What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-06 · 200 added, 126 removed, 700 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

September 30,

Current assets:

38 unchanged sentences

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

Three months ended June 30,

Three months ended September 30,

Six months ended

September 30,

Cost of goods sold

2 unchanged sentences

Share-based compensation

Expected credit losses on financial assets and related charges

Asset impairment and restructuring costs

3 unchanged sentences

Other income (expense), net

Income (loss) before income taxes

Income tax (expense) recovery

Net income (loss)

(Loss) income before income taxes

Income tax recovery (expense)

Net (loss) income

Net loss attributable to noncontrolling interests and

redeemable noncontrolling interest

Net income (loss) attributable to Canopy Growth Corporation

Basic earnings (loss) per share

Net (loss) income attributable to Canopy Growth Corporation

Basic (loss) earnings per share

Basic weighted average common shares outstanding

Diluted earnings (loss) per share

Diluted (loss) earnings per share

Diluted weighted average common shares outstanding

Comprehensive loss:

Net income (loss)

Comprehensive income (loss):

Net (loss) income

Other comprehensive income (loss), net of income tax effect

3 unchanged sentences

Comprehensive income (loss)

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive loss attributable to noncontrolling interests

and redeemable noncontrolling interest

Comprehensive income (loss) attributable to Canopy Growth Corporation

Comprehensive income (loss) attributable to Canopy Growth

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

10 unchanged sentences

Balance at March 31, 2021

Other issuances of common shares

Other issuances of common

shares and warrants

Replacement equity instruments

7 unchanged sentences

noncontrolling interests

Comprehensive (loss) income

Balance at June 30, 2021

Redemption of redeemable

noncontrolling interest

Comprehensive income (loss)

Balance at September 30, 2021

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

10 unchanged sentences

Balance at March 31, 2020

Other issuances of common shares

Other issuances of common

shares and warrants

Exercise of warrants

1 unchanged sentence

Share-based compensation

Issuance and vesting of restricted

Changes in redeemable

3 unchanged sentences

Comprehensive income (loss)

Balance at June 30, 2020

Balance at September 30, 2020

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

2 unchanged sentences

(in thousands of Canadian dollars, unaudited)

Three months ended June 30,

Six months ended September 30,

Cash flows from operating activities:

6 unchanged sentences

Asset impairment and restructuring costs

Income tax expense (recovery)

Non-cash foreign currency

Interest paid

Expected credit losses on financial assets and related charges

Income tax recovery

Non-cash fair value adjustments

Change in operating assets and liabilities, net of effects from

3 unchanged sentences

Accounts payable and accrued liabilities

Other, including non-cash fair value adjustments

Other, including non-cash foreign currency

Net cash used in operating activities

2 unchanged sentences

Purchases of intangible assets

Proceeds on sale of property, plant and equipment

Proceeds on sale of intangible assets

1 unchanged sentence

Net cash proceeds on sale of subsidiaries

Sale of (investments in) other financial assets

Recovery of amounts related to construction financing

Payment of acquisition related liabilities

Net cash outflow on acquisition of noncontrolling interests

(Investments in) sale of other financial assets

Investment in Acreage Arrangement

Loan advanced to Acreage Hempco

Net cash outflow on acquisition of subsidiaries

Other investing activities

Net cash used in investing activities

Cash flows from financing activities:

Payment of share issue costs

Proceeds from issuance of shares by RIV Capital

Proceeds from issuance of common shares and warrants

Proceeds from exercise of stock options

2 unchanged sentences

Repayment of long-term debt

Other financing activities

Net cash (used in) provided by financing activities

7 unchanged sentences

(in thousands of Canadian dollars, unaudited)

Three months ended June 30,

Six months ended September 30,

Supplemental disclosure of cash flow information

11 unchanged sentences

The principal activities of the Company are the production, distribution and sale of a diverse range of cannabis and cannabinoid-based products for both adult recreational and medical purposes under a portfolio of distinct brands in Canada pursuant to the Cannabis Act , which came into effect on October 17, 2018 and regulates both the medical and recreational cannabis markets in Canada.

The Company has also expanded to jurisdictions outside of Canada where federally lawful, permissible and regulated for cannabis and/or hemp, and the Company, through its subsidiaries, operates in the United States, Germany, and certain other global markets.

The Company has also expanded to jurisdictions outside of Canada where cannabis and/or hemp is federally lawful, permissible and regulated, and the Company, through its subsidiaries, operates in the United States, Germany, and certain other global markets.

Additionally, the Company produces, distributes and sells a range of other consumer products globally, including vaporizers;

25 unchanged sentences

The Company adopted ASU 2019-12 as of April 1, 2021.

