
In connection with the Fixed Share Acquisition, (i) each outstanding stock option to acquire Fixed Shares was exchanged for a replacement option exercisable for Canopy Growth common shares, with the number of underlying Canopy Growth common shares and exercise price of such options adjusted by the Fixed Share Exchange Ratio; (ii) each outstanding warrant to acquire Fixed Shares was exchanged for a replacement warrant to acquire Canopy Growth common shares, with the number of underlying Canopy Growth
common shares and exercise price of such warrants adjusted by the Fixed Share Exchange Ratio; and (iii) each restricted share unit and performance share unit, as applicable, that vested into Fixed Shares was exchanged for a replacement restricted share unit or performance share unit, as applicable, that vests into Canopy Growth common shares, with the number of underlying Canopy Growth common shares adjusted by the Fixed Share Exchange Ratio.
In addition, Canopy Growth: (i) issued 5,118,426 common shares of the Company to an eligible participant pursuant to the existing tax receivable bonus plans of High Street Capital Partners, LLC, a subsidiary of Acreage (“HSCP”); and (ii) 306,151 common shares of the Company were issuable in connection with Canopy USA’s acquisition of the minority interests of certain subsidiaries of Acreage, of which 237,682 common shares of the Company have been issued.
Immediately following the closing of the Acreage Acquisition, Canopy Growth issued an aggregate of 1,315,553 common shares and 1,197,658 common share purchase warrants to certain securityholders of Acreage in order to satisfy an outstanding liability. Each common share purchase warrant entitles the holder thereof to acquire one common share of Canopy Growth at an exercise price of US$3.66 until June 6, 2029.
In exchange for the issuances of Canopy Growth common shares, warrants and other replacement securities in connection with the Acreage Acquisition, Canopy Growth received additional Non-Voting Shares with a value of $50.8 million and Canopy USA delivered guarantees in respect of the obligations owing pursuant to the Elevate (as defined below) loan receivable. Refer to Note 13 for more information on Canopy USA investment balances and refer to Note 21 for more information on the share and warrant issuances as part of the Acreage Acquisition.
Canadian Federal Income Tax Proposals
Proposed amendments to the Income Tax Act (Canada) originally released on June 10, 2024 with revised proposals released on August 12, 2024 and September 23, 2024, (collectively the “Capital Gains Proposals”), would, if enacted, generally increase the capital gains inclusion rate from one-half to two-thirds for corporations and trusts, and from one-half to two-thirds for individuals on the portion of capital gains realized, including capital gains realized indirectly through a trust or partnership, in a taxation year that exceed $250,000.
On March 21, 2025, Prime Minister Carney announced that the Government of Canada will cancel the Capital Gains Proposals.
Factors Impacting our Business
To achieve our vision, our strategy consists of five pillars:
Furthering our Leadership Position with Medical Cannabis Patients Worldwide - We are committed to the high-quality production of medical cannabis products and are equally committed to helping medical professionals confidently prescribe and patients to responsibly use our products. Our unwavering commitment to the safety and effectiveness of our products is a critical strategic imperative which also helps differentiate us in the growing cannabis market. To remain successful, we consistently strive to make significant investments in our operations within Canada and Europe and we are well-positioned to pursue international growth opportunities with our strong medical cannabis brands and distribution networks. We intend to fuel the continued demand for our European Union Good Manufacturing Practices (“EU-GMP”) certified medical grade cannabis internationally with supply from within Europe and from our Canadian EU-GMP certified facility in Kincardine, Ontario. In addition, we will continue to maximize our existing routes to market to further our execution on our international growth plans, while leveraging our cannabis expertise and well-established medical brands.
Leadership of Global Vaporization through Storz &Bickel - Vaporization is a consumption method that aligns with the desires of several of our medical cannabis patients and adult-use consumers. With an already extensive product portfolio, our focus is to continue to push for more impactful product innovations that allow for the expansion of new product formats. Like our cannabis, these devices are crafted with the same attention to quality, performance and safety and undergo rigorous manufacturing procedures and certification. While already internationally established, Storz & Bickel is focused on addressing consumer needs in the North American market and intends to continue to deliver its award-winning products to a broader audience.
Focusing on Profitable Scale in Adult-Use Cannabis through our Powerhouse Brands Backed by Exceptional Product Quality - The heart of our business is in North America with our roots in Canada and investments in the U.S. Our brand portfolio includes Tweed, Claybourne™, HiWay, 7ACRES, Twd., Wana, and Deep Space in our Canadian adult-use market. As markets continue to evolve, we believe the role of brands will become more prominent in consumers’ desire for trustworthy products that deliver quality and consistency of experience. We are investing in our brands to further our position of leadership in the market and to continually strengthen their relationship with consumers. We understand that the success of our products and brands is only achievable with the support and buy-in of customers. As consumer needs and trends evolve, we are continuing to focus our efforts on product categories with the highest and most tangible profit opportunities that also align to customer needs and consumer desires. At the same time, we are significantly optimizing our wholesale capabilities to ensure that our products have the broadest distribution in our highest profit geographies.
Leveraging Our Disciplined “Asset-Right” Model and Power Growth - As the cannabis market continues to rapidly evolve, we remain focused on driving efficiency for the greatest return on asset investments. Our objective is to excel at our own internal manufacturing capabilities by making selective investments in assets that will accelerate returns and secure long-term sustainable profitability. This means we will invest where necessary and continue to leverage local and/or regional suppliers for raw materials to complement our owned operations. We continually and consistently seek to optimize our operating footprint in order to achieve profitability and foster growth while retaining a steadfast commitment to the quality of our products and the integrity of our global supply chain.
Unparalleled exposure to the expanding U.S. cannabis market - Unlike other cannabis businesses, our investment in Canopy USA provides a unique opportunity to maximize the value of our previously-held conditional U.S. THC investments. We have an unconsolidated and non-controlling interest in Canopy USA which is, and is expected to continue to be, accounted for as an equity method (fair value) investment until such time as a Stock Exchange Permissibility Date (as defined below) occurs. Canopy USA’s powerhouse brands, Wana (as defined below) and Jetty (as defined below), establish a foundation for us to participate in the world’s largest and fastest growing cannabis market and to offer our shareholders unique exposure to this market’s growth.
Canopy USA and certain entities over which Canopy USA exercises control (such entities, the “Canopy USA LPs”) currently hold an ownership interest in the following assets, among others:
•Wana - Canopy USA holds 100% of the membership interests of Wana Wellness, LLC, The Cima Group, LLC, and Mountain High Products, LLC (collectively, “Wana”).
•Jetty - Canopy USA holds approximately 77% of the shares of Lemurian, Inc. (“Jetty”).
•Acreage - Canopy USA holds 100% of the issued and outstanding shares of Acreage Holdings, Inc. (“Acreage”).
•TerrAscend - the Canopy USA LPs hold an aggregate of 64,564,487 TerrAscend common shares (the “TerrAscend Common Shares”) on an as-converted basis and 22,474,130 TerrAscend Common Share purchase warrants with a weighted average exercise price of $6.07 per TerrAscend Common Share and expiring on December 31, 2032 (the “TerrAscend Warrants”). Assuming full exercise of the TerrAscend Warrants, the Canopy USA LPs will hold an aggregate of 87,038,617 TerrAscend Common Shares on an as-converted basis assuming conversion of the TerrAscend exchangeable shares (the “TerrAscend Exchangeable Shares”) held by the Canopy USA LPs.
Part 2 - Results of Operations
The results of operations presented below reports the financial performance of the continuing operations of Canopy Growth for the years ended March 31, 2025 and 2024. Further to Note 6 in the Company’s accompanying financial statements, the BioSteel segment results for all periods prior to the September 14, 2023 and November 16, 2023, being the effective dates of deconsolidation as a result of the CCAA Proceedings (as defined below), are classified as discontinued operations and therefore are excluded from continuing operations.
On September 14, 2023, Canopy Growth ceased funding the operations of BioSteel Sports Nutrition Inc. (“BioSteel Canada”) and commenced proceedings (the “CCAA Proceedings”) under the Companies' Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) and obtained recognition of that proceeding under Chapter 15 of the United States Bankruptcy Code.
Discussion of Fiscal 2025 Results of Operations
The following table presents selected consolidated financial information for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars, except share amounts and
where otherwise indicated)
$ Change
% Change
Selected consolidated financial information:
Net revenue
$
268,995
$
297,146
$
(28,151
)
(9
%)
Gross margin percentage
%
%
-
300 bps
Net loss from continuing operations
$
(604,138
)
$
(483,682
)
$
(120,456
)
(25
%)
Net loss from continuing operations
attributable to Canopy Growth Corporation
$
(604,138
)
$
(483,682
)
$
(120,456
)
(25
%)
Basic and diluted loss per share from
continuing operations1
$
(5.62
)
$
(6.47
)
$
0.85
%
1 For the year ended March 31, 2025, the weighted average number of outstanding common shares, basic and diluted, totaled 107,553,729 (year ended March 31, 2024 - 74,787,521).
Net Revenue
We report net revenue in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Revenue derived from the remainder of our operations are included within “other”. The following table presents segmented net revenue for the years ended March 31, 2025 and 2024:
Net Revenue
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Canada cannabis
Canadian adult-use cannabis1,3
$
78,828
$
92,803
$
(13,975
)
(15
%)
Canadian medical cannabis2,4
77,032
66,362
10,670
%
$
155,860
$
159,165
$
(3,305
)
(2
%)
International markets cannabis5
$
39,734
$
41,312
$
(1,578
)
(4
%)
Storz & Bickel
$
73,401
$
70,670
$
2,731
%
This Works
$
-
$
21,256
$
(21,256
)
(100
%)
Other1,2
-
4,743
(4,743
)
(100
%)
Net revenue
$
268,995
$
297,146
$
(28,151
)
(9
%)
1 A reclassification of $433 of ancillary cannabis revenues from Other to Canadian adult-use cannabis occurred for the year ended March 31, 2024.
2 A reclassification of $5,016 of ancillary cannabis revenues from Other to Canadian medical cannabis occurred for the year ended March 31, 2024.
3 Reflects excise taxes of $36,442 and other revenue adjustments, representing our determination of returns and pricing adjustments, of $4,166 for the year ended March 31, 2025 (year ended March 31, 2024 - excise taxes of $40,115 and other revenue adjustments of $3,514).
4 Reflects excise taxes of $8,532 for the year ended March 31, 2025 (year ended March 31, 2024 - $6,673).
5 Reflects other revenue adjustments of $100 for the year ended March 31, 2025 (year ended March 31, 2024 - $645).
Net revenue was $269.0 million in fiscal 2025, as compared to $297.1 million in fiscal 2024. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023; (ii) a decrease in Canada adult-use cannabis; and (iii) a decline in our U.S. CBD business. These decreases were partially offset by: (i) growth in Canada medical; and (ii) growth in Storz & Bickel.
Canada cannabis
Net revenue from our Canada cannabis segment was $155.9 million in fiscal 2025, as compared to $159.2 million in fiscal 2024.
Canadian adult-use cannabis net revenue was $78.8 million in fiscal 2025, as compared to $92.8 million in fiscal 2024. The year-over-year decrease is primarily attributable to lower sales volumes and sales velocity on our core flower and PRJ offerings due to continued increase in price competition, partially offset by a shift towards infused PRJs and opportunistic bulk sales.
Canadian medical cannabis net revenue was $77.0 million in fiscal 2025, as compared to $66.4 million in fiscal 2024. The year-over-year increase is primarily attributable to an increase in the average size of medical orders placed by our customers due largely to an increase in the percentage of insured customers, and a larger assortment of cannabis product choices offered to our customers.
International markets cannabis
International markets cannabis revenue was $39.7 million in fiscal 2025, as compared to $41.3 million in fiscal 2024. The year-over-year decrease is primarily attributable to: (i) a decline in our Australian medical cannabis business and (ii) a decline in our U.S. CBD business resulting from a transition of our U.S. CBD business to Canopy USA which was deconsolidated on April 30, 2024, offset by increased shipments of flower products in Europe, driven by Poland and Germany.
Storz & Bickel
Revenue from Storz & Bickel was $73.4 million in fiscal 2025, as compared to $70.7 million in fiscal 2024. The year-over-year increase is primarily attributable to strong growth in Germany and the United Kingdom, sales of our Mighty vaporizer and sales of Venty, our newest portable vaporizer.
This Works
Revenue from This Works was $nil in fiscal 2025, as compared to $21.3 million in fiscal 2024. The year-over-year decrease is due to the completion of the divestiture of This Works on December 18, 2023.
Cost of Goods Sold and Gross Margin
The following table presents cost of goods sold, gross margin and gross margin percentage on a consolidated basis for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars except where indicated)
$ Change
% Change
Net revenue
$
268,995
$
297,146
$
(28,151
)
(9
%)
Cost of goods sold
$
189,484
$
216,264
$
(26,780
)
(12
%)
Gross margin
79,511
80,882
(1,371
)
(2
%)
Gross margin percentage
%
%
-
300 bps
Cost of goods sold was $189.5 million in fiscal 2025, as compared to $216.3 million in fiscal 2024. Our gross margin was $79.5 million in fiscal 2025, or 30% of net revenue, as compared to a gross margin of $80.9 million and gross margin percentage of 27% of net revenue in fiscal 2024. The year-over-year increase in the gross margin percentage was primarily attributable to improvement in our Canada cannabis segment resulting from (i) the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023; and (ii) a shift in channel mix to higher margin medical sales, partially offset by costs related to new product launches, increased price competition and higher indirect costs.
We report gross margin and gross margin percentage in four segments: (i) Canada cannabis; (ii) international markets cannabis; (iii) Storz & Bickel; and (iv) This Works. Gross margin and gross margin percentage associated with the remainder of our operations are included within “other". The following table presents segmented gross margin and gross margin percentage for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars except where indicated)
$ Change
% Change
Canada cannabis segment
Net revenue1
$
155,860
$
159,165
$
(3,305
)
(2
%)
Cost of goods sold2
119,343
133,525
(14,182
)
(11
%)
Gross margin
36,517
25,640
10,877
%
Gross margin percentage
%
%
700 bps
International markets cannabis segment
Revenue
$
39,734
$
41,312
$
(1,578
)
(4
%)
Cost of goods sold
24,509
24,630
(121
)
%
Gross margin
15,225
16,682
(1,457
)
(9
%)
Gross margin percentage
%
%
(200) bps
Storz & Bickel segment
Revenue
$
73,401
$
70,670
$
2,731
%
Cost of goods sold
45,632
40,542
5,090
%
Gross margin
27,769
30,128
(2,359
)
(8
%)
Gross margin percentage
%
%
(500) bps
This Works segment
Revenue
$
-
$
21,256
$
(21,256
)
(100
%)
Cost of goods sold
-
10,722
(10,722
)
(100
%)
Gross margin
-
10,534
(10,534
)
(100
%)
Gross margin percentage
-
%
%
N/A
Other
Revenue1
$
-
$
4,743
$
(4,743
)
(100
%)
Cost of goods sold2
-
6,845
(6,845
)
(100
%)
Gross margin
-
(2,102
)
2,102
%
Gross margin percentage
-
%
(44
%)
N/A
1 A reclassification of $5,449 of ancillary cannabis revenues from Other to Canada cannabis occurred for the year ended March 31, 2024.
2 A reclassification of $4,705 of ancillary cannabis cost of goods sold from Other to Canada cannabis occurred for the year ended March 31, 2024.
Canada cannabis
Gross margin for our Canada cannabis segment was $36.5 million in fiscal 2025, or 23% of net revenue, as compared to $25.6 million in fiscal 2024, or 16% of net revenue. The year-over-year increase in the gross margin percentage was primarily attributable to: (i) the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023; and (ii) a shift in channel mix to higher margin medical sales.
International markets cannabis
Gross margin for our international markets cannabis segment was $15.2 million in fiscal 2025, or 38% of net revenue, as compared to $16.7 million in fiscal 2024, or 40% of net revenue. The year-over-year decrease in the gross margin percentage is primarily attributable to recent pricing pressures in Poland and lower selling prices in Germany. Lower sales in our Australian medical cannabis business and the decline in U.S. CBD sales also contributed to the decline in gross margin percentage.
Storz & Bickel
Gross margin for our Storz & Bickel segment was $27.8 million in fiscal 2025, or 38% of net revenue, as compared to $30.1 million in fiscal 2024, or 43% of net revenue. The year-over-year decrease in the gross margin percentage is driven primarily by a shift in product mix as additional rebates were provided to clear out remaining stock of a previously planned discontinued product and increases in indirect costs.
This Works
Gross margin for our This Works segment was $nil in fiscal 2025, or 0% of net revenue, as compared to $10.5 million in fiscal 2024, or 50% of net revenue. The year-over-year decrease in the gross margin percentage is due to the completion of the divestiture of This Works on December 18, 2023.
Operating Expenses
The following table presents operating expenses for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Operating expenses
General and administrative
$
65,060
$
90,265
$
(25,205
)
(28
%)
Sales and marketing
60,852
76,145
(15,293
)
(20
%)
Acquisition, divestiture, and other costs
19,524
34,767
(15,243
)
(44
%)
Depreciation and amortization
24,190
28,252
(4,062
)
(14
%)
Selling, general and administrative expenses
169,626
229,429
(59,803
)
(26
%)
Share-based compensation
(4,205
)
14,180
(18,385
)
(130
%)
Loss on asset impairment and restructuring
31,233
65,987
(34,754
)
(53
%)
Total operating expenses
$
196,654
$
309,596
$
(112,942
)
(36
%)
Selling, general and administrative expenses
Selling, general and administrative expenses were $169.6 million in fiscal 2025, as compared to $229.4 million in fiscal 2024.
General and administrative expense was $65.1 million in fiscal 2025, as compared to $90.3 million in fiscal 2024. The year-over-year decrease is primarily attributable to: (i) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023; (ii) continued decrease in people costs and professional service costs; and (iii) the divestiture of This Works on December 18, 2023.
Sales and marketing expense was $60.9 million in fiscal 2025, as compared to $76.1 million in fiscal 2024. The year-over-year decrease is primarily attributable to: (i) the divestiture of This Works on December 18, 2023; (ii) the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023; and (iii) continued decrease in people costs and professional service costs.
Acquisition-related costs were $19.5 million in fiscal 2025, as compared to $34.8 million in fiscal 2024. In fiscal 2025, costs were incurred primarily in relation to:
•continued legal costs arising from the restatement of our consolidated financial statements in connection with the review of the financial reporting matters related to the BioSteel business unit;
•the Reorganization of Canopy USA;
•costs associated with the Debt Acquisition of Acreage; and
•costs relating to the modification of the Credit Agreement that occurred in August 2024;
Comparatively, in fiscal 2024, costs were incurred primarily in relation to:
•approximately $8.3 million of costs relating to the modification of the Credit Agreement that occurred in July 2023;
•approximately $10.7 million of legal and audit costs related to the restatement of our consolidated financial statements for the following previously filed periods: (i) audited consolidated financial statements for the fiscal year ended March 31, 2022, originally included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, and (ii) unaudited consolidated financial statements for the quarterly periods ended June 30, 2022, September 30, 2022 and December 31, 2022, originally included in the our Quarterly Reports on Form 10-Q for such quarterly periods, in connection with the correction of material misstatement arising from an internal review of financial reporting matters related to sales in the BioSteel business unit that were accounted for incorrectly, and the filing of our Annual Report on Form 10-K for the fiscal years ended March 31, 2023 and 2022 in June 2023;
•the Reorganization of Canopy USA, including the Reorganization Amendments and the Additional Reorganization Amendments; and
•evaluating other potential opportunities.
Depreciation and amortization expense was $24.2 million in fiscal 2025, as compared to $28.3 million in fiscal 2024. The year-over-year decrease is primarily attributable to the previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business.
Share-based compensation
Share-based compensation was $(4.2) million in fiscal 2025, as compared to $14.2 million in fiscal 2024. The year-over-year change from an expense to an expense reversal is driven by the departure of our former CEO which resulted in a deemed modification of his existing share-based compensation and reversal of expensing associated with unvested tranches. The expense reversal is partially offset by (i) the first quarter of fiscal 2025 grant of 0.8 million options and 0.7 million restricted share units and (ii) higher forfeitures in fiscal 2024 due to previously-noted restructuring actions.
Asset impairment and restructuring costs
Asset impairment and restructuring costs recorded in operating expenses were $31.2 million in fiscal 2025, as compared to $66.0 million in fiscal 2024.
Loss on asset impairment and restructuring recorded in fiscal 2025 is primarily related to the non-cash impairment of divestiture-related assets, employee restructuring costs, and ongoing holding costs to maintain previously restructured sites. These amounts were offset by a gain related to remeasurement of a lease liability upon execution of the exit agreement.
Comparatively, in fiscal 2024, the loss on asset impairment and restructuring was primarily related to: (i) the Storz & Bickel goodwill and intangible asset impairment resulting from our annual impairment testing; (ii) the charges associated with the completion of the This Works divestiture; and (iii) incremental impairment losses and other costs associated with the restructuring of our Canadian cannabis operations that were initiated in the three months ended March 31, 2023. These charges were offset by a gain on the sale of our production facility at 1 Hershey Drive in Smiths Falls, Ontario. The gain is due to the sale proceeds exceeding the carrying value that was previously impaired at March 31, 2023.
Other
The following table presents other income (expense), net, and income tax (expense) recovery for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Other income (expense), net
(479,854
)
(242,641
)
(237,213
)
(98
%)
Income tax expense
(7,141
)
(12,327
)
5,186
%
Other income (expense), net
Other income (expense), net, was an expense amount of $479.9 million in fiscal 2025, as compared to an expense amount of $242.6 million in fiscal 2024. The year-over-year change of $237.3 million, increase in expense, is primarily attributable to:
•Increase in non-cash expense of $275.4 million related to fair value changes on our Canopy USA related and other financial assets, from an expense amount of $124.8 million in fiscal 2024 to an expense amount of $400.2 million in fiscal 2025. The fiscal 2025 expense amount is primarily attributable to fair value decreases relating to our investments in:
•the Canopy USA equity method investment in the amount of $98.6 million;
•the Canopy USA LPs equity method investment in the amount of $148.1 million;
•the Canopy Elevate I LLC, Canopy Elevate II LLC and Canopy Elevate III LLC (collectively, “Elevate”) loan receivable, in the amount of $7.3 million relating to fair value movements in consideration of the debtor's net assets;
•the Acreage Debt (as defined below) loan receivable, in the amount of $140.1 million, primarily attributable to changes in market conditions and assumptions;
•the Acreage financial instrument, in the amount of $31.8 million. On a quarterly basis, we determine the fair value of the Acreage financial instrument using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement. The fair value decrease in fiscal 2025 is primarily attributable to an increase of approximately 75% in our share price up to the Deconsolidation Date (as defined below), relative to an increase of approximately 46% in Acreage’s share price during that same period. As a result, the model at the Deconsolidation Date reflects both a higher estimated value of the Canopy Growth common shares that were expected to be issued upon the Acreage Acquisition, and a higher estimated value of the Acreage shares that were expected to be acquired at that time. In the period up to the Deconsolidation Date, the relative share price movements resulted in a decrease in the value of the Acreage financial instrument; and
•Indiva Limited (“Indiva”) shares, in the amount of $2.8 million due to a decrease in the price per Indiva share as a result of Indiva's CCAA proceedings.
These fair value decreases were partially offset by a fair value increase related to our investment in:
•the TerrAscend Exchangeable Shares, in the amount of $17.3 million, which was primarily attributable to an increase of approximately 16% in TerrAscend’s share price up to April 30, 2024, being the date that Canopy Growth deconsolidated the financial results of Canopy USA (the “Deconsolidation Date”);
•the TerrAscend Warrants, in the amount of $7.9 million, which was primarily attributable to an increase of approximately 16% in TerrAscend’s share price up to the Deconsolidation Date; and
•the Option Premium, in the amount of $3.1 million related to closing of the Acreage Debt Acquisition and release of the amount that was previously held in escrow pursuant to the Option Agreement.
Comparatively, the fiscal 2024 expense amount is primarily attributable to fair value decreases relating to our investments in:
•The Wana financial instrument, in the amount of $83.2 million, primarily attributable to changes in expectations of future cash flows to be generated by Wana;
•The Jetty financial instrument, in the amount of $15.1 million, primarily attributable to changes in expectations of future cash flows to be generated by Jetty;
•The Acreage financial instrument, in the amount of $45.4 million. On a quarterly basis, we determine the fair value of the Acreage financial instrument using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement. The fair value decrease for fiscal 2024 is primarily attributable to a decrease of approximately 51% in our share price, relative to a decrease of approximately 49% in Acreage's share price during the same period. As a result, the model at March 31, 2024 reflects both a lower estimated value of the Canopy Growth common shares expected to be issued upon changes in U.S. federal law to permit the general cultivation, distribution, and possession of marijuana or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”), and a lower estimated value of the Acreage shares expected to be acquired at that time. In fiscal 2024, the relative share price movements resulted in a decrease in the value of the Acreage financial instrument.
•The Universal Hemp, LLC (“Acreage Hempco”) debenture, in the amount of $15.8 million, primarily attributable to changes in expectations of future cash flows to be received.
These fair value decreases were partially offset by a fair value increases related to our investments in:
•The TerrAscend Exchangeable Shares, in the amount of $26.9 million, primarily attributable to an increase of approximately 23% in TerrAscend’s share price during fiscal 2024; and
•The 22,474,130 TerrAscend Warrants, in the amount of $6.6 million, primarily attributable to an increase of approximately 23% in TerrAscend’s share price during fiscal 2024.
•Decrease in expense of $35.8 million related to non-cash fair value changes on our debt, from $35.8 million in fiscal 2024 to $nil in fiscal 2025. The year-over-year change is driven primarily by the fair value change of the CBI Note in fiscal 2024. In fiscal 2025 there are no debt balances recorded at fair value.
•Change of $47.8 million related to fair value changes on acquisition related contingent consideration and other, from an income of $12.3 million in fiscal 2024 to an expense of $35.5 million in fiscal 2025. The fair value change in fiscal 2025 relates primarily to various acquisition related contingent consideration. Comparatively, the fair value change in fiscal 2024 related primarily to the estimated deferred payments associated with our investment in Wana.
•Change of $34.4 million related to charges associated with the settlement of our debt, from an expense amount of $12.1 million in fiscal 2024 to an income amount of $22.3 million in fiscal 2025. For fiscal 2025, we recognized a gain of $22.3 million, primarily in connection with the exchange of the CBI Note. Comparatively, in fiscal 2024, we recognized a charge of $12.1 million, which is primarily due to the settlement of our unsecured senior notes and principal repayments on the Credit Facility.
•Decrease in interest income of $7.4 million, from $16.2 million in fiscal 2024 to $8.8 million in fiscal 2025. The year-over-year decrease is attributable to lower cash and cash equivalents and short-term investment balances.
•Decrease in interest expense of $30.8 million, from $105.4 million in fiscal 2024 to $74.6 million in fiscal 2025. The year-over-year decrease is primarily attributable to the reduction of our debt balances.
Income tax expense
Income tax expense in fiscal 2025 was $7.1 million, as compared to an income tax expense of $12.3 million in fiscal 2024. In fiscal 2025, the income tax expense consisted of a deferred income tax expense of $6.8 million (compared to an expense of $12.0 million in fiscal 2024) and current income tax expense of $0.3 million (compared to an expense of $0.3 million in fiscal 2024).
The decrease of $5.2 million in the deferred income tax expense is primarily a result of: (i) a decrease due to the settlements of the Canopy Notes in fiscal 2024 relative to the settlements of the CBI Notes in fiscal 2025; and (ii) an increase due to the realization of deferred taxes for entities that historically did not meet the deferred tax asset recognition criteria.
The current income tax expense remained consistent year over year and arose primarily in connection with tax on income for tax purposes that could not be reduced by the group’s tax attributes in the current taxation year.
Restructuring, Asset Impairments and Related Costs
Fiscal 2025
Total restructuring, asset impairments and related costs of $33.2 million were recognized in fiscal 2025. The fiscal 2025 expense amount is primarily attributable to the non-cash impairment of divestiture-related assets, employee restructuring costs and other costs associated with previous restructuring actions. This was partially offset by a gain related to the Lease Renegotiation and reversal of a previous restructuring charge.
A summary of the pre-tax charges recognized in fiscal 2025 in connection with our restructuring actions described above is as follows:
Year ended
March 31, 2025
Costs recorded in cost of goods sold:
Inventory write-downs and other charges
$
1,991
Costs recorded in operating expenses:
Impairment of property, plant and equipment, net
13,523
Contractual and other settlement obligations
(1,942
)
Employee-related, other asset impairment and other restructuring costs
19,652
Asset impairment and restructuring costs
31,233
Total restructuring, asset impairments and related costs
$
33,224
Fiscal 2024
Total restructuring, asset impairments and related costs of $65.0 million were recognized in fiscal 2024.
Restructuring and other charges totaling $(14.5) million were recognized in fiscal 2024 comprised of: (i) a gain on property, plant and equipment, (ii) reversal of inventory write-downs and other charges, (iii) reversal of contractual and other settlement costs, and (iv) employee-related costs and other restructuring costs. These charges relate to various incremental impairment losses and other costs associated with the restructuring of the Company's Canadian cannabis operations that were initiated in the three months ended
March 31, 2023, in addition to continued evaluation of the Company's overall operations throughout fiscal 2024. The gain on property, plant and equipment was primarily driven by a gain on the sale of the Company's production facility at 1 Hershey Drive in Smiths Falls, Ontario.
Impairment charges totaling $79.5 million were recognized in fiscal 2024, comprised of: (i) goodwill impairment losses of $42.1 million relating to the Storz & Bickel reporting unit, (ii) impairment charges of $9.0 million for the Storz & Bickel acquired brand intangible asset, (iii) impairment charges of $28.1 million relating to This Works divestiture including $7.9 million for the acquired brand and $20.2 million for the excess of carrying amount over the fair value less costs to sell of This Works, and (iv) other intangible asset impairment charges of $0.3 million.
A summary of the pre-tax charges recognized in fiscal 2024 in connection with our restructuring actions described above is as follows:
Year ended March 31, 2024
Restructuring and other charges
Other impairments
Total
Costs recorded in cost of goods sold:
Reversal of inventory write-downs and other charges
$
(986
)
$
-
$
(986
)
Costs recorded in operating expenses:
(Gain) impairment of property, plant and equipment, net
(40,578
)
-
(40,578
)
Impairment of intangible assets
-
17,266
17,266
Impairment of goodwill
-
42,081
42,081
Contractual and other settlement obligations
(2,129
)
-
(2,129
)
Employee-related and other restructuring costs
29,193
20,154
49,347
Asset impairment and restructuring costs
(13,514
)
79,501
65,987
Total restructuring, asset impairments and related costs
$
(14,500
)
$
79,501
$
65,001
Net Loss
The net loss from continuing operations in fiscal 2025 was $604.1 million, as compared to a net loss from continuing operations of $483.7 million in fiscal 2024. The year-over-year increase in the net loss from continuing operations is primarily attributable to the year-over-year increase in expense relating to other income (expense), net, of $237.3 million, which was primarily driven by increased fair value losses on Canopy USA related assets. The higher expense was partially offset by a decrease in operating loss resulting from lower operating expenses. These variances are described above.
Adjusted EBITDA (Non-GAAP Measure)
Our “Adjusted EBITDA” is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management calculates Adjusted EBITDA as the reported net income (loss), adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; restructuring costs recorded in cost of goods sold; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition, divestiture, and other costs. Asset impairments related to periodic changes to our supply chain processes are not excluded from Adjusted EBITDA given their occurrence through the normal course of core operational activities. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information as this measure demonstrates the operating performance of businesses.
The following table presents Adjusted EBITDA for the years ended March 31, 2025 and 2024:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Net loss from continuing operations
$
(604,138
)
$
(483,682
)
$
(120,456
)
(25
%)
Income tax expense
7,141
12,327
(5,186
)
(42
%)
Other (income) expense, net
479,854
242,641
237,213
%
Share-based compensation
(4,205
)
14,180
(18,385
)
(130
%)
Acquisition, divestiture, and other costs
21,502
37,435
(15,933
)
(43
%)
Depreciation and amortization
43,118
53,176
(10,058
)
(19
%)
Loss on asset impairment and restructuring
31,233
65,987
(34,754
)
(53
%)
Restructuring costs recorded in cost of goods sold
1,991
(986
)
2,977
%
Adjusted EBITDA
$
(23,504
)
$
(58,922
)
$
35,418
%
The Adjusted EBITDA loss in fiscal 2025 was $23.5 million, as compared to an Adjusted EBITDA loss of $58.9 million in fiscal 2024. The year-over-year decrease in the Adjusted EBITDA loss is primarily attributable to the year-over-year reduction in our total selling, general and administrative expense. These variances are described above.
Discussion of Fiscal 2024 Results of Operations
The following table presents selected consolidated financial information for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars, except share amounts and
where otherwise indicated)
$ Change
% Change
Selected consolidated financial information:
Net revenue
$
297,146
$
333,253
$
(36,107
)
(11
%)
Gross margin percentage
%
(19
%)
-
4,600 bps
Net loss from continuing operations
$
(483,682
)
$
(3,080,430
)
$
2,596,748
%
Net loss from continuing operations attributable to
Canopy Growth Corporation
$
(483,682
)
$
(3,078,533
)
$
2,594,851
%
Basic and diluted loss per share from
continuing operations1
$
(6.47
)
$
(66.39
)
$
59.92
%
1For the year ended March 31, 2024, the weighted average number of outstanding common shares, basic and diluted, totaled 74,787,521 (year ended March 31, 2023 - 46,372,441).
2 Share and per share amounts have been retrospectively adjusted to reflect the Company's share consolidation on the basis of one post-consolidation common share for every 10 pre-consolidation common shares, which became effective on December 15, 2023.
Net Revenue
The following table presents segmented net revenue for the years ended March 31, 2024 and 2023:
Net Revenue
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Canada cannabis
Canadian adult-use cannabis
Business-to-business1,3
$
92,803
$
97,343
$
(4,540
)
(5
%)
Business-to-consumer
-
36,243
(36,243
)
(100
%)
92,803
133,586
(40,783
)
(31
%)
Canadian medical cannabis net revenue2,4
66,362
61,859
4,503
%
$
159,165
$
195,445
$
(36,280
)
(19
%)
International markets cannabis5
$
41,312
$
38,949
$
2,363
%
Storz & Bickel
$
70,670
$
64,845
$
5,825
%
This Works
$
21,256
$
26,029
$
(4,773
)
(18
%)
Other1,2
4,743
7,985
(3,242
)
(41
%)
Net revenue
$
297,146
$
333,253
$
(36,107
)
(11
%)
1 A reclassification of $433 and $2,317 of ancillary cannabis revenues from Other to Canadian adult-use cannabis occurred for the year ended March 31, 2024 and March 31, 2023, respectively.
2 A reclassification of $5,016 and $6,061 of ancillary cannabis revenues from Other to Canadian medical cannabis occurred for the year ended March 31, 2024 and March 31, 2023, respectively.