There was no impact of adopting ASU 2019-12 on the condensed interim consolidated financial statements.

There was no material impact of adopting ASU 2019-12 on the condensed interim consolidated financial statements.

Investments-Equity Securities

7 unchanged sentences

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

In addition, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

In addition, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted after December 15, 2020.

1 unchanged sentence

ASSET IMPAIRMENT AND RESTRUCTURING COSTS

In the three months ended June 30, 2021, the Company recorded charges related to operational changes resulting from the continuing strategic review of its business as a result of recent acquisition activities, and the partial outcome of certain integration initiatives.

Additionally, the Company recognized incremental costs associated with the closure of certain of its Canadian production facilities in December 2020.

Charges totaling $ 89,249 were recognized in the three months ended June 30, 2021, primarily representing the difference between the net book value of the associated long-lived assets and their estimated fair value.

In the three months ended June 30, 2021, the Company recorded charges related to operational changes resulting from the continuing strategic review of its business as a result of recent acquisition activities, which will result in the closure of its Niagara-on-the-Lake, Ontario and Langley, British Columbia facilities.

Additionally, the Company recognized costs associated with the closure of previously-identified Canadian production facilities in December 2020.

In the three months ended September 30, 2021, the Company recognized incremental costs associated with the closure of previously-identified Canadian production facilities in December 2020.

As a result, in the three and six months ended September 30, 2021, the Company recognized asset impairment and restructuring costs of $ 2,510 and $ 91,759 , respectively, primarily representing the difference between the net book value of the associated long-lived assets and their estimated fair value.

CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents are as follows:

September 30,

Cash equivalents

1 unchanged sentence

The components of short-term investments are as follows:

September 30,

Term deposits

2 unchanged sentences

Commercial paper and other

The amortized cost of short-term investments at June 30, 2021 is $ 1,492,227 (March 31, 2021 – $ 1,145,364 ).

The amortized cost of short-term investments at September 30, 2021 is $ 1,151,334 (March 31, 2021 – $ 1,145,364 ).

AMOUNTS RECEIVABLE, NET

The components of amounts receivable, net are as follows:

September 30,

Accounts receivable, net

2 unchanged sentences

Other receivables

Included in the accounts receivable, net balance at June 30, 2021 is an allowance for doubtful accounts of $ 1,582 (March 31, 2021 – $ 1,411 ) .

Included in the accounts receivable, net balance at September 30, 2021 is an allowance for doubtful accounts of $ 1,324 (March 31, 2021 – $ 1,411 ) .

The components of inventory are as follows:

September 30,

Raw materials, packaging supplies and consumables

1 unchanged sentence

Finished goods

In the three months ended June 30, 2021, the Company recorded write-downs related to inventory in cost of goods sold of $ 6,014 (three months ended June 30, 2020 – $ 19,386 ).

In the three and six months ended September 30, 2021, the Company recorded write-downs related to inventory in cost of goods sold of $ 86,837 and $ 92,851 (three and six months ended September 30, 2020 – $ 4,945 and $ 24,331 ).

PREPAID EXPENSES AND OTHER ASSETS

The components of prepaid expenses and other assets are as follows:

September 30,

Prepaid expenses

3 unchanged sentences

Additional details on how the fair value of significant investments is calculated are included in Note 21.

September 30,

TerrAscend Exchangeable Shares

16 unchanged sentences

The components of property, plant and equipment are as follows:

September 30,

Buildings and greenhouses

8 unchanged sentences

Accumulated depreciation

Depreciation expense included in cost of goods sold for the three months ended June 30, 2021 is $ 10,462 (three months ended June 30, 2020 – $ 14,786 ).

Depreciation expense included in selling, general and administrative expenses for the three months ended June 30, 2021 is $ 6,654 (three months ended June 30, 2020 – $ 2,629 ).

Depreciation expense included in cost of goods sold for the three and six months ended September 30, 2021 is $ 14,388 and $ 24,850 , respectively (three and six months ended September 30, 2020 – $ 14,449 and $ 29,235 , respectively).

Depreciation expense included in selling, general and administrative expenses for the three and six months ended September 30, 2021 is $ 5,604 and $ 12,258 , respectively (three and six months ended September 30, 2020 – $ 4,509 and $ 7,138 , respectively).

INTANGIBLE ASSETS

The components of intangible assets are as follows:

June 30, 2021

September 30, 2021

March 31, 2021

9 unchanged sentences

Total intangible assets

Amortization expense included in cost of goods sold for the three months ended June 30, 2021 is $ 18 ( three months ended June 30, 2020 – $ 702 ).

Amortization expense included in selling, general and administrative expenses for the three months ended June 30, 2021 is $ 7,998 (three months ended June 30, 2020 – $ 15,930 ).

Amortization expense included in cost of goods sold for the three and six months ended September 30, 2021 is $ 25 and $ 43 , respectively ( three and six months ended September 30, 2020 – $( 739 ) and $( 37 ), respectively).

Amortization expense included in selling, general and administrative expenses for the three and six months ended September 30, 2021 is $ 8,763 and $ 16,761 , respectively (three and six months ended September 30, 2020 – $ 13,539 and $ 29,469 , respectively).

The changes in the carrying amount of goodwill are as follows:

5 unchanged sentences

Foreign currency translation adjustments

Balance, June 30, 2021

Balance, September 30, 2021

OTHER ACCRUED EXPENSES AND LIABILITIES

The components of other accrued expenses and liabilities are as follows:

September 30,

Employee compensation

2 unchanged sentences

The components of debt are as follows:

September 30,

Maturity Date

29 unchanged sentences

The Notes will mature on July 15, 2023 .

The Notes are subordinated in right of payment to any existing and future senior indebtedness, including indebtedness under the revolving credit facility.

The Notes are subordinated in right of payment to any existing and future senior indebtedness, including any indebtedness under the revolving debt facility with FCC, as defined below.

The Notes will rank senior in right of payment to any future subordinated borrowings.

2 unchanged sentences

The Notes will be convertible, at the holder’s option, at a conversion rate of 20.7577 common shares for every $ 1 principal amount of Notes (equal to an initial conversion price of approximately $ 48.18 per common share), subject to adjustments in certain events.

In addition, the holder has the right to exercise the conversion option from September 30, 2018 to January 15, 2023, if (i) the market price of the Company common shares for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the 5 business day period after any consecutive 5 trading day period (the “measurement period”) in which the trading price per $ 1 principal amount of the Notes for each trading day in the measurement period was less than 98 % of the product of the last reported sales price of the Company’s common shares and the conversion rate on each such trading day, (iii) the Notes are called for redemption or (iv) upon occurrence of certain corporate events (“Fundamental Change”).

In addition, the holder has the right to exercise the conversion option from September 30, 2018 to January 15, 2023, if (i) the market price of the Company common shares for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the 5 business day period after any consecutive 5 trading day period (the “Measurement Period”) in which the trading price per $ 1 principal amount of the Notes for each trading day in the Measurement Period was less than 98 % of the product of the last reported sales price of the Company’s common shares and the conversion rate on each such trading day, (iii) the Notes are called for redemption or (iv) upon occurrence of certain corporate events (a “Fundamental Change”).

A Fundamental Change occurred upon completion of the investment by Constellation Brands, Inc.

10 unchanged sentences

The changes in fair value related to the Company’s own credit risk are recorded through other comprehensive income (loss).

The overall change in fair value of the Notes during the three months ended June 30, 2021, was a decrease of $ 51,372 (three months ended June 30, 2020, an increase of $ 35,694 ), which included contractual interest of $ 6,378 (three months ended June 30, 2020, interest of $ 6,444 ).

The overall change in fair value of the Notes during the three and six months ended September 30, 2021, was a decrease of $ 52,194 and $ 103,566 , respectively (three and six months ended September 30, 2020, an increase of $ 36,306 and $ 72,000 , respectively), which included contractual interest of $ 6,306 and $ 12,684 (three and six months ended September 30, 2020, interest of $ 6,306 and $ 12,750 , respectively).

Refer to Note 21 for additional details on how the fair value of the Notes is calculated.

6 unchanged sentences

and (iv) a reduction in the conversion price to $ 0.285 .

In addition, on September 9, 2020, Supreme Cannabis issued new senior unsecured non-convertible debentures (“Accretion Debentures”).

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 $ 36,500 to a maximum of $ 13,500 , compounding on a semi-annual basis commencing on September 9, 2020, and ending on September 9, 2023.

The Accretion Debentures are payable in cash, but do not bear cash interest and are not

convertible into Supreme Shares.

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 Supreme Arrangement (as defined below), 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 (as defined below) 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.

As a result of the Supreme Arrangement (as defined below), 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, the Company, Supreme Cannabis and the Trustee entered into a supplemental indenture whereby the Company agreed to issue common shares upon conversion of any Supreme Debenture.

In addition, the Company may force conversion of the Supreme Debentures outstanding with 30 days’ notice if the daily volume weighted average trading price of the Company’s common shares is greater than $38.59 for any 10 consecutive trading days.

The Company, Supreme Cannabis and the Trustee entered into a further supplemental indenture whereby the Company 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.