3 Reflects excise taxes of $40,115 and other revenue adjustments, representing our determination of returns and pricing adjustments, of $3,514 for the year ended March 31, 2024 (year ended March 31, 2023 - excise taxes of $43,071 and other revenue adjustments of $3,503).
4 Reflects excise taxes of $6,673 for the year ended March 31, 2024 (year ended March 31, 2023 - $4,926).
5 Reflects other revenue adjustments of $645 for the year ended March 31, 2024 (year ended March 31, 2023 - $8,569).
Net revenue was $297.1 million in fiscal 2024, as compared to $333.3 million in fiscal 2023. The year-over-year decrease is primarily attributable to: (i) the divestiture of our retail business in Canada in the third quarter of fiscal 2023; (ii) the divestiture of This Works on December 18, 2023; and (iii) a decrease in the Canada business-to-business channel. These decreases were partially offset by: (i) growth in Canada medical; (ii) growth in Storz & Bickel; and (iii) international markets cannabis sales growth.
Canada cannabis
Net revenue from our Canada cannabis segment was $159.2 million in fiscal 2024, as compared to $195.4 million in fiscal 2023.
Canadian adult-use cannabis net revenue was $92.8 million in fiscal 2024, as compared to $133.6 million in fiscal 2023.
•Net revenue from the business-to-business channel was $92.8 million in fiscal 2024, as compared to $97.3 million in fiscal 2023. The year-over-year decrease is primarily attributable to lower sales volumes across our premium and value-priced categories which, for the value-priced category, is largely the result of a strategy shift. For the premium category, the decrease is primarily attributable to supply constraints resulting from shortages of in-demand flower. This decrease was partially offset by increased sales of our mainstream brands, primarily resulting from improved product attributes and new products introduced under the Tweed brand.
•Revenue from the business-to-consumer channel was $nil in fiscal 2024, as compared to $36.2 million in fiscal 2023. The year-over-year decrease is attributable to the divestiture of our retail business in Canada in the third quarter of fiscal 2023.
Canadian medical cannabis net revenue was $66.4 million in fiscal 2024, as compared to $61.9 million in fiscal 2023. The year-over-year increase is primarily attributable to an increase in the average size of medical orders placed by our customers due largely to an increase in the percentage of insured customers, and a larger assortment of cannabis product choices offered to our customers. These factors were partially offset by a year-over-year decrease in the total number of medical orders, which was primarily related to the increasing number of adult-use cannabis retail stores across Canada.
International markets cannabis
International markets cannabis revenue was $41.3 million in fiscal 2024, as compared to $38.9 million in fiscal 2023. The year-over-year increase is attributable to growth in our global medical cannabis business in Australia, Germany, Poland, and Czech Republic. This increase was partially offset by: (i) a decline in our U.S. CBD business resulting from the continuing impact of our strategy shift to re-focus and refine our portfolio of product and brand offerings; and (ii) bulk cannabis sales in fiscal 2023, predominantly to a customer in an exited international market, which did not recur in fiscal 2024.
Storz & Bickel
Revenue from Storz & Bickel was $70.7 million in fiscal 2024, as compared to $64.8 million in fiscal 2023. The year-over-year increase is primarily attributable to the launch of a new portable vaporizer in the third quarter of fiscal 2024, expansion of our distribution and retail channels in the United States, and favorable foreign currency translation.
This Works
Revenue from This Works was $21.3 million in fiscal 2024, as compared to $26.0 million in fiscal 2023. The year-over-year decrease is primarily attributable to the completion of the divestiture of This Works on December 18, 2023.
Cost of Goods Sold and Gross Margin
The following table presents cost of goods sold, gross margin and gross margin percentage on a consolidated basis for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars except where indicated)
$ Change
% Change
Net revenue
$
297,146
$
333,253
$
(36,107
)
(11
%)
Cost of goods sold
$
216,264
$
396,782
$
(180,518
)
(45
%)
Gross margin
80,882
(63,529
)
144,411
%
Gross margin percentage
%
(19
%)
-
4,600 bps
Cost of goods sold was $216.3 million in fiscal 2024, as compared to $396.8 million in fiscal 2023. Our gross margin was $80.9 million in fiscal 2024, or 27% of net revenue, as compared to gross margin of $(63.5) million and gross margin percentage of (19%) of net revenue in fiscal 2023. The year-over-year increase in the gross margin percentage was primarily attributable to:
•Improvement in our Canada cannabis segment, primarily attributable to: (i) the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023; (ii) a year-over-year decrease in write-downs of excess inventory; and (iii) opportunistic utilization of lower cost inputs.
•A year-over-year decrease in restructuring charges, from $81.8 million in fiscal 2023 to a reversal of $1.0 million in fiscal 2024. In fiscal 2023, restructuring charges related primarily to inventory write-downs resulting from: (i) the strategic changes to our business that were initiated in the fourth quarter of fiscal 2022, including the shift to a contract manufacturing model for certain product format; and (ii) amounts deemed excess based on current and projected demand; and
•Improvement in our international markets cannabis and This Works segments, primarily due to lower excess and obsolete inventory charges in fiscal 2024.
The following table presents segmented gross margin and gross margin percentage for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars except where indicated)
$ Change
% Change
Canada cannabis segment
Net revenue1
$
159,165
$
195,445
$
(36,280
)
(19
%)
Cost of goods sold2
133,525
288,339
(154,814
)
(54
%)
Gross margin
25,640
(92,894
)
118,534
%
Gross margin percentage
%
(48
%)
6,400 bps
International markets cannabis segment
Revenue
$
41,312
$
38,949
$
2,363
%
Cost of goods sold
24,630
42,271
(17,641
)
(42
%)
Gross margin
16,682
(3,322
)
20,004
%
Gross margin percentage
%
(9
%)
4,900 bps
Storz & Bickel segment
Revenue
$
70,670
$
64,845
$
5,825
%
Cost of goods sold
40,542
38,733
1,809
%
Gross margin
30,128
26,112
4,016
%
Gross margin percentage
%
%
300 bps
This Works segment
Revenue
$
21,256
$
26,029
$
(4,773
)
(18
%)
Cost of goods sold
10,722
15,824
(5,102
)
(32
%)
Gross margin
10,534
10,205
%
Gross margin percentage
%
%
1,100 bps
Other
Revenue1
$
4,743
$
7,985
$
(3,242
)
(41
%)
Cost of goods sold2
6,845
11,615
(4,770
)
(41
%)
Gross margin
(2,102
)
(3,630
)
1,528
%
Gross margin percentage
(44
%)
(45
%)
100 bps
1 A reclassification of $5,449 and $8,378 of ancillary cannabis revenues from Other to Canada cannabis occurred for the year ended March 31, 2024 and March 31, 2023, respectively.
2 A reclassification of $4,705 and $5,981 of ancillary cannabis cost of goods sold from Other to Canada cannabis occurred for the year ended March 31, 2024 and March 31, 2023, respectively.
Canada cannabis
Gross margin for our Canada cannabis segment was $25.6 million in fiscal 2024, or 16% of net revenue, as compared to $(92.9) million in fiscal 2023, or (48%) of net revenue. The year-over-year increase in the gross margin percentage was primarily attributable to: (i) the realized benefit of our cost savings program and strategic changes to our business that were initiated in the fourth quarter of fiscal 2023; (ii) year-over-year decrease in write-downs of excess inventory; and (iii) opportunistic utilization of lower cost inputs.
International markets cannabis
Gross margin for our international markets cannabis segment was $16.7 million in fiscal 2024, or 40% of net revenue, as compared to $(3.3) million in fiscal 2023, or (9%) of net revenue. The year-over-year increase in the gross margin percentage is primarily attributable to an improvement in our U.S. CBD business, due primarily to the year-over-year decrease in restructuring charges, as we recorded charges of $8.2 million in fiscal 2023 relating to inventory write-downs resulting from strategic changes to our business. Further supporting the improved gross margin was a shift in the business mix to increased sales in Australia, Poland and Czech Republic.
Storz & Bickel
Gross margin for our Storz & Bickel segment was $30.1 million in fiscal 2024, or 43% of net revenue, as compared to $26.1 million in fiscal 2023, or 40% of net revenue. The year-over-year increase in the gross margin percentage is primarily attributable to lower input costs and a positive shift in product and channel mix.
This Works
Gross margin for our This Works segment was $10.5 million in fiscal 2024, or 50% of net revenue, as compared to $10.2 million in fiscal 2023, or 39% of net revenue. The year-over-year increase in the gross margin percentage is primarily attributable to lower excess and obsolete inventory charges.
Operating Expenses
The following table presents operating expenses for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Operating expenses
General and administrative
$
90,265
$
135,313
$
(45,048
)
(33
%)
Sales and marketing
76,145
137,342
(61,197
)
(45
%)
Acquisition, divestiture, and other costs
34,767
35,584
(817
)
(2
%)
Depreciation and amortization
28,252
34,278
(6,026
)
(18
%)
Selling, general and administrative expenses
229,429
342,517
(113,088
)
(33
%)
Share-based compensation
14,180
25,322
(11,142
)
(44
%)
Loss on asset impairment and restructuring
65,987
2,199,146
(2,133,159
)
(97
%)
Total operating expenses
$
309,596
$
2,566,985
$
(2,257,389
)
(88
%)
Selling, general and administrative expenses
Selling, general and administrative expenses in fiscal 2024 were $229.4 million, as compared to $342.5 million in fiscal 2023.
General and administrative expense was $90.3 million in fiscal 2024, as compared to $135.3 million in fiscal 2023. The year-over-year decrease is due primarily to the restructuring actions initiated in the fourth quarter of fiscal 2023, which included operational changes designed to align general and administrative costs with business objectives, and further streamline the organization to drive process-related efficiencies. We realized reductions relative to fiscal 2023, primarily in relation to: (i) compensation costs for finance, information technology, legal and other administrative functions; (ii) a reduction in facilities and insurance costs; (iii) curtailment of research and development projects; and (iv) shift to outsourced contract model for certain research and development projects.
Sales and marketing expense was $76.1 million in fiscal 2024, as compared to $137.3 million in fiscal 2023. The year-over-year decrease is primarily attributable to: (i) the divestiture of our retail business in Canada in the third quarter of fiscal 2023; (ii) the divestiture of This Works on December 18, 2023; and (iii) cost reductions related to the previously-noted restructuring actions and cost savings programs, which resulted in a rationalization of our sales and marketing spending in certain areas of our business, particularly for our Canadian cannabis and U.S. CBD business, and a reduction in compensation costs.
Acquisition-related costs were $34.8 million in fiscal 2024, as compared to $35.6 million in fiscal 2023. In fiscal 2024, costs were incurred primarily in relation to:
•approximately $8.3 million of costs relating to the modification of the Credit Agreement that occurred in July 2023;
•approximately $10.7 million of legal and audit costs related to the restatement of our consolidated financial statements for the following previously filed periods: (i) audited consolidated financial statements for the fiscal year ended March 31, 2022, originally included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, and (ii) unaudited consolidated financial statements for the quarterly periods ended June 30, 2022, September 30, 2022 and December 31, 2022, originally included in the our Quarterly Reports on Form 10-Q for such quarterly periods, in connection with the correction of material misstatement arising from an internal review of financial reporting matters related to sales in the BioSteel business unit that were accounted for incorrectly, and the filing of our Annual Report on Form 10-K for the fiscal years ended March 31, 2023 and 2022 in June 2023;
•the Reorganization of Canopy USA, including the Reorganization Amendments and the Additional Reorganization Amendments; and
•evaluating other potential opportunities.
Depreciation and amortization expense was $28.3 million in fiscal 2024, as compared to $34.3 million in fiscal 2023. The year-over-year decrease is primarily attributable to:
•the previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business; and
•the divestiture of our retail business in Canada in the third quarter of fiscal 2023.
Share-based compensation
Share-based compensation was $14.2 million in fiscal 2024, as compared to $25.3 million in fiscal 2023. The year-over-year decrease is primarily attributable to the impact of our previously-noted restructuring actions, which resulted in forfeitures of stock options, restricted share units and performance units and results in lower relative expenses in future periods. While 2.4 million stock options were granted in the first quarter of fiscal 2024 and 1.5 million restricted share units were granted in the second quarter of fiscal 2024, the associated expense relating to both items partially offset the decrease noted.
Asset impairment and restructuring costs
Asset impairment and restructuring costs recorded in operating expenses were $66.0 million in fiscal 2024, as compared to $2.2 billion in fiscal 2023.
Loss on asset impairment and restructuring recorded in fiscal 2024 is primarily related to: (i) the Storz & Bickel goodwill and intangible asset impairment resulting from our annual impairment testing; (ii) the charges associated with the completion of the This Works divestiture; and (iii) incremental impairment losses and other costs associated with the restructuring of our Canadian cannabis operations that were initiated in the three months ended March 31, 2023. These charges were offset by a gain on the sale of our production facility at 1 Hershey Drive in Smiths Falls, Ontario. The gain is due to the sale proceeds exceeding the carrying value that was previously impaired at March 31, 2023. Comparatively, in fiscal 2023, these costs included charges of $456.9 million related to restructuring actions and charges of $1.7 billion related to other asset impairments.
Other
The following table presents other income (expense), net, and income tax (expense) recovery for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Other income (expense), net
(242,641
)
(455,644
)
213,003
%
Income tax (expense) recovery
(12,327
)
5,728
(18,055
)
(315
%)
Other income (expense), net
Other income (expense), net was an expense amount of $242.6 million in fiscal 2024, as compared to an income amount of $455.6 million in fiscal 2023. The year-over-year change of $213.0 million, decrease in expense, was primarily attributable to:
•Decrease in non-cash income of $26.9 million related to fair value changes on the warrant derivative liability associated with the warrants held by CBI to acquire 3,845,444 common shares at a price of $766.80 per common share (the “Tranche B Warrants”). The income of $nil in fiscal 2024 is due to the warrant derivative liability being written down to $nil value in fiscal 2023 and the Tranche B Warrants being considered expired as of November 1, 2023. Comparatively, the income of $26.9 million is primarily attributable to a decrease of approximately 75% in our share price during fiscal 2023, further impacted by a shorter expected time to maturity of the Tranche B Warrants.
•Decrease in non-cash income of $47.0 million related to fair value changes on the liability arising from the Acreage Acquisition, from income of $47.0 million in fiscal 2023 to $nil in fiscal 2024. The income amount recognized in fiscal 2023, associated with a decrease in the liability arising from the Acreage Acquisition to $nil during the first quarter of fiscal 2023, is primarily attributable to a decrease of approximately 61% in our share price during the first quarter of fiscal 2023, relative to a decrease of approximately 27% in Acreage’s share price during that same period. As a result, the model at June 30, 2022 reflected a lower estimated value of the Canopy Growth common shares expected to be issued at the exchange ratio of 0.03048 upon a Triggering Event, relative to the estimated value of the Fixed Shares expected to be acquired at that time; in the first quarter of fiscal 2023, this resulted in a change from a liability amount to an asset amount of $60.0 million in other financial assets. Fair value changes associated with the Acreage financial instrument asset is described below as part of the fair value changes on our Canopy USA related and other financial assets.
•Change of $7.3 million related to the non-cash fair value changes on our debt, from an expense amount of $43.1 million in fiscal 2023 to an expense amount of $35.8 million in fiscal 2024. The year-over-year change, is primarily attributable to the fair value changes on the unsecured non-interest bearing convertible debentures, offset by the fair value change of the unsecured senior notes prior to redemption in July 2023, compared to the fair value change of the unsecured senior notes in fiscal 2023.
•Increase of $12.7 million related to expenses associated with the settlement of our debt, from $0.6 million income in fiscal 2023 to $12.1 million expense in fiscal 2024. For fiscal 2024, we recognized charges of $12.1 million, primarily in connection with the conversion of the US$100 million aggregate principal amount of senior unsecured convertible debentures (the “Convertible Debentures”) (as described under Note 18 of the Financial Statements) into Canopy Growth common shares at a conversion price of 92.5% of the volume-weighted average price of our common shares during the three consecutive trading days ending on the business day immediately prior to the date of conversion and the Second Quarter 2024 Paydowns (as
defined below), Third Quarter 2024 Paydowns (as defined below), and Fourth Quarter 2024 Paydown (as defined below) which resulted in a principal reduction of $73,313 (US$54,491), $65,379 (US$48,532) and $31,078 (US$23,000), respectively, for a cash payment of $69,647 (US$51,766), $63,167 (US$46,902) and $27,970 (US$20,700), respectively, and included write-offs of the related deferred financing costs. These charges were partially offset by a gain recognized upon the second payment made on April 17, 2023 to reduce principal indebtedness under the Credit Facility, as we repaid $125.6 million (US$93.8 million) of the principal amount outstanding under the Credit Agreement at a discounted price of US$930 per US$1,000.
•Decrease in non-cash income of $26.6 million related to fair value changes on acquisition related contingent consideration and other, from $38.9 million in fiscal 2023 to $12.3 million in fiscal 2024. These fair value changes relate primarily to the estimated deferred payments associated with our investment in Wana, with the fair value changes in both periods primarily associated with changes in expectations of future cash flows to be generated by Wana.
•Decrease in interest expense of $20.8 million, from $126.2 million in fiscal 2023 to $105.4 million in fiscal 2024. The year-over-year decrease is primarily attributable to the paydown of our Credit Facility throughout fiscal 2024, offset by increases in interest rates in fiscal 2024 relative to fiscal 2023.
•Decrease in interest income of $8.1 million, from $24.3 million in fiscal 2023 to $16.2 million in fiscal 2024. The year-over-year decrease is primarily attributable to the year-over-year combined decrease in our cash and cash equivalents and short-term investments balances, partially offset by higher interest rates in fiscal 2024 relative to fiscal 2023.
•Decrease in non-cash expense of $299.3 million related to fair value changes on our Canopy USA and other financial assets, from $424.1 million in fiscal 2023 to $124.8 million in fiscal 2023. The fiscal 2024 expense amount is primarily attributable to fair value decreases relating to our investments in:
•The Wana financial instrument, in the amount of $83.2 million, primarily attributable to changes in expectations of future cash flows to be generated by Wana;
•The Jetty financial instrument, in the amount of $15.1 million, primarily attributable to changes in expectations of future cash flows to be generated by Jetty;
•The Acreage financial instrument, in the amount of $45.4 million. On a quarterly basis, we determine the fair value of the Acreage financial instrument using a probability-weighted expected return model, incorporating several potential scenarios and outcomes associated with the Acreage Amended Arrangement. The fair value decrease for fiscal 2024 is primarily attributable to a decrease of approximately 51% in our share price, relative to a decrease of approximately 49% in Acreage's share price during the same period. As a result, the model at March 31, 2024 reflects both a lower estimated value of the Canopy Growth common shares expected to be issued upon a Triggering Event, and a lower estimated value of the Acreage shares expected to be acquired at that time. In fiscal 2024, the relative share price movements resulted in a decrease in the value of the Acreage financial instrument.
•The Acreage Hempco debenture, in the amount of $15.8 million, primarily attributable to changes in expectations of future cash flows to be received.
These fair value decreases were partially offset by fair value increases primarily attributable to our investments in:
•The TerrAscend Exchangeable Shares, in the amount of $26.9 million, primarily attributable to an increase of approximately 23% in TerrAscend’s share price during fiscal 2024; and
•The TerrAscend Warrants, in the amount of $6.6 million, primarily attributable to an increase of approximately 23% in TerrAscend’s share price during fiscal 2024.
Comparatively, the expense amount in fiscal 2023 was primarily attributable to fair value decreases relating to our investments in: (i) the TerrAscend Exchangeable Shares ($186.5 million); (ii) the secured debentures issued by TerrAscend Canada Inc. and Arise Bioscience Inc. and associated 22,474,130 TerrAscend warrants, being all of the previously issued TerrAscend warrants controlled by the Canopy USA LPs that were cancelled and exchanged for the TerrAscend Warrants (totaling $58.7 million); (iii) the TerrAscend Warrants issued by TerrAscend ($7.0 million) and (iv) the option to purchase 1,072,450 TerrAscend Common Shares for an aggregate price of $1.00 ($4.7 million), which were all driven largely by a decrease of approximately 71% in TerrAscend’s share price in fiscal 2023. Additionally, the fair value of our investment in the Wana and Jetty financial instruments decreased $154.9 million and $19.9 million, respectively, due primarily to changes in expectations of the future cash flows to be generated by Wana and an increase in discount rates used in the valuation of both the Wana and Jetty financial instruments and the fair value of HSCP's amended tax receivable agreement decreased by $38.0 million, due primarily to changes in estimates. The fair value decreases were partially offset by a fair value increase related to the Acreage financial instrument in the amount of $55.4 million.
Income tax expense (recovery)
Income tax expense in fiscal 2024 was $12.3 million, as compared to an income tax recovery of $5.7 million in fiscal 2023. In fiscal 2024, the income tax expense consisted of deferred income tax expense of $12.0 million (compared to a recovery of $1.6 million in fiscal 2023) and current income tax expense of $0.3 million (compared to a recovery of $4.1 million in fiscal 2023).
The increase of $13.6 million in the deferred income tax expense is primarily a result of an increase due to the settlements of the Canopy Notes, net of recognition of losses for tax purposes, where the accounting criteria for recognition of an asset has been met.
The increase of $4.4 million in the current income tax expense arose primarily in connection with tax on income for tax purposes that could not be reduced by the group’s tax attributes in current taxation year, as compared to, legal entities that generated a loss for tax purposes during the prior taxation period, which loss was carried back to a prior taxation period to reduce that prior period’s income for tax purposes.
Restructuring, Asset Impairments and Related Costs
Fiscal 2024
Total restructuring, asset impairments and related costs of $65.0 million were recognized in fiscal 2024.
Restructuring and other charges totaling $(14.5) million were recognized in fiscal 2024 comprised of: (i) a gain on property, plant and equipment, (ii) reversal of inventory write-downs and other charges, (iii) reversal of contractual and other settlement costs, and (iv) employee-related costs and other restructuring costs. These charges relate to various incremental impairment losses and other costs associated with the restructuring of the Company's Canadian cannabis operations that were initiated in the three months ended March 31, 2023, in addition to continued evaluation of the Company's overall operations throughout fiscal 2024. The gain on property, plant and equipment was primarily driven by a gain on the sale of the Company's production facility at 1 Hershey Drive in Smiths Falls, Ontario.
Impairment charges totaling $79.5 million were recognized in fiscal 2024, comprised of: (i) goodwill impairment losses of $42.1 million relating to the Storz & Bickel reporting unit, (ii) impairment charges of $9.0 million for the Storz & Bickel acquired brand intangible asset, (iii) impairment charges of $28.1 million relating to This Works divestiture including $7.9 million for the acquired brand and $20.2 million for the excess of carrying amount over the fair value less costs to sell of This Works, and (iv) other intangible asset impairment charges of $0.3 million.
A summary of the pre-tax charges recognized in fiscal 2024 in connection with our restructuring actions described above is as follows:
Year ended March 31, 2024
Restructuring and other charges
Other impairments
Total
Costs recorded in cost of goods sold:
Reversal of inventory write-downs and other charges
$
(986
)
$
-
$
(986
)
Costs recorded in operating expenses:
(Gain) impairment of property, plant and equipment, net
(40,578
)
-
(40,578
)
Impairment of intangible assets
-
17,266
17,266
Impairment of goodwill
-
42,081
42,081
Contractual and other settlement obligations
(2,129
)
-
(2,129
)
Employee-related and other restructuring costs
29,193
20,154
49,347
Asset impairment and restructuring costs
(13,514
)
79,501
65,987
Total restructuring, asset impairments and related costs
$
(14,500
)
$
79,501
$
65,001
Fiscal 2023
Total restructuring, asset impairments and related costs of $2.3 billion were recognized in fiscal 2023, including property, plant and equipment and intangible asset impairment charges, inventory write-downs and other charges, contractual and other settlement costs, and employee-related costs and other restructuring costs totaling $538.7 million associated with:
•The restructuring actions initiated in the fourth quarter of fiscal 2023 in relation to our Canadian cannabis operations;
•Impairment losses associated with the divestiture of our Canadian retail operations in connection with the acquisition by (i) OEG Retail Cannabis, a prior Canopy Growth licensee partner, of 23 of the Company’s corporate-owned retail stores in Manitoba, Saskatchewan and Newfoundland and Labrador, as well as all Tokyo Smoke-related intellectual property and (ii) 420 Investments Ltd., a licensed cannabis retailer, of five of the Company’s corporate-owned retail stores in Alberta;
•Incremental costs primarily associated with the restructuring actions completed in fiscal 2022, including the closure of certain of our Canadian production facilities, and operational changes initiated in the fourth quarter of fiscal 2022 to: (i) implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business; and (ii) implement a flexible manufacturing platform, including contract manufacturing for certain product formats;
•Employee-related restructuring charges associated with actions completed in the third quarter of fiscal 2023 and fourth quarter of fiscal 2023 as part of our ongoing program to align general and administrative costs with business objectives, and further streamline the organization; and
•Inventory write-downs and associated restructuring charges of $81.8 million related primarily to: (i) the aforementioned strategic changes to our business that were initiated in the fourth quarter of fiscal 2023, including the closure of our production facility at 1 Hershey Drive in Smiths Falls, Ontario; and (ii) the strategic changes to our business initiated in fiscal 2022, including the shift to a contract manufacturing model for certain product formats and the closure of certain of our production facilities.
Impairment charges totaling $1.7 billion were recognized in fiscal 2023, comprised of: (i) goodwill impairment losses totaling $1.7 billion, including $1.7 billion associated with our cannabis operations reporting unit in the global cannabis segment in the first quarter of fiscal 2023, and impairment losses of $2.3 million recorded in the second quarter of fiscal 2023 in relation to our This Works reporting units (refer to “Impairment of Goodwill” in “Critical Accounting Policies and Estimates” section below; and (ii) impairment charges of $14.6 million relating to certain acquired brand intangible assets, primarily within our Canada cannabis segment.
A summary of the pre-tax charges recognized in fiscal 2023 in connection with our restructuring actions described above is as follows:
Year ended March 31, 2023
Restructuring and other charges
Other impairments
Total
Costs recorded in cost of goods sold:
Inventory write-downs and other charges
$
81,802
$
-
$
81,802
Costs recorded in operating expenses:
Impairment of property, plant and equipment
376,176
-
376,176
Impairment of intangible assets
27,399
14,614
42,013
Impairment of goodwill
-
1,727,679
1,727,679
Contractual and other settlement obligations
18,427
-
18,427
Employee-related and other restructuring costs
34,851
-
34,851
Asset impairment and restructuring costs
456,853
1,742,293
2,199,146
Total restructuring, asset impairments and related costs
$
538,655
$
1,742,293
$
2,280,948
Net Loss
The net loss from continuing operations in fiscal 2024 was $483.7 million, as compared to a net loss from continuing operations of $3.1 billion in fiscal 2023. The year-over-year decrease in the net loss from continuing operations is primarily attributable to: (i) the year-over-year decrease in asset impairment and restructuring costs, which was largely related to the goodwill impairment losses of $1.7 billion recorded in the first quarter of fiscal 2023; and (ii) the year-over-year decrease in expense relating to other income (expense), net, of $213.0 million. These variances are described above.
Adjusted EBITDA (Non-GAAP Measure)
The following table presents Adjusted EBITDA for the years ended March 31, 2024 and 2023:
Years ended March 31,
(in thousands of Canadian dollars)
$ Change
% Change
Net loss from continuing operations
$
(483,682
)
$
(3,080,430
)
$
2,596,748
%
Income tax expense (recovery)
12,327
(5,728
)
18,055
%
Other (income) expense, net
242,641
455,644
(213,003
)
(47
%)
Share-based compensation
14,180
25,322
(11,142
)
(44
%)
Acquisition, divestiture, and other costs
37,435
35,584
1,851
%
Depreciation and amortization1
53,176
80,033
(26,857
)
(34
%)
Loss on asset impairment and restructuring
65,987
2,199,146
(2,133,159
)
(97
%)
Restructuring costs recorded in cost of goods sold
(986
)
81,802
(82,788
)
(101
%)
Adjusted EBITDA
$
(58,922
)
$
(208,627
)
$
149,705
%
The Adjusted EBITDA loss in fiscal 2024 was $58.9 million, as compared to an Adjusted EBITDA loss of $208.6 million in fiscal 2023. The year-over-year decrease in the Adjusted EBITDA loss is primarily attributable to the year-over-year improvement in our gross margin, and the year-over-year reduction in our total selling, general and administrative expense. These variances are described above.
Part 3 - Financial Liquidity and Capital Resources
The Financial Statements have been prepared in accordance with generally accepted accounting principles on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
In our consolidated financial statements for the fiscal year ended March 31, 2023, we raised substantial doubt about our ability to continue as a going concern for at least twelve months from the issuance of those consolidated financial statements, due to certain material debt obligations coming due in the short-term, recurring losses from operations and additional required financing to fund our business and operations.
As of the date of the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “2024 Annual Report”), we were able to successfully mitigate the substantial doubt by completing several balance sheet actions, as described in the 2024 Annual Report. During the fiscal year ended March 31, 2025, we experienced recurring losses from operations and required additional capital to fund our operations, which raised substantial doubt about our ability to continue as a going concern. However, we also completed additional actions during the fiscal year ended March 31, 2025, which included: (i) establishing our ATM Programs, pursuant to which an aggregate of 71,044,862 common shares of the Company were issued and sold for gross proceeds of $347.1 million (US$250 million) under the June 2024 ATM Program and an aggregate of 23,169,358 common shares of the Company were issued and sold for gross proceeds of $38.3 million (US$26.7 million) under the February 2025 ATM Program; (ii) entering into the Second ARCA as well as making a mandatory US$100.0 million prepayment of the Credit Facility and the Optional Prepayment in connection therewith, which significantly reduced our short-term debt obligation and extended the maturity date of the Credit Facility; (iii) receiving additional proceeds from the liquidation and sale of assets of BioSteel Canada; and (iv) completing the Lease Renegotiation, which is expected to reduce our potential lease payment obligation. We continue to evaluate different strategies and may pursue additional actions that are expected to further increase our liquidity position, including, but not limited to, pursuing additional actions to find cost-savings and seeking additional financing from both the public and private markets through the issuance of equity and/or debt securities.
We have access to further liquidity through public offerings of equity and debt securities. To facilitate such offerings, in June 2024, we filed (a) a shelf registration statement with the SEC (as amended, the “Shelf Registration Statement”); and (b) a short form base shelf prospectus dated June 5, 2024 that is effective for a 25 month period (the “Canadian Shelf Prospectus”). Pursuant to the Shelf Registration Statement we may sell securities up to an aggregate total offering price of US$500 million. Pursuant to the Canadian Shelf Prospectus we may sell securities up to an aggregate total offering price of US$500 million (or the equivalent thereof in other currencies). The securities covered by the Shelf Registration Statement and the Canadian Shelf Prospectus include: (i) common shares; (ii) exchangeable shares; (iii) debt securities; (iv) subscription receipts; (v) warrants; and (vi) units consisting of one or more of such securities or any combination of these securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
We may also access liquidity through the February 2025 ATM Program, pursuant to which we may sell, from time to time, up to US$172.1 million of additional common shares of the Company as of the date hereof. Refer to Notes 21 and 36 to the Financial Statements.
As a result of our plans above and our financial results at March 31, 2025, we conclude that the substantial doubt about our ability to continue as a going concern has been alleviated.
As of March 31, 2025, we had cash and cash equivalents of $113.8 million and short-term investments of $17.7 million.
We have recently completed the following debt and equity financings:
•On April 18, 2024, we entered into the April 2024 Exchange Agreement with Greenstar, pursuant to which Greenstar completed the Note Exchange, calculated based on a price per Exchangeable Share equal to $8.91. Pursuant to the terms of the April 2024 Exchange Agreement, all accrued but unpaid interest on the CBI Note together with the remaining principal amount of the CBI Note was cancelled and forgiven for no additional consideration by Greenstar. Following the closing of the Note Exchange, there is no outstanding balance owing under the CBI Note and the CBI Note has been cancelled.
•On May 2, 2024, we entered into an exchange and subscription agreement (the “Exchange and Subscription Agreement”) with a single institutional investor (the “May 2024 Investor”) pursuant to which, among other things, the May 2024 Investor delivered to us approximately $27.5 million aggregate principal amount of outstanding Supreme Debentures and Accretion Debentures (as defined below) held by the May 2024 Investor and paid us approximately $68.3 million (US$50.0 million) in exchange for us issuing to the May 2024 Investor (i) a new senior unsecured convertible debenture of the Company (the “May 2024 Convertible Debenture”) with an aggregate principal amount of approximately $96.4 million maturing five years from the closing date (the “Closing Date”) of the transaction (the “Transaction”) and (ii) 3,350,430 common share purchase warrants
(the “May 2024 Investor Warrants”). Each May 2024 Investor Warrant entitles the holder to acquire one Canopy Share at an exercise price equal to $16.18 per Canopy Share for a period of five years from the Closing Date. The May 2024 Convertible Debenture bears interest at a rate of 7.50% per annum, payable in semi-annual payments in cash or, at our option, in Canopy Shares for the first four semi-annual interest payments after the Closing Date, subject to satisfaction of certain conditions, including the prior approval of the TSX.
The May 2024 Convertible Debenture is convertible into Canopy Shares at the option of the May 2024 Investor at a conversion price equal to $14.38 per share. The May 2024 Convertible Debenture is subject to a forced conversion feature upon notice from us in the event that the average closing trading price of the Canopy Shares on the TSX exceeds $21.57 for a period of 10 consecutive trading days. In addition, pursuant to the terms of the May 2024 Convertible Debenture, for so long as the principal amount under the May 2024 Convertible Debenture remains outstanding (the “Debenture ROFR Term”), we granted the May 2024 Investor a right of first refusal to subscribe for, and to be issued, as an investor in any debt or equity financing that we wish to complete during the Debenture ROFR Term (the “Proposed Financing”); provided, however, that the May 2024 Investor shall subscribe for 25% of the Proposed Financing on the same terms and conditions contemplated in the Proposed Financing.
•On June 6, 2024, we established the June 2024 ATM Program that allowed us to issue and sell up to US$250 million of common shares of the Company to the public from time to time at the Company’s discretion. As of March 31, 2025, the June 2024 ATM Program has been completed and a total of 71,044,862 common shares have been sold at an average price of $4.89 per common share, for gross proceeds of $347.1 million (US$250 million) and net proceeds, inclusive of commissions and fees, of $341.8 million. Since the establishment of the June 2024 ATM Program, we have paid an aggregate amount of $5.2 million as compensation to the Agents involved in the sale of our common shares under the June 2024 ATM Program.
•On August 20, 2024, we entered into the August 2024 Supreme Convertible Debt Exchange with the August 2024 Investor pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $2.7 million of aggregate principal amount of outstanding Supreme Debentures held by the August 2024 Investor in exchange for 291,351 common shares of the Company and $0.03 million in cash for accrued interest.