8 unchanged sentences

The components of other liabilities are as follows:

As at June 30, 2021

As at September 30, 2021

As at March 31, 2021

9 unchanged sentences

Adjustments to redemption amount

As at June 30, 2021

Redemption of redeemable noncontrolling interest

As at September 30, 2021

As at March 31, 2020

1 unchanged sentence

Adjustments to redemption amount

As at June 30, 2020

As at September 30, 2020

SHARE CAPITAL

2 unchanged sentences

(i) Equity financings

There were no equity financings during the three months ended June 30, 2021 (three months ended June 30, 2020 - no ne).

There were no equity financings during the six months ended September 30, 2021 (six months ended September 30, 2020 - no ne).

(ii) Other issuances of common shares

During the three months ended June 30, 2021, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

During the six months ended September 30, 2021, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

Number of shares

1 unchanged sentence

Completion of acquisition milestones

During the three months ended June 30, 2020, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

Other issuances

During the six months ended September 30, 2020, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

Number of shares

5 unchanged sentences

Expiry of warrants

Balance outstanding at June 30, 2021 1

Balance outstanding at September 30, 2021 1

1 This balance excludes the Tranche C Warrants (as defined below), which represent a derivative liability and have nominal value.

1 unchanged sentence

Exercise of warrants

Balance outstanding at June 30, 2020 1

Expiry of warrants

Balance outstanding at September 30, 2020 1

1 This balance excludes the Tranche C Warrants (as defined below), which represent a derivative liability and have nominal value.

6 unchanged sentences

All directors, officers, employees and independent contractors of the Company are eligible to receive awards of common share purchase options (“Options”), restricted share units (“RSUs”), performance share units (“PSUs”), deferred share units, stock appreciation rights, performance awards, or other shares-based awards (collectively, the “Awards”) under the Omnibus Plan.

The maximum number of common shares reserved for Awards is 39,311,910 at June 30, 2021.

As of June 30, 2021, the only Awards issued have been Options, RSUs and PSUs under the Omnibus Plan.

The Omnibus Plan is administered by the Corporate Governance, Compensation and Nominating committee of the Company (“CGC&N Committee”) which establishes exercise prices, at not less than the market price at the date of grant, and expiry dates.

The maximum number of common shares reserved for Awards is 39,338,306 at September 30, 2021.

As of September 30, 2021, the only Awards issued have been Options, RSUs and PSUs under the Omnibus Plan.

The Omnibus Plan is administered by the Corporate Governance, Compensation and Nominating Committee of the Company (the “CGC&N Committee”) which establishes exercise prices, at not less than the market price at the date of grant, and expiry dates.

Options under the Omnibus Plan generally become exercisable in increments with 1/3 being exercisable on each of the first, second and third anniversaries from the date of grant, with expiry dates set at ten years from issuance, subject to the capacity of the CGC&N Committee pursuant to the Omnibus Plan to provide for an expiry date in an award agreement for the grant of options, which is less than ten years from issuance.

1 unchanged sentence

Under the Company’s Employee Share Purchase Plan (the “Purchase Plan”) the aggregate number of common shares that may be issued is 600,000 , and the maximum number of common shares which may be issued in any one fiscal year shall not exceed 300,000 .

For the three months ended June 30, 2021, no common shares were issued under the Purchase Plan.

The following is a summary of the changes in the Options outstanding during the three months ended June 30, 2021:

For the three and six months ended September 30, 2021, 61,103 common shares were issued under the Purchase Plan.

The following is a summary of the changes in the Options outstanding during the six months ended September 30, 2021:

exercise price

4 unchanged sentences

Options forfeited

Balance outstanding at June 30, 2021

The following is a summary of the Options as at June 30, 2021:

Balance outstanding at September 30, 2021

The following is a summary of the Options as at September 30, 2021:

Options Outstanding

7 unchanged sentences

Range of Exercise Prices

June 30, 2021

September 30, 2021

$0.06 - $24.62

3 unchanged sentences

$42.85 - $171.54

At June 30, 2021, the weighted average exercise price of Options outstanding and Options exercisable was $ 36.50 and $ 37.23 , respectively (March 31, 2021 – $ 36.79 and $ 36.97 , respectively).

The Company recorded $ 8,044 in share-based compensation expense related to Options issued to employees and contractors for the three months ended June 30, 2021 (three months ended June 30, 2020 – $ 22,328 ).

The share-based compensation expense for the three months ended June 30, 2021 includes an amount related to 1,559,413 Options being provided in exchange for services which are subject to performance conditions (for the three months ended June 30, 2020 – 2,060,068 ).

During the three months ended June 30, 2021, the Company issued replacement options to employees in relation to the acquisition of Supreme Cannabis (Note 26) and recorded share-based compensation expense of $ 823 .

The Company uses the Black-Scholes option pricing model to establish the fair value of Options granted during the three months ended June 30, 2021 and 2020, on their measurement date by applying the following assumptions:

At September 30, 2021, the weighted average exercise price of Options outstanding and Options exercisable was $ 36.46 and $ 38.07 , respectively (March 31, 2021 – $ 36.79 and $ 36.97 , respectively).

The Company recorded $ 10,298 and $ 18,342 , respectively, in share-based compensation expense related to Options and Purchase Plan shares issued to employees and contractors for the three and six months ended September 30, 2021 (three and six months ended September 30, 2020 – $ 15,525 and $ 37,853 , respectively).

The share-based compensation expense for the six months ended September 30, 2021 includes an amount related to 1,559,413 Options being provided in exchange for services which are subject to performance conditions (for the six months ended September 30, 2020 – 2,060,068 ).

The Company issued replacement options to employees in relation to the acquisition of Supreme Cannabis (Note 26) and during the three and six months ended September 30, 2021, recorded share-based compensation expense of $nil and $ 823 , respectively.

The Company uses the Black-Scholes option pricing model to establish the fair value of Options granted during the three months ended September 30, 2021 and 2020, on their measurement date by applying the following assumptions:

September 30,

Risk-free interest rate

7 unchanged sentences

The risk-free rate was based on zero coupon Canada government bonds with a remaining term equal to the expected life of the Options.

During the three months ended June 30, 2021, 205,335 Options were exercised ranging in price from $ 2.68 to $ 36.34 for gross proceeds of $ 3,592 (for the three months ended June 30, 2020 – 711,472 Options were exercised ranging in price from $ 1.32 to $ 27.99 for gross proceeds of $ 4,722 ).

For the three months ended June 30, 2021, the Company recorded $ 2,295 , in share-based compensation expense related to RSUs (for the three months ended June 30, 2020 – $ 3,842 ).

The following is a summary of the changes in the Company’s RSUs during the three months ended June 30, 2021:

Number of RSUs

During the six months ended September 30, 2021, 332,105 Options were exercised ranging in price from $ 0.06 to $ 36.34 for gross proceeds of $ 4,886 (for the six months ended September 30, 2020 – 1,431,880 Options were exercised ranging in price from $ 0.06 to $ 27.99 for gross proceeds of $ 10,756 ).

For the three and six months ended September 30, 2021, the Company recorded $ 3,690 and $ 5,985 , respectively, in share-based compensation expense related to RSUs and PSUs (for the three and six months ended September 30, 2020 – $ 2,343 and $ 6,185 , respectively).

The following is a summary of the changes in the Company’s RSUs and PSUs during the six months ended September 30, 2021:

Number of RSUs and PSUs

Balance outstanding at March 31, 2021

RSUs released

RSUs cancelled and forfeited

Balance outstanding at June 30, 2021

During the three months ended June 30, 2021, the Company recorded $1,699 (for the three months ended June 30, 2020 – $2,970), in share-based compensation expense related to acquisition milestones.

During the three months ended June 30, 2021, 9,888,801 common shares, (during the three months ended June 30, 2020 – 751,922 ) were released on completion of acquisition milestones.

At June 30, 2021, there were up to 645,509 common shares to be issued on the completion of acquisition and asset purchase milestones.

RSUs and PSUs granted

RSUs and PSUs released

RSUs and PSUs cancelled and forfeited

Balance outstanding at September 30, 2021

During the three and six months ended September 30, 2021, the Company recorded $1,706 and $3,405, respectively, in share-based compensation expense related to acquisition milestones (for the three and six months ended September 30, 2020 – $2,908 and $9,114, respectively).

During the three and six months ended September 30, 2021, 59,258 and 9,948,059 , common shares, respectively, were released on completion of acquisition milestones (during the three and six months ended September 30, 2020 – 397,164 and 1,149,086 , respectively).

At September 30, 2021, there were up to 656,709 common shares to be issued on the completion of acquisition and asset purchase milestones.

In certain cases, the number of common shares to be issued is based on the volume weighted average share price at the time the milestones are met.

The number of common shares has been estimated assuming the milestones were met at June 30, 2021.

The number of common shares has been estimated assuming the milestones were met at September 30, 2021.

The number of common shares excludes common shares that are to be issued on July 4, 2023 to the previous shareholders of Spectrum Colombia S.A.S.

5 unchanged sentences

BioSteel has a stock option plan under which non-transferable options to purchase common shares of BioSteel may be granted to directors, officers, employees, or independent contractors of the BioSteel.

As at June 30, 2021, BioSteel had 1,549,800 (March 31, 2021 – 1,581,000 ) options outstanding which vest in equal tranches over a 5-year period.

As at September 30, 2021, BioSteel had 1,537,800 (March 31, 2021 – 1,581,000 ) options outstanding which vest in equal tranches over a 5-year period.