•On February 28, 2025, we established the February 2025 ATM Program that allows us to issue and sell up to US$200 million of common shares of the Company to the public from time to time at the Company's discretion. As of March 31, 2025, we sold an aggregate of 23,169,358 common shares at an average price of $1.65 per common share, for gross proceeds of $38.3 million and net proceeds, inclusive of commissions and fees, of $37.9 million. Since the establishment of the February 2025 ATM Program, we have paid an aggregate amount of $0.4 million as compensation to the agents involved in the sale of our common shares under the February 2025 ATM Program. As of May 28, 2025, we can issue and sell up to US$172.1 million of our common shares under the February 2025 ATM Program.
In addition to the above, we continue to review and pursue selected external financing sources to ensure adequate financial resources. These potential sources include, but are not limited to: (i) obtaining financing from traditional or non-traditional investment capital organizations; (ii) obtaining funding from the sale of our common shares or other equity or debt instruments; and (iii) obtaining debt financing with lending terms that more closely match our business model and capital needs. We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, and open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Cash Flows
The table below presents cash flows for the years ended March 31, 2025, 2024, 2023:
Years ended March 31,
(in thousands of Canadian dollars)
Net cash (used in) provided by:
Operating activities1
$
(165,750
)
$
(281,950
)
$
(557,546
)
Investing activities2
(47,788
)
241,590
433,379
Financing activities
148,660
(465,055
)
(19,694
)
Effect of exchange rate changes on cash and cash equivalents
8,389
(1,292
)
44,863
Net decrease in cash and cash equivalents
(56,489
)
(506,707
)
(98,998
)
Cash and cash equivalents, beginning of period3
170,300
677,007
776,005
Cash and cash equivalents, end of period4
$
113,811
$
170,300
$
677,007
1 Includes net cash used in operating activities from discontinued operations of $nil, $(53,529) and $(163,123) for the years ended March 31, 2025, 2024 and 2023, respectively.
2 Includes net cash provided by (used in) investing activities from discontinued operations of $14,127, $21,992 and $(24,050) for the years ended March 31, 2025, 2024 and 2023, respectively.
3 Includes cash of our discontinued operations of $nil, $9,314, and $13,610 for March 31, 2024, 2023 and 2022, respectively.
4 Includes cash of our discontinued operations of $nil, $nil and $9,314 for March 31, 2025, 2024, and 2023, respectively.
Operating activities
Cash used in operating activities totaled $165.8 million in fiscal 2025, as compared to cash used of $282.0 million in fiscal 2024. The decrease in the cash used in operating activities is primarily due to: (i) the year-over-year decrease in our operating losses, resulting from our previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business; and (ii) a reduction in the cash interest paid resulting from a reduction in our debt balances.
Cash used in operating activities totaled $282.0 million in fiscal 2024, as compared to cash used of $557.5 million in fiscal 2023. The decrease in the cash used in operating activities is primarily due to: (i) the year-over-year decrease in our working capital spending, resulting from our previously-noted restructuring actions and cost savings programs, including the closure of certain of our Canadian facilities and other operational changes to implement cultivation-related efficiencies and improvements in the Canadian adult-use cannabis business; and (ii) a reduction in the cash interest paid resulting from a reduction in our debt balances.
Investing activities
The cash used in investing activities totaled $47.8 million in fiscal 2025. Purchases of property, plant and equipment were $10.8 million, primarily related to building improvements and production equipment enhancements made at certain of our Canadian cultivation and production facilities. Our strategic investments in other financial assets were $95.3 million and related primarily to the cash payment to acquire the outstanding principal, including all accrued and unpaid interest thereon, of Acreage's debt, being an amount up to US$150.0 million (the “Acreage Debt”). Additional cash outflows include $7.0 million relating to the deconsolidation of the financial results of Canopy USA within the Company's financial statements, refer to Note 5 in the Company's accompanying financial statements for details. Net redemptions of short-term investments were $16.4 million, and were made largely to fund operations and investing activities as described above. Proceeds of $4.9 million from the sale of property, plant and equipment primarily in relation to previous restructuring actions. Net cash inflow on loan receivable of $30.3 million, primarily related to cash receipts from various loan repayments.
The cash provided by investing activities totaled $241.6 million in fiscal 2024. Purchases of property, plant and equipment were $3.4 million, primarily related to production equipment enhancements made at certain of our Canadian cultivation and production facilities, and at our Storz & Bickel facilities. Our strategic investments in other financial assets were $0.3 million, and related primarily to our $2.2 million investment in Indiva Inc. Net redemptions of short-term investments were $78.5 million, and were made largely to fund operations and investing activities as described above. Proceeds of $154.1 million from the sale of property, plant and equipment primarily related to facilities sold in connection with the restructuring actions associated with our Canadian cannabis operations and transition to an asset-light model. Additional cash outflows include $1.0 million from the sale of certain wholly-owned subsidiaries, and other investing activities of $7.7 million, primarily related to completing the purchase of the remaining 45% of the common shares of Les Serres Vert Cannabis Inc., in connection with the restructuring actions related to our Canadian cannabis operations initiated in the fourth quarter of fiscal 2023.
The cash provided by investing activities totaled $433.4 million in fiscal 2023. Purchases of property, plant and equipment were $9.1 million, primarily related to improvements made at certain of our Canadian cultivation and production facilities, and at our Storz & Bickel facilities. Our strategic investments in other financial assets were $67.2 million, and related primarily to: (i) the upfront payment made as consideration for entering the option agreements granting the Jetty Options (the “Jetty Agreements”) ($29.2 million); and (ii) the payment of the Option Premium in the amount of $38.0 million (US$28.5 million) to acquire an option to purchase the Acreage Debt from the Lenders, pursuant to the option agreement entered into with the Lenders in connection with the Reorganization. Net redemptions of short-term investments were $502.6 million, and related to the redemption of short-term investments largely to fund operations and investing activities as described above. Additional cash inflows include proceeds of $14.9 million from the sale of certain wholly-owned subsidiaries, and proceeds of $13.6 million from the sale of property, plant and equipment. Finally, other investing activities resulted in a cash inflow of $3.9 million, primarily related to the partial repayment of the principal on a loan associated with the sale of a wholly-owned subsidiary in fiscal 2022, partially offset by the cash outflow associated with the redemption of the first tranche of the BioSteel redeemable noncontrolling interest. Included in the cash provided by investing activities for fiscal 2023 was cash used of $24.1 million relating to the BioSteel discontinued operations and is primarily driven by the acquisition of a manufacturing facility located in Verona, Virginia from Flow Beverage Corp. The acquisition was completed through BioSteel on November 8, 2022.
Financing activities
The cash provided by financing activities totaled $148.7 million in fiscal 2025. Proceeds from the issuance of common shares were $385.4 million and related to the sale of common shares as part of the ATM Programs and $8.5 million in gross proceeds were received from the exercise of warrants, these amounts were offset by share issuance costs of $10.2 million. In addition, $68.3 million was received relating to the Exchange and Subscription Agreement, offset by long-term debt repayments of $289.0 million which related primarily to the First Quarter 2025 Paydowns, Second Quarter 2025 Paydown, Third Quarter 2025 Paydown, and the Optional Prepayment. Other financing activities resulted in a cash outflow of $24.5 million, which related primarily to: (i) finance lease payments and (ii) share issuance costs, as noted above.
The cash used in financing activities totaled $465.1 million in fiscal 2024, as we made repayments of long-term debt in the amount of $509.8 million related primarily to the various paydowns on the Credit Facility throughout the year. Other financing activities resulted in a cash outflow of $36.3 million, primarily relating to finance lease payments made in connection with terminating the finance lease for the cultivation facility in Mirabel, Quebec, share issuance costs, and debt issuance and extinguishment costs. The cash outflows are offset by proceeds from issuances of common shares and warrants of $81.1 million in September 2023 and January 2024.
The cash used in financing activities totaled $19.7 million in fiscal 2023, as we made repayments of long-term debt in the amount of $118.2 million related primarily to the first paydown of the Credit Facility. We received net proceeds of $135.2 million (US$100.0 million) pursuant to the purchase, by an institutional investor, of Convertible Debentures in February 2023. Also, other financing activities resulted in a cash outflow of $38.0 million, primarily related to fees paid in connection with the Exchange Transaction, the first paydown of the Credit Facility, and the registered direct offering of Convertible Debentures.
Free Cash Flow (Non-GAAP Measure)
Free cash flow is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management believes that free cash flow presents meaningful information regarding the amount of cash flow required to maintain and organically expand our business, and that the free cash flow measure provides meaningful information regarding our liquidity requirements.
The table below presents free cash flows for the years ended March 31, 2025, 2024, 2023:
Years ended March 31,
(in thousands of Canadian dollars)
Net cash used in operating activities - continuing
operations
$
(165,750
)
$
(228,421
)
$
(394,423
)
Purchases of and deposits on property, plant
and equipment - continuing operations
(10,813
)
(3,449
)
(9,114
)
Free cash flow1 - continuing operations
$
(176,563
)
$
(231,870
)
$
(403,537
)
1Free cash flow is a non-GAAP measure, and is calculated as net cash provided by (used in) operating activities, less purchases of and deposits on property, plant and equipment.
Free cash flow in fiscal 2025 was an outflow of $176.6 million, as compared to an outflow of $231.9 million in fiscal 2024. The year-over-year decrease in the free cash outflow primarily reflects the decrease in cash used in operating activities, as described above.
Free cash flow in fiscal 2024 was an outflow of $231.9 million, as compared to an outflow of $403.5 million in fiscal 2023. The year-over-year decrease in the free cash outflow primarily reflects the decrease in cash used in operating activities, as described above.
Debt
Since our formation, we have financed our cash requirements primarily through the issuance of common shares of Canopy Growth, including the $5.1 billion investment by CBI in the third quarter of fiscal 2019, and debt. Total debt outstanding as of March 31, 2025 was $304.1 million, as compared to $597.2 million as of March 31, 2024. The total principal amount owing, which excludes fair value adjustments, deferred debt costs, and interest payable, was $315.5 million at March 31, 2025, a decrease from $622.0 million at March 31, 2024. These decreases were due to: (i) the April 2024 Exchange Agreement, which resulted in the settlement of all amounts owing under the CBI Note; (ii) the First Quarter 2025 Paydowns resulting in an aggregate principal reduction of $11.2 million; (iii) the Second Quarter 2025 Paydown resulting in an aggregate principal reduction of $1.1 million; (iv) the Third Quarter 2025 Paydown resulting in an aggregate principal reduction of $137.7 million; (v) the August 2024 Supreme Convertible Debt Exchange (as defined below); and (v) the Optional Prepayment resulting in an aggregate principal reduction of $143.9 million and offset by the Exchange and Subscription Agreement where a cash payment of approximately US$50 million was received and approximately $27.5 million of aggregate principal amount outstanding Supreme Debentures and Accretion Debentures were settled in exchange for a new senior unsecured convertible debenture with an aggregate principal amount of $96.4 million.
Credit Facility
On March 18, 2021, the Company entered into the Credit Agreement providing for the Credit Facility in the aggregate principal amount of US$750.0 million.
The Company had the ability to obtain up to an additional US$500.0 million of incremental senior secured debt pursuant to the Credit Agreement. Pursuant to the balance sheet actions completed in connection with the Reorganization, on October 24, 2022, we entered into agreements with certain of our lenders under the Credit Agreement pursuant to which we agreed to purchase in the aggregate US$187.5 million of the principal amount outstanding under the Credit Facility at a discounted price of US$930 per US$1,000 or US$174.4 million in the aggregate. The first payment, which was oversubscribed, in the amount of approximately $117.5 million (US$87.9 million) was made on November 10, 2022 to reduce the principal indebtedness under the Credit Facility by approximately $126.3 million (US$94.4 million). The second payment of approximately $116.8 million (US$87.2 million) was made
on April 17, 2023 to reduce principal indebtedness under the Credit Facility by approximately $125.6 million (US$93.8 million). Additionally, on October 24, 2022, we and certain of our lenders agreed to make certain amendments to the Credit Agreement which, among other things, resulted in: (i) a reduction to the minimum liquidity covenant to no less than US$100.0 million following completion of the second principal repurchase on April 17, 2023; (ii) certain changes to the application of net proceeds from asset sales; (iii) the establishment of a new committed delayed draw term credit facility in an aggregate principal amount of US$100.0 million; and (iv) the elimination of the additional US$500.0 million incremental term loan facility.
On July 13, 2023, we entered into an amended Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement required the Company to prepay or repurchase principal indebtedness under the Credit Facility in an amount equal to the U.S. dollar equivalent of $93,000 at a discounted price of US$930 per US$1,000 (the “July 2023 Paydown”). In addition, pursuant to the Amended Credit Agreement we agreed to apply certain net proceeds from asset sales to prepay or repurchase principal indebtedness under the Credit Facility and receive principal reductions at, in certain circumstances, a discounted price of US$950 per US$1,000. The Amended Credit Agreement also includes, among other things, amendments to the minimum liquidity covenant such that the US$100.0 million minimum ceased to apply concurrently with the July 2023 Paydown. The July 2023 Paydown was made on July 21, 2023.
On each of August 11, 2023 and September 14, 2023, pursuant to the terms of the Amended Credit Agreement, we repurchased additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the “Second Quarter 2024 Paydowns”). The Second Quarter 2024 Paydowns resulted in an aggregate principal reduction of $73.3 million (US$54.5 million) for a cash payment of $69.6 million (US$51.8 million).
On each of November 28, 2023 and December 27, 2023, pursuant to the terms of the Amended Credit Agreement, we repurchased and repaid, as applicable, additional outstanding principal amounts under the Credit Facility using certain net proceeds from completed asset sales (the “Third Quarter 2024 Paydowns”). The Third Quarter 2024 Paydowns resulted in an aggregate principal reduction of $65.4 million (US$48.5 million) for a cash payment of $63.2 million (US$46.9 million).
On February 21, 2024, we repurchased and repaid, as applicable, additional outstanding principal amounts under the Credit Facility (the “Fourth Quarter 2024 Paydown”). The Fourth Quarter 2024 Paydown resulted in an aggregate principal reduction of $31.1 million (US$23.0 million) for a cash payment of $28.0 million (US$20.7 million).
On April 29, 2024 and June 28, 2024, we made the First Quarter 2025 Paydowns. The First Quarter 2025 Paydowns resulted in an aggregate principal reduction of $11.2 million (US$8.2 million) for a cash payment of $11.2 million (US$8.2 million).
On August 8, 2024, we entered into an amendment (the “Amending Agreement”) with all of the lenders to the Credit Facility under the Amended Credit Agreement. Pursuant to the terms of the Amending Agreement, the maturity date of the Credit Facility was extended to December 18, 2026 and a mandatory US$97.5 million prepayment of the Credit Facility at 97.5% of par thereby reducing the outstanding amount of the Credit Facility by US$100 million was required to be made by December 31, 2024. In addition, the Amending Agreement provided for a further extension to the maturity date of the Credit Facility to September 18, 2027 if the Optional Prepayment was made on or before March 31, 2025. The Amending Agreement also includes changes to certain negative covenants, repayment provisions in the event of divestitures and events of default.
Through August 8, 2024, the Credit Facility matured on March 18, 2026 and through December 26, 2023, had an interest rate of LIBOR + 8.50%. After August 8, 2024, the Credit Facility matured on December 18, 2026, and after December 26, 2023, interest on amounts outstanding under the Credit Facility is calculated at either the applicable prime rate plus 7.50% per annum, subject to a prime rate floor of 2.00%, or adjusted term SOFR plus 8.50% per annum, subject to an adjusted term SOFR floor of 1.00%. Our obligations under the Credit Facility are guaranteed by our material wholly-owned Canadian and U.S. subsidiaries. The Credit Facility is secured by substantially all of our assets and our material wholly-owned Canadian and U.S. subsidiaries, including material real property. The Amended Credit Agreement contains representations and warranties, and affirmative and negative covenants.
On September 27, 2024, we made the Second Quarter 2025 Paydown. The Second Quarter 2025 Paydown resulted in an aggregate principal reduction of $1.1 million (US$0.9 million) for a cash payment of $1.1 million (US$0.9 million).
On October 16, 2024, we made the Third Quarter 2025 Paydown. The Third Quarter 2025 Paydown resulted in an aggregate principal reduction of $137.7 million (US$100.0 million) for a cash payment of $134.3 million (US$97.5 million).
On March 31, 2025, we made the Optional Prepayment and, as a result, the maturity date under the Credit Agreement was extended to September 18, 2027. The Optional Prepayment resulted in an aggregate principal reduction of $143.9 million (US$100.0 million) for a cash payment of $140.3 million (US$97.5 million).
Unsecured Senior Notes (the "Canopy Notes")
In June 2018, we issued the Canopy Notes with an aggregate principal amount of $600.0 million. The Canopy Notes bore interest at a rate of 4.25% per annum, payable semi-annually on January 15th and July 15th of each year commencing January 15, 2019. The Canopy Notes matured on July 15, 2023. In June 2022, in connection with the 2022 Exchange Transaction, we entered into the 2022 Exchange Agreements with the Noteholders and agreed to acquire and cancel approximately $262.6 million of aggregate
principal amount of the Canopy Notes from the Noteholders for an aggregate purchase price (excluding $5.4 million paid in cash to the Noteholders for accrued and unpaid interest) of $260.0 million which was paid in our common shares.
The Canopy Notes were issued pursuant to an indenture dated June 20, 2018, as supplemented on April 30, 2019 and June 29, 2022 (collectively, the “Canopy Notes Indenture”). As a result of a supplement to the Canopy Notes Indenture dated June 29, 2022 (the “Second Supplemental Indenture”), we irrevocably surrendered our right to settle the conversion of any Note with our common shares. As a result, had there been any conversions of Canopy Notes following the execution of the Second Supplemental Indenture these would have been settled entirely in cash, unless otherwise negotiated.
On April 13, 2023, we entered into the April 2023 Exchange Agreement with Greenstar in order to acquire and cancel $100.0 million aggregate principal amount of our outstanding Canopy Notes. Pursuant to the April 2023 Exchange Agreement, we agreed to acquire and cancel $100.0 million aggregate principal amount of the Canopy Notes held by Greenstar in exchange for: (i) a cash payment to Greenstar in the amount of the unpaid and accrued interest owing under the Canopy Notes held by Greenstar; and (ii) the CBI Note. As a result, Greenstar no longer holds any Canopy Notes. On April 18, 2024, the CBI Note was cancelled in connection with the Note Exchange.
On June 29, 2023, we entered into the June 2023 Exchange Agreements with certain Noteholders to acquire and cancel $12.5 million aggregate principal amount of the Canopy Notes from such Noteholders in exchange for cash, including accrued and unpaid interest owing under the Canopy Notes, and the issuance of approximately 2.43 million Canopy Growth common shares.
On July 13, 2023, we entered into the Redemption Agreements with certain Noteholders of our Canopy Notes, pursuant to which approximately $193 million aggregate principal amount of the Canopy Notes were redeemed on the applicable closing date for: (i) an aggregate cash payment of approximately $101 million; (ii) the issuance of approximately 9.04 million Canopy Growth common shares; and (iii) the issuance of approximately $40.4 million aggregate principal amount of Debentures. The Debentures were issued pursuant to a debenture indenture dated July 14, 2023 between us and Odyssey Trust Company, as trustee. The Debentures are convertible into Debenture Shares at the option of the holder at any time or times following the Shareholder Approval until the maturity date of January 15, 2024, at a conversion price equal to $5.50, subject to adjustment in certain events. Following the Redemption, we settled the remaining aggregate principal amount owing under the outstanding Canopy Notes and, as of the maturity date, there were no Canopy Notes outstanding.
As of September 30, 2023, all conversions pursuant to the Debentures have been completed and the amount outstanding under the Debentures was $nil.
Supreme Convertible Debentures and Accretion Debentures
On October 19, 2018, The Supreme Cannabis Company, Inc. (“Supreme Cannabis”) issued 6.0% senior unsecured convertible debentures (the “Supreme Debentures”) for gross proceeds of $100.0 million. On September 9, 2020, the Supreme Debentures were amended to effect, among other things: (i) the cancellation of $63.5 million of principal amount of the Supreme Debentures; (ii) an increase in the interest rate to 8% per annum; (iii) the extension of the maturity date to September 10, 2025; and (iv) a reduction in the conversion price to $2.85.
In addition, on September 9, 2020, Supreme Cannabis issued new senior unsecured non-convertible debentures (the “Accretion Debentures”). The principal amount began at $nil and accretes at a rate of 11.06% per annum based on the remaining principal amount of the Supreme Debentures of $36.5 million to a maximum of $13.5 million, compounding on a semi-annual basis commencing on September 9, 2020, and ending on September 9, 2023. As of September 9, 2023, the principal amount of the Accretion Debentures was finalized as $10.4 million. The Accretion Debentures are payable in cash, but do not bear cash interest and are not convertible into Supreme Shares (as defined below). The principal amount of the Accretion Debentures will amortize, or be paid, at 1.0% per month over the 24 months prior to maturity.
As a result of the arrangement (the “Supreme Arrangement”) we completed with Supreme Cannabis on June 22, 2021 pursuant to which we acquired 100% of the issued and outstanding common shares of Supreme Cannabis (the “Supreme Shares”), the Supreme Debentures remain outstanding as securities of Supreme Cannabis, which, upon conversion will entitle the holder thereof to receive, in lieu of the number of Supreme Shares to which such holder was theretofore entitled, the consideration payable under the Supreme Arrangement that such holder would have been entitled to be issued and receive if, immediately prior to the effective time of the Supreme Arrangement, such holder had been the registered holder of the number of Supreme Shares to which such holder was theretofore entitled.
In connection with the Supreme Arrangement, we, Supreme Cannabis and Computershare Trust Company of Canada (the “Trustee”) entered into a supplemental indenture whereby we agreed to issue common shares upon conversion of any Supreme Debenture. In addition, we may force conversion of the Supreme Debentures outstanding with 30 days’ notice if the daily volume weighted average trading price of our common shares is greater than $385.90 for any 10 consecutive trading days. We, Supreme Cannabis and the Trustee entered into a further supplemental indenture whereby we agreed to guarantee the obligations of Supreme Cannabis pursuant to the Supreme Debentures and the Accretion Debentures.
Prior to September 9, 2023, the Supreme Debentures are not redeemable. Beginning on and after September 9, 2023, Supreme Cannabis may from time to time, upon providing 60 days prior written notice to the Trustee, redeem the Supreme Debentures outstanding, provided that the Accretion Debentures have already been redeemed in full.
On August 20, 2024, we entered into the August 2024 Supreme Convertible Debt Exchange with the August 2024 Investor pursuant to which, among other things, the August 2024 Investor delivered to the Company approximately $2.7 million of aggregate principal amount of outstanding Supreme Debentures held by the August 2024 Investor in exchange for 291,351 common shares of the Company and $0.03 million in cash for accrued interest.
For the years ended March 31, 2025 and March 31, 2024 principal payments on the Accretion Debentures totaled $1.5 million and $3.5 million, respectively, and approximately $30.2 million of aggregate principal amount of outstanding Supreme Debenture and Accretion Debentures were settled through the August 2024 Supreme Convertible Debt Exchange and the Exchange and Subscription Agreement.
Refer to the May 2024 Convertible Debenture details below for details on partial settlement of the Supreme Debentures and Accretion Debentures.
May 2024 Convertible Debenture
On May 2, 2024, we entered into the Exchange and Subscription Agreement with the May 2024 Investor pursuant to which, among other things, the May 2024 Investor delivered to us approximately $27.5 million aggregate principal amount of outstanding Supreme Debentures and Accretion Debentures held by the May 2024 Investor and paid us approximately US$50 million in exchange for us issuing to the May 2024 Investor (i) the May 2024 Convertible Debenture with an aggregate principal amount of $96.4 million maturing five years from the Closing Date of the Transaction and (ii) 3,350,430 May 2024 Investor Warrants of Canopy Growth. Each May 2024 Investor Warrant entitles the holder to acquire one Canopy Growth common share at an exercise price equal to $16.18 per Canopy Growth common share for a period of five years from the Closing Date. The May 2024 Convertible Debenture bears interest at a rate of 7.50% per annum, payable in semi-annual payments in cash or, at our option, in Canopy Growth common shares for the first four semi-annual interest payments after the Closing Date, subject to satisfaction of certain conditions, including the prior approval of the TSX.
The May 2024 Convertible Debenture is convertible into Canopy Growth common shares at the option of the May 2024 Investor at a conversion price equal to $14.38 per share. The May 2024 Convertible Debenture is subject to a forced conversion feature upon notice from us in the event that the average closing trading price of the Canopy Growth common shares on the TSX exceeds $21.57 for a period of 10 consecutive trading days. In addition, pursuant to the terms of the May 2024 Convertible Debenture, during the Debenture ROFR Term, we granted the May 2024 Investor a right of first refusal to subscribe for, and to be issued, as an investor in a Proposed Financing; provided, however, that the May 2024 Investor shall subscribe for 25% of the Proposed Financing on the same terms and conditions contemplated in the Proposed Financing.
Contractual Obligations and Commitments
The table below presents information about our contractual obligations and commitments as of March 31, 2025 and the timing and effect that such obligations and commitments are expected to have on our liquidity and cash flows in future periods:
Payments due by period
Less than
(CDN $000's)
Total
1 year
1-3 years
3-5 years
Over 5 years
Long-term debt obligations
$
315,466
$
2,422
$
216,686
$
96,358
$
-
Interest payments on debt obligations
102,275
35,856
56,382
10,037
-
Operating leases1
24,937
8,371
13,503
3,063
-
Finance leases1
22,319
9,819
12,500
-
-
Purchase obligations
36,468
36,264
-
-
Other liabilities2
17,379
8,892
8,487
-
-
$
518,844
$
101,624
$
307,762
$
109,458
$
-
1 Refer to Note 32 of our Financial Statements for further information on our leases. Amounts include interest related to operating and finance leases of $1.8 million and $1.1 million, respectively.
2 Refer to Note 19 of our Financial Statements for further information on our other liabilities.
Part 4 - Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 3 of our Financial Statements. Certain of our accounting policies require the application of significant judgment by management and, as a result, are subject to an inherent degree of uncertainty. We believe that the following accounting policies and estimates are the most critical to fully understand and evaluate our reported financial position and results of operations, as they require our most subjective or complex management judgments. The estimates used are based on our historical experience, our observance of trends in the industry, information provided by our customers
and information available from other outside sources, as appropriate. Actual results may vary from our estimates in amounts that may be material to the Financial Statements.
The following critical accounting policies and estimates are those which we believe have the most significant effect on the amounts recognized in the Financial Statements.
Inventory valuation
Critical judgment. Inventory is valued at the lower of cost and net realizable value. The valuation of our inventory balances involves calculating the estimated net realizable value of our inventory and assessing it against the cost. A component of this analysis therefore involves determining whether there is excess, slow-moving or obsolete inventory on hand.
Assumptions and judgment. When determining whether there is excess, slow-moving or obsolete inventory, management makes assumptions around future demand and production forecasts, which are then compared to current inventory levels. Management also makes assumptions around future pricing, and considers historical experience and the application of the specific identification method for identifying obsolete inventory.
Impact if actual results differ from assumptions. If the assumptions around future demand for our inventory are more optimistic than actual future results, the net realizable value calculated using these assumptions may be overstated, resulting in an overstatement of the inventory balance.
Estimated useful lives and depreciation and amortization of property, plant and equipment and intangible assets
Critical estimates. During the purchase or construction of our property, plant and equipment, and during the acquisition or purchase of intangible assets, amounts are capitalized onto the balance sheet. When the assets go into service, a useful life is assigned to determine the required quarterly depreciation and amortization expense. The useful lives are determined through the exercise of judgment. When an asset is abandoned or ceases to be used the carrying value of the asset is adjusted to its salvage value.
Assumptions and judgment. The useful lives are determined based on the nature of the asset. Management considers information from manufacturers, historical data, and industry standards to estimate the appropriate useful life and salvage value. In certain cases management may obtain third party appraisals to estimate salvage value.
Impact if actual results differ from assumptions. If actual useful lives differ from the estimates used, the timing of depreciation and amortization expense will be impacted. For example, a longer useful life will result in lower depreciation and amortization expense recorded each year, but will also increase the periods over which depreciation and amortization expense is taken. When an asset is abandoned, if the salvage value differs from the estimates used the abandonment cost will be impacted.
Impairment of property, plant and equipment and finite lived intangible assets
Critical estimates. Property, plant and equipment and finite lived intangible assets need to be assessed for impairment when an indicator of impairment exists. If an indicator of impairment exists, further judgement and assumptions will be required in determining the recoverable amount.
Assumptions and judgment. When determining whether an impairment indicator exists, judgement is required in considering the facts and circumstances surrounding these long-lived assets. Management considers whether events such as a change in strategic direction, changes in business climate, or changes in technology would indicate that a long-lived asset may be impaired. When an impairment indicator does exist, judgement and assumptions are required to estimate the future cash flows used in assessing the recoverable amount of the long-lived asset.
Impact if actual results differ from assumptions. If impairment indicators exist and are not identified, or judgement and assumptions used in assessing the recoverable amount change, the carrying value of long-lived assets can exceed the recoverable amount.
Impairment of goodwill and indefinite lived intangible assets
Critical estimates. Indefinite lived intangible assets and goodwill need to be tested for impairment annually at the measurement date of March 31 or sooner, if events or circumstances indicate that the carrying amount of an asset may not be recoverable. An entity may first perform a qualitative assessment of impairment, and a quantitative assessment is only required if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Assumptions and judgment. When performing a qualitative assessment, judgment is required when considering relevant events and circumstances that could affect the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned. Management considers whether events and circumstances such as a change in strategic direction and changes in business climate would impact the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned. If a quantitative analysis is required, assumptions are required to estimate the fair value to compare against the carrying value.
Goodwill
Fiscal 2023
As a result of the continued decline in the price of our common shares in the first quarter of fiscal 2023, we determined there to be an indicator of impairment for the cannabis operations reporting unit in the global cannabis segment, which was a reportable segment in the first quarter of fiscal 2023. As a result, we performed a quantitative interim goodwill impairment assessment for the cannabis operations reporting unit as of June 30, 2022. We concluded that the carrying value of the cannabis operations reporting unit was higher than its estimated fair value, and a goodwill impairment loss totaling $1.7 billion was recognized in the first quarter of fiscal 2023, representing the entirety of the goodwill assigned to the cannabis operations reporting unit.
The estimated fair value of the cannabis operations reporting unit was determined using the market valuation method, which is consistent with the methodology we used for our annual impairment test conducted at March 31, 2022. The most significant assumptions used in applying this method were: (i) the price of our common shares; and (ii) the estimated control premium associated with ownership of our common shares.
While we changed our reportable segments in the second quarter of fiscal 2023, there were no changes to the composition of our reporting units to which goodwill remained assigned at September 30, 2022. In the second quarter of fiscal 2023, we determined there to be indicators of impairment for our This Works reporting unit, as slower growth rates resulted in updated long-term financial forecasts indicating lower forecasted revenue and cash flow generation. As a result, we performed a quantitative interim goodwill impairment test for This Works as of September 30, 2022 and concluded that the carrying value was higher than its estimated fair value, as determined using the income valuation method. We recognized a goodwill impairment loss totaling $2.3 million in the second quarter of fiscal 2023, representing the entirety of the goodwill assigned to our This Works the reporting unit.
At March 31, 2023, we performed our annual goodwill impairment analysis using the quantitative assessment. No impairment was noted for our Storz & Bickel reporting unit, as the estimated fair value of the Storz & Bickel reporting unit exceeded its carrying value. The estimated fair value of the Storz & Bickel reporting unit was determined using the income valuation method, with the most significant assumptions used in applying this method being: (i) the discount rate; (ii) the expected long-term growth rate; (iii) revenue growth rate projections; and (iv) annual cash flow projections. This methodology is consistent with that used by us for our annual impairment test conducted at March 31, 2022.
The carrying value, at March 31, 2023, of the goodwill associated with the Storz & Bickel reporting unit was $85.6 million. For the Storz & Bickel reporting unit, if all other assumptions were held constant and the discount rate was increased by 50 basis points, the estimated fair value would decrease by 5% and result in an impairment charge. If all other assumptions were held constant and the long-term growth rate was decreased by 50 basis points, the estimated fair value would decrease by 4% and result in an impairment charge. If all other assumptions were held constant and the revenue growth rate projections were decreased by 250 basis points, the estimated fair value would decrease by 11% and result in an impairment charge. If all other assumptions were held constant and the annual cash flow projections were decreased by 250 basis points, the estimated fair value would decrease by 3%.
At March 31, 2023, the fair value of the Storz & Bickel reporting unit to which goodwill is assigned exceeded its carrying value by approximately 3%. Accordingly, the goodwill assigned to the Storz & Bickel reporting unit is at risk for impairment in future periods. We may be required to perform a quantitative goodwill impairment assessment in future periods for the Storz & Bickel reporting unit, to the extent we experience declines in the expected long-term growth rate, revenue growth rate projections or annual cash flow projections, or if discount rates increase, or if other indicators of impairment arise.
Fiscal 2024
As part of our annual impairment testing, we performed a quantitative goodwill impairment assessment for our remaining goodwill balance, which is assigned to the Storz & Bickel reporting unit. From the analysis, an impairment of $42.1 million to Storz & Bickel's goodwill was recognized as the estimated fair value of the Storz & Bickel reporting unit was less than its carrying value. The estimated fair value of the Storz & Bickel reporting unit was determined using the income valuation method, with the most significant assumptions used in applying this method being: (i) the discount rate; (ii) the expected long-term growth rate; (iii) revenue growth rate projections; and (iv) annual cash flow projections. Certain negative trends, including slower growth rates, resulted in updated long-term financial forecasts indicating lower forecasted revenue and cash flow generation for the Storz & Bickel reporting unit. This methodology is consistent with that used by us for our annual impairment test conducted at March 31, 2023. At March 31, 2024, the remaining carrying value of the Storz & Bickel goodwill is $43.2 million.
Fiscal 2025
As part of our annual impairment testing, we performed a quantitative goodwill impairment assessment for our remaining goodwill balance, which is assigned to the Storz & Bickel reporting unit. From the analysis, no impairment was noted for our Storz & Bickel reporting unit, as the estimated fair value of the Storz & Bickel reporting unit exceeded its carrying value. The estimated fair value of the Storz & Bickel reporting unit was determined using the income valuation method, with the most significant assumptions used in applying this method being: (i) the discount rate; (ii) the expected long-term growth rate; (iii) revenue growth rate projections;
and (iv) annual cash flow projections. This methodology is consistent with that used by us for our annual impairment test conducted at March 31, 2024.
The carrying value, at March 31, 2025, of the goodwill associated with the Storz & Bickel reporting unit was $46.0 million. For the Storz & Bickel reporting unit, if all other assumptions were held constant and the discount rate was increased by 50 basis points, the estimated fair value would decrease by 5%. If all other assumptions were held constant and the long-term growth rate was decreased by 50 basis points, the estimated fair value would decrease by 4%. If all other assumptions were held constant and the revenue growth rate projections were decreased by 250 basis points, the estimated fair value would decrease by 13% and result in an impairment charge. If all other assumptions were held constant and the annual cash flow projections were decreased by 250 basis points, the estimated fair value would decrease by 3%.