In determining the amount of share-based compensation related to these options, BioSteel used the Black-Scholes option pricing model to establish the fair value of options on their measurement date.

The Company recorded $ 265 of share-based compensation expense related to the BioSteel options during the three months ended June 30, 2021 (three months ended June 30, 2020 – $ 244 ), with a corresponding increase in noncontrolling interest.

The Company recorded $ 259 and $ 524 of share-based compensation expense related to the BioSteel options during the three and six months ended September 30, 2021, respectively, with a corresponding increase in noncontrolling interest (three and six months ended September 30, 2020 – $ 418 and $ 662 , respectively).

RIV Capital Inc.

(“RIV Capital”) share-based payments

For the three months ended June 30, 2020, the Company recorded $ 1,301 in share-based compensation expense related to its former subsidiary, RIV Capital.

For the three and six months ended September 30, 2020, the Company recorded $ 790 and $ 2,091 , respectively, in share-based compensation expense related to its former subsidiary, RIV Capital.

The Company disposed of its investment in RIV Capital on February 23, 2021.

6 unchanged sentences

Other comprehensive income (loss)

As at June 30, 2021

As at September 30, 2021

Foreign currency translation adjustments

3 unchanged sentences

Other comprehensive loss

As at June 30, 2020

As at September 30, 2020

NONCONTROLLING INTERESTS

4 unchanged sentences

Share-based compensation

Ownership changes

As at June 30, 2021

As at September 30, 2021

As at March 31, 2020

4 unchanged sentences

Ownership changes

As at June 30, 2020

As at September 30, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS

12 unchanged sentences

Quoted prices

June 30, 2021

September 30, 2021

Short-term investments

44 unchanged sentences

Increase or decrease in discount rate will result in a decrease or increase in fair value

TerrAscend warrants - October 2019, March 2020, December 2020

TerrAscend warrants - October 2019, March 2020

Black-Sholes option pricing model

Probability and timing of US legalization

Increase or decrease in probability of US legalization will result in an increase or decrease in fair value

TerrAscend warrants - December 2020

Monte Carlo simulation model

28 unchanged sentences

Increase or decrease in future wholesale price and production levels will result in an increase or decrease in fair value

During the three months ended June 30, 2021 and June 30, 2020, there were no transfers of amounts between levels .

During the six months ended September 30, 2021 and September 30, 2020, there were no transfers of amounts between levels .

Revenue is dissaggregated as follows:

Three months ended

Six months ended

September 30,

Canadian recreational cannabis net revenue

7 unchanged sentences

Other consumer products revenue

1 Canadian recreational business-to-business net revenue reflects excise taxes of $ 17,834 (three months ended June 30, 2020 – $ 7,246 ).

2 Canadian medical cannabis net revenue reflects excise taxes of $ 1,380 (three months ended June 30, 2020 – $ 1,426 ).

1 Canadian recreational business-to-business net revenue during the three and six months ended September 30, 2021 reflects excise taxes of $ 12,913 and $ 30,747 , respectively (three and six months ended September 30, 2020 – $ 14,200 and $ 21,446 , respectively).

2 Canadian medical cannabis net revenue for the three and six months ended September 30, 2021 reflects excise taxes of $ 1,361 and $ 2,741 , respectively (three and six months ended September 30, 2020 – $ 1,362 and $ 2,788 , respectively).

The Company recognizes variable consideration related to estimated future product returns and price adjustments as a reduction of the transaction price at the time revenue for the corresponding product sale is recognized.

Net revenue reflects actual returns and variable consideration related to estimated returns and price adjustments in the amount of $ 3,000 for the three months ended June 30, 2021 (three months ended June 30, 2020 – $ 3,400 ).

As of June 30, 2021, the liability for estimated returns and price adjustments was $ 8,387 (March 31, 2021 – $ 6,441 ).

Net revenue reflects actual returns and variable consideration related to estimated returns and price adjustments in the amount of $nil and $ 3,000 for the three and six months ended September 30, 2021, respectively (three and six months ended September 30, 2020 – $ 3,750 and $ 7,150 , respectively).

As of September 30, 2021, the liability for estimated returns and price adjustments was $ 7,146 (March 31, 2021 – $ 6,441 ).

OTHER INCOME (EXPENSE), NET

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Three months ended

Six months ended

September 30,

Fair value changes on other financial assets

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Interest expense

Foreign currency loss

Loss on disposal of consolidated entity

Foreign currency gain (loss)

Gain/(loss) on disposal of consolidated entity

Other income (expense), net

There have been no material changes to income tax matters in connection with normal course operations during the three months ended June 30, 2021.

There have been no material changes to income tax matters in connection with normal course operations during the six months ended September 30, 2021.

The Company is subject to income tax in numerous jurisdictions with varying income tax rates.

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Three months ended

Basic earnings (loss) per share computation

Net income (loss) attributable to common shareholders

Six months ended

September 30,

Basic (loss) earnings per share computation

Net (loss) income attributable to common shareholders

of Canopy Growth

Weighted average number of common shares outstanding

Basic earnings (loss) per share

Diluted earnings (loss) per share computation

Net income (loss) used in the computation of basic earnings (loss) per share

Numerator adjustments for diluted earnings (loss) per share:

Adjustment to net loss attributable to noncontrolling interests and redeemable

noncontrolling interest

Basic (loss) earnings per share

Diluted (loss) earnings per share computation

Net (loss) income used in the computation of basic (loss) earnings

Numerator adjustments for diluted (loss) earnings per share:

Adjustment to net loss attributable to noncontrolling interests

and redeemable noncontrolling interest

Removal of fair value changes on convertible senior notes

Net income (loss) used in the computation of diluted earnings (loss) per share

Weighted average number of common shares outstanding used in the computation

of basic earnings (loss) per share

Denominator adjustments for diluted earnings (loss) per share:

Adjustment to interest expense on Supreme convertible

Net (loss) income used in the computation of diluted (loss)

earnings per share

Weighted average number of common shares outstanding used in the

computation of basic (loss) earnings per share

Denominator adjustments for diluted (loss) earnings per share:

Dilutive impact of assumed exercise or conversion of:

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Other securities

Weighted average number of common shares for computation of diluted

earnings (loss) per share

Diluted earnings (loss) per share 1

Weighted average number of common shares for computation of

diluted (loss) earnings per share

Diluted (loss) earnings per share 1

1 In computing diluted earnings per share, incremental common shares are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive .

The following table summarizes the consolidated balance sheet impact at acquisition of the Company’s business combinations that occurred in the three months ended June 30, 2021:

The following table summarizes the consolidated balance sheet impact at acquisition of the Company’s business combinations that occurred in the six months ended September 30, 2021:

Cash and cash equivalents

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Acreage is only permitted to issue an aggregate of up to 32,700,000 Fixed Shares and Floating Shares.

At June 30, 2021, the right and the obligation (the “Acreage financial instrument”) to acquire the Fixed Shares represents a financial liability of $ 450,000 (March 31, 2021 – $ 600,000 ), as the estimated fair value of the Acreage business is less than the estimated fair value of the consideration to be provided upon the exercise of the Acreage financial instrument.

Fair value changes of $ 150,000 were recognized in other income (expense), net in the three months ended June 30, 2021 (three months ended June 30, 2020 – $ 35,000 ) (see Note 23).

At September 30, 2021, the right and the obligation (the “Acreage financial instrument”) to acquire the Fixed Shares represents a financial liability of $ 162,000 (March 31, 2021 – $ 600,000 ), as the estimated fair value of the Acreage business is less than the estimated fair value of the consideration to be provided upon the exercise of the Acreage financial instrument.

Fair value changes of $ 288,000 and $ 438,000 were recognized in other income (expense), net in the three and six months ended September 30, 2021, respectively (three and six months ended September 30, 2020 – $ 88,151 and $ 53,151 , respectively) (see Note 23).

The fair value determination includes a high degree of subjectivity and judgment, which results in significant estimation uncertainty.

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The amount advanced on September 23, 2020 pursuant to the Debenture has been recorded in other financial assets (see Note 9), and the Company has elected the fair value option under ASC 825 (see Note 21).

At June 30, 2021, the estimated fair value of the debenture issued to an affiliate of the Company by Acreage Hempco was $ 28,391 (March 31, 2021 – $ 27,448 ), measured using a discounted cash flow model, and fair value changes and foreign currency translation adjustments totaling $ 943 were recognized in other income (expense), net in the three months ended June 30, 2021 (see Note 23).

At September 30, 2021, the estimated fair value of the Debenture issued to an affiliate of the Company by Acreage Hempco was $ 26,565 (March 31, 2021 – $ 27,448 ), measured using a discounted cash flow model (see Note 23).

Refer to Note 9 for details on fair value changes, foreign currency translation adjustment, and interest received during the six months ended September 30, 2021.

An additional US$ 50,000 may be advanced pursuant to the Debenture subject to the satisfaction of certain conditions by Acreage Hempco.

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and (ii) common shares with a value of $ 1.583 billion, during the period commencing on April 18, 2019 and ending on the date that is 24 months after the date that CBI exercises all of the Tranche A Warrants.

The share repurchase credit feature is accounted for as a derivative liability, with the fair value continuing to be $nil at June 30, 2021.