At March 31, 2025, the fair value of the Storz & Bickel reporting unit to which goodwill is assigned exceeded its carrying value by approximately 10%. Accordingly, the goodwill assigned to the Storz & Bickel reporting unit is at risk for impairment in future periods. We may be required to perform a quantitative goodwill impairment assessment in future periods for the Storz & Bickel reporting unit, to the extent we experience declines in the expected long-term growth rate, revenue growth rate projections or annual cash flow projections, or if discount rates increase, or if other indicators of impairment arise.
Indefinite lived intangible assets
If a quantitative analysis is required, our acquired intangible assets are evaluated for impairment by comparing the carrying value of the intangible assets to their estimated fair value. The estimated fair value of the acquired brand indefinite lived intangible assets is calculated based on an income approach using the relief-from-royalty method. The estimated fair value of the operating license indefinite life intangible assets is calculated based on a market valuation approach.
In fiscal 2023, we recognized intangible asset impairment losses totaling $14.6 million in connection with certain acquired brand intangible assets, primarily within our Canada cannabis segment.
In fiscal 2024, we recognized intangible asset impairment losses totaling $9.0 million in connection with certain acquired brand intangible assets relating to our Storz & Bickel segment. Certain negative trends, including slower growth rates and increased competition, resulted in updated long-term financial forecasts indicating lower forecasted revenue and cash flow generation for the specific acquired brands. This change in financial forecasts indicated it was more likely than not that the fair value of our indefinite lived intangible asset associated with the acquired brands might also be below their carrying values, and accordingly we performed a quantitative assessment for impairment. The most significant assumptions used in the relief-from-royalty method to determine the estimated fair value of intangible assets with indefinite lives are: (i) the estimated royalty rate, (ii) the discount rate, (iii) the expected long-term growth rate, and (iv) the annual revenue projections.
In fiscal 2025, no intangible asset impairments were recognized.
Impact if actual results differ from assumptions. If the judgements relating to the qualitative or quantitative assessments performed differ from actual results, or if assumptions are different, the values of the indefinite lived intangible assets and goodwill can differ from the amounts recorded.
Fair value measurement of equity method investments
Critical estimates. The Canopy USA and the Canopy USA LPs equity method investments are measured at fair value. The valuation of the equity method investments use an asset based approach where Level 3 inputs are used. As a result of the deconsolidation of Canopy USA and the Acreage Acquisition, the fair value measurement of the Canopy USA equity method investment is dependent on fair value measurements of the Acreage financial instrument, Wana financial instrument and Jetty financial instrument which are described below. The fair value measurement of the Canopy USA LPs equity method investment is dependent on fair value measurement of the TerrAscend Exchangeable Shares and TerrAscend Warrants which are described below.
Assumptions and judgment. The valuation techniques require assumptions and judgment around the inputs to be used.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculations will be impacted. Certain assumptions will have greater impact on the determination of fair value. Information on the valuation techniques and inputs used in determining fair values are disclosed in Note 25 of our Financial Statements.
Acreage financial instrument fair value measurement
Critical estimates. The Acreage financial instrument is measured at fair value through net income (loss) using Level 3 inputs.
Assumptions and judgment. The valuation of the Acreage financial instrument is highly subjective and management applies a probability-weighted expected return model which considers a number of potential outcomes. We use judgment to make assumptions on the key inputs including the: (i) probability of each scenario; (ii) number of common shares to be issued; (iii) probability and timing of U.S. legalization; (iv) estimated premium on U.S. legalization; (v) control premium; and (vi) market access premium.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation technique and inputs used in determining fair values are disclosed in Note 25 of our Financial Statements.
TerrAscend Exchangeable Shares and TerrAscend Warrants fair value measurement
Critical estimates. The TerrAscend Exchangeable Shares and TerrAscend Warrants are measured at fair value through net income (loss) using Level 3 inputs.
Assumptions and judgment. The valuation of the TerrAscend Exchangeable Shares is based on a put option pricing model and the valuation of the TerrAscend Warrants is based on a Black-Scholes option pricing model. We use judgment to make assumptions on the key input, being the probability and timing of U.S. legalization.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation technique and inputs used in determining fair values are disclosed in Note 25 of our Financial Statements.
Wana financial instrument fair value measurement
Critical estimates. As a result of entering into the Wana Agreements, we recognized: (i) the call options associated with the Wana Agreements (the “Wana Options”), which represents options to purchase 100% of Wana for payments equal to 15% of Wana’s fair market value at the time the option is exercised; and (ii) additional deferred payments that we expect to make in respect of Wana as of the 2.5- and 5-year anniversaries of October 14, 2021, computed based on a pre-determined contractual formula (the “Wana Deferred Payments”). The Wana Options and Wana Deferred Payments are measured at fair value through net income (loss) using Level 3 inputs.
Assumptions and judgment. The valuation of the Wana Options is measured using a discounted cash flow model, which requires assumptions and judgment to determine the expected future cash flows associated with Wana. The valuation of the Wana Deferred Payments is based on a Monte Carlo simulation model, and we are required to use judgment and make assumptions on the key inputs, being the probability and timing of U.S. legalization and the volatility of Wana equity.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation techniques and inputs used in determining fair valued are disclosed in Note 25 of our Financial Statements.
Jetty financial instrument fair value measurement
Critical estimates. As a result of entering into the Jetty Agreements, we recognized: (i) the call options associated with the Jetty Agreements (the “Jetty Options”), which represents two option agreements, with the first option agreement exercisable in two tranches, to purchase 100% of Jetty; and (ii) additional deferred payments that we expect to make in respect of Jetty, computed based on a pre-determined contractual formula (the “Jetty Deferred Payments”). The Jetty Options and Jetty Deferred Payments are measured at fair value through net income (loss) using Level 3 inputs.
Assumptions and judgment. The valuation of the Jetty Options is measured using a discounted cash flow model, which requires assumptions and judgment to determine the expected future cash flows associated with Jetty. The valuation of the Jetty Deferred Payments is based on a Monte Carlo simulation model, and we are required to use judgment and make assumptions on the key inputs, being the probability and timing of U.S. legalization and the volatility of Jetty equity and revenues.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculation will be impacted. Information on the valuation techniques and inputs used in determining fair valued are disclosed in Note 25 of our Financial Statements.
Other fair value measurements
Critical estimates. Some of our assets and liabilities are measured at fair value. In certain cases where Level 1 inputs are not available, valuation approaches using Level 2 and Level 3 inputs are required.
Assumptions and judgment. The valuation techniques require assumptions and judgment around the inputs to be used.
Impact if actual results differ from assumptions. If the assumptions and judgments differ, the fair value calculations will be impacted. Certain assumptions will have greater impact on the determination of fair value depending on the nature of the asset or liability. Information on the valuation techniques and inputs used in determining fair values are disclosed in Note 25 of our Financial Statements.
Revenue recognition
Critical estimates. The determination of the reduction of the transaction price for variable consideration requires that we make certain estimates and assumptions that affect the timing and amounts of revenue recognized.
Assumptions and judgment. We estimate the variable consideration by taking into account factors such as historical information, current trends, forecasts, inventory levels, availability of actual results and expectations of customer and consumer behavior.
Impact if actual results differ from assumptions. A more optimistic outlook on future demand can result in lower expected returns and reduced likelihood of price adjustments necessary to sell the product. This outlook will reduce the provision against revenue.
Stock-based compensation
Critical estimates. We use the Black-Scholes option pricing model to calculate our share-based compensation expense.
Assumptions and judgment. The option pricing model relies on key inputs such as rate of forfeiture, expected life of the option, the volatility of our share price, and the risk-free interest rate used.
Impact if actual results differ from assumptions. If key inputs differ, the fair value of options will be impacted. A higher fair value of the options will result in higher share-based compensation expense over the vesting period of the option.
Income taxes
Critical estimates. Many of our normal course transactions may have uncertain tax consequences. We use judgment to determine income for tax purposes and this may impact the recognized amount of assets or liabilities, the disclosure of contingent liabilities or the reported amount of revenue or expense and may result in an unrealized tax benefit for transactions that have not yet been reviewed by tax authorities and that may in the future be under discussion, audit, dispute or appeal.
Assumptions and judgment. We use historical experience, current and expected future outcomes, third-party evaluations and various other assumptions believed to be reasonable in making judgements.
Impact if actual results differ from assumptions. An unrealized tax benefit will be recognized when we determine that it is more likely than not that the tax position is sustainable based on its technical merits. In any case, if the final outcome is different from our estimate this will impact our income taxes and cash flow.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the potential economic loss arising from adverse changes in market factors. As a result of our global operating, acquisition and financing activities, we are exposed to market risk associated with changes in foreign currency exchange rates, interest rates and equity prices. To manage the volatility relating to these risks, we may periodically purchase derivative instruments including foreign currency forwards. We do not enter into derivative instruments for trading or speculative purposes.
Foreign currency risk
Our Financial Statements are presented in Canadian dollars. We are exposed to foreign currency exchange rate risk as the functional currencies of certain subsidiaries, including those in the United States and Europe, are not in Canadian dollars. The translation of foreign currencies to Canadian dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date, and for revenues and expense using an average exchange rate for the period. Therefore, fluctuations in the value of the Canadian dollar affect the reported amounts of net revenue, expenses, assets and liabilities. The resulting translation adjustments are reported as a component of accumulated other comprehensive income or loss on the consolidated balance sheet.
A hypothetical 10% change in the U.S. dollar against the Canadian dollar compared to the exchange rate at March 31, 2025, would affect the carrying value of net assets by approximately $1.6 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss. A hypothetical 10% change in the euro against the Canadian dollar compared to the exchange rate at March 31, 2025, would affect the carrying value of net assets by approximately $20.2 million, with a corresponding impact to the foreign currency translation account within accumulated other comprehensive income or loss.
We also have exposure to changes in foreign exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. As a result, we have been impacted by changes in exchange rates and may be impacted for the foreseeable future.
Foreign currency derivative instruments may be used to hedge existing foreign currency denominated assets and liabilities, forecasted foreign currency denominated sales/purchases to/from third parties as well as intercompany sales/purchases, intercompany principal and interest payments, and in connection with acquisitions, divestitures or investments outside of Canada. Historically, while we have purchased derivative instruments to mitigate the foreign exchange risks associated with certain transactions, the impact of these hedging transactions on our Financial Statements has been immaterial.
Interest rate risk
Our cash equivalents and short-term investments are held in both fixed-rate and adjustable-rate securities. Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a lower rate, generating less interest income. As at March 31, 2025, our cash and cash equivalents, and short-term
investments, consisted of $17.8 million in interest rate sensitive instruments, as compared to $88.0 million at March 31, 2024, in interest rate sensitive instruments.
Our financial liabilities consist of long-term fixed rate debt and floating-rate debt. Fluctuations in interest rates could impact our cash flows, primarily with respect to the interest payable on floating-rate debt.
Aggregate Notional Value
Fair Value
Decrease in Fair Value - Hypothetical 1% Rate Increase
March 31, 2025
March 31, 2024
March 31, 2025
March 31, 2024
March 31, 2025
March 31, 2024
Promissory note
$
-
$
100,000
$
-
$
89,224
$
-
$
(523
)
Fixed interest rate debt
98,778
38,186
N/A
N/A
N/A
N/A
Variable interest rate debt
216,686
469,819
N/A
N/A
N/A
N/A
Equity price risk
We hold other financial assets and liabilities in the form of investments in shares, warrants, options, put liabilities, and convertible debentures that are measured at fair value and recorded through either net income (loss) or other comprehensive income (loss). We are exposed to price risk on these financial assets, which is the risk of variability in fair value due to movements in equity or market prices.
Information regarding the fair value of financial instrument assets and liabilities that are measured at fair value on a recurring basis, and the relationship between the unobservable inputs used in the valuation of these financial assets and their fair value is presented in Note 25 of the Financial Statements.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
The financial statements required by this item and the reports of the independent accountants thereon required by Item 14(a)(2) appear on pages to. See accompanying Index to the Financial Statements on page.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-K was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2025, based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, management has determined that our internal control over financial reporting as of March 31, 2025 was effective.
Our independent registered public accounting firm, PKF O’Connor Davies, LLP, who audited our financial statements included in this Form 10-K, has issued its report on the effectiveness of our internal control over financial reporting as of March 31, 2025, which is included herein.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
Rule 10b5-1 Trading Arrangements
During the three months ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption or termination a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(c) of Regulation S-K.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The table below sets forth certain biographical information regarding each director of the Company. In addition, a discussion of the qualifications, attributes and skills of each director that led the Company's board of directors (the “Board”) and the Corporate Governance, Compensation and Nominating Committee of the Board (“CGCN Committee”) to the conclusion that he or she should continue to serve as a director follows each of the director biographies. Additional information regarding the skills and expertise of each director is included below under the section entitled “Board of Directors, Committees and Governance-Board Skills Matrix.” If a director is listed as “Independent” in the table below, that director meets the requirement to be an “independent director” under Rule 5605(a)(2) the Listing Rules of the Nasdaq Stock Market (the “Nasdaq Rules”) and the definition of “independence” under Canadian National Instrument 52-110 - Audit Committees (“NI 52-110”).
Directors
Name
Age (1)
Position
Luc Mongeau
Director and Chief Executive Officer
Willy Kruh
Director and Chair of the Audit Committee
David Lazzarato
Director, Chair of the Board and member of the Audit Committee, and member of the CGCN Committee
Theresa Yanofsky
Director, Chair of the CGCN Committee and member of the Audit Committee
(1) Ages as of May 1, 2025.
Luc Mongeau
Woodbridge, Ontario, Canada
Independent
Director Since
February 7, 2024, CEO since January 6, 2025
Luc Mongeau is the Chief Executive Officer (“CEO”) of Canopy Growth and also serves on the Board. Mr. Mongeau is a seasoned executive with over 25 years of experience spearheading multi-billion-dollar consumer goods companies throughout North America, including Weston Foods, and Mars Petcare. Prior to joining Canopy Growth, Mr. Mongeau was the CEO of eSolutions Furniture Inc. Mr. Mongeau served as the CEO of eSolutions Furniture Inc., a leading e-commerce solution for residential and commercial furniture in North America, from September 2022 to January 2025. He also served as President of Weston Foods Inc., a leading provider of fresh and frozen baked products to the North American market, from September 2017 to March 2022. Mr. Mongeau is an established leader with a demonstrated track record of marketing and sales agility. Mr. Mongeau has consistently delivered operational excellence in brand-led businesses. Mr. Mongeau brings his extensive experience in business transformation and strategic leadership to the Company. Mr. Mongeau holds a Bachelor of Science from the Université de Sherbrooke and an MBA from the Ivey School of Business at Western University. He has also completed executive education at Harvard Business School.
Committee Memberships
CGCN Committee(1) (exited November 2024)
Attendance in Fiscal 2025
Other Public Company Directorships
Board: 24/24
CGCN: 4/4
None
(1) In connection with Mr. Mongeau’s appointment as Chief Executive officer of the Company on November 26, 2024 (which appointment became effective on January 6, 2025), he was removed as a member of the CGCN Committee on November 26, 2024.
David Lazzarato
Toronto, Ontario, Canada
Independent
Director Since
March 31, 2020
David Lazzarato serves as Chair of the Board, is a member of the Audit Committee and a member of the CGCN Committee. Mr. Lazzarato’s impressive career includes senior executive positions with Alliance Atlantis Communications, Allstream, Bell Canada, and CAE. In 2016, Mr. Lazzarato retired and has since been a corporate director. Mr. Lazzarato has served on corporate and not-for-profit boards for two decades and served on the board of directors of Flutter Entertainment plc, a New York Stock Exchange listed company, from May 2020 until May 2024 and has served on the board of directors of Thunderbird Entertainment since February 2024. Mr. Lazzarato brings to the Board a demonstrated commercial and financial acumen to assist businesses going through pivotal inflection points.
Committee Memberships
Audit Committee
CGCN Committee
Attendance in Fiscal 2025
Other Public Company Directorships
Board: 24/24
Thunderbird Entertainment (as of February 2024)
Audit: 4/4
CGCN: 5/5
Willy Kruh
Toronto, Ontario, Canada
Independent
Director Since
February 7, 2024
Willy Kruh CPA, CA, MBA, serves as a member of the Board where he also acts as the Chair of the Audit Committee as well as a member of the CGCN Committee. Mr. Kruh worked at KPMG LLP from 1984 to 2019, most recently serving as Partner and Global (and Canadian from 1999) Chairman of Consumer and Retail at KPMG LLP from 2007 until his retirement from KPMG LLP in October 2019. Since October 2020, Mr. Kruh has served as CEO of PlanEXT, an Israel-based global leader in pharmaceutical cannabis research and development. Mr. Kruh has over 35 years of experience as a recognized and trusted advisor, consultant, and auditor in the consumer and retail sector. He has been instrumental in shaping the financial landscape of leading CPG (as defined below), Retail, Food and Beverage multinational corporations, offering strategic guidance and invaluable insights to industry leaders in North America and globally. Mr. Kruh brings a wide range of financial as well as consumer and retail industry experience to the Board.
Committee Memberships
Audit Committee (Chair)
CGCN Committee (joined in January 2025)
Attendance in Fiscal 2025
Other Public Company Directorships
Board: 22/24
None
Audit: 4/4
CGCN: 1/1
Theresa Yanofsky
Westmount, Quebec, Canada
Independent
Director Since
March 31, 2020
Theresa Yanofsky currently serves as a member of the Board where she also acts as the Chair of the CGCN Committee as well as a member of the Audit Committee. Ms. Yanofsky has extensive experience working with big-name retailers and is respected for her strategic leadership and disciplined approach to driving revenue. Ms. Yanofsky brings over 30 years of experience working with rapidly growing big-name global retailers. Ms. Yanofsky has served as a board member for Reitmans (Canada) Ltd., (“Reitmans”), a Canadian-based retailer listed on the TSX, since August 2019 and has served as a member of the board of directors of Goodfood Market Corp., a leading online grocery company in Canada listed on the TSX, since July 2019. Most recently, Ms. Yanofksy was appointed as a board member for Purolator Inc., a leading integrated freight, package and logistics provider, in April, 2022. Ms. Yanofksy served as the Senior Vice-President, General Manager of Sephora Canada, a retailer of personal care and beauty products, from 2015 until her retirement in March 2020; prior to which she worked at L Brands where she was the country manager for Bath & Body Works Canada. Ms. Yanofsky brings over 30 years of experience working with rapidly growing big-name global retailers as well as significant senior management and public company board and corporate governance experience.
Committee Memberships
Audit Committee
CGCN Committee (Chair)
Attendance in Fiscal 2025
Other Public Company Directorships
Board: 24/24
Goodfood Market Corp.
Audit: 4/4
Reitmans Ltd.
CGCN: 5/5
Purolator Inc.
Board of Directors, Committees and Governance
Overview
The Board and management of the Company recognize the importance of corporate governance for the effective management of the Company and the protection of its stakeholders, particularly our shareholders (“Shareholders”).
National Policy 58-201 - Corporate Governance Guidelines (“NI 58-101”) establishes corporate governance guidelines that apply to all public companies. NI 58-101 charters disclosure of corporate governance practices, which disclosure is set out below, in accordance with Form 58-101F1 - Corporate Governance Disclosure. The Company is also required to comply with the provisions of the Sarbanes-Oxley Act of 2002 (“SOX”) and the applicable rules adopted by the SEC pursuant to SOX, as well as the Nasdaq Rules and the rules of the Toronto Stock Exchange (the “TSX”).
Maintaining a high standard of corporate governance is a priority for the Board and the Company’s management as both believe that effective corporate governance will help create and maintain Shareholder value in the long term. A description of the Company’s corporate governance practices is set out below.
Board of Directors
The Board is responsible for the stewardship of the Company, supervising the management of our business affairs and acting in the best interests of the Company. The Board has adopted a written “Corporate Governance Guidelines” pursuant to which the Board assumes responsibility for the stewardship of the Company. The Corporate Governance Guidelines are available on the Company’s website at www.canopygrowth.com/investors/governance/committees-charters/.
The Company’s Corporate Governance Guidelines state that the primary responsibilities of directors are to exercise their business judgment in good faith and to act in what they reasonably believe is in the best interests of the Company. Directors are required to fulfill their responsibilities consistent with their fiduciary duties, in compliance with all applicable rules and regulations and subject to the provisions of the Company’s certificate of incorporation, as amended and its bylaws. In forming his or her judgment, each director is entitled to rely in good faith on the accuracy of the records of the Company and the information, opinions, reports or statement presented by the Company’s officers, employees, Board committees, outside advisors and auditors. In discharging their obligations, directors are entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors.
The independent judgment of the Board in carrying out its responsibilities is the responsibility of all directors. The Board facilitates independent supervision of management through meetings of the Board and through frequent informal discussions among independent members of the Board and management. In addition, the Board has free access to the Company’s external auditors, external legal counsel and to the Company’s officers.
Meetings
During Fiscal 2025, the Board met 24 times, the Audit Committee met 4 times and the CGCN Committee met 5 times. The Board and committees held a combination of in-person and video conference meetings. The individual attendance summary for each of the directors who served as a director during Fiscal 2025 is set forth above.
Board Member Attendance at Board Meetings and Annual Shareholder Meetings
The Company’s Corporate Governance Guidelines state that all directors are expected to make reasonable best efforts to attend all meetings of the Board, all meetings of the committees of which they are members and the annual meeting of Shareholders, and to maintain a satisfactory Board and committee meeting attendance record of no less than 75% in the aggregate, subject to recusal by the Board or relevant committee. During Fiscal 2025, the current directors attended, in aggregate, over 98% of the total number of Board meetings, 100% of CGCN Committee meetings, and 100% of Audit Committee meetings held and on which he or she served during his or her period of service. The Company generally encourages, but does not require, directors to attend the Company’s annual meetings of Shareholders. Directors are encouraged to attend Board meetings and meetings of committees of which they are members in person but may also attend such meetings by telephone or video conference. All directors were present at the Company’s 2024 annual general meeting of Shareholders, which was held via live audio webcast held on September 24, 2024 (the “2024 Annual General Meeting”).
Familial Relationships
There are no family relationships among any directors and executive officers.
Board Leadership Structure and Qualifications
Pursuant to the Corporate Governance Guidelines, the Board must be composed of a majority of “independent directors”, including the Chair of the Board. The Company defines an “independent director” in accordance with the standards and requirements promulgated by all applicable regulatory bodies exercising control over the Company, including Rule 5605(a)(2) of the Nasdaq Rules. Where it is not appropriate for the Chair of the Board to be independent, an independent director will be appointed to act as lead director (the “Lead Director”). The Lead Director carries out the primary responsibilities that would otherwise be the responsibility of the independent Chair of the Board. At this time, the Board believes that requiring that there be a Lead Director in the event the Chair of the Board is not an independent director is appropriate to provide the most effective leadership structure for Canopy Growth in the rapidly-evolving and highly-regulated cannabis industry.
Currently, Luc Mongeau serves as our CEO and David Lazzarato serves as Chair of our Board. Mr. Lazzarato is an independent director and therefore we currently do not have a Lead Director.
The Chair of the Board will preside over all meetings of the directors, be responsible for the agenda at all meetings of the Board and will preside over meetings of Shareholders. The Chair will convey recommendations of the independent directors to the Board and will be the liaison between the Board and the management of the Company. The Chair will preview information sent to the Board as necessary and approve meeting schedules to assure that there is sufficient time for discussion of all agenda items.
The key responsibilities of the Chair of the Board include, among other things:
•providing leadership to the Board with respect to its functions as described in the Corporate Governance Guidelines and as otherwise may be appropriate;
•ensuring Canopy Growth’s policies and practices related to corporate governance and Board operations are properly reflected in internal and external communications;
•working with the CGCN Committee, submitting to the Board a proposed slate of directors for election at the annual general meeting of shareholders;
•ensuring that appropriate procedures are in place for the effective operation of the Board;
•managing the ongoing performance review and the compensation plan for the Company’s CEO; and
•being available to the Company’s CEO and management to provide guidance and advice.
Oversight of Risk Management
The Board oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face. The Board performs this role primarily through its Audit Committee and CGCN Committee. Each Board committee addresses the risks specific to the function of that committee. For example, the Board committees address the following risks:
•The Audit Committee performs the Board’s oversight responsibilities as they relate to our accounting policies, internal controls, and financial reporting practices, and is responsible for, among other things, overseeing the process by which the Company assesses and manages risk and identifying risks inherent in the Company’s business including cybersecurity risks.
•In connection with its corporate compensation responsibilities, the CGCN Committee reviews all compensation policies and practices for all employees to determine whether such policies and practices create risks that are reasonably likely to have a material adverse effect on the Company.
•In connection with its corporate governance responsibilities, the CGCN Committee is to discuss with management and evaluate management’s efforts to ensure that the Company’s management is taking into account risks that may affect the Company in the areas of human capital management, and the need to update disclosure controls and procedures to address evolving disclosure requirements on environmental, social and governance matters.
Position Descriptions
Chief Executive Officer
The CEO leads the management of the Company’s business and affairs and the implementation of the resolutions and policies of the Board and will report to and comply with the direction of the Board. The key accountabilities and responsibilities of the CEO include, among other things: duties relating to the Company’s values, strategy, governance, risk management, risk appetite, financial performance, human resources management, operational direction, Board interaction, talent management, succession planning and effective communication with Shareholders, clients, employees, regulators and other stakeholders. In addition, the Mongeau Agreement (as defined below) sets forth the responsibilities of the CEO, as approved by the Board, including:
•shaping global strategic plans by developing and executing the Company’s strategy with the appropriate scale and pace while retaining Company values and entrepreneurial culture and targeting the best markets and products for sustainable customer satisfaction with the appropriate sales and earnings growth;
•developing a world-class supply chain by defining and executing the supply chain strategy and aligning people, processes and systems to optimize output while maintaining high levels of efficiency across product development, manufacturing/production, quality control and logistics;
•delivering consistency by producing results based on agreed upon targets and timetable in a rapidly evolving industry;
•building leading product portfolios by continuing to innovate and develop new products to fulfill consumers across various channels, including medical and adult-use;
•embracing social responsibility by ensuring that the Company is adhering to all regulatory requirements and is viewed a leader in quality products and safety around the world, and ensuring the Company is at the forefront of the rapidly evolving regulatory landscape;
•cultivating high performing cross-functional teams and leading the executive team in setting and executing strategic, financial and operational initiatives to drive sustainable growth and profitability;
•fostering a high performing culture in an entrepreneurial and fast-paced environment that operates with discipline and trust among leaders; and
•such other duties as the Board may specify from time to time.
Committee Chairs
The Board has developed written charters with respect to each of the Audit Committee and the CGCN Committee, which includes a description of the primary responsibilities of the Chairs of such committees.
The primary responsibilities of the Chair of the Audit Committee and CGCN Committee include, among other things: chairing and setting the agenda for the meetings of the applicable committee, providing leadership to the applicable committee and acting as liaison and maintaining communication with the Chair of the Board and the Board to optimize and co-ordinate input from directors, and to optimize the effectiveness of the applicable committee. The Corporate Governance Guidelines and the committee charters set out in writing the responsibilities of the Board and the committees, respectively.
Committees of Our Board of Directors
The standing committees of the Board consist of the Audit Committee and the CGCN Committee. The responsibilities of these committees are described below. In addition, the Board may establish other committees from time to time to assist the Board in connection with specific matters. The Board oversees the operations of the committees, the appointment of their respective members, their compensation and their conduct. The Board has no intention at this time to establish other standing committees. The following table summarizes the current membership of the Board and each of its committees:
Director Name
Audit Committee
CGCN Committee
Willy Kruh
Chair
Member
Theresa Yanofsky
Member
Chair
David Lazzarato
Member
Member
The Audit Committee and the CGCN Committee have adopted detailed charters outlining their responsibilities, including the specific responsibilities of the chair of each committee. Copies of these charters are available on the Company’s website at www.canopygrowth.com/investors/governance/committees-charters/.
Audit Committee
General. The Board has a separately designated standing Audit Committee established in accordance with the Nasdaq Rules. The Audit Committee is currently comprised of three directors: Willy Kruh (Chair), David Lazzarato and Theresa Yanofsky, all of whom are considered to be “independent” within the meaning of such term under applicable Nasdaq Rules relating to audit committees and Section 1.4 of NI 52-110. The members of the Audit Committee are appointed by the Board, and each member of the Audit Committee serves at the pleasure of the Board until the member resigns, is removed or ceases to be a member of the Board.
The Board has determined that Willy Kruh, the Chair of the Audit Committee, qualifies as an “audit committee financial expert” for purposes of the SEC’s rules and meets the requirements for independence of audit committee members under the Nasdaq Rules. The SEC has indicated that the designation of Mr. Kruh as an audit committee financial expert does not make him an “expert” for any purpose, impose any duties, obligations or liabilities on him that are greater than those imposed on other members of the Audit Committee and the Board who do not carry this designation or affect the duties, obligations or liabilities of any other member of the Audit Committee or the Board.
Purpose. The Audit Committee’s primary purpose is to assist the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control over financial reporting and accounting compliance, the audit process of the financial statements and processes for identifying, evaluating and monitoring the management of the Company’s principal risks impacting financial reporting. The committee also assists the Board with the oversight of financial strategies and the adequacy and effectiveness of the Company’s overall risk management program. The Audit Committee Chair also meets regularly with management and with the Company’s internal auditors, including its Chief Financial Officer, and its external auditors, PKF O’Connor Davies. The Audit Committee Charter (the “Audit Committee Charter”) sets forth the role and responsibilities of the committee’s chair.
Responsibilities. Pursuant to the Audit Committee Charter, the Audit Committee is directly responsible for, among other things: (1) assisting the Board with the oversight of the quality and integrity of the Company’s financial statements, (2) the appointment, compensation and oversight of the work of the independent auditors, including resolution of disagreements between management and the independent auditors regarding financial reporting and (3) establishment and maintenance of processes to assure compliance with applicable legal and regulatory requirements and the Company Code of Business Conduct and Ethics.
The Audit Committee Charter is available on the Company’s website at www.canopygrowth.com/investors/governance/committees-charters/.
CGCN Committee
General. The CGCN Committee is currently comprised of three directors of the Company: Theresa Yanofsky (Chair), Willy Kruh, and David Lazzarato. all of whom are considered to be an “independent director” under applicable Nasdaq Rules relating to compensation committees and nominating committees and meet the definition of “independence” under NI 52-110.
Purpose. The CGCN Committee’s purpose is to provide leadership in shaping the corporate governance policies and practices of the Company, put forward nominations for the appointment of directors by the Board, discharge the responsibilities of the Board relating to compensation of the Company’s directors and executive officers as determined by the Board, assist the Board in establishing appropriate incentive compensation and equity-based plans and to administer such plans, oversee the annual process of evaluation of the performance of management; and to assist the Board in its oversight of CGCN Committee’s human resource strategies.
Responsibilities - Compensation and Corporate Governance Matters. The CGCN Committee’s primary responsibilities are, among other things, to assist the Board in discharging its responsibilities relating to: (1) setting the Company’s compensation program, (2) administering and monitoring the incentive and equity-based compensation plans including awards under the Company’s Amended
and Restated Omnibus Incentive Plan (the “Omnibus Incentive Plan”), and (3) preparing the compensation committee report, in the annual report and proxy statement under the rules and regulations of the SEC. In addition, the CGCN Committee is responsible for overseeing and assessing the functioning of the Board, its committees and individual directors, for the development, recommendation to the Board, implementation and assessment of effective corporate governance principles, overseeing the process of succession planning for the CEO and, as warranted, other senior officers of the Company, and handling such other matters that are specifically delegated to the committee by the Board from time to time.
Pursuant to the CGCN Committee charter (the “CGCN Committee Charter”), the CGCN Committee shall, among other things:
•annually, review and approve or recommend that the Board approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those corporate goals and objectives, and approve or recommend that the Board approve the CEO’s compensation level based on this evaluation;
•annually review and, as appropriate, approve or recommend that the Board approve each element of compensation including salaries, bonuses, benefits, and perquisites, and including with respect to any equity-based plans, for the CEO and each other executive officer;
•annually review, and as appropriate, approve or recommend the results of the most recent stockholder advisory vote on the compensation of named executive officers (a “Say on Pay Vote”) when considering executive compensation policies and decisions, the frequency with which the Company will conduct Say on Pay Votes, the inclusion of proposals regarding the Say on Pay Vote and the frequency of the Say on Pay Vote in any Company filing with the SEC in accordance with applicable law and regulation; and
•annually, review the results of the CEO’s performance with the Chair of the Board or the Lead Director, as applicable.
The CGCN Committee Charter does not provide for delegation of these duties.
Pursuant to the CGCN Committee Charter, the CGCN Committee has the authority to retain, at Canopy Growth’s expense, a compensation consultant only after taking into consideration the independence factors set out in Rule 5605(d)(3)(D) of the Nasdaq Rules (the “Compensation Committee Advisor Independence Factors”), to the extent applicable. For Fiscal 2025, after considering the Compensation Committee Advisor Independence Factors, the CGCN Committee continued to directly retain Mercer (Canada) Limited (“Mercer”) as its compensation consultant.
For additional information with respect to the role of Mercer in the determination of executive compensation, please see “Compensation Discussion and Analysis,” including the information under the subsection entitled “Annual Oversight of Compensation.”
Responsibilities - Board Nominations. The CGCN Committee is responsible for: identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board, and to select, or to recommend that the Board select, the director nominees for the next annual meeting of shareholders. In carrying out the foregoing duties, the CGCN Committee consistently seeks to achieve a balance of knowledge, experience, diversity and capability on the Board. While the CGCN Committee has not established specific minimum qualifications for director candidates, it considers all pertinent factors that it deems appropriate. As set forth in our Corporate Governance Guidelines, among the qualifications considered in the selection of director candidates, the CGCN Committee will look at the following attributes and criteria of candidates: experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication and conflicts of interest. In evaluating and identifying candidates, the CGCN Committee has the authority to retain and terminate any third-party search firm that is used to identify director candidates and has the authority to approve the fees and retention terms of any search firm.
The CGCN Committee will also consider director nominations identified by Shareholders. Nominations by Shareholders must be provided in a timely manner and must include sufficient biographical information so that the CGCN Committee can appropriately assess the proposed nominee’s background and qualifications. For a Shareholder to have his or her candidate considered by the CGCN Committee for inclusion as a director nominee at the Company's 2025 annual meeting of shareholders, Shareholder submissions of candidates for nomination to the Board must be submitted in writing to the Corporate Secretary of the Company at Canopy Growth Corporation, 1 Hershey Drive, Smiths Falls, Ontario, K7A 0A8. Potential nominees recommended by a Shareholder in accordance with these procedures will be considered and evaluated in the same manner as other potential nominees.
The CGCN Committee Charter is available on the Company’s website at www.canopygrowth.com/investors/governance/committees-charters/.
Compensation Committee Interlocks and Insider Participation
The following persons served as members of the CGCN Committee during Fiscal 2025: Luc Mongeau (prior to his appointment as CEO), James Sabia (former director, resigned from the Board effective April 18, 2024), Theresa Yanofsky, Willy Kruh and David Lazzarato. No person who served as a member of the CGCN Committee during Fiscal 2025 served as an officer or employee of the Company prior to or during such person’s tenure on the CGCN Committee, and no such person had any relationships with the Company of the type that is required to be disclosed under Item 404 of Regulation S-K. During Fiscal 2025, none of our executive officers served
as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of another entity one of whose executive officers served on the CGCN Committee or the Board.
Diversity, Equity and Inclusion
Over the course of Fiscal 2025, the Company has continued its journey towards creating greater equity in its workplace. We have undertaken the below noted steps to help us achieve our diversity, equity and inclusion (“DEI”) vision to: 1) develop a workforce of talent that reflects the communities and consumers we serve, and 2) create an inclusive environment where individuals feel welcomed, respected and valued based on their unique identities and perspectives.
To achieve these goals, we believe in investing in resources and integrating DEI strategies into our business efforts and priorities versus treating them solely as a standalone objective. As part of our initiatives, we have developed a multi-year strategy focused on the following four areas: 1) systems and accountability; 2) creating a culture of inclusion; and 3) increased education and awareness. As part of this work, several of our key activities are highlighted below:
•Continued with the observance of a Canadian company-wide holiday for the Day of Truth and Recognition as a part of Canada’s overall initiatives towards Indigenous Reconciliation.
•Maintained a U.S. company-wide holiday in recognition of both Martin Luther King Day and Juneteenth.
•Advanced a recognition day calendar for historically excluded groups with dates including, among others, Lunar New Year, Juneteenth, World Mental Health Day, Diwali and the Indigenous People’s Day.
•Trained all Human Resource team members on how to manage bias in hiring.
•Increased diversity in our job candidate pipeline by partnering with job boards and with external recruiting firms.
•Integrated tools to mitigate bias into year-end review, our talent review processes and our annual merit program.
We actively seek opportunities to enhance our DEI strategy through a variety of initiatives. We are investing time, resources and leadership engagement to achieve our desired results and achieve meaningful progress.
As of the date of this Form 10-K, the Company has four directors, one of whom is a woman, representing 25% of Board membership. None of the current directors are from any of the other “designated groups” (as defined in the Employment Equity Act (Ontario), namely women, members of visible minorities, Indigenous peoples and persons with disabilities (collectively, the “Designated Groups”). One of the directors is part of the LGBTQ+ community. As of March 31, 2025, two of the Company’s named executive officers, as such term is defined by the SEC and Canadian National Instrument 51-102 - Continuous Disclosure Obligations, are women, each of whom is a visible minority. None of the executive officers are from any of the other Designated Groups. As of March 31, 2025, three of the Company’s seven leadership committee members are women, two of whom are visible minorities. None of the leadership committee members are from any other Designated Groups.
Exercise of Independent Judgment - Conflicts of Interest
The Company is governed by the provisions of the Canada Business Corporations Act (the “CBCA”), pursuant to which a director or officer of the Company must disclose to the Company in writing or by requesting that it be entered in the minutes of meetings of the Board, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with the Company, if the director or officer: (a) is a party to the contract or transaction; (b) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction. Except as otherwise permitted by the CBCA, an interested director cannot vote on any resolution to approve such contract or transaction.
Board and Committee Assessment
The Board is committed to regular assessments of its own effectiveness and that of its committees. The CGCN Committee is responsible for coordinating periodic assessments of the effectiveness of the Board, the Audit Committee and the CGCN Committee. Annually, the CGCN Committee makes recommendations to the Board regarding the process to be followed and the issues to be explored.
The Board addresses items raised both through the assessment process and through informal feedback as warranted. In Fiscal 2025, the Board has continued to expand its exposure to members of management, further enhanced its focus on key topics of strategic concern to the Company, and continued to develop its knowledge of the Company’s business functions through various presentations and discussions from internal business groups. The Board conducted a formal assessment of its own effectiveness and that of its committees during Fiscal 2025 which was completed on March 31, 2025. The Board concluded that committee and Board meetings are efficient and effective.
Orientation and Continuing Education
The CGCN Committee ensures that newly elected directors and committee members receive effective and comprehensive orientation, and that all directors are provided continuing education opportunities, both to maintain and enhance their skills and abilities as directors and, as applicable, committee members, and to ensure their knowledge and understanding of the Company’s business remains current.
Through its onboarding program, new directors are given the opportunity to meet with members of management to review the budget, forecast and strategic plan for the Company, as well as key corporate projects. When circumstances permit, a new director shall participate in a site tour of the Company's operating facilities and of the retail stores carrying our products and receive an overview of the past year of activities, the competitive landscape and insight into distribution channels.
In order to ensure that directors are knowledgeable in subjects related to the discharge of their duties as well as cannabis industry trends, the Company has addressed continuing education in its Corporate Governance Guidelines, which provide, among other things, that each director is expected to be involved in continuing director education on an ongoing basis to enable him or her to better perform his or her duties and to recognize and deal appropriately with issues that arise in connection therewith. The Board has adopted a Continuing Education Policy, which provides that the CGCN Committee will present the directors, from time to time throughout each fiscal year, with a variety of continuing education opportunities. The CGCN Committee may also invite external legal counsel and other external advisors of the Company to present at Board meetings on topics and trends facing companies in the cannabis industry. In addition, directors have access to the Company’s in-house and external legal counsel in the event of any questions or matters relating to their corporate and director responsibilities and to keep themselves current with changes in legislation. In Fiscal 2025, the Board was offered four education sessions, one of which was presented by external advisors and three were presented by various Company business units. These included a session on director fiduciary duties (Canada and the US), changes to the U.S. cannabis regulatory roadmap, and international cannabis landscape and regulatory changes, changes in vaping legislation and risk in Australia, as well as an in-depth review of the innovation pipeline and relevant market competitors of Storz and Bickel. Sessions were held in-person and virtually and the majority were attended by all members of the Board.
These continuing education opportunities are in addition to any presentations by management or other Company employees on the Company’s ongoing operations either at Board meetings or organized separately.
The Board's Continuing Education Policy is administered by the CGCN Committee and reviewed on an annual basis and revised as necessary.
Board Skills Matrix
The following skills matrix sets out skills and expertise that the Board considers important to fulfill its oversight role, the specific skills and expertise of each director and reflects the current strengths of the Board as a whole.
Theresa
Yanofsky
Willy
Kruh
Luc
Mongeau
David
Lazzarato
Canadian Cannabis industry
X
X
X
X
Retail and consumer products industries
X
X
X
X
Public company board experience
X
-
-
X
CPA designation
-
X
-
X
Public company executive experience
-
-
-
X
Corporate governance
-
X
-
X
Executive compensation
X
-
X
X
International business
X
X
X
X
M&A
X
X
X
X
Finance and capital markets
-
X
-
X
Legal and regulatory
-
X
X
X
HR and labor relations
X
X
X
X
Marketing
X
X
X
-
Operations
X
X
X
-
Information technology
X
X
X
X
Director Term Limits
In order to ensure that the interests of directors are fully aligned with those of the Company, directors shall be required to retire from the Board at the age of 75 in accordance with the Company’s Mandatory Director Retirement Age Policy. One year prior to a given director attaining the age of 75, the CGCN Committee will begin the process of identifying a suitable replacement for the retiring director. In exceptional circumstances, the CGCN Committee may recommend to the Board to exempt a director from the application of the Mandatory Director Retirement Age Policy.
Anti-Hedging & Insider Trading Policy
Pursuant to the Company’s Insider Trading Policy, the executive officers and directors are not permitted to enter into any transaction that has the direct or indirect effect of offsetting the economic value (hedging) of any interest in any security of the Company. This includes the purchase of financial instruments such as variable prepaid forward contracts, equity swaps, collars or units of exchange
funds that are designed to hedge or offset a decrease in the market value of securities. To the Company’s knowledge, no executive officer or director of the Company has entered into any such transaction or purchased such a financial instrument.
The Board has also adopted an Insider Trading Policy to ensure, among other things: (i) that persons to whom the policy applies understand their obligations to preserve the confidentiality of undisclosed “Material Information” (as defined in the Insider Trading Policy); (ii) strict compliance by all insiders with all requirements relating to the reporting of insider trading and with respect to trading when in possession of undisclosed “Material Information”; (iii) that individuals subject to scheduled and unscheduled blackout periods adhere to the restrictions on trading as set out in the policy and (iv) preclearance request procedures for Reporting Insiders (as defined in the Insider Trading Policy) and post trading reporting procedures for Reporting Insiders required to file reports under Section 16 of the Exchange Act. The Company seeks to discourage its employees from frequent buying and selling of securities for the purpose of realizing short-term profits and to acquire securities as long term investments only. For greater detail, please refer to the Company’s Insider Trading Policy, which can be found at https://www.canopygrowth.com/investors/governance/articles-bylaws-policies/.
Succession Plan
In accordance with the Corporate Governance Guidelines, the Company has adopted a succession plan in order to lessen disruption and provide direction in the event of an extended absence or departure of the CEO or another member of executive management. By outlining the strategic direction of the Company, integrating strategies and embedding accountability, the succession plan is designed to ensure a smooth transition across the Company. The succession plan includes specific strategies for addressing either a short-term, long-term, or permanent absence of the CEO or other member of the executive management team. It is the responsibility of the CGCN Committee, in consultation with the executive management team and the Chief Human Resources Officer (“CHRO”), to suggest further mechanisms to minimize the impact of an unforeseen absence or vacancy in key roles and to ultimately make a recommendation to the Board to fill the vacancy. Pursuant to the Corporate Governance Guidelines, the CGCN Committee is required to annually review and report to the Board on succession planning, which must include emergency CEO succession, CEO succession in the ordinary course and succession for other members of the senior management team.
Share Ownership Guidelines
For the purpose of strengthening the alignment of the interests of the Company’s executive officers and non-employee directors with those of the other Shareholders, the Company approved written Share Ownership Guidelines (the “Guidelines”) and reviews the Guidelines annually. In accordance with the Guidelines, executive officers as well as certain other members of senior management are expected to hold share interests valued at the multiples of annual base salary by the end of an initial five-year accumulation period, beginning on the later of (i) the date of approval of the Guidelines; or (ii) the date on which the Guidelines become applicable to a given director or officer following their appointment to such position, and to maintain such an ownership level thereafter. The following details of the Guidelines are applicable to the following officer positions held as of March 31, 2025:
Title
Guidelines
Chief Executive Officer
five times base salary
Chief Financial Officer
three times base salary
Chief Legal Officer
three times base salary
Directors are expected to hold share interests valued at two-and-a-half times their annual cash Board retainer by the end of an initial five-year accumulation period and to maintain such an ownership level thereafter. For purposes of the Guidelines, share interests include, among other things, Canopy Shares and restricted stock.
In instances where an officer or director has not achieved the share ownership level established by the Guidelines within the initial five-year accumulation period, the CGCN Committee will review the matter with such officer or director to determine an appropriate remedy in light of the principles of these Guidelines. The CGCN Committee will annually review and assess the adequacy of the Guidelines and adopt any changes it deems necessary.
Communication with the Board
The Company values input from its Shareholders and is respectful of their right to communicate any concerns they may have to leadership of the Company. Considering the above, Shareholders or other interested parties may arrange to communicate directly with members of the Board or committees of the Board, the Chair of the Board, a Chair of a committee of the Board or the Board or committees of the Board as a group by writing to them in the care of the Board of Directors, Canopy Growth Corporation, 1 Hershey Drive, Smiths Falls, ON, K7A 3K8. We will forward all such communications (other than unsolicited advertising materials) to the applicable members of the Board or committees of the Board. The Company reserves the right to edit profanity or other inappropriate language, or to exclude questions that are not pertinent to Board or committee matters or that are otherwise inappropriate.
Involvement in Certain Legal Proceedings/Cease Trade Orders, Bankruptcies, Penalties or Sanctions
Except as disclosed below:
1.No director is, as at the date of this Form 10-K, or has been within ten years before the date of this Form 10-K, a director, chief executive officer or chief financial officer of any company (including the Company) that:
a.was subject to an order that was issued while the director was acting in the capacity as director, chief executive officer or chief financial officer; or
b.was subject to an order that was issued after the director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer
For the purposes hereof, the term “order” means: (a) a cease trade order; (b) an order similar to a cease trade order; or (c) an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days.
2.No director:
a.is, as at the date of this Form 10-K, or has been within the 10 years before the date of this Form 10-K, a director or executive officer of any company (including the Company) that, while such person was acting in such capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver-manager or trustee appointed to hold its assets; or
b.has, within 10 years before the date of this Form 10-K, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director.
3.No director has been subject to:
a.any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
b.any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a director.
On May 10, 2023, the Company announced that as a result of preliminary findings from its internal review, the Company’s (i) audited consolidated financial statements for the fiscal year ended March 31, 2022, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (the “2022 10-K”), and (ii) unaudited consolidated financial statements for the quarterly periods ended June 30, 2022, September 30, 2022 and December 31, 2022, included in the Company’s Quarterly Reports on Form 10- Q for such quarterly periods (collectively, the “Form 10-Qs” and together with the 2022 10-K, the “Prior Financial Statements”), should no longer be relied upon because of certain material misstatements contained in the Prior Financial Statements (the “Default”). On June 2, 2023, the Ontario Securities Commission issued a management cease trade order against David Klein, the former CEO and Judy Hong, the CFO, as a result of the Default. The management cease trade order was lifted on June 27, 2023 following the filing of the Company’s annual reports on Form 10-K for the fiscal years ended March 31, 2023 and 2022, which contained the Company’s audited financial statements for the fiscal years ended March 31, 2023 and 2022, as well as restatements of the Prior Financial Statements.
Since August 2019, Ms. Yanofsky has served as a member of the board of directors of Reitmans. On May 19, 2020, Reitmans filed a petition with the Québec Superior Court for the issuance of, and was granted on the same day, an initial order (the “Initial Order”) seeking the protection and the remedies offered by the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C 36 (the “CCAA”). Since its initial filing, Reitmans obtained extensions of the Initial Order until May 28, 2021. On May 25, 2021, the Québec Superior Court issued an extension of the stay of proceedings pursuant to the CCAA until September 28, 2021. Reitmans has elected to reduce the amount of the interim debtor-in-possession financing entered into in connection with the CCAA proceedings from $60.0 million to C$30.0 million. On January 4, 2022, Reitmans obtained a sanction order from the Québec Superior Court for the Company’s plan of arrangement under the CCAA (the “Plan of Arrangement”). Under the Plan of Arrangement, Reitmans distributed an aggregate amount of C$95 million (the “Reitmans Settlement Amount”) to its creditors in full and final settlement of all claims affected by the Plan of Arrangement, including an initial payment of up to C$20,000 per claim plus, if applicable, a pro rata distribution of the remaining balance of the Reitmans Settlement Amount.
Except as set forth above, we are not aware of any of our directors or executive officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation S-K.
EXECUTIVE OFFICERS
The following sets forth certain information regarding our executive officers:
Name
Age (1)
Position
Luc Mongeau
Director and Chief Executive Officer
Judy Hong
Chief Financial Officer
Christelle Gedeon
Chief Legal Officer
(1) Ages as of May 1, 2025
Luc Mongeau. For information regarding Mr. Mongeau, see “Board of Directors” above.
Judy Hong serves as Canopy Growth’s CFO. Having joined the Company in December 2019 to lead Canopy Growth’s Investor Relations. Ms. Hong was appointed as interim CFO on November 19, 2021 and promoted to CFO on April 1, 2022. Ms. Hong’s deep knowledge of the CPG sector has been integral in shaping Canopy Growth’s overall commercial strategy and guiding the Company’s engagement with the financial community.
Ms. Hong’s financial and capital markets experience was built during her over 20 years’ experience at Goldman Sachs & Co. Ms. Hong’s roles at Goldman Sachs & Co included serving as a Managing Director, in the Global Investment Research Division, from 2013 until her departure in December 2019. During this time, Ms. Hong covered the Beverage and Tobacco sectors in the Consumer Products and Retail team within Global Investment Research and has been ranked in The Wall Street Journal’s “Best on the Street”. Ms. Hong earned an MBA from New York University’s Stern School of Business and a BS in Communications from Cornell University. From September 2014-January 2020, Ms. Hong served as a Treasurer on the board of Bottomless Closet, a non-profit organization based in New York.
Christelle Gedeon serves as Canopy Growth’s Chief Legal Officer (“CLO”) and Corporate Secretary. Dr. Gedeon joined the Company in August 2022, and oversees the Company’s legal group in addition to all government affairs, regulatory and quality matters as well as Corporate Development, Business Intelligence and Canopy Growth’s strategy. Her role has included ongoing advocacy with the Canadian government to enhance critical elements of the regulatory framework for cannabis to ensure the sector’s long-term growth and sustainability.
Dr. Gedeon has been instrumental to the Company’s profitability strategy including leading the development and announcement of Canopy USA, the Company’s novel approach to realizing the opportunity presented by the U.S. THC market in advance of federal permissibility.
Prior to joining Canopy Growth, Dr. Gedeon served in a number of senior leadership roles including Chief Legal Officer and Corporate Secretary at Aphria, Inc. from July 2018 to August 2021 and Chief Legal Officer of The Metals Company, a deep-sea mining company, from August 2021 to August 2022. Prior to joining Aphria, Dr. Gedeon was a Partner at Fasken Martineau DuMoulin LLP, a leading Canadian law firm. Through these roles, she developed extensive experience in the cannabis industry and in the management of complex regulatory structures, intellectual property management, corporate governance, government relations, and strategic acquisitions, all capabilities that are critical to advancing Canopy Growth’s strategy for North American leadership.
An accomplished commercial lawyer and strategist with more than a decade of experience, Dr. Gedeon played an instrumental role in the completion of more than 50 mergers, acquisitions, and strategic investments during her tenure. Additionally, she has been named one of Canada’s Law Department Leaders of the Year, included as part of the Legal 500 GC 2020 Powerlist, and named to the 2019 Canadian General Counsel Awards Tomorrow’s Leader. Dr. Gedeon holds an LL.B/B.C.L. from McGill University, is a member in good standing of the Ontario and Quebec bars, and also a registered trademark agent in addition to holding a Ph.D. in Clinical Pharmacology and Toxicology from the University of Toronto.
Ethical Business Conduct
The Board is responsible for promoting an ethical business culture and fostering an environment that places an emphasis on compliance. The Board monitors compliance, including through receipt by the Audit Committee, of reports of unethical behavior.
The Board has adopted a Code of Business Conduct and Ethics (the “Code”) for directors, officers (including our CEO, CFO and principal accounting officer), employees and applicable third parties conducting work for or on behalf of the Company. The Code may be accessed on the Company’s website at www.canopygrowth.com/code-of-business-conduct-and-ethics/. We intend to post on our website all disclosures that are required by law or Nasdaq Rules concerning any amendments to, or waivers from, any provision of the Code.
Directors, officers, employees and consultants are responsible for reporting situations of non-compliance with respect to breaches of law, regulation or company policy, including the Code, or other concerns related to ethics and business conduct of which they become aware to the Chair of the Board, CEO, Corporate Secretary or outside legal counsel or in accordance with the Company’s Whistleblower Policy. If any person chooses to remain anonymous, every effort is made by the Company to respect such a request.
The Company has a strict no retaliation policy for anyone who reports a violation in good faith, regardless of the accuracy of such a report. Furthermore, any allegation of reprisal is fully investigated by the Company.
The Board has also adopted a Whistleblower Protection Policy which establishes procedures for: (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, auditing and other financial matters (collectively, “Accounting Irregularities”), any illegal acts or violations of the Code or any other policy of the Company, or applicable laws and regulations (collectively, “Wrongdoings”); and (ii) the submission by employees, officers and directors of the Company, on a confidential and anonymous basis, of concerns regarding any Accounting Irregularities and Wrongdoings.
The Board has also adopted a Disclosure Policy to ensure, among other things: (i) that the Company complies with timely disclosure obligations under securities laws and the regulations of the stock exchanges on which the Company’s securities are listed; (ii) that the Company prevents material misrepresentations made to the public; (iii) that the Company prevents the selective disclosure of “material information” (as defined in the Disclosure Policy); (iv) that prompt corrected disclosure is made by the Company, if material information is undisclosed or if material misrepresentations are known to have been made publicly; and (v) that all communications to the public are informative, timely, factual, balanced, accurate and broadly disseminated.
The Board has also adopted an Insider Trading Policy as discussed above under “-Anti-Hedging & Insider Trading Policy.”
The Board has also continued to maintain and has updated existing policies after completing a thorough review of its corporate governance practices. In Fiscal 2025, no new policies were adopted by the Board. The following table outlines recent updates to our current policies during Fiscal 2025:
Policy
Description
Form 8-K Disclosure Compliance Policy
An updated version of the policy was adopted by the Board that refined language regarding financial disclosure information.
Anti-Bribery and Anti-Corruption Policy
An updated version of the policy was adopted by the Board that clarified a consequence for failure to comply with the policy, refined the applicability of the policy to Business Associates (as such term is defined in the Clawback Policy), and added language refining employee obligations under the policy and identified the CLO as responsible for enforcement of the policy within the Company.
Clawback Policy
An updated version of the policy was adopted by the Board that included a transition period in the event the Company changes its fiscal year and clarified language regarding the method of recouping incentive-based compensation and other recoupment rights, including providing discretion for the Board on enforcement of the policy. This policy is applicable to executives, officers and to senior management as well as other persons who perform policy-making functions of the Company.
Code of Business Conduct and Ethics
An updated version of the Code of Business Conduct and Ethics was adopted by the Board to refine existing language, including among other things, clarifications regarding the procedure in a situation where further guidance is required.
Disclosure Policy
An updated version of the policy was adopted by the Board that added language regarding company-controlled social media, clarified language on authorized spokespersons, and refined language on disclosures and communications made in the necessary course of business.
Insider Trading Policy
An updated version of the Insider Trading Policy was adopted by the Board that further defined securities and exemptions to trading prohibitions, clarified pre-clearance request procedures for Reporting Insiders (as such term defined in the Insider Trading Policy), and further refined post trading reporting procedures for Reporting Insiders required to file reports under Section 16 of the Exchange Act.
Regulation FD Policy
An updated version of the Regulation FD Policy was adopted by the Board that added a cybersecurity incident to the scope of the policy.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
COMPENSATION DISCUSSION AND ANALYSIS
Throughout this Compensation Discussion and Analysis (“CD&A”), we describe our executive compensation philosophy, program and decisions made in Fiscal 2025 for our named executive officers, as such term is defined by the SEC and Canadian National Instrument 51-102 - Continuous Disclosure Obligations (“NEOs”). For a complete understanding of the executive
compensation program, this disclosure should be read in conjunction with the Summary Compensation Table and other executive compensation-related disclosures included in this Form 10-K.
For Fiscal 2025, the Company’s NEOs included the CEO, CFO, CLO, and Former CEO, as follows:
Name
Title
Luc Mongeau
Chief Executive Officer (effective January 6, 2025)
Judy Hong
Chief Financial Officer
Christelle Gedeon
Chief Legal Officer
David Klein
Special Advisor to the Board (January 6, 2025 through August 31, 2025) & Former Chief Executive Officer (until January 6, 2025)
Fiscal 2025 Performance Highlights
Fiscal 2025 built on the progress further advancing its path to profitability, strengthening its balance sheet and refining strategy and organizational structure to position Canopy Growth for sustainable growth and profitability.
Highlights for Fiscal 2025 include:
Refined Strategy and Organizational Structure post a Smooth CEO Transition
•After a comprehensive search, Canopy Growth’s Board named Mr. Luc Mongeau as new CEO. Mr. Mongeau is an accomplished senior leader with more than 25 years of CPG experience. Prior to being appointed CEO, Mr. Mongeau had been actively engaged with the Board, first as an observer of the Board before assuming the role as a Board member in February of 2024.
•Following a business review led by Mr. Mongeau, Canopy Growth has implemented a number of initiatives to improve profitability, sharpen commercial execution, and strengthen operational performance. These initiatives include: (1) Positioning Global Medical platform for accelerated growth; (2) Tightening focus in Canada adult-use to improve execution and profitability; (3) Broadening Global Operations function to support commercial priorities; and (4) Further reducing costs across all areas of businesses.
Strengthened Financial Performance and the Balance Sheet
•Benefiting from cost reduction actions taken to date, increased Consolidated Gross Margins in Fiscal 2025 and Canada Cannabis Gross Margins in Fiscal 2025 by 300 basis points (“bps”) and 700 bps points, respectively, versus Fiscal 2024.
•Excluding impact of divested businesses, Selling, General & Administrative (“SG&A”) expenses in Fiscal 2025 reduced by 18% compared to Fiscal 2024 (excluding the impact of restructured businesses).
•Total debt further reduced by C$293 million or 49% in Fiscal 2025 compared to Fiscal 2024, and the Company extended the maturity of its senior secured term loan to September 2027.
•Benefiting from reduction in overall debt balances in Fiscal 2025, annual interest payments have been reduced by approximately $33 million.
Growth in Global Medical Cannabis
•Canada medical cannabis net revenue in Fiscal 2025 increased 16% compared to Fiscal 2024, driven by high-quality engagement and customer care of insured patients, as well as expanding the assortment of products offered to our customers through spectrumtherapeutics.com.
•The Company established a single Global Medical cannabis business by combining operations across Canada, Europe, Australia, and New Zealand, positioning Global Medical business for accelerated growth.
Canadian Adult-Use Business Advancement
•Canadian adult-use cannabis business implemented a new hybrid sales model during first half of Fiscal 2025 with the mission to enhance distribution of key brands within our portfolio.
•Launched Claybourne™ infused pre-rolls across Canada in the third quarter of Fiscal 2025. Claybourne™ has risen to #2 market share in the infused pre-roll product category in Alberta, #3 in Ontario and #3 nationally (source: calculated using the Company's internal proprietary market analysis tool that applies sales data supplied by third-party providers and government agencies, last 13 weeks ended April 27, 2025).
•Continued efforts in Fiscal 2025 to elevate the quality and variety of the Company's Tweed and 7ACRES flower and pre-roll joint product offerings.
Continued leadership in vaporization via Storz & Bickel
•Storz & Bickel delivered net revenue in Fiscal 2025 of C$73 million, representing a 4% increase over Fiscal 2024 driven by a full-year of Venty portable vaporizer sales.
•Consumer demand for the high performance Venty portable vaporizer, which launched in the second half of Fiscal 2024, continued to be strong in Fiscal 2025. The Venty portable vaporizer features highly adjustable airflow, precise temperature control and the fastest heat-up-time of any Storz & Bickel device.
Canopy USA completed acquisitions of Acreage, Wana and majority ownership of Jetty
•Canopy USA completed acquisition of 100% Wana, 76% in Jetty and 100% in Acreage during the course of Fiscal 2025.
•Following the acquisition of Acreage, full integration is underway under a new leadership team at Canopy USA, led by Brooks Jorgensen, an accomplished executive in high growth industries, including cannabis, wine and spirits.
CEO Transition
Leadership Transition Overview
Luc Mongeau's appointment as CEO of Canopy Growth was officially announced on November 26, 2024, marking the culmination of a thorough and strategic search process to identify a successor to David Klein. Mr. Klein's planned retirement, announced in August 2024, prompted the Board to initiate the selection process. The Board reaffirmed its confidence in the Company's direction, selecting Mr. Mongeau as the ideal successor due to his extensive leadership experience, particularly within the consumer-packaged goods (“CPG”) industry. Mr. Mongeau’s appointment as CEO became effective on January 6, 2025.
Mr. Mongeau brings more than 25 years of senior leadership experience, having previously served as CEO of a leading North American e-commerce provider in the furniture sector and held prominent roles as President of Weston Foods and Mars Petcare North America. His career is characterized by a strong track record of operational excellence, business transformation, and profitability enhancement. Mr. Mongeau's involvement with Canopy Growth dates back to early 2023, when he first joined as a Board observer, later becoming a Board member in February 2024. This prior engagement has allowed Mr. Mongeau to familiarize himself with Canopy Growth's strategy and operations, positioning him to seamlessly step into the CEO role.
Mr. Klein's departure was voluntary, as he transitions into retirement. Under Mr. Klein’s leadership, Canopy Growth underwent significant transformation, implementing an asset-light business model and launching Canopy USA. Beginning January 6, 2025, and continuing through August 31, 2025, Mr. Klein serves the Board in a Special Advisor capacity, where he remains available to provide strategic guidance and mentorship to Mr. Mongeau on an as-needed basis. While no longer involved in the day-to-day operations of the Company, Mr. Klein’s engagement during this period is intended to support a smooth leadership transition and provide continuity on key strategic matters when required.
Strategic Rational for CEO Succession
The selection of Luc Mongeau as CEO reflects a careful alignment with Canopy Growth's strategic priorities. Mr. Mongeau’s expertise in leading complex organizations through transformation, particularly in CPG and digital commerce, makes him well-suited to drive Canopy Growth's continued expansion and focus on profitability. His leadership roles at eSolutions Furniture Inc., Weston Foods, and Mars Petcare North America demonstrate his ability to scale businesses, manage large teams, and execute strategic initiatives that drive operational efficiency.
Mr. Mongeau's priorities include leveraging Canopy Growth’s position in the global cannabis market focusing on sustainable profitability in the global medical cannabis market as well as the Canadian adult use market. The leadership transition was part of a planned succession, not a broader organizational restructuring.
Compensation Adjustments & Philosophy
Luc Mongeau’s compensation package was designed to reflect both market benchmarks and the unique dynamics of the cannabis industry, which remains volatile. Mr. Mongeau’s total compensation consists of a base salary of C$975,000, a short-term incentive (“STI”) bonus of 100% of his earned and received base salary (the “Mongeau Target Amount”), and a long-term incentive (“LTI”) award of 300% of his base salary, with 50% in stock options (“Options”) and 50% in restricted stock units (“RSUs”). For Fiscal 2025, Mr. Mongeau’s Target STI ranged from 0-2x the Target Award based on the achievement of certain mutually developed financial/operational/strategic and individual performance objectives, which have been approved by the CGCN Committee. For Fiscal 2025, Mr. Mongeau’s STI amount was pro-rated from his start date through the end of Fiscal 2025. While this compensation deviates slightly from the prior CEO's compensation package, it is reflective of the new organizational size, while maintaining a focus on aligning pay with performance.
As part of the CEO transition, Mr. Mongeau received a sign-on grant of 225,000 Options and 50,000 RSUs on February 11, 2025, following the end of the Company’s quarterly financial blackout period. This grant is designed to incentivize long-term value creation and align Mr. Mongeau’s interests with those of Shareholders. Such grant is separate from, and in addition to, Mr. Mongeau’s annual LTI award, which will be granted at the same time as LTI awards to our other executive officers and employees.
D. Klein (Former CEO) Compensation Updates
For Fiscal 2025, prior to the retirement decision, Mr. Klein approached the CGCN Committee with recommendations to align his compensation package to reflect the Company’s size, scale and market capitalization. These adjustments reflect ongoing efforts to optimize executive compensation structures that are in line with corporate objectives, market conditions, and Shareholder interests.
Effective June 8, 2024, Mr. Klein's base salary was adjusted from US$975,000 to US$750,000 aligning Mr. Klein’s base salary to the 50th percentile of our U.S. based peer population. Mr. Klein’s annual STI target of 125% and LTI target of 400% will be calculated against his new base salary. This overall reduction in compensation aligns with the Company’s compensation philosophy disclosed above and is aimed at ensuring competitiveness in the executive compensation landscape while prudently managing cash costs.
In Fiscal 2025, in addition to the LTI award that Mr. Klein was entitled to under the Klein Agreement (as defined below), Mr. Klein received a one-time equity grant valued at US$500,000 divided equally between Options and RSUs, with both the Options vesting in full one year from the grant date on June 10, 2025, while the RSUs vest in full on June 15, 2025, in alignment with the Company’s standard RSU vesting schedule.
As announced on August 16, 2024, Mr. Klein intended to retire at the end of the fiscal year but remained as CEO until Mr. Mongeau commenced serving as CEO on January 6, 2025. Upon commencement of Mr. Mongeau’s service as CEO, Mr. Klein transitioned into the title of Special Advisor to the Board. Mr. Klein continued to receive his compensation entitlements through March 31, 2025. During the period of April 1, 2025 - August 31, 2025, Mr. Klein will be paid a monthly stipend of US$5,000. Upon retirement on August 31, 2025, all outstanding equity awards granted to Mr. Klein by the Company will be forfeited in accordance with the terms of the Omnibus Incentive Plan.
Fiscal 2025 Named Executive Officer Retention Awards
As previously disclosed, on August 19, 2024, the Board approved cash retention awards for Ms. Hong, Chief Financial Officer and Dr. Gedeon, Chief Legal Officer, in the amount of US$150,000 each. These retention awards are payable on October 1, 2025, and are intended to ensure leadership continuity and organizational stability during the Company’s CEO transition. These awards reflect the Board’s recognition of the critical contributions of both executives in guiding the Company through a period of strategic and operational change.
Board & CGCN Committee Transition Oversight
The Board and the CGCN Committee played an integral role in the CEO succession process, overseeing the transition to ensure that it aligned with Canopy Growth's long-term strategic goals. The Board regularly reviews the Company’s leadership pipeline and talent development to ensure readiness for succession in key executive roles.
In partnership with an external executive search firm, the Board and the CGCN Committee established clear selection criteria, evaluating both internal and external candidates against the Company’s strategic objectives. This process included detailed interviews, assessments, and benchmarking to ensure the chosen candidate had the necessary leadership capabilities to lead Canopy Growth through its next phase of growth.
The CGCN Committee, with input from third-party external compensation consultant, Mercer, designed a market-competitive compensation package for Mr. Mongeau, ensuring it was aligned with both the Company’s strategic priorities and Shareholder expectations. This included a balanced mix of base salary, performance-based short-term incentives, and equity compensation to encourage long-term growth.
The Board and the CGCN Committee remain deeply engaged in the transition process, working closely with Mr. Mongeau to ensure alignment with the Company’s performance goals and strategic objectives. They continue to monitor Mr. Mongeau’s integration into the role, ensuring that Shareholder interests are upheld and leadership stability is maintained throughout the transition period.
Objectives and General Principles of the Compensation Program
The Company’s compensation philosophy is based on attracting, retaining and motivating employees with incentives aligned with corporate strategic objectives and the interests of Shareholders, while effectively managing risk and broader stakeholder
considerations. The Company believes that an effective compensation program, founded on the following principles, is key to building long-term shareholder value:
Attracting, Retaining and Motivating Talent in Key Markets
Alignment with Corporate Strategic Objectives
Alignment with Shareholders’ Interests
Effective Risk Management
Total compensation, inclusive of base, short-term, and long-term incentives, are benchmarked against talent in markets in which the Company competes for talent, both inside and outside the Company’s industry. The approach seeks to ensure that the Company’s talent acquisition efforts remain in line with market standard and practice while the sector seeks to balance unique interplay of the sector being a high-growth sector but maturing in certain markets where the sector is experiencing significant market changes.
Awards are linked to the Company’s short-term and long-term strategic objectives, and pay programs are aligned with our pay-for-performance philosophy.
A significant component of total compensation consists of equity-based compensation that is “at risk”, where executives are rewarded for contributing to a higher return on Shareholders’ investment and are equally negatively impacted by delivering lower Shareholder returns. Together with our minimum Share Ownership Policy, the use of equity-based compensation ensures that employees are material owners of the Company’s equity and are aligned with the interests of Shareholders.
The compensation structure encourages the Company’s management to take responsible risks and to manage those risks appropriately through the use of a balanced scorecard which rewards employees to balance financial performance and individual achievement. More details regarding risk management can be found within “Executive Compensation Risk Management”.
Target Pay Positioning
For NEOs, total target direct compensation is set by reference to the 50th percentile of relevant publicly-traded peers, weighted more heavily towards long-term equity-based compensation. Positioning will depend upon the role, responsibilities, experience, and contributions of each NEO, as well as the comparability to the peer incumbents, which may deviate slightly from the 50th percentile based on informed judgment. Recognizing that the Company is a North American organization with senior executives located in both Canada and the United States, the dual peer group approach (the Canadian Consumer-Focused Group and the U.S. CPG and Pharmaceutical Group) is used for benchmarking and target setting purposes to reflect competitive pay levels in both jurisdictions, as appropriate.
Annual Oversight of Compensation
Role of the CGCN Committee
The CGCN Committee is responsible for overseeing executive compensation, including the annual review and approval of NEO compensation. For CEO compensation, the CGCN Committee works with its independent compensation advisor, Mercer, and is supported by the Company’s CHRO, to develop and approve compensation decisions. For all other NEOs and senior officers, the CGCN Committee reviews and approves recommendations provided by the CEO and CHRO. The CGCN Committee also reviews various aspects of the Company’s compensation programs and makes determinations on changes to incentive plan design, as appropriate. The process and timeline of the CGCN Committee’s annual activities are noted below.
Fiscal 2025 Policies & Practices Related to the Grant of Certain Equity Awards
At its regularly scheduled annual meeting, the CGCN Committee approved equity awards for each individual executive officer, in alignment with their respective employment agreements. In accordance with our Omnibus Incentive Plan, these annual equity awards are issued upon the exit of our fourth quarter financial blackout period, which occurs two trading days after the annual earnings call. The valuation of these awards are calculated based upon the fair market value definition as prescribed in our Omnibus Incentive Plan. The CGCN Committee does not grant equity awards in anticipation of the release of material nonpublic information (“MNPI”), and the Company does not time the release of MNPI based upon grant dates of equity. In the event MNPI becomes known to the CGCN Committee before granting an equity award, the CGCN Committee will consider such information and use its business judgment to determine whether to delay the grant of equity to avoid any appearance of impropriety.
Role of the Compensation Consultant
The CGCN Committee continued their engagement of Mercer, to provide independent advice on executive compensation, including the alignment of Canopy Growth’s compensation policies and practices with its executive compensation philosophy and related governance matters. The nature and scope of services provided by Mercer to the CGCN Committee during Fiscal 2025 included the review, support, and advice on:
•The Company’s compensation philosophy
•The review of Canopy Growth’s peer group
•Compensation levels for Canopy Growth’s NEOs and other executive roles and the Board
•Short-Term Incentive Plan metrics, weightings, and target setting
•Long-Term Incentive Plan mix of vehicles and related performance metrics
•Compensation disclosure and other governance matters
•Management-prepared materials and recommendations in advance of CGCN Committee meetings
•Attendance at CGCN Committee meetings as requested
The CGCN Committee considers, among other information, the advice provided by Mercer in making its executive compensation decisions; however, it may or may not follow Mercer’s advice in making such decisions.
Any other services, not related to executive or director compensation, and recommendations provided by Mercer or its affiliates to the Company require approval from the Chair of the CGCN Committee. The CGCN Committee has considered the independence of Mercer and has not identified any conflicts of interests regarding their services or employees.
Role of CEO and CHRO
The CEO and CHRO support the CGCN Committee in fulfilling its executive compensation oversight responsibilities. The CEO and CHRO provide recommendations to the CGCN Committee on compensation decisions for all NEOs and senior executive officers, other than the CEO. The CHRO also provides information, analysis, and guidance to the CGCN Committee and responds to questions to assist in the CGCN Committee’s evaluation of compensation programs and decisions.
Components of Compensation & Key Decisions for Fiscal Year 2025
Summary of Compensation Elements
The Company’s compensation program applies to all employees. However, the component mix varies by role within the Company, and may consist of components of the following:
Pay Element
Description & Objective
Fixed
Annual
Base Salary
•Fixed component of executive pay, used to determine other elements of compensation and benefits
•Provides predictable compensation for day-to-day services
Performance-Based
Annual
Short-Term Incentives
•Annual cash bonus awarded based on the achievement of defined financial and non-financial annual objectives
•Varies depending on the level of actual performance to incentivize the achievement of short-term objectives
Long-Term
Stock Options
•Provided annually and intended to align recipient with shareholder value creation, as well as to drive retention of key employees
•No value to recipient unless shareholder value created from time of grant
Share-based Awards
•Provided annually to align recipient with shareholder value creation, incentivize achievement of defined long-term objectives, and to drive retention of key employees
•Previously granted performance share units (“PSUs”) cliff vest on the third anniversary of grant based on continued service and achievement of “Relative Total Shareholder Return” (“Relative TSR”) and Adjusted EBITDA(1) (For more details, please see: “Long Term Incentives”)
Pay Element
Description & Objective
•The last PSU grant was awarded in Fiscal 2023 and will vest in 2025. No further PSUs have been awarded by the CGCN Committee.
•RSUs vest equally over three years from the date of grant based on continued service
Other
Annual
Benefits
•Provided annually as a fixed component of executive benefits
•Benefit coverage offered includes group health care, dental, vision, health spending account, Flexible Spending Account (FSA), life insurance, accidental death and dismemberment insurance, and short- and long-term disability coverage. Coverage varies by the country in which the employee resides
•Eligible to participate in our current 401(k) or Canadian Group Retirement Savings Plan
•Annual product allowance
•CEO is entitled to a car allowance pursuant to their employment agreement
(1) Adjusted EBITDA is calculated as the reported net loss, adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition-related costs. Adjusted EBITDA is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies.
A significant portion of our NEOs’ compensation is variable and linked to performance against short-term financial and individual objectives, as well as Share price performance and long-term financial objectives. The following charts illustrate our CEO’s Fiscal 2024 target total direct compensation (“TDC”) mix.
Base Salary
Base salary forms the foundation for attracting and retaining top talent while ensuring competitiveness with the market. Base salaries are determined based on market rates for similar positions and each executive’s expected contribution and past performance.
For all NEOs other than the CEO, the CEO and the CHRO develop salary recommendations based on: (i) approved benchmarking provided by the Company’s independent compensation consultant (Mercer) and (ii) market survey data. CEO base salary decisions are developed by the CGCN Committee with input from Mercer and the CHRO, and are informed by the approved benchmarking data. All senior executive base salaries, including the salary of the CEO, are reviewed and approved by the CGCN Committee.
As outlined above under the heading, “D. Klein (Former CEO) Compensation Updates”, effective June 8, 2024, Mr. Klein's base salary was modified from US$975,000 to US$750,000, in efforts to align his compensation package to reflect the Company’s size, scale and market capitalization.
Upon the effective date of his appointment as CEO, Mr. Mongeau’s base salary was set at C$975,000, which is in line with the reduced base salary of his predecessor, Mr. Klein. This reflects continued efforts to align executive compensation with market benchmarks while ensuring competitive pay within the cannabis and CPG sectors.
For Fiscal 2025, the CGCN Committee decided upon 0% base pay adjustments for the remaining NEOs. This decision reflected the Company’s continued focus on aligning executive compensation with broader financial discipline.
The following table illustrates base salary details for our NEOs throughout Fiscal 2025:
Individual
Local
Currency
Fiscal 2024 Annual Base Salary
Fiscal 2025 Annual Base Salary(1)
% Change
Luc Mongeau
C$
-
C$975,000
-
Judy Hong
US$
US$415,000
US$415,000
-
Christelle Gedeon
C$
C$535,000
C$535,000
-
David Klein
US$
US$975,000
US$750,000(2)
(23%)
(1) For NEOs compensated in Canadian dollars, base salary is presented in C$. U.S. dollar equivalents can be converted using the average exchange rate of C$1.00 = US$0.6951 for Fiscal 2025, and C$1.00 = US$0.7386 for Fiscal 2024, as set forth above under “Executive Compensation-Currency Conversion” in this Item 11.
(2) Effective June 8, 2024, Mr. Klein’s base salary was adjusted from US$975,000 to US$750,000, aligning with the 50th percentile of our U.S.-based peer group. This adjustment was disclosed in the Fiscal 2024 CD&A. Effective April 1, 2025, Mr. Klein’s salary has decreased to US$5,000 per month (US$60,000 annually) as part of his employment agreement through August 31, 2025.
Short-Term Incentives
All NEOs who are employed by the Company at the end of Fiscal 2025 participate in the Company’s short-term incentive plan (the “STIP”), which provides an annual cash incentive based on performance relative to defined financial and individual objectives. The STIP is a leveraged bonus design, where executives may earn between 0% and 200% of the target bonus opportunity (“target”), which is defined as a percentage of base salary for each executive.
Plan Design
For our NEOs, the STIP is linked to a combination of corporate, financial and individual objectives and is structured as follows:
Base Salary
($)
X
STIP Target
(% of salary)
X
Performance Score
(0 - 200%)
=
STIP Payout
($)
Fiscal 2025 Target Award Levels
Under the STIP, and pursuant to their respective employment agreements, each NEO has a target award expressed as a percentage of base salary. Payouts are based on the achievement of overall Company performance relative to pre-established qualitative and quantitative objectives. NEOs may receive no payout for performance at or below threshold level, and a maximum payout of 200% of target for performance at or above maximum objectives.
As part of the leadership transition, the target short-term incentive opportunity for the CEO position has been reduced from 125% to 100% of base salary. This adjustment reflects a more conservative pay approach in response to the Company’s evolving business environment and increased focus on profitability. This modification underscores Canopy Growth’s commitment to aligning executive compensation with the new business size, managing costs, and maintaining a competitive yet disciplined incentive structure.
The threshold, target, and maximum awards for our NEOs are as follows:
Individual
Below Threshold (% of salary)
Target (% of salary)
Maximum (% of salary)
Luc Mongeau | CEO
0%
100%
200%
Judy Hong | CFO
0%
75%
150%
Christelle Gedeon | CLO
0%
75%
150%
David Klein | Former CEO
0%
125%
250%
Fiscal 2025 STIP Performance Criteria & Results
Per the Company’s STIP initially adopted by the Board for Fiscal 2021, the performance of the Company’s executive leadership team, including the NEOs, was assessed based on predetermined criteria that were established and approved by the CGCN Committee at the beginning of the fiscal year. For Fiscal 2025, all NEOs were assessed against corporate and financial objectives, which were recommended and approved by the CGCN Committee. These objectives were weighted as outlined in the table below.
In Fiscal Year 2025, the CGCN Committee approved a performance-based bonus for our NEOs, totaling 77.6% of the target. This outcome reflects both underperformance against financial metrics and superior performance on corporate objectives. Specifically, the Company achieved 17.6% of the Revenue target and 29.3% of the Adjusted EBITDA target, which were impacted by broader industry headwinds and continued market volatility. Despite these financial challenges, the Company delivered on key corporate priorities.
The corporate objectives established and certified by the CGCN Committee as having been achieved at a superior level which included cash management, new product development, and sourcing of product internationally. These priorities were designed to drive long-term sustainability and align operations with the Company’s strategic plan. The executive teams’ performance in these areas was critical to maintaining operational discipline, fostering innovation, and positioning the Company for future growth.
Although the financial metrics fell below target, the approved STIP payout reflects a balanced view of performance across all metrics, recognizes the executive team’s strategic contributions during a complex fiscal year, and supports ongoing talent retention and alignment with shareholder interests.
Fiscal 2025
Canopy Growth
Adjusted EBITDA(1)
Canopy Growth
Revenue
Other Corporate
Objectives
Total
Objective Weighting
45%
25%
30%
100%
Achievement Against Applicable Metric Based on Adjusted Financial Performance Metrics
29.3%
17.6%
200%
-
Weight X Achievement
13.2%
4.4%
60%
77.6%
(1) Adjusted EBITDA is calculated as the reported net loss, adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition-related costs. Adjusted EBITDA is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies.
Fiscal 2025 STIP Payouts
For Fiscal 2025, the CGCN Committee approved the following cash bonuses to the NEOs based on actual performance relative to the defined STIP objectives:
Individual
Target
(% of salary)
Payout Factor
(% of target)
Bonus Payout
(USD) (1)
Luc Mongeau | CEO
100%
77.6%
$122,460(2)
Judy Hong | CFO
75%
77.6%
$241,505
Christelle Gedeon | CLO
75%
77.6%
$216,411
David Klein | Former CEO
125%
77.6%
$768,082
(1) Fiscal 2025 STIP payments and can be converted to C$ using the average exchange rate of C$1.00 = US$0.6951, as set forth above under “Executive Compensation-Currency Conversion” in this Item 11. These payments are expected to be made by July 11, 2025.
(2) Mr. Mongeau’s Fiscal 2025 annual bonus has been prorated based on his hire date of January 6, 2025.
Long Term Incentives
Summary of Principal Terms of Long-Term Incentive Plan (“LTIP”) Instruments
The table below summarizes the principal terms of our Options and RSUs for Fiscal 2025.
RSUs
Options
Purpose
•RSUs represent compensation to incentivize executives to achieve long-term objectives of the Company, to retain executives, as well as to align executives’ interests with those of Shareholders
•Options represent compensation that is intended to align executives’ interests with those of Shareholders by providing executives with the opportunity to become Shareholders
•These are considered entirely “at risk” because the value of Options rises (and may fall) in conjunction with the market price of Shares where the change in Share prices is deemed an indirect measure of overall performance by the Company and the execution on key performance metrics by the Company’s employees and executives
Form of Award
•RSUs represent notional Shares that track the value of the Canopy Shares as of the vesting date,
•A holder of vested Options may acquire Canopy Shares at the exercise price established on the date of grant, which is equal to the closing price of the
RSUs
Options
based on the TSX in prior years and, beginning in Fiscal 2025, based on the Nasdaq
Shares on the applicable stock exchange on which the Shares traded as of the date of grant
•Beginning in Fiscal 2025, newly granted Options are priced and tracked based on the closing price of the Shares on the Nasdaq
Vesting
•Historically, RSUs generally vested on the first, second, and third anniversaries of the grant date, with one-third of the granted RSUs vesting on each date.
•Beginning in Fiscal 2025, the Company transitioned to a standardized vesting approach for annual equity grants, with RSUs vesting in equal one-third installments on June 15th of the first, second, and third year following the grant date
•Options vest on the first, second, and third anniversaries of the date of the grant, with one third of the number of granted Options vesting on each date
Settlement
•RSUs will, at the CGCN Committee’s discretion, be settled in Shares purchased from the open market, or in Shares issued from treasury
•The value of a vested Option is the difference between its exercise price and the closing price of the Shares on the applicable stock exchange on which the Shares are traded on the date prior to exercise
•Beginning in Fiscal 2025, newly granted Options are priced and tracked based on the value of the Shares as listed on the NASDAQ. All Options are settled in Shares issued from treasury
Fiscal 2023 PSU Awards
PSUs were last awarded to NEOs at the start of Fiscal 2023. No new PSUs were awarded in this Fiscal year and PSUs are no longer part of our LTI program.
The vesting of PSUs which were awarded in Fiscal 2023 are based on: (i) Relative TSR (50% weight) against a custom group of cannabis industry peers approved by the Board; and (ii) Adjusted EBITDA performance (50% weight) against predetermined targets established at the beginning of the fiscal year, as recommended and approved by the CGCN Committee.
PSUs provide compensation that is conditional on the achievement of pre-determined, multi-year performance criteria. The number of PSUs that vest is moderated higher or lower based on performance related to (i) Canopy Growth’s Relative TSR versus a custom cannabis industry peer group and (ii) absolute Adjusted EBITDA objectives.
For each of the Relative TSR and Adjusted EBITDA metric, performance is measured using an “umbrella” approach, whereby both annual performance (20% weighting per year) and three-year cumulative performance (40% weighting) are measured independently to determine overall PSU vesting at the end of the three-year performance period.
The following table sets forth the cannabis industry peers against which Canopy Growth’s Relative TSR is measured for the purposes of the Fiscal 2023 PSU awards. Also outlined below is the assessment framework used to measure Relative TSR performance.
Relative TSR Peers(1)
Percentile vs. Relative TSR Peers
Performance
Multiplier (1)
Curaleaf Holdings
Greater than or equal to the 75th percentile
1.5x
Green Thumb Industries
Tilray
Cronos Group
50th percentile
1x
Sundial Growers
Aurora Cannabis
Less than or equal to the 25th percentile
0.5x
OrganiGram Holdings
Charlotte’s Web Holdings
(1)Interpolated on a linear basis in between
(1) Hexo Corporation and The Valens Company, which we formerly included among our Relative TSR Peers, have been acquired by Tilray Inc. and Sundial Growers Inc., respectively, and therefore have been removed from the Relative TSR analysis.
PSU Metric Details and Certification Results
PSUs were awarded to eligible NEOs during Fiscal 2023. No new PSUs were awarded during Fiscal 2024 or Fiscal 2025 and will not be part of the Fiscal 2026 LTIP. The below results reflect the achievement factor of objectives set forth within the Fiscal 2023 PSU award cycle.
Based on the Company’s performance in Fiscal 2025, the CGCN Committee certified the following achievement factors:
•109% for the Fiscal 2025 Adjusted EBITDA targets set forth during the Fiscal 2023 PSU grant
•103% for the 3-year Cumulative Adjusted EBITDA target set forth during the Fiscal 2023 PSU grant
•50% for the Fiscal 2025 Total Shareholder Return target set forth during the Fiscal 2023 PSU grants
•50% for the 3-year Cumulative Total Shareholder Return target set forth during the Fiscal 2023 PSU grant
Total Shareholder Return Objectives
Adjusted EBITDA Objectives
Targets
TSR Return
Adjusted EBITDA
(‘000s of C$)
Fiscal
Results
FY25 TSR
-87%
FY25 Adjusted EBITDA
(23,504)
3-Year Cumulative (FY23-FY25)
-99%
3-Year Cumulative (FY23 - FY25)
(432,095)
Fiscal 2025 PSU Targets (FY25)
Threshold (0.5x)
(100,000)
Target (1x)
(50,000)
Maximum (1.5x)
100,000
FY25 Achievement
109%
Cumulative PSU Targets (FY23-FY25)
Threshold (0.5x)
(675,000)
Target (1x)
(450,000)
Maximum (1.5x)
(123,000)
FY23-25 Grant Achievement
103%
Fiscal 2025 | Long Term Incentive Award Grant Issuance
All NEOs who were employed by the Company at the start of Fiscal 2025 participated in the Company’s LTIP. Initially adopted by the Board for Fiscal 2021 and further amended September of 2023, the Company’s leadership team, including the NEOs, receive annual LTI grants.
As specified above in the section “D. Klein (Former CEO) Compensation Updates”, for Fiscal 2025, Mr. Klein’s annual grant consisted of 75% Options and 25% RSUs, while his one-time equity award reflected 50% Options and 50% RSUs. Both awards were granted on June 10, 2025.
Ms. Hong and Dr. Gedeon’s annual grants are composed of 50% Options and 50% RSUs, and were granted on June 10, 2025.
Mr. Mongeau was granted 14,360 RSUs on June 10, 2024, in alignment with his compensation package for serving on the Board. These RSU awards vest in equal tranches on the last trading day of the fiscal quarter.
As part of the Mongeau Agreement, for assuming the role of CEO, Mr. Mongeau was granted a sign-on award of 225,000 Options (exercise price of US$2.43) and 50,000 RSUs on February 11, 2025, following the end of the Company’s quarterly financial blackout period. These awards vest in equal one-third installments on the first, second, and third anniversaries of the grant date, being February 11, 2026, 2027, and 2028.
The following table shows the LTI awards granted to our NEOs for Fiscal 2025.
Individual
Grant Date
Option (#)
Share-Based Awards (#)
Luc Mongeau | CEO
06/10/2024(1)
-
14,360
02/11/2025(2)
225,000
50,000
Judy Hong | CFO
06/10/2024
99,776
82,016
Christelle Gedeon | CLO
06/10/2024
62,307
51,217
David Klein | Former CEO
06/10/2024
360,636
98,815
06/10/2024(3)
40,071
32,939
(1) Mr. Mongeau was awarded 14,360 RSUs on June 10, 2024 as part of his compensation package for serving on the Board, of which he served for 3 quarters and vested 10,770 RSUs. Upon assuming the role of CEO, the remaining 3,590 RSUs were cancelled.
(2) As part of the CEO transition, Mr. Mongeau received a sign-on equity grant on February 11, 2025. These awards will vest in three equal annual installments on the first, second, and third anniversaries of the grant date, subject to the terms of the respective award agreements.
(3) In Fiscal 2025, Mr. Klein received a one-time equity grant valued at US$500,000, divided equally between Options and RSUs. The Options vest in full one year from the grant date, while the RSUs vest in full on June 15, 2025.
Each of the Options granted has a six-year term, subject to earlier termination upon the occurrence of certain events related to termination of employment, as specified in the form of option agreement pursuant to which the Options were granted (the “Option Grant Agreement”). One-third of the Options become exercisable on each of the first, second and third anniversaries of the date of grant, subject to the terms of the Option Grant Agreement. The exercise price of each Option granted on June 10, 2024 is US$7.59.
RSUs granted on June 10, 2024 vest in equal one-third installments on June 15, 2025, 2026, and 2027.
Fiscal 2026 | Long Term Incentive Award Plan Design
For Fiscal 2026, the CCGN Committee approved maintaining the same annual grant percentages for NEOs (salary X accrual percentage).
However, as part of the CEO transition, the LTI target for the CEO role has been adjusted from 400% to 300% of salary, with an equal split between Stock Options (50%) and RSUs (50%), reflecting a more balanced approach to long-term incentives.
Individual
Total LTI Accrual
(% of salary)
RSU (% of salary)
Stock Option (% of salary)
Luc Mongeau | CEO
300%
150%
150%
Judy Hong | CFO
300%
150%
150%
Christelle Gedeon | CLO
200%
100%
100%
Peer Groups and Compensation Benchmarking
With the engagement of our executive compensation consultant Mercer, the CGCN Committee re-evaluated Canopy Growth’s publicly-traded peer group in Fiscal 2023. We believe this peer group, with the adjustments noted below, reflects the current reality of Canopy Growth and the cannabis industry and the companies we compete with for talent.
In Fiscal 2023, the CGCN Committee approved the use of two distinct groups of publicly-traded peers to inform the setting of target total direct compensation levels for NEOs. The first group includes similarly-sized Canadian consumer-focused industry comparators, including cannabis companies, while the second group includes similarly-sized U.S. CPG and also includes companies in the cannabis industry. These groups include organizations that the Company would potentially compete with for talent. The criteria used to select the peer group are as follows:
•Publicly traded company;
•Market capitalization between approximately 1/3 and 3 times that of the Company at the time of the review in early Fiscal 2023 (with the Company positioned at or near median); and
•Operating within the consumer discretionary, consumer staples or pharmaceuticals industries
The peers selected for benchmarking executive compensation in Fiscal 2025 are:
Company Name
Cannabis
Peer Group
Global Industry Classification Sub-Industry
Canada Goose Holdings Inc.
CAN
Apparel, Accessories and Luxury Goods
Company Name
Cannabis
Peer Group
Global Industry Classification Sub-Industry
Pet Valu Holdings Ltd.
CAN
Specialty Stores
Jamieson Wellness Inc.
CAN
Personal Products
SNDL Inc.
●
CAN
Pharmaceuticals
Village Farms International, Inc.
●
CAN
Agricultural Products - produce cannabis
Andrew Peller Limited
CAN
Distillers and Vintners
High Tide Inc.
●
CAN
Pharmaceuticals
Goodfood Market Corp.
CAN
Internet and Direct Marketing Retail
Cronos Group Inc.
●
CAN
Pharmaceuticals
Aurora Cannabis Inc.
●
CAN
Pharmaceuticals
Tilray Brands, Inc.
●
US
Pharmaceuticals
WW International, Inc.
US
Specialized Consumer Services
Green Thumb Industries Inc.
●
US
Pharmaceuticals
SunOpta Inc.
US
Packaged Foods and Meats
MGP Ingredients, Inc.
US
Distillers and Vintners
Amphastar Pharmaceuticals, Inc.
US
Pharmaceuticals
Nature’s Sunshine Products, Inc.
US
Personal Care Products
Ascend Wellness Holdings, Inc.
●
US
Personal Care Products
ANI Pharmaceuticals, Inc.
US
Pharmaceuticals
(1) Effective April 1, 2024, Beyond Meat, Inc. and Throne Health Tech, Inc. have been removed from the peer group. This adjustment reflects our commitment to maintaining a relevant and comparable peer group composition in line with evolving market dynamics.
In addition to its review of peer group executive compensation data, the CGCN Committee uses executive compensation survey data to supplement its review, and when insufficient peer group data is available for specific executive positions or as another means of performing a market check on executive compensation levels and practices. This information assists the CGCN Committee in making well-informed decisions regarding executive compensation matters.
Executive Compensation Risk Management
The CGCN Committee considers and assesses, as necessary, the implications of risks associated with the Company’s compensation policies and practices and devotes such time and resources as it believes are appropriate given the Company’s current stage of development. The Company’s practice during Fiscal 2025 of compensating its senior executives through a mix of base salary, short-term incentives and long-term incentives, provided under the Omnibus Incentive Plan, is designed to mitigate risk by: (i) ensuring that the Company retains such executives; and (ii) aligning the interests of its executives with the short-term and long-term objectives of the Company and its Shareholders. The CGCN Committee monitors the Company’s compensation practices and policies at least annually and more often as may be required to deal with issues that arise between annual reviews. During Fiscal 2025, the CGCN Committee did not identify any significant risks arising from the Company’s compensation policies and practices that the CGCN Committee believed were reasonably likely to have a material adverse effect on the Company.
The table below outlines key elements of the Company’s compensation risk management framework:
Risk Mitigating Compensation Practices
•Conduct an annual review of the Company’s compensation practices to ensure that the Company compensates its key employees appropriately to retain executives with critical skills.
•Deliver a significant majority of each executive’s compensation through “at-risk” instruments that create a clear link between pay and performance, align executive interests with those of Shareholders and help incentivize executives to drive Shareholder value.
•Defer a significant portion of each executive’s compensation through the application of multi-year time vesting conditions on long-term incentive equity awards. Options and RSUs vest over three years.
•Cap annual short-term incentive payouts to discourage excessive risk-taking.
Risk Mitigating Compensation Practices
•Adopt guidelines regarding share ownership for the CEO and other NEOs set at five times annual base salary for the CEO and at three times annual base salary for the rest of the NEOs.
•Have trading guidelines that restrict executives and directors from entering into transactions that have the direct or indirect effect of offsetting (hedging) the economic benefits of owning Company securities.
•Hold an annual say-on-pay advisory vote which provides Shareholders with a mechanism to share their views on the Company’s executive pay practices.
•Receive independent, third-party advice directly from an external compensation consultant.
•Maintain a clawback policy, outlined in the Omnibus Incentive Plan, whereby the Board may require the reimbursement, reduction or cancellation of an award for (i) failing to comply with any obligation to the Company; (ii) termination for cause; (iii) conduct that causes material financial or reputational harm to the Company or its affiliates; (iv) willful misconduct, gross negligence or fraud; or (v) restatement of its financial statements resulting in negative impacts to the Company’s financial results. In addition, the Board adopted a standalone clawback policy that provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws. In Fiscal 2025, an updated version of the standalone clawback policy was adopted by the Board that included a transition period in the event the Company changes its fiscal year and clarified language regarding the method of recouping incentive-based compensation and other recoupment rights, including providing discretion to the Board on enforcement of the policy.
Results of Fiscal 2024 Say-On-Pay Vote
Canopy Growth’s compensation program for its executive management team is designed to drive Shareholder value and to effectively attract and retain talent. Each year, we conduct a Shareholder advisory vote to approve the compensation of our NEOs as disclosed in our proxy statement for our annual meeting of shareholders (a “say-on-pay” vote). At our 2024 Annual General Meeting, our Shareholders approved our NEO compensation at that time, with approximately 79.45% of the votes cast voting in favor of approval. Given these results, the CGCN Committee has decided to retain our overall approach to executive compensation while continuing to evaluate our practices frequently, including in response to future say-on-pay votes. The CGCN Committee continues to monitor further stakeholder feedback, Company performance, and market developments for potential further improvements to the Company’s compensation structure for executive officers. The Company expects to have its next “say-on-pay” vote at its 2025 annual meeting of shareholders (the “2025 Annual Meeting”).
Performance Graph
The following performance graph illustrates the Company’s cumulative Shareholder return assuming reinvestment of dividends, by comparing a C$100 investment in the Shares beginning April 1, 2020 to the return on the S&P/TSX Composite Index and the Horizons Marijuana Life Sciences Index ETF.
March 31, 2020
March 31, 2021
March 31, 2022
March 31, 2023
March 31, 2024
March 31, 2025
Canopy Growth Corporation
C$100.00
C$214.63
C$49.33
C$12.65
C$6.23
C$0.71
S&P/TSX Composite Index
C$100.00
C$151.46
C$179.78
C$169.99
C$193.72
C$224.36
Horizons Marijuana Life Sciences Index ETF
C$100.00
C$223.09
C$104.18
C$47.82
C$49.95
C$31.50
Since April 1, 2020, the Share price performance declined because of considerable volatility in the cannabis sector resulting from a multitude of factors, including, among others, the multiple attempts in the U.S. to reschedule cannabis from a Schedule I substance to a Schedule III substance under the Controlled Substances Act (21 U.S.C. § 811), significant price compression across core products in both adult-use and international medical supply, rising energy costs contributed to increased operating costs, depressing margins. Relative stock underperformance was even more pronounced given the recent election of the Trump administration and their uncertain position on cannabis rescheduling as well as prices of commodities remaining high when compared to April 1, 2020, supporting the S&P TSX performance. Continued capital requirements through the issuance of additional common shares has further affected the relative underperformance which has continued throughout Fiscal 2025.
While our Share price has been volatile due in part to the evolving state of the cannabis industry, our executive compensation remains competitive as we aim to attract and retain an experienced executive team whose compensation is tied to a variety of metrics including long-term profit improvement and Share price appreciation. Executive compensation for Fiscal 2025 remains aligned with financial performance and the Shareholder experience to the end of Fiscal 2025, evidenced by a significant decrease in realizable equity compensation held by executives. For further discussion on this point, please refer above to “PSU Metric Details and Certification Results”.
COMPENSATION COMMITTEE REPORT
The members of the CGCN Committee have reviewed and discussed the contents of the CD&A with management. Based on such review and discussion with management, and subject to the limitations on the role and responsibility of the CGCN Committee, the CGCN Committee recommended to the Board that the CD&A be included in the Company’s Form 10-K and in the proxy statement issued in connection with the 2025 Annual Meeting.
Respectfully submitted by the members of the CGCN Committee
Theresa Yanofsky (Chair)
David Lazzarato
Willy Kruh
The foregoing Compensation Committee Report shall not be deemed to be “soliciting material,” deemed “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act. Notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act, or the Exchange Act that might incorporate by reference past or future filings, including this Form 10-K, in whole or in part, the foregoing Compensation Committee Report shall not be incorporated by reference into any such filings.
EXECUTIVE COMPENSATION
Currency Conversion
Certain of the NEO’s employment agreements specify payments in U.S. dollars, while others specify payments in Canadian dollars. Where payments are made in Canadian dollars throughout this section, we have converted Canadian dollars to U.S. dollars using the Bloomberg average exchange rates for the relevant 12-month period as specified in the bullets below. Share-based currency conversion calculations are represented as of the applicable award date using the Bloomberg exchange rate for the date of the award.
•Fiscal 2025 of C$1.00 to US$0.6951 for the 12-month period ended March 31, 2025;
•Fiscal 2024 of C$1.00 to US$0.7386 for the 12-month period ended March 31, 2024; and
•Fiscal 2023 of C$1.00 to US$0.7564 for the 12-month period ended March 31, 2023.
Share Consolidation
On December 15, 2023, the Company's share consolidation on the basis of one post-consolidation common share for every 10 pre-consolidation common share became effective (the "Share Consolidation"). All issued and outstanding common shares, per share amounts, and outstanding equity instruments and awards exercisable into common shares below have been retroactively adjusted to reflect the Share Consolidation for all prior periods presented.
Summary Compensation Table
The following table sets forth the compensation for Fiscal 2023, Fiscal 2024 and Fiscal 2025 awarded to, earned by, or paid to the NEOs.
Name and Principal Position
Fiscal Year
Salary
Bonus(1)
Stock
awards(2)
Option awards(2)
Non-equity incentive plan compensation(1)
All other compensation(3)
Total
Luc Mongeau, CEO(4)
130,331
-
121,500
422,489
122,460
172,145
968,925
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Judy Hong, CFO
415,001
-
622,501
584,124
241,505
9,618
1,872,749
410,960
-
622,499
772,886
486,685
10,033
2,303,063
391,221
167,167(5)
499,962
1,583,184
-
-
2,641,533
Christelle Gedeon, CLO(6)
371,880
-
388,737
364,767
216,411
1,342,488
383,454
-
375,977
479,289
454,884
-
1,693,604
232,812(6)
157,444(7)
357,668
554,908
-
-
1,302,831
David Klein, Former CEO(8)
801,923
-
1,000,013
2,341,763
768,082
96,587
5,008,368
975,000
-
974,997
3,631,643
1,921,169
102,282
7,605,091
975,000
687,711(5)
1,645,450
3,056,810
-
94,550
6,459,521
Notes:
(1)Fiscal 2023 STI payments were included in the bonus section given discretion was applied to adjust certain performance metrics in the STIP. Fiscal 2024 & 2025 STI payments are included in the non-equity incentive plan compensation section. The amounts for Fiscal 2025 are expected to be paid by July 11, 2025.
(2)The amounts in this column represent the aggregate grant date fair value of the relevant award(s) presented, as determined in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation”. See Note 22 to the consolidated financial statements included in this Form 10-K, regarding assumptions underlying valuation of equity awards.
(3)Represents the following for the respective NEOs: For Mr. Mongeau, it includes C$125,543 (US$87,265) in director fees and US$81,744 in director equity awards for his service on the Board prior to his appointment as CEO (see “Director Compensation”), as well as a C$4,327 (US$3,008) annual car allowance and annual cell phone allowance C$185 (US$128) following his appointment as CEO. For Ms. Hong, it includes a US$8,658 401(k) employer match and a US$960 annual cell phone allowance. For Dr. Gedeon, it includes a C$997 (US$693) annual cell phone allowance. For Mr. Klein, it includes a C$125,000 (US$86,888) annual perquisite allowance, a US$8,658 401(k) employer match, and a US$1,041 annual cell phone allowance.
(4)Mr. Mongeau was appointed CEO effective January 6, 2025, and, other than his compensation for serving as a non-employee director prior to becoming CEO as noted in footnote (3), his compensation relates to the portion of Fiscal 2025 during which he was employed as CEO.
(5)For Fiscal 2023, these columns reflect an additional discretionary amount of bonus payout for Mr. Klein and Ms. Hong of US$4,498 and US$1,093, respectively. This information is provided to clarify the extent to which such payments were discretionary, rather than based on the calculation of Adjusted EBITDA.
(6)Dr. Gedeon was appointed as Chief Legal Officer on August 1, 2022, and her compensation relates to the portion of Fiscal 2023 during which she was employed with the Company.
(7)Consists of C$65,000 (US$49,166) plus C$6,500 (US$4,917) associated vacation pay for a one-time signing bonus, plus pro-rated discretionary STI payout C$136,649 (US$103,361).
(8)Mr. Klein was the CEO until January 6, 2025, at which time he transitioned into the title of Special Advisor to the Board effective January 6, 2025.
Grants of Plan-Based Awards in Fiscal 2025
The following table sets forth the grants of plan-based awards made in Fiscal 2025. Non-equity incentive plan awards listed below were made pursuant to the terms of the respective NEO’s employment agreement. All equity incentive plan awards were made pursuant to the terms of the respective NEO’s employment agreement and the Omnibus Incentive Plan.
Name
Grant
Date
Estimated Future Payouts Under Non-Equity Incentive Plan(1)
Estimated Future Payouts Under Equity Incentive Plan Awards
All other stock awards: Number of shares of stock or units(#)
All other option awards: Number of securities underlying options (#)
Exercise or base price of option awards ($/Sh)
Grant date fair value of stock and option awards(2)
Threshold ($)
Target ($)
Max
($)
Threshold (#)
Target (#)
Max (#)
Luc Mongeau
6-Jan-25(3)
$0
$157,826
$315,652
-
-
-
-
-
-
-
10-Jun-24
-
-
-
-
-
-
14,360(4)
-
-
$108,992
11-Feb-25
-
-
-
-
-
-
-
172,812
$2.43
$324,494
11-Feb-25
-
-
-
-
-
-
-
52,188
$2.43
$97,995
11-Feb-25
-
-
-
-
-
-
50,000
-
-
$121,500
Judy Hong
1-Apr-24
$0
$311,250
$622,500
-
-
-
-
-
-
-
10-Jun-24
-
-
-
-
-
-
-
99,776
$7.59
$584,124
10-Jun-24
-
-
-
-
-
-
82,016
-
-
$622,501
Christelle Gedeon
1-Apr-24
$0
$278,909
$557,818
-
-
-
-
-
-
-
10-Jun-24
-
-
-
-
-
-
-
43,163
$7.59
$250,413
10-Jun-24
-
-
-
-
-
-
-
19,144
$7.59
$114,354
10-Jun-24
-
-
-
-
-
-
51,217
-
-
$388,737
David Klein
1-Apr-24
$0
$989,897
$1,979,795
-
-
-
-
-
-
-
10-Jun-24
-
-
-
-
-
-
-
360,636
$7.59
$2,111,292
10-Jun-24
-
-
-
-
-
-
-
40,071
$7.59
$230,471
10-Jun-24
-
-
-
-
-
-
98,815
-
-
$750,006
10-Jun-24
-
-
-
-
-
-
32,939
-
-
$250,007
Notes:
(1)The amounts shown in these columns reflect the short-term cash incentive bonuses that potentially could have been earned during Fiscal 2025 based upon the achievement of Company performance goals under our STIP. The actual award paid to each NEO under the STIP for Fiscal 2025 is set forth above in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. More information regarding short-term cash incentive bonuses under our STIP can be found in the CD&A under the heading “Short-Term Incentives”.
(2)The amounts in this column represent the aggregate grant date fair value of the relevant award(s) presented, as determined in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” See Note 22 of the consolidated financial statements included in this Form 10-K, regarding assumptions underlying valuation of equity awards.
(3)Represents Mr. Mongeau’s prorated short-term cash incentive bonus based on his appointment as CEO effective January 6, 2025.
(4)Represents Mr. Mongeau’s equity award that was granted during his service as a member of the Board. This award was granted in connection with his role as a non-employee director and prior to his appointment as CEO effective January 6, 2025.
Employment Agreements
Luc Mongeau
In connection with Mr. Mongeau’s appointment as CEO of the Company, on November 26, 2024, the Company and Mr. Mongeau entered into an employment agreement (the “Mongeau Agreement”).
Pursuant to the Mongeau Agreement, as CEO, Mr. Mongeau reports to the Board and is entitled to a base salary of C$975,000. Mr. Mongeau is also entitled to a monthly car allowance in the amount of C$1,875.
Mr. Mongeau is eligible for a short-term annual incentive performance bonus of 100% of his base salary (the “Mongeau Target Amount”), with a payout range of up to two times the Mongeau Target Amount based upon the achievement of certain mutually developed financial, operational, strategic and individual performance objectives approved by the CGCN Committee.
Mr. Mongeau is entitled to participate in the Omnibus Incentive Plan. Pursuant to the Mongeau Agreement, Mr. Mongeau received a new hire one-time equity grant of 50,000 RSUs and 225,000 Options, which have a strike price of US$2.43, which is equal to the Fair Market Value share (as defined in the Omnibus Incentive Plan). These awards will vest in equal tranches, reflective of one-third (33 1/3%) annually, on the three annual anniversaries of the grant date.
At the discretion of the CGCN Committee, Mr. Mongeau is eligible to receive, at least once every fiscal year, a long-term award grant equal to 300% of his base salary, which may be comprised of Options, RSUs, PSUs and/or any other form of award authorized by the Omnibus Incentive Plan. The CGCN Committee, in its sole discretion, may determine the ratio of the various forms of awards that Mr. Mongeau is entitled to receive pursuant to the Omnibus Incentive Plan.
If the Company terminates Mr. Mongeau’s employment without Cause (as defined in the Mongeau Agreement) or if Mr. Mongeau resigns for Good Reason (as defined in the Mongeau Agreement), then, provided that Mr. Mongeau signs and returns to the Company a full and final employment separation, release and waiver of liability, the Company will provide (a) a lump sum payment equal to 18 months’ Mr. Mongeau’s base salary; (b) a lump sum payment equal to 150% of the average actual annual amounts paid to Mr. Mongeau as a short-term annual incentive performance bonus during the prior two years, and the continuation of any statutorily prescribed benefits for the minimum amount of time prescribed by the provisions of the Employment Standards Act, 2000 (Ontario) (the “ESA”). The Company may terminate Mr. Mongeau’s employment with Cause, without further liability.
The Mongeau Agreement contains certain non-competition and non-solicitation provisions in favor of the Company for a period of 18 months following the termination of the Mongeau Agreement.
Judy Hong
In connection with Ms. Hong’s appointment as CFO of the Company, on April 1, 2022, the Company and Ms. Hong entered into an employment agreement dated March 24, 2022 (the “Hong Agreement”).
Pursuant to the Hong Agreement, as CFO, Ms. Hong reports to the CEO of the Company. She was initially entitled to a base salary of US$395,000 (or approximately C$495,200) per year.
Ms. Hong is eligible for a short-term annual incentive performance bonus of 75% of her base salary (the “Hong Target Amount”), with a payout range of up to two times the Hong Target Amount based upon the achievement of certain mutually developed financial, operational, strategic and individual performance objectives approved by the CGCN Committee.
Ms. Hong is also entitled to participate in the Omnibus Incentive Plan. Pursuant to the Hong Agreement, Ms. Hong is eligible to receive, at least once every fiscal year, a long-term award grant equal to 300% of her base salary (using the fair market value of the Shares on the date of grant), which may be comprised of Options, RSUs, PSUs and/or any other form of award authorized by the Omnibus Incentive Plan. The CGCN Committee, in its sole discretion, may determine the ratio of the various forms of awards that Ms. Hong is entitled to receive pursuant to the Omnibus Incentive Plan.
Pursuant to the Hong Agreement, Ms. Hong’s employment with the Company is “at will.” If the Company terminates Ms. Hong’s employment without cause, then, provided that Ms. Hong signs and returns to the Company a full and final employment separation, release and waiver of liability, the Company will provide (a) a lump sum payment equal to 18 months’ of Ms. Hong’s base salary, which shall be payable no later than two and a half months following the end of the calendar year in which the termination occurs; (b) a lump sum payment equal to 150% of the average actual annual amounts paid to Ms. Hong as a short-term annual incentive performance bonus during the prior two years, which shall be payable no later than two and a half months following the end of the calendar year in which the termination occurs; (c) any outstanding PSUs will vest at actual performance levels for all years already certified by the Board or any responsible committee thereof; and (d) if Ms. Hong were to elect continuation coverage under the Company’s medical plan pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), a reimbursement to Ms. Hong for a portion of the COBRA premium payments as further described in the Hong Agreement. The Company may also terminate Ms. Hong’s employment with cause, without further liability to Ms. Hong.
The Hong Agreement contains certain non-competition and non-solicitation provisions in favor of the Company for a period of 18 months following the termination of the Hong Agreement.
The Hong Agreement was modified in June 2023 to increase Ms. Hong’s annual salary to US$415,000.
Christelle Gedeon
In connection with Dr. Gedeon’s appointment as CLO of the Company, on August 1, 2022, the Company and Dr. Gedeon entered into an employment agreement (the “Gedeon Agreement”).
Pursuant to the Gedeon Agreement, as CLO, Dr. Gedeon reports to the CEO of the Company. She was initially entitled to a base salary of C$485,000 (or approximately US$366,854), and was paid C$65,000 (or approximately US$49,166) as a signing bonus.
Dr. Gedeon is eligible for a short-term annual incentive performance bonus of 75% of her base salary (the “Gedeon Target Amount”), with a payout range of up to two times the Gedeon Target Amount based upon the achievement of certain mutually developed financial, operational, strategic and individual performance objectives approved by the CGCN Committee.
Dr. Gedeon is also entitled to participate in the Omnibus Incentive Plan. Pursuant to the Gedeon Agreement, Dr. Gedeon is eligible to receive, at least once every fiscal year, a long-term award grant equal to 200% of her base salary (using the fair market value of the Shares on the date of grant), which may be comprised of Options, RSUs, PSUs and/or any other form of award authorized by the Omnibus Incentive Plan. The CGCN Committee, in its sole discretion, may determine the ratio of the various forms of awards that Dr. Gedeon is entitled to receive pursuant to the Omnibus Incentive Plan.
If the Company terminates Dr. Gedeon’s employment without cause, then, provided that Dr. Gedeon signs and returns to the Company a full and final employment separation, release and waiver of liability, the Company will provide (a) a lump sum payment
equal to 18 months’ Dr. Gedeon’s base salary; (b) a lump sum payment equal to 150% of the average actual annual amounts paid to Dr. Gedeon as a short-term annual incentive performance bonus during the prior two years, (c) any outstanding PSUs will vest at actual performance levels for all years already certified by the Board or any responsible committee thereof; and (d) the continuation of any statutorily prescribed benefits for the minimum amount of time prescribed by the provisions of the ESA. The Company may also terminate Dr. Gedeon’s employment with cause, without further liability to Dr. Gedeon.
The Gedeon Agreement contains certain non-competition and non-solicitation provisions in favor of the Company for a period of 18 months following the termination of the Gedeon Agreement.
The Gedeon Agreement was modified effective June 1, 2023, to reflect a salary of C$509,250 (or approximately US$385,196) per year. Additionally, the Gedeon Agreement was further modified, effective August 21, 2023, due to an increase in scope and responsibility, to reflect a salary of C$535,000 (or approximately US$395,151) per year.
David Klein
Mr. Klein served as CEO of the Company pursuant to an employment agreement between Mr. Klein and the Company dated December 8, 2019, as amended on June 8, 2021, June 14, 2022, and June 8, 2024 (the “Klein Agreement”). As CEO, Mr. Klein reported to the Board and, effective June 8, 2024, was entitled to a base salary of US$750,000 (or approximately C$1,015,435) per year, subject to review by the CGCN Committee on an annual basis, and an annual perquisite allowance of C$125,000 (or approximately US$99,700).
Mr. Klein was eligible for a short-term annual incentive performance bonus of 125% of base salary (the “Klein Target Amount”), with a payout range of up to two times the Klein Target Amount based upon the achievement of certain mutually developed financial, operational, strategic and individual performance objectives approved by the CGCN Committee.
Mr. Klein was also entitled to participate in the Omnibus Incentive Plan. Pursuant to the Klein Agreement, Mr. Klein was eligible to receive an annual long-term award grant equal to 400% of his base salary (using the fair market value of the Shares on the date of grant), which may be comprised of Options, RSUs, PSUs and/or any other form of equity authorized by the Omnibus Incentive Plan. The CGCN Committee, in its sole discretion, could determine the ratio of the various forms of equity that Mr. Klein was entitled to receive pursuant to the Omnibus Incentive Plan. In Fiscal 2025, Mr. Klein received a one-time equity grant valued at US$500,000 divided equally between Options and RSUs, with both the Options and the RSUs each vesting one year from the grant date.
Pursuant to the Klein Agreement, Mr. Klein received a grant of Options on December 6, 2019, equal to C$20,000,000 (or approximately US$15,952,000 using the fair market value of the Options on the date of grant, based on the closing price of the Shares on December 6, 2019) (the “Klein Inducement Grant”). The Company granted Mr. Klein Options to purchase 161,812 Shares at an exercise price of C$247.20 (US$186.50) per Share pursuant to the Klein Inducement Grant.
The Klein Inducement Grant vests on the first, second and third anniversaries of the date of grant, subject to meeting the following conditions: (a) 33.5% of the Options will vest only if during any 90-day period during the term of the Klein Inducement Grant, the average closing Share price on the TSX has appreciated by a minimum of 50% from the date of grant; (b) 33.5% of the Options will vest only if as at the end of any fiscal year during the term of the Klein Inducement Grant, audited annual revenue of C$2.5 billion (or approximately US$2.0 billion) is achieved by the Company for such fiscal year, as confirmed by the auditors of the Company; and (c) 33% of the Options will vest only if as at the end of any fiscal year during the term of the Klein Inducement Grant, a C$100 million (or approximately US$80 million) CAET (as defined below) is achieved by the Company for such fiscal year, as confirmed by the auditors of the Company. The Options granted under the Klein Inducement Grant have a six-year term.
“CAET” means for any fiscal year of the Company, Adjusted EBITDA (as defined below) for such fiscal year further adjusted to remove any individual non-core market with negative Adjusted EBITDA outside of the Company’s core markets, which for greater certainty, for the purposes of the Klein Agreement, are Canada, UK, Spain, Denmark, Chile and Brazil, as long as the negative Adjusted EBITDA is in-line with the Board approved plan for such removed market.
“Adjusted EBITDA” means, for any fiscal year of the Company, earnings before interest, tax, depreciation and amortization of the Company as set forth in the financial statements for the Company for such fiscal year then ended, adjusted to exclude share-based compensation expense, acquisition related costs including stock based compensation, and other non-cash items pursuant to past practices and approved by the Audit Committee.
The Company may terminate the Klein Agreement at any time for reasons other than cause or willful misconduct by providing (a) a lump sum payment equal to $1,950,000; (b) 2.5 times the average actual amounts paid as a short-term annual incentive performance bonus during the prior two years; (c) any statutory severance pay that may be required pursuant to the ESA; (d) the continuation of benefits for a period of two years from the date of termination (it being understood that a payment will be made equal to the premium cost for any such benefits that cannot be continued); (e) the vesting of any outstanding PSUs, at actual performance levels, for all years already certified by the Board or any responsible committee thereof; and (f) any other statutorily prescribed benefit. As a condition to receiving any payments which exceed the statutory entitlements upon termination without cause, Mr. Klein will be required to execute a release in favor of the Company.
The Klein Agreement contains certain non-competition and non-solicitation provisions in favor of the Company for a period of 12 months following the termination of the Klein Agreement effective August 31, 2025.
As discussed above, effective January 6, 2025, Mr. Klein transitioned into the title of Special Advisor to the Board. Under this arrangement, Mr. Klein continued to receive his base salary, perquisite allowance, and was eligible to receive a Fiscal 2025 short-term incentive bonus through March 31, 2025. From April 1 through August 31, 2025, Mr. Klein will receive a monthly stipend of US$5,000. During this time, his outstanding equity awards will continue to vest in accordance with their original terms; however, he will not receive any new equity grants. Mr. Klein’s employment with the Company will terminate on August 31, 2025.
Outstanding Equity Awards at March 31, 2025
The following table presents information concerning outstanding Options, RSUs, and PSU awards to each of the NEOs as of March 31, 2025, the Company’s fiscal year end.
Name
Grant Date (1)
Option Awards
Stock Awards
Number of securities underlying unexercised options - (#) exercisable
Number of securities underlying unexercised options - (#) unexercisable
Equity incentive plan awards: number of securities underlying unexercised unearned options (#)
Option exercise price ($)
Option expiration date
Number of shares or units of stock that have not vested (#)
Market value of shares or units of stock that have not vested ($)(2)
Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)
Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested
($)(2)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Luc Mongeau
11-Feb-25
-
172,812
-
US$2.43
11-Feb-31
-
-
-
-
11-Feb-25
-
52,188
-
US$2.43
11-Feb-31
-
-
-
-
11-Feb-25
-
-
-
-
-
50,000
US$45,500
-
-
Judy Hong
24-Dec-19
3,486
-
-
C$262.70
24-Dec-25
-
-
-
-
27-Mar-20
-
-
C$213.40
27-Mar-26
-
-
-
-
9-Jun-21
-
-
C$308.70
9-Jun-27
-
-
-
-
3-Dec-21
5,311
-
-
C135.80
3-Dec-27
-
-
-
-
14-Jun-22
20,214
10,106
-
C$48.40
14-Jun-28
-
-
-
-
14-Jun-22
-
-
-
-
-
-
-
13,386
C$17,803
22-Nov-22
24,950
12,474
-
C$53.90
22-Nov-28
-
-
-
-
28-Jun-23
88,301
176,602
-
C$6.20
28-Jun-29
-
-
-
-
22-Aug-23
-
-
-
-
-
100,375
C$133,499
-
-
10-Jun-24
-
99,776
-
US$7.59
10-Jun-30
-
-
-
-
10-Jun-24
-
-
-
-
-
82,016
US$74,635
-
-
Christelle Gedeon
10-Aug-22
10,811
5,405
-
C$37.00
10-Aug-28
-
-
-
-
10-Aug-22
6,667
3,333
-
C$37.00
10-Aug-28
-
-
-
-
17-Aug-22
-
-
-
-
-
-
-
9,574
C$12,733
22-Nov-22
3,327
1,663
-
C$53.90
22-Nov-28
-
-
-
-
28-Jun-23
-
32,258
-
C$6.20
28-Jun-29
-
-
-
-
28-Jun-23
54,758
77,258
-
C$6.20
28-Jun-29
-
-
-
-
22-Aug-23
-
-
-
-
-
60,624
C$80,630
-
-
10-Jun-24
-
19,144
-
US$7.59
10-Jun-30
-
-
-
-
10-Jun-24
-
43,163
-
US$7.59
10-Jun-30
-
-
-
-
10-Jun-24
-
-
-
-
-
51,217
US$46,607
-
-
David Klein
6-Dec-19(3)
53,938
-
107,874
C$247.20
6-Dec-25
-
-
-
-
27-Mar-20
18,348
-
-
C$213.40
27-Mar-26
-
-
-
-
9-Jun-21
13,948
-
-
C$308.70
9-Jun-27
-
-
-
-
14-Jun-22
66,525
33,262
-
C$48.40
14-Jun-28
-
-
-
-
14-Jun-22
-
-
-
-
-
-
-
44,054
C$58,592
22-Nov-22
24,950
12,474
-
C$53.90
22-Nov-28
-
-
-
-
28-Jun-23
414,910
829,819
-
C$6.20
28-Jun-29
-
-
-
-
22-Aug-23
-
-
-
-
-
157,214
C$209,095
-
-
10-Jun-24
-
360,636
-
US$7.59
10-Jun-30
-
-
-
-
10-Jun-24
-
40,071
-
US$7.59
10-Jun-30
-
-
-
-
10-Jun-24
-
-
-
-
-
98,815
US$89,922
-
-
10-Jun-24
-
-
-
-
-
32,939
US$29,974
-
-
Notes:
(1)Unless otherwise indicated, with respect to all outstanding equity awards held by the NEOs as of March 31, 2025, Options vest in equal one-third installments on each of the first three anniversaries of the grant date, subject to the continued employment of the respective NEO. PSUs follow a three-year cliff vesting schedule, with 100% of the earned award vesting and being released on the third anniversary of the grant date, subject to the achievement of applicable performance conditions and continued employment. RSUs granted in Fiscal 2025, unless otherwise specified, vest in equal one-third installments on June 15 of each of the first three years following the grant date, in alignment with the Company’s standardized vesting approach.
(2)The market value of the unvested stock awards is calculated by multiplying the number of unvested Shares held by the applicable NEO by the closing price of the Shares on March 31, 2025 (the last trading day of Fiscal 2025) on the Nasdaq Global Select Market, which was US$0.91 or on the TSX, which was C$1.33. Awards granted prior to Fiscal 2025 were issued in C$; therefore, these values can be converted into US$ utilizing the Fiscal 2025 average exchange rate of C$1.00 to US$0.6951, as set forth above under “Executive Compensation-Currency Conversion” in this Item 11.
(3)These Options will vest on the first, second and third anniversaries of the date of grant, subject to meeting the following conditions: (a) 33.5% of the Options will vest only if during any 90-day period during the term of the Klein Inducement Grant, the average closing Share price on the TSX has appreciated by a minimum of 50% from the date of grant; (b) 33.5% of the Options will vest only if as at the end of any fiscal year during the term of the Klein Inducement Grant, audited annual revenue of C$2.5 billion (or approximately US$2.0 billion) is achieved by the Company for such fiscal year, as confirmed by the auditors of the Company; and (c) 33% of the Options will vest only if as at the end of any fiscal year during the term of the Klein Inducement Grant, a C$100 million (or approximately US$80 million) CAET is achieved by the Company for such fiscal year, as confirmed by the auditors of the Company.
Option Exercises and Stock Vested in Fiscal 2025
The following table presents information concerning Option exercises and Shares acquired upon vesting of RSU awards by each of our NEOs in Fiscal 2025:
Option awards
Stock awards
Name
Number of shares acquired on exercise
(#)
Value realized
on exercise
($) (1)
Number of shares
acquired on vesting
(#)
Value realized
on vesting
($) (2)
Luc Mongeau(3)
-
-
10,770
50,377
Judy Hong
-
-
50,290
292,154
Christelle Gedeon
-
-
30,313
176,032
David Klein
-
-
82,092
480,565
Notes:
(1)These amounts reflect the aggregate of the differences between the exercise price of the Option and the market price of a Share at the time of exercise for each Option exercised by an NEO in Fiscal 2025.
(2)These amounts reflect the market price on the vesting date.
(3)The vested RSUs for Mr. Mongeau represent awards granted for his service as a member of the Board prior to his appointment as CEO in January 2025.
Potential Payments Upon Termination or Change-in-Control
A narrative description of the individual payments the Company is currently required to make upon termination or a change in control of the Company is described above under “Employment Agreements”.
Potential Payments Upon Termination Without Cause
As outlined in the section titled “D. Klein (Former CEO) Compensation Updates”, Mr. Klein announced his intention to retire at the end of Fiscal 2025 and remained in his role as Chief Executive Officer until January 6, 2025, when Mr. Mongeau commenced service as CEO. Upon this leadership transition, Mr. Klein assumed the role of Special Advisor to the Board.
Mr. Klein continued to receive his full compensation entitlements through March 31, 2025. For the period of April 1, 2025, through August 31, 2025, Mr. Klein will receive a monthly stipend of US$5,000 in connection with his advisory responsibilities. As the transition was not considered a termination for cause or without cause, no severance or accelerated vesting provisions were triggered. Mr. Klein is not entitled to any payments upon his termination, other than amounts due to him in his role as Special Advisor to the Board.
The following table sets forth the estimated payments and benefits to each of the active NEOs in the event of a termination without cause, assuming such termination occurred on March 31, 2025, and there was no change-in-control, based on the terms of their respective employment agreements in effect as of that date:
Termination Without Cause
Individual
Cash Payment ($)
Accelerated Awards ($) (4)
Benefits ($) (5)
Total ($)
Luc Mongeau | CEO
$1,081,749(1)
-
$17,762
$1,099,511
Judy Hong | CFO
$1,262,889(2)
$3,904
$41,762
$1,308,555
Christelle Gedeon | CLO
$1,049,352(3)
$2,793
$4,375
$1,056,520
Notes:
(1)Upon termination without cause effective March 31, 2025, Mr. Mongeau would have been entitled to a payment in the amount of $1,081,749, representing 18 months base salary plus one and a half times the average actual amounts paid as short-term annual incentive performance bonus to Mr. Mongeau during the prior two years, as well as five weeks of statutorily prescribed vacation time. As Mr. Mongeau was appointed CEO in January 2025 and had not received STI payments in the prior two years, the STI component of this severance estimate is $0 in accordance with the terms of his employment agreement.
(2)Upon termination without cause effective March 31, 2025, Ms. Hong would have been entitled to a payment in the amount of $1,262,889 representing 18 months base salary plus one and a half times the average actual amounts paid as short-term annual incentive performance bonuses to Ms. Hong during the prior two years, as well as a $150,000 retention award.
(3)Upon termination without cause effective March 31, 2025, Dr. Gedeon would have been entitled to a payment in the amount of $1,049,352, representing 18 months base salary plus one and a half times the average actual amounts paid as short-term annual incentive performance bonuses to Dr. Gedeon during the prior two years, as well as two weeks of statutorily prescribed vacation time, as well as a $150,000 retention award.
(4)Upon termination without cause effective March 31, 2025, any unvested PSUs at actual performance levels, for all years already certified by the Board or any responsible committee thereof, held by Ms. Hong and Dr. Gedeon immediately vest. The value was calculated based on the closing price of the Shares on March 28, 2025 (the last trading day of Fiscal 2025) on the Nasdaq Global Select Market, which was US$0.91.
(5)As of March 31, 2025, Mr. Mongeau, Ms. Hong, and Dr. Gedeon are participants in Canopy Growth’s benefits plan. Upon termination without cause effective March 31, 2025, Mr. Mongeau and Dr. Gedeon would receive the statutorily prescribed benefits as set forth in the ESA. Upon termination without cause effective March 31, 2025, if Ms. Hong were to elect continuation coverage under the Company’s medical plan pursuant to the COBRA, a reimbursement to Ms. Hong for a portion of COBRA premium payments would be required.
Subject to the specific terms of the NEOs’ respective employment agreements, upon a termination of the NEO without cause, Options, RSUs and other Awards will be treated in accordance with the terms of the Omnibus Incentive Plan.
Potential Payments Upon Termination Following a Change in Control
None of the NEOs are entitled to a payment upon a change of control pursuant to the terms of their respective employment agreements. However, pursuant to the terms of Omnibus Incentive Plan, for a period of 18 months following a Change in Control (as defined in the Omnibus Incentive Plan), where a participant’s employment or term of office or engagement is terminated for any reason, other than for Cause (as defined in the Omnibus Incentive Plan): (i) any unvested awards as at the date of such termination shall be deemed to have vested, and any period of restriction shall be deemed to have lapsed, as at the date of such termination and shall become payable as at the date of termination; and (ii) the level of achievement of performance goals for any unvested awards that are deemed to have vested pursuant to (i) above, shall be based on the actual performance achieved at the end of the applicable period immediately prior to the date of termination.
The table below shows the payments that would be made to the active NEOs upon each of their terminations within 18 months of a Change in Control. As noted above, Mr. Klein is not entitled to any payments upon his termination, other than amounts due to him in his role as Special Advisor to the Board. With the exception of the “Accelerated Awards ($)” and “Total ($)” columns, all amounts in the table below are the same as in the “Potential Payments Upon Termination” table above and all footnotes to the “Cash Payment ($)” and “Benefits ($)” columns of the “Potential Payments Upon Termination” table above apply equally to the corresponding columns in the table below.
Termination within 18 Months Following Change In Control
Individual
Cash Payment ($)
Accelerated Awards ($)(1)
Benefits ($)
Total ($)
Luc Mongeau | CEO
$1,081,749
$45,500
$17,762
$1,145,011
Judy Hong | CFO
$1,262,889
$178,153
$41,762
$1,482,804
Christelle Gedeon | CLO
$1,049,352
$110,488
$4,375
$1,164,215
Notes:
(1)Reflect unvested RSU, PSU, and Option awards, which will be deemed to have vested. PSUs reflect previous years actual certified achievement factors, while uncertified awards reflect on-target amounts. The value was calculated based on the closing price of the Shares on March 28, 2025 (the last trading day of Fiscal 2025) on the Nasdaq Global Select Market, which was US$0.91.
CEO Pay Ratio and Background
Set forth below is the annual total compensation of our median employee, the annualized total compensation of our CEO, Mr. Mongeau, and the ratio of those two values. Given that Mr. Mongeau served as CEO for only a portion of Fiscal 2025, we have annualized his compensation to reflect what it would have been had he served in the role for the full fiscal year to provide a more accurate and comparable disclosure of the CEO pay ratio:
•The Fiscal 2025 annual total compensation of the median employee of Canopy Growth (other than our CEO, Mr. Mongeau) was US$44,098 (or approximately C$63,441).
•The Fiscal 2025 annualized total compensation of our CEO, Mr. Mongeau, was US$3,253,110 (or approximately C$4,680,060).
•For Fiscal 2025, the ratio of the annualized total compensation of our CEO to the median annual total compensation of all our other employees was 73 to 1.
To determine the median employee, we used our global employee population as of March 31, 2025. Total compensation for this purpose was calculated using each employee’s annualized base salary, projected STI bonus, and the target value of LTI awards to be granted during the year, where applicable.
Amounts that were originally paid or recorded in Canadian dollars were converted to U.S. dollars using the Bloomberg average exchange rate of C$1.00 to US$0.6951 for the 12-month period ended March 31, 2025.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records, pursuant to the methodology described above. The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
DIRECTOR COMPENSATION
Director Compensation
The Company’s director compensation program is designed to attract and retain qualified individuals to serve on the Board. The CGCN Committee assesses the director compensation program annually and approves any changes it deems appropriate based on market benchmarking, governance best practices, and the Company’s strategic needs. For Fiscal 2025, non-employee directors received the following amounts in connection with their services to the Company in their capacity as directors:
Fiscal 2025 Fees and Equity Awards(1)
Annual Amount
(US$)(2)
Chair
$156,398 (C$225,000)
Board Member
$104,265 (C$150,000)
Annual Equity Grant - Chair - RSUs
$156,398 (C$225,000)
Annual Equity Grant - Non-Chair Board Member - RSUs
$104,265 (C$150,000)
Committee Chair
$20,853 (C$30,000)
Committee Member
$10,427 (C$15,000)
Notes:
(1)The RSUs generally vest in four equal quarterly installments, beginning on the last trading day of the first quarter after such RSUs are granted.
(2)Fiscal 2025 Board payments were converted to US$ using the average exchange rate of C$1.00 = US$0.6951, as set forth above under “Executive Compensation-Currency Conversion” in this Item 11. These payments are expected to be made by July 11, 2025.
Director Compensation in Fiscal 2025
Name
Fees Earned or Paid in Cash($) (1)
Stock Awards
($) (2)(3)
Total
($)
David Lazzarato
$175,049
$163,489
$338,538
Theresa Yanofsky
$135,545
$108,992
$244,537
Willy Kruh
$128,043
$108,992
$237,035
Luc Mongeau (former non-executive director)(4)
$87,265
$81,744
$169,009
Judy A. Schmeling (former director)(5)
$15,419
Nil
$15,419
Garth Hankinson (former director)(5)
Nil
Nil
Nil
James A. Sabia (former director)(5)
Nil
Nil
Nil
Notes:
(1)This column reflects the following amounts earned or paid during Fiscal 2025: (i) a cash retainer for Board service and (ii) cash retainers for serving as a committee member, a committee Chair or Chair of the Board.
(2)The amounts in this column represent the aggregate grant date fair value of the relevant award(s) presented, as determined in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” See Note 22 of the consolidated financial statements included in this Form 10-K, regarding assumptions underlying valuation of equity awards.
(3)Consists of RSUs granted at an exchange rate of C$1.00 = US$0.7266 and all vested as of March 31, 2025.
(4)Reflects compensation granted to Mr. Mongeau for his service on the Board prior to his appointment as CEO in January 2025. Additional compensation earned as CEO within Fiscal 2025 is defined within the “Summary Compensation Table”.
(5)Ms. Schmeling, Mr. Hankinson and Mr. Sabia resigned from the Board effective April 18, 2024. Ms. Schmeling received compensation reflecting her service through April 2024. Mr. Sabia voluntarily waived his right to receive non-employee director compensation from Fiscal 2021 onwards, and Mr. Hankinson voluntarily waived his right to receive non-employee director compensation from Fiscal 2022 onwards.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information, based on data provided to us or filed with the SEC, with respect to beneficial ownership of our Shares as of May 1, 2025 for:
•all persons known by us to own beneficially more than 5% of our outstanding Shares;
•each of our NEOs named in the Summary Compensation Table included in Item 11 (“Executive Compensation”) of this Form 10-K;
•each of our directors; and
•all of our current directors and executive officers as a group.
Beneficial ownership is determined according to the rules of the SEC. Generally, a person has beneficial ownership of a security if the person possesses sole or shared voting or investment power of that security, including any securities that a person has the right to acquire beneficial ownership within 60 days. Except as otherwise indicated, all persons listed below have sole voting power and dispositive power with respect to the Shares beneficially owned by them, subject to applicable community property laws.
Name and Address of Beneficial Owner
Number of Shares Beneficially Owned
Percent of Class
Greater than 5% Shareholders
CBI Group
26,261,474
(3)
12.4
%
Directors and Named Executive Officers
David Lazzarato
22,886
(4)
*
Theresa Yanofsky
20,199
(5)
*
Willy Kruh
9,272
(6)
*
Luc Mongeau
7,687
(7)
*
Judy Hong
313,935
(8)
*
Christelle Gedeon
189,798
(9)
*
Current Directors and Executive Officers as a Group (6 persons)
563,777
*
Notes:
* Less than 1%.
(1)Except as otherwise indicated, the address for each shareholder listed is c/o Canopy Growth Corporation, 1 Hershey Drive, Smiths Falls, Ontario, K7A 0A8.
(2)The percentages above are based on 185,192,210 Common Shares outstanding as of May 1, 2025. In accordance with the rules of the SEC, Common Shares that may be issued upon the exercise, vesting or exchange of derivative securities (such as a Options, RSUs or Exchangeable Shares) within 60 days of May 1, 2025 are deemed to be beneficially owned by the person holding such Options, RSUs or Exchangeable Shares and are treated as outstanding for the purpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentage beneficial ownership of any other person.
(3)Consists of 15,811,474 Exchangeable Shares held by Greenstar Canada Investment Limited Partnership (“Greenstar”) and 10,450,000 Exchangeable Shares held by CBG Holdings LLC (“CBG”). According to the Schedule 13D/A (Amendment No. 13) (“13D/A#13”) filed with the SEC on April 19, 2024 by CBG, Greenstar II LLC (“GII”), Greenstar II Holdings LLC (“GIIH”), Greenstar, Greenstar Canada Investment Corporation (“GCIC”), Constellation Brands Canada Holdings ULC (“CBCH ULC”), Constellation Capital LLC (“CC LLC”), Constellation International Holdings Limited (“CIHL”) and Constellation Brands, Inc. (“CBI” and, together with its affiliates, the “CBI Group”), (i) each of Greenstar, GCIC, CBCH ULC, CC LLC and CIHL has shared voting and dispositive power over 15,811,474 Exchangeable Shares, (ii) each of CBG, GII, GIIH shares has shared voting and dispositive power over 10,450,000 Exchangeable Shares, and (iii) CBI has shared voting and dispositive power over 26,261,474 Exchangeable Shares. Each Exchangeable Share is convertible, at any time, at the option of the holder, into Common Shares. Other than information relating to the CBI Group’s percentage of beneficial ownership, the foregoing information is based solely on the information provided in 13D/A#13. This beneficial owner’s address is 207 High Point Drive, Victor, New York 14564.
(4)Consists of 22,886 Common Shares held directly by Mr. Lazzarato.
(5)Consists of 20,199 Common Shares held directly by Ms. Yanofsky.
(6)Consists of 9,272 Common Shares held directly by Mr. Kruh.
(7)Consists of 7,687 Common Shares held directly by Mr. Mongeau.
(8)Consists of 356 Common Shares held directly by Ms. Hong, 274,900 Options that could be exercised within 60 days of May 1, 2025, and 27,339 RSUs and 11,340 PSUs that will vest within 60 days of May 1, 2025.
(9)Consists of 13,525 Common Shares held directly by Dr. Gedeon, 151,090 Options that could be exercised within 60 days of May 1, 2025, and 17,072 RSUs and 8,111 PSUs that will vest within 60 days of May 1, 2025.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth the details regarding the number of Shares to be issued upon exercise of outstanding Options, RSUs and PSUs and the weighted average exercise price of the outstanding Options in connection with the Omnibus Incentive Plan as of March 31, 2025:
Plan Category
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans(1)
Equity compensation plans approved by security holders(2)
5,008,600 (3)
$22.81
13,377,930
Equity compensation plans not approved by security holders
-
-
-
Total
5,008,600
$22.81
13,377,930
Notes:
(1)Based on the maximum number of Shares available for issuance under the Omnibus Incentive Plan, being 18,386,529 Shares, or 10% of the 183,865,295 outstanding Shares as of March 31, 2025.
(2)The maximum number of Shares issuable from treasury pursuant to awards under the Omnibus Incentive Plan cannot exceed 10% of the total outstanding Shares from time to time.
(3)Represents the number of Shares reserved for issuance upon the exercise or vesting, as applicable, of the denoted outstanding Options, RSUs and PSUs issued pursuant to the Omnibus Incentive Plan.
Securities Outstanding under Equity Compensation Plans
The following table sets forth the details regarding the number of Shares reserved for issuance under awards currently outstanding pursuant to the Omnibus Incentive Plan and ESPP as of March 31, 2025:
Compensation Security
Number of Shares Reserved for Issuance and Percentage of Outstanding Shares
as of March 31, 2025(1)
Options
3,648,915 (2.0%)
RSUs
1,286,224 (0.7%)
PSUs
73,461 (0.0%)
Total
5,008,600 (2.7%)
Notes:
(1)Percentages based on 183,865,295 issued and outstanding Shares as of March 31, 2025.
To date, no deferred stock units, restricted stock or stock appreciation rights have been issued pursuant to the Omnibus Incentive Plan.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
We or one of our subsidiaries may occasionally enter into transactions with certain “related persons” as defined in Item 404 of Regulation S-K. Related persons include our executive officers, directors, director nominees, persons beneficially owning 5% or more of the Shares, immediate family members of these persons and entities in which one of these persons has a direct or indirect material interest. We generally refer to transactions with these related persons as “related person transactions”.
The CBI Group Investments
On November 2, 2017, Greenstar invested C$245 million (or approximately US$191 million, based on the foreign exchange rate as of the date of the transaction) in Canopy Growth in exchange for (i) 1,887,690 Shares; and (ii) 1,887,690 warrants exercisable at an exercise price per Share of C$129.783 (or approximately US$101.322) (the “Greenstar Warrants”).
In connection with our offering of senior notes of the Company due July 2023 (the “Canopy Notes”) pursuant to an indenture dated June 20, 2018, Greenstar purchased C$200 million (or approximately US$150 million) worth of Canopy Notes. Prior to the Company entering into a second supplemental indenture dated June 29, 2022, amending the terms of the Canopy Notes (the “Second Supplement”), the C$200 million principal amount of Canopy Notes held by Greenstar were convertible in certain circumstances and subject to certain conditions into an aggregate of 415,154 Shares. Pursuant to the Second Supplement, the Company irrevocably surrendered its right to settle the conversion of any Canopy Note by the issuance of Shares or a combination of cash and Shares.
On November 1, 2018, CBG invested C$5.079 billion (or approximately US$3.877 billion, based on the foreign exchange rate as of the date of the transaction) in Canopy Growth in exchange for (i) 10,450,000 Shares at a price of C$486.00 (or approximately US$370.90, based on the foreign exchange rate as of the date of the transaction) per Share, and (ii) 13,974,545 warrants (the “CBG Warrants”), of which 8,847,286 CBG Warrants (the “Original Tranche A Warrants”) had an exercise price of C$504.00 (or approximately US$385.20) and were exercisable until November 1, 2021 and the remaining 5,127,259 CBG Warrants (the “Original Tranche B Warrants”) had an exercise price per Share based on the five-day volume weighted average price of the Shares on the TSX at the time of exercise and will become immediately exercisable only following the exercise of the Original Tranche A Warrants.
On April 18, 2019, CBG, Greenstar and Canopy Growth entered into the second amended and restated investor rights agreement (the “Amended Investor Rights Agreement), which amended the first amended and restated investor rights agreement dated November 1, 2018 between CBG, Greenstar and Canopy Growth. In addition, on April 18, 2019, CBG and Canopy Growth entered into a consent agreement (the “Consent Agreement”). In connection with these agreements, on June 27, 2019 Canopy Growth also amended the terms of the Original Tranche A Warrants and the Original Tranche B Warrants as follows: (a) extended the term of the Original Tranche A Warrants to November 1, 2023 (the “Tranche A Warrants”) and, (b) replaced the Original Tranche B Warrants with two tranches of warrants (the “Tranche B Warrants” and the “Tranche C Warrants”) each of which were to vest and become exercisable once all Original Tranche A Warrants had been exercised and were exercisable until November 1, 2026, with different terms: the Tranche B Warrants were exercisable to acquire 3,845,444 million Shares at a price of C$766.80 (or approximately US$585.50) per Share and the Tranche C Warrants were exercisable to acquire 1,281,815 Shares at a price equal to the 5-day volume-weighted average price of the Shares immediately prior to exercise.
On May 1, 2020, the Greenstar Warrants were exercised for aggregate gross proceeds of approximately C$245 million (or approximately US$174 million, based on the foreign exchange rate as of the date of the transaction).
On June 29, 2022, Greenstar entered into an exchange agreement with the Company, pursuant to which Greenstar agreed to exchange C$100 million principal amount of the Canopy Notes for 2,924,546 Shares. The exchange was part of an exchange by the Company of an aggregate of approximately C$260 million principal amount of Canopy Notes held by Greenstar and certain other holders into Shares.
On October 24, 2022, CBG, Greenstar and the Company entered into the consent agreement (the “Third Consent Agreement”), pursuant to which CBG was expected to surrender for cancellation the warrants held by CBG to purchase 13,974,545 Shares.
On April 14, 2023, Greenstar entered into an exchange agreement with the Company pursuant to which the Company agreed to purchase for cancellation the remaining C$100 million principal amount of Canopy Notes held by Greenstar in exchange for: (i) a cash payment to Greenstar in the amount of unpaid and accrued interest owing under the Canopy Notes held by Greenstar; and (ii) a promissory note (the “CBI Note”) issued to Greenstar in the aggregate principal amount of C$100 million payable on December 31, 2024. As a result, Greenstar no longer holds any Canopy Notes.
On November 1, 2023, the Tranche A Warrants expired in accordance with their terms without having been exercised. In accordance with the terms of the Tranche B Warrants and Tranche C Warrants, the vesting of the remaining Tranche B Warrants and Tranche C Warrants, as applicable, was conditioned on the exercise, in full, of the Tranche A Warrants. Accordingly, the Tranche B Warrants and Tranche C Warrants are not, and will not become, exercisable and are considered expired as of November 1, 2023.
Amended Investor Rights Agreement
As noted above, Canopy Growth and the CBG Group entered into the Amended Investor Rights Agreement pursuant to which the CBG Group had certain governance rights which are summarized below. In addition, on October 24, 2022, we entered into the Third Consent Agreement pursuant to which, we agreed, among other things, that following the conversion by CBG and Greenstar of their respective Shares into Exchangeable Shares (as defined below), other than the Third Consent Agreement and the termination rights contained therein and the CBI Note held by Greenstar, all agreements between the Company and CBI, including the Amended Investor Rights Agreement, would be terminated.
Board Representation
Pursuant to the Amended Investor Rights Agreement, the CBI Group was entitled to designate four nominees for election or appointment to the Board for so long as the CBG Group held the Target Number of Shares (the “Nominee Rights”).
Approval and Other Rights
The Amended Investor Rights Agreement provided that so long as the CBI Group continued to hold at least the Target Number of Shares, the Board would not: (i) propose or resolve to change the size of the Board, except where otherwise required by law, or with the consent of CBG; or (ii) present a slate of Board nominees to Shareholders for election that is greater than or fewer than seven directors.
Pursuant to the Amended Investor Rights Agreement, for so long as the CBI Group continued to hold at least the Target Number of Shares, we would not, without the prior written consent of CBG, among other things, (a) consolidate or merge into or with another person or enter into any other similar business combination, including pursuant to any amalgamation, arrangement, recapitalization or reorganization, other than a consolidation, merger or other similar business combination of any wholly-owned subsidiary or an amalgamation or arrangement involving a subsidiary with a another person in connection with a permitted acquisition; (b) acquire any shares or similar equity interests, instruments convertible into or exchangeable for shares or similar equity interests, assets, business or operations with an aggregate value of more than C$250 million (or approximately US$199 million), in a single transaction or a series of related transactions; (c) sell, transfer, lease, pledge or otherwise dispose of any of its or any of its subsidiaries’ assets, business or operations (in a single transaction or a series of related transactions) in the aggregate with a value of more than C$20 million (or approximately US$16 million); or (d) make any changes to our policy with respect to the declaration and payment of any dividends on the Shares.
In accordance with the Amended Investor Rights Agreement, the CBI Group was not permitted, prior to the exercise or expiry of all of the CBG Warrants, to purchase more than 2,000,000 Shares (subject to customary adjustments for Share splits, consolidations or other changes to the outstanding Share capital of a similar nature): (i) on the TSX, the Nasdaq or any other stock exchange, marketplace or trading market on which the Shares are then listed; or (ii) through private agreement transactions with existing holders of Shares, provided that CBG must promptly notify Canopy Growth of any acquisition of Shares.
Exclusivity Covenant and Termination
The Amended Investor Rights Agreement also provided that, subject to certain conditions, so long as the CBI Group continued to hold at least the Target Number of Shares, the CBI Group would adhere to certain non-competition restrictions including that the Company will be their exclusive strategic vehicle for cannabis products of any kind anywhere in the world (subject to limited exceptions). Further, the CBI Group agreed, for a limited period of time and subject to certain exceptions, to certain post-termination, non-competition restrictions, which included not pursuing other cannabis opportunities and not directly or indirectly participating in a competing business anywhere in the world.
On October 24, 2022, we entered into the Third Consent Agreement pursuant to which, we agreed, among other things, that following the conversion by CBG and Greenstar of their respective Shares into Exchangeable Shares, other than the Third Consent Agreement and the termination rights contained therein and the CBI Note held by Greenstar, all agreements between the Company and CBI, including the Amended Investor Rights Agreement, would be terminated. As a result, the CBI Group would no longer be subject to the non-competition restrictions in the Amended Investor Rights Agreement.
Pre-Emptive Rights and Top-Up Rights
Additionally, under the Amended Investor Rights Agreement, the CBI Group had certain pre-emptive rights as well as certain top-up rights in order to maintain its pro rata equity ownership position in Canopy Growth in connection with any offering or distribution of securities by Canopy Growth (subject to certain exceptions).
Consent Agreement
In addition to the amendments to the CBG Warrants described above, pursuant to the First Consent Agreement, the Company agreed that without the prior written consent of CBG, such consent not to be unreasonably withheld, the Company would not (i) exercise its right to acquire all of the issued and outstanding Class E subordinate voting shares (the “Fixed Shares”) of Acreage prior to federal legalization of cannabis; (ii) amend, modify, supplement or restate the arrangement agreement between the Company and Acreage dated
April 18, 2019, as amended on May 15, 2019, September 23, 2020 and November 17, 2020 (“Acreage Arrangement Agreement”); or (iii) waive any terms, covenants or conditions set forth in the Acreage Arrangement Agreement.
In addition, we agreed that, in the event that CBG exercises the Tranche A Warrants in full, the Company would purchase for cancellation the lesser of (i) 2,737,886 Shares, and (ii) Shares with a value of C$1,582,995,262, (or approximately US$1,260,222,528 as of April 30, 2023) during the period commencing on April 18, 2019 and ending on the date that is 24 months after the date that CBG exercises all of the Tranche A Warrants. However, if the CBI Group elected to convert the Shares held by the CBI Group into Exchangeable Shares, CBG had agreed to surrender the CBG Warrants for cancellation and as a result, our obligation to repurchase such Shares would terminate as the Tranche A Warrants would not be exercised. If, for any reason, we did not purchase for cancellation the Shares within such period, we were required to credit CBG an amount (the “Credit Amount”), as liquidated damages, equal to the difference between: (i) C$1,582,995,262 (or approximately US$1,260,222,528 as of April 30, 2023); and (ii) the actual purchase price we paid in purchasing Shares pursuant to the First Consent Agreement. The Credit Amount would have reduced the aggregate exercise price otherwise payable by CBG upon each exercise of the Original Tranche B Warrants (including those Original Tranche B Warrants reclassified as Tranche C Warrants).
We also agreed that if the CBI Group received any notification or communication of any violation or contravention of applicable law or any liability to the CBI Group under applicable law or any notification or communication that would be expected to result in a violation or contravention of applicable law or any actual liability to the CBI Group under applicable law, as a result of the license agreement between us and Acreage, CBG had the right to direct and cause us to terminate the license agreement in accordance with its terms, provided that we had an opportunity to cure any such violation, contravention or liability and CBG would have been be required to take all commercially reasonable efforts to assist us in addressing such violation, contravention or liability.
On June 24, 2020, the Company and Acreage entered into a proposal agreement (the “Proposal Agreement”) to amend the terms of the then existing plan of arrangement made pursuant to the Acreage Arrangement. Concurrent with the execution of the Proposal Agreement, on June 24, 2020, Canopy Growth and CBG entered into a second consent agreement (the “Second Consent Agreement”). As the transactions contemplated by the Proposal Agreement may have resulted in certain taxes owing by CBG or its affiliates, the Company agreed, pursuant to the Second Consent Agreement, to indemnify CBG and its affiliates for such taxes and losses incurred in relation to such taxes, subject to certain exceptions. The Company and CBG agreed to terminate the First Consent Agreement and the Second Consent Agreement upon termination of the Amended Investor Rights Agreement.
On October 24, 2022, the Company entered into an arrangement agreement with Canopy USA and Acreage, as amended (the “Floating Share Arrangement Agreement”), pursuant to which, subject to the satisfaction of the closing conditions set forth in the Floating Share Arrangement Agreement, including the conditions set forth in the Acreage Arrangement Agreement, Canopy USA would acquire all of the issued and outstanding Class D subordinate voting shares of Acreage (the “Floating Shares”) by way of a court-approved plan of arrangement (the “Floating Share Arrangement”). The Floating Share Arrangement received the requisite approval from the holders of Floating Shares at the special meeting of Acreage shareholders held on March 15, 2023 and on March 20, 2023 Acreage obtained a final order from the Supreme Court of British Columbia approving the Floating Share Arrangement. On December 9, 2024, in connection with: (i) Acreage Arrangement Agreement; and (ii) the Floating Share Arrangement Agreement , Canopy USA acquired all of the issued and outstanding shares of Acreage.
On October 24, 2022, we entered into the Third Consent Agreement pursuant to which, we agreed, among other things, that following the conversion by CBG and Greenstar of their respective Shares into Exchangeable Shares, other than the Third Consent Agreement and the termination rights contained therein and the CBI Note held by Greenstar, all agreements between the Company and CBI would terminate, including the First Consent Agreement and the Second Consent Agreement.
Approval of Exchangeable Shares and Related Matters
At a special meeting (the “Special Meeting”) of shareholders of the Company held on April 12, 2024, the Company’s shareholders passed a special resolution authorizing and approving an amendment to the Company’s Articles of Incorporation, as amended, in order to: (i) create and authorize the issuance of an unlimited number of a new class of non-voting and non-participating exchangeable shares (the “Exchangeable Shares”) and (ii) restate the rights of the Shares to provide for a conversion feature whereby each Share may at any time, at the option of the holder, be converted into one Exchangeable Share (the “Exchangeable Shares Resolution”).
On April 18, 2024, in connection with the approval of the Exchangeable Shares Resolution and the creation of the Exchangeable Shares, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Greenstar, pursuant to which Greenstar converted approximately C$81.2 million of principal amount of the C$100 million principal amount CBI Note into 9,111,549 Exchangeable Shares (the “Note Exchange”), calculated based on a price per Exchangeable Share equal to C$8.91. Pursuant to the terms of the Exchange Agreement, all accrued and unpaid interest on the CBI Note together with the remaining principal amount of the CBI Note was cancelled and forgiven for no additional consideration by Greenstar. Following the closing of the Note Exchange, there is no outstanding balance owing under the CBI Note and the CBI Note has been cancelled.
Concurrently with the Note Exchange, Greenstar and CBG Holdings LLC (“CBG” and, together with Greenstar, the “CBG Group”), a wholly owned subsidiary of CBI, exchanged all 17,149,925 Common Shares they collectively held for 17,149,925
Exchangeable Shares (the “CBI Exchange”) for no consideration pursuant to the terms of the Company’s Articles of Incorporation, as amended in accordance with the Exchangeable Shares Resolution. As a result of the CBI Exchange and the Note Exchange, the CBG Group no longer holds any Common Shares and, as of May 28, 2025, the CBG held an aggregate of 26,261,474 Exchangeable Shares. Assuming the conversion of CBG Group’s Exchangeable Shares into Canopy Shares, CBG Group would own 12.4% of the outstanding Canopy Shares as of May 28, 2025.
In accordance with the Third Consent Agreement and as a result of the CBI Exchange, on April 18, 2024, CBG, Greenstar and Canopy Growth terminated the Investor Rights Agreement, along with an administrative services agreement, a co-development agreement and all other commercial arrangements between them and their subsidiaries, other than the Third Consent Agreement, certain termination agreements and the Exchange Agreement. As a result, CBI no longer holds any governance rights in relation to Canopy Growth, including the Nominee Rights.
In connection with the termination of the Investor Rights Agreement and subsequent to the Note Exchange, on April 18, 2024, Garth Hankinson, Judy Schmeling and James Sabia each provided notice to the Company of his or her decision to resign from the Board effective immediately (the “CBI Resignations”). Each of Mr. Hankinson, Ms. Schmeling and Mr. Sabia had been a nominee of the CBG Group under the Amended Investor Rights Agreement.
Policy Regarding Related Person Transactions
The Board and the Audit Committee updated a written policy on May 28, 2025, which updated the prior policy adopted on June 20, 2023, providing that all related person transactions or series of similar transactions required to be disclosed pursuant to SEC Regulation S-K Item 404(a) must be presented to the Board for pre-approval or ratification. The policy requires each of our (i) directors or director nominees, (ii) executive officers, and (iii) security holders known by the Company to own of record or to beneficially own more than 5% of any class of our voting securities to notify the Chief Legal Officer promptly and, whenever possible, in advance of the occurrence of any potential related person transaction in which such person is directly or indirectly involved.
The CLO is responsible for reviewing all potential related person transactions and taking reasonable steps to ensure that all related person transactions requiring disclosure under Item 404(a) of Regulation S-K are presented to the Audit Committee for pre-approval or ratification by members of the committee in their discretion at the committee’s next regularly scheduled meeting or, if deemed appropriate, by consent in lieu of a meeting. No director may engage in a vote to pre-approve or ratify any related person transaction in which he or she or any member of his or her immediate family has a material interest; provided, however, that such director must provide any information concerning such related person transaction that the Audit Committee may reasonably request. If a potential related person transaction involves the CLO, the CFO would assume the responsibilities of the CLO under the policy with respect to that transaction.
The Audit Committee may consider all factors it deems relevant when determining whether to approve or ratify a related person transaction. In the context of evaluating potential transactions, the Audit Committee may consider, among other factors, the nature of the transaction and the related person’s interest in the transaction, the size of the transaction, whether we are able to engage in a comparable transaction with an unaffiliated party on more favorable terms, the benefit of the transaction to the Company, and the impact of the transaction on the related person. Following the adoption of this policy, we are not aware of any related person transaction required to be reported under Regulation S-K Item 404(a) that has not been pre-approved or ratified pursuant to this policy.
Director Independence
The Board is currently comprised of four directors: Luc Mongeau, Willy Kruh, David Lazzarato and Theresa Yanofsky. Please see the biographies of individual directors in Item 10 of this Form 10-K. The Board has determined that three of the four directors (or 75% of the directors), namely Messrs. Kruh, Lazzarato and Ms. Yanofsky, have no relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and each is an “independent director” under Rule 5605(a)(2) of the Nasdaq Rules and meet the definition of “independence” under NI 52-110. Mr. Mongeau is not considered independent because of his role as the CEO of the Company.
During Fiscal 2025, following the conclusion of formal business of each quarterly Board meeting, the non-independent director was asked to leave the meeting and the independent directors held an “in camera” meeting to facilitate open and candid discussion. In addition, any item which could involve a potential conflict of interest among one or more directors is voted on by those directors that are not related to the conflict in question. It is anticipated that “in camera” meetings of the independent directors will continue to be held in this manner during the current fiscal year.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
The following table sets forth fees billed and expected to be billed to the Company for the fiscal years ended March 31, 2025 and 2024 for professional services rendered by PKF O'Connor Davies, LLP ("PKFOD").
(US$)
(US$)
Audit Fees(1)
$2,625,000
$2,886,620
Audit-Related Fees(2)
-
-
Tax Fees(3)
-
-
All Other Fees(4)
-
-
Total
$2,625,000
$2,886,620
Notes:
(1)“Audit Fees” refers to the aggregate fees billed and expected to be billed by PKFOD for audit services, including fees incurred in relation to quarterly reviews, procedures in connection with securities filings, and statutory audits.
(2)“Audit-Related Fees” refers to the aggregate fees billed for assurance and related services by PKFOD that are reasonably related to the performance of the audit or review of the Company’s financial statements and not reported under Audit Fees.
(3)“Tax Fees” refers to the aggregate fees billed for the professional services rendered by PKFOD for tax compliance.
(4)“All Other Fees” refers to fees for products and services provided by the principal accountant, other than the services reported in the above categories.
The Audit Committee’s policy is to pre-approve any and all audit services and permissible non-audit services to be performed by the Company’s independent registered public accounting firm. All fees and services described in the table above were pre-approved by the Audit Committee.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules.
(a) (1)
Financial Statements
See the accompanying Index to Consolidated Financial Statement Schedule on page.
(a) (2)
Financial Statement Schedules
See the accompanying Index to Consolidated Financial Statement Schedule on page.
(a) (3)
Exhibits
Exhibit Index
Exhibit
Number
Description
2.1
Arrangement Agreement, dated as of April 18, 2019, by and between Canopy Growth Corporation and Acreage Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on June 1, 2020).
2.2
First Amendment to Arrangement Agreement, dated as of May 15, 2019, by and between Canopy Growth Corporation and Acreage Holdings, Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on June 1, 2020).
2.3
Proposal Agreement, dated as of June 24, 2020, by and between Canopy Growth Corporation and Acreage Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 30, 2020).
2.4
Second Amendment to the Arrangement Agreement, dated as of September 23, 2020, by and between Canopy Growth Corporation and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 23, 2020).
2.5
Floating Share Arrangement Agreement, dated October 24, 2022, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on October 26, 2022).
2.6
First Amendment to Arrangement Agreement, dated March 17, 2023, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Acreage Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on March 21, 2023).
2.7
Second Amendment to Arrangement Agreement, dated May 31, 2023, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 2, 2023).
2.8
Third Amendment to Arrangement Agreement, dated August 31, 2023, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 1, 2023).
2.9
Fourth Amendment to Arrangement Agreement, dated October 31, 2023, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 1, 2023).
2.10
Fifth Amendment to Arrangement Agreement, dated December 29, 2023, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 2, 2024).
2.11
Sixth Amendment to Arrangement Agreement, dated March 29, 2024, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2024).
2.12
Seventh Amendment to Arrangement Agreement, dated April 25, 2024, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 30, 2024).
2.13
Eighth Amendment to Arrangement Agreement, dated May 8, 2024, by and among Canopy Growth Corporation, Canopy USA, LLC and Acreage Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 13, 2024).
3.1
Certificate of Incorporation and Articles of Amendment of Canopy Growth Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on June 1, 2020).
3.2
Bylaws of Canopy Growth Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the SEC on November 8, 2021).
3.3
Amendment to Articles of Canopy Growth Corporation, filed on December 15, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2023).
3.4
Articles of Amendment to Articles of Incorporation of Canopy Growth Corporation, filed on April 12, 2024 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 16, 2024).
4.1*
Description of Capital Stock of Canopy Growth Corporation.
4.2
Form of Canopy Growth Corporation Common Share Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on June 1, 2020).
4.3
Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 18, 2023).
4.4
Form of Series A Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 19, 2024).
4.5
Form of Series B Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on January 19, 2024).
4.6
Form of Convertible Debenture Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 6, 2024).
4.7
Form of Warrant Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on May 6, 2024).
10.1
Form of Director and Officer Indemnity Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on May 31, 2022).
10.2
Canopy Growth Corporation Amended and Restated Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on May 31, 2022).
10.3
Form of Option Grant Agreement (U.S. and Canadian Employees) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 14, 2021).
10.4
Form of Restricted Stock Unit Grant Agreement (U.S. Employees) (For Settlement in Common Shares Only) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 14, 2021).
10.5
Form of Restricted Stock Unit Grant Agreement (For Non-U.S. Employees) (For Settlement in Common Shares Only) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on June 14, 2021).
10.6
Form of Performance Stock Unit Grant Agreement (U.S. Employees) (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 6, 2021).
10.7
Form of Performance Stock Unit Grant Agreement (Canadian Employees) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 6, 2021).
10.8
Canopy Growth Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the SEC on November 8, 2021).
10.9
Canopy Growth Corporation Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.10
Form of Option Grant Agreement (U.S. and Canadian Employees) (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.11
Form of Option Grant Agreement (International Employees) (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.12
Form of Restricted Stock Unit Grant Agreement (U.S. Employees) (For Settlement in Common Shares Only) (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.13
Form of Restricted Stock Unit Grant Agreement (Non-U.S. Employees) (For Settlement in Common Shares Only) (incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.14*
Non-Employee Director Compensation Table.
10.15
Debenture, dated as of September 23, 2020, issued by Universal Hemp, LLC to 11065220 Canada Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on September 23, 2020).
10.16
Credit Agreement, dated as of March 18, 2021, among Canopy Growth Corporation and 11065220 Canada Inc., as borrowers, the lenders party thereto and Wilmington Trust, National Association, as administrative and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 18, 2021).
10.17
Amendment No. 1 to Credit Agreement, dated as of October 24, 2022, among Canopy Growth Corporation, 11065220 Canada Inc., the lenders party thereto and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on October 26, 2022).
10.18
Amendment No. 2 to Credit Agreement, dated as of July 13, 2023, between Canopy Growth Corporation, 11065220 Canada Inc., the lenders party thereto and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on July 14, 2023).
10.19
Amendment No. 3 to Credit Agreement, dated as of August 8, 2024, between Canopy Growth Corporation, 11065220 Canada Inc., the lenders party thereto and Wilmington Trust, National Association (incorporated by reference to
Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, filed with the SEC on August 9, 2024).
10.20
Separation Agreement, by and between Canopy Growth Corporation and David Klein, dated August 15, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 16, 2024).
10.21
Employment Agreement, effective as of November 26, 2024, by and between Canopy Growth Corporation and Luc Mongeau (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 26, 2024).
10.22
Employment Agreement, effective as of March 29, 2022, between Canopy Growth Corporation and Judy Hong (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on May 31, 2022).
10.23
Amendment to Employment Agreement of Judy Hong, effective as of June 1, 2023 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, filed with the SEC on May 30, 2024).
10.24
Letter Agreement, dated October 24, 2022, by and among 11065220 Canada Inc., AFC Gamma Inc., Viridescent Realty Trust, Inc. and AFC Institutional Fund LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the SEC on October 26, 2022).
10.25
Amended and Restated Protection Agreement, dated as of May 19, 2023, by and among Canopy USA, LLC, 11065220 Canada Inc. and Canopy Growth Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 9, 2023).
10.26
Second Amended and Restated Protection Agreement, dated as of January 25, 2024, by and among Canopy USA, LLC, 11065220 Canada Inc. and Canopy Growth Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2023, filed with the SEC on February 9, 2024).
10.27
Amended and Restated Limited Liability Company Agreement of Canopy USA, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 9, 2023).
10.28
Second Amended and Restated Limited Liability Company Agreement of Canopy USA, LLC, dated April 30, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 6, 2024).
10.29
Form of Exchange Agreement dated June 29, 2023, by and between Canopy Growth Corporation and the investor signatory thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 3, 2023).
10.30
Form of Redemption Agreement dated July 13, 2023, by and between Canopy Growth Corporation and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 14, 2023).
10.31
Indenture, dated July 14, 2023, between the Canopy Growth Corporation and Odyssey Trust Company, as trustee (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 14, 2023).
10.32
Share Purchase Agreement, dated May 19, 2023, by and among Canopy USA, LLC and Huneeus 2017 Irrevocable Trust (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 9, 2023).
10.33
Form of Subscription Agreement, dated September 18, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 18, 2023).
10.34
Form of Registration Rights Agreement, between the Company and the investors party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on September 18, 2023).
10.35
Agreement of Purchase and Sale, dated as of August 15, 2023, by and among the Canopy Growth Corporation, Tweed Inc. and Hershey Canada Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 9, 2023).
10.36
Form of Subscription Agreement, dated January 18, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 19, 2024).
10.37
Registration Rights Agreement, dated as of January 19, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on January 19, 2024).
10.38
Exchange Agreement, dated as of April 18, 2024, by and between Greenstar Canada Investment Limited Partnership and Canopy Growth Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 19, 2024).
10.39
Exchange and Subscription Agreement, dated as of May 2, 2024, by and between the Company and the investor party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on May 6, 2024).
10.40
Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on May 6, 2024).
10.41
Employment Agreement, effective as of August 1, 2022, between Canopy Growth Corporation and Christelle Gedeon (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, filed with the SEC on May 30, 2024).
10.42
Amendment to Employment Agreement of Christelle Gedeon, effective as of August 21, 2023 (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, filed with the SEC on May 30, 2024).
10.43
Retention Agreement, by and between Canopy Growth Corporation USA, LLC and Judy Hong, effective as of August 19, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2024).
10.44
Retention Agreement, by and between Canopy Growth Corporation and Christelle Gedeon, effective as of August 19, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2024).
10.45
Second Amended and Restated Credit Agreement, dated as of September 13, 2024, by and among 11065220 Canada Inc., as lender, the other lenders party thereto, High Street Capital Partners, LLC, as borrower, Acreage Holdings, Inc. and each other loan party identified on the signature pages thereto, and Acquiom Agency Services LLC, as agent for the lenders (incorporated by reference to Exhibit 10.1 to Acreage Holdings, Inc.’s Current Report on Form 8-K filed by Acreage Holding, Inc. with the SEC on September 19, 2024).
10.46
Assignment and Acceptance, dated as of June 3, 2024, by and among AFC Gamma, Inc., AFC Institutional Fund LLC and AFC Agent LLC, as assignors, and 11065220 Canada Inc., as assignee (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 5, 2024).
10.47
Commitment Letter Agreement, dated June 3, 2024, by and between Viridescent Realty Trust, Inc. and 11065220 Canada Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 5, 2024).
10.48
Assignment and Acceptance, dated as of June 3, 2024, by and between 11065220 Canada Inc., as assignor, and Viridescent Realty Trust, Inc., as assignee (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on June 5, 2024).
10.49
Amended and Restated Credit Agreement, dated as of June 3, 2024, by and among Viridescent Realty Trust, Inc. and 11065220 Canada Inc., as lenders, High Street Capital Partners, LLC, as borrower, Acreage Holdings, Inc. and each other loan party identified on the signature pages thereto, and VRT Agent LLC, as agent for the lenders (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on June 5, 2024).
10.50
Agreement Among Lenders, dated as of June 3, 2024, by and among Viridescent Realty Trust, Inc., as First Out Lender, 11065220 Canada Inc., as Last Out Lender, VRT Agent LLC, as Administrative Agent, and acknowledged by the other loan parties thereto (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the SEC on June 5, 2024).
10.51
Amendment No. 3 to Credit Agreement, dated as of August 8, 2024, between Canopy Growth Corporation, 11065220 Canada Inc., the lenders party thereto and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.13 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, filed with the SEC on August 9, 2024).
10.52*
Loan Agreement, dated as of April 14, 2022, between Canopy Elevate I LLC and 11065220 Canada Inc.
10.53*
Loan Agreement, dated as of April 14, 2022, between Canopy Elevate II LLC and 11065220 Canada Inc.
10.54*
Loan Agreement, dated as of April 14, 2022, between Canopy Elevate III LLC and 11065220 Canada Inc.
14.1*
Canopy Growth Corporation Code of Business Conduct and Ethics.
19.1*
Insider Trading Policy.
21.1*
List of Subsidiaries of Canopy Growth Corporation.
23.1*
Consent of PFK O’Connor Davies, Independent Registered Public Accounting Firm.
23.2*
Consent of KPMG, LLP, Independent Registered Public Accounting Firm.
24.1*
Power of Attorney (included on signature page hereto).
31.1*
Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1*
Clawback Policy.
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 This document has been identified as a management contract or compensatory plan or arrangement.
* Filed herewith.
** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
 Portions of this exhibit are redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
 Portions of this exhibit are redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K.