The share repurchase credit feature is accounted for as a derivative liability, with the fair value continuing to be $nil at September 30, 2021.

The modifications to the Tranche A Warrants resulted in them meeting the definition of a derivative instrument under ASC 815 - Derivatives and Hedging (“ASC 815”).

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The Tranche B Warrants are accounted for as derivative instruments measured at fair value in accordance with ASC 815.

At June 30, 2021, the fair value of the warrant derivative liability was $ 299,318 (March 31, 2021 – $ 615,575 ), and fair value changes of $ 316,257 have been recognized in other income (expense), net in the three months ended June 30, 2021 (three months ended June 30, 2020 – gain of $ 35,369 ) (see Note 23).

At September 30, 2021, the fair value of the warrant derivative liability was $ 104,773 (March 31, 2021 – $ 615,575 ), and fair value changes of $ 194,545 and $ 510,802 have been recognized in other income (expense), net in the three and six months ended September 30, 2021, respectively (three and six months ended September 30, 2020 – gain of $ 65,174 and $ 100,543 , respectively) (see Note 23).

The fair value determination includes a high degree of subjectivity and judgment, which results in significant estimation uncertainty.

See Note 21 for additional details on how the fair value of the warrant derivative liability is calculated on a recurring basis.

The Tranche C Warrants are accounted for as derivative instruments, with the fair value continuing to be $nil at June 30, 2021.

The Tranche C Warrants are accounted for as derivative instruments, with the fair value continuing to be $nil at September 30, 2021.

SEGMENT INFORMATION

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(ii) This Works beauty, skincare, wellness and sleep products;

(iii) BioSteel sports nutrition beverages, mixes, protein, gum and mints;

BioSteel sports nutrition beverages, mixes, protein, gum and mints;

and (iv) other revenue sources.

The Company’s CODM evaluates the performance of these two segments focusing on (i) segment net revenue, and (ii) segment gross margin and gross margin

percentage as the measure of segment profit or loss.

The Company’s CODM evaluates the performance of these two segments focusing on ( i ) segment net revenue, and (ii) segment gross margin and gross margin percentage as the measure of segment profit or loss.

Accordingly, information regarding segment net revenue and segment gross margin for the comparative periods has been recast to reflect the aforementioned change in reportable segments.

Three months ended

Six months ended

September 30,

Segmented net revenue

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Share-based compensation

Expected credit losses on financial assets and relates charges

Asset impairment and restructuring costs

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Six months ended

September 30,

United States

Disaggregation of property, plant and equipment by geographic area:

September 30,

United States

For the three months ended June 30, 2021, one customer represented more than 10% of the Company’s net revenue (three months ended June 30, 2020 – one ).

For the three months ended September 30, 2021, no customer represented more than 10% of the Company’s net revenue (three months ended September 30, 2020 – none ).

For the six months ended September 30, 2021, one customer represented more than 10% of the Company’s net revenue (six months ended September 30, 2020 – none ).

SUBSEQUENT EVENTS

Plan to Acquire Wana

On October 14, 2021, the Company and Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, “Wana” and each, a “Wana Entity”) announced that they have entered into definitive agreements (the “Wana Agreements”) providing the Company with the right, upon the occurrence or waiver (at the discretion of the Company) of the

Triggering Event , to acquire 100 % of the outstanding membership interests of Wana .

Wana manufactures and sells gummies in the U.S.

state of Colorado and licenses its intellectual property to partners, who manufacture, distribute, and sell Wana -branded gummies across the United States, including in California, Arizona, Illinois, Michigan and Florida .

This gives Wana a total footprint of 12 U.S.

states currently, and across Canada.

The Wana Agreements are structured as three separate option agreements whereby the Company has a call option to acquire 100 % of the membership interests in each Wana Entity.

As consideration for entering into the Wana Agreements, the Company made an upfront cash payment (the “Upfront Payment”) in the aggregate amount of US$ 297,500 .

Upon exercise of the right to acquire each Wana Entity, the Company will make a payment equal to 15 % of the fair market value of such Wana Entity at the time the option is exercised (the “Call Option Payments”).

As additional consideration for the right to acquire each Wana Entity, the Company may make additional deferred payments (the “Deferred Payments”) in respect of each Wana Entity as of the 2.5 and 5-year anniversary of the Upfront Payment, less certain deductions.

At the Company’s option, the Call Option Payments and the Deferred Payments may be satisfied in cash, common shares or a combination thereof at the Company’s sole discretion.

Until such time as the Company exercises its right to acquire each Wana Entity, the Company will have no economic or voting interest in Wana, the Company will not control Wana, and the Company and Wana will continue to operate independently.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements