
PART I. FINANCIAL INFORMATION Details the company's unaudited condensed interim consolidated financial statements and related disclosures for Q1 FY2026 Item 1. Financial Statements Presents Canopy Growth Corporation's unaudited condensed interim consolidated financial statements for Q1 FY2026, including balance sheets, operations, cash flows, and notes Condensed Interim Consolidated Balance Sheets Details the company's financial position as of June 30, 2025, with $904.7 million total assets, $415.7 million total liabilities, and stable equity Consolidated Balance Sheet Summary (in thousands of Canadian dollars) | Balance Sheet Item | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Current Assets | $303,359 | $294,574 | | Total Assets | $904,671 | $917,701 | | Total Current Liabilities | $98,669 | $94,404 | | Total Liabilities | $415,695 | $430,488 | | Total Shareholders' Equity | $488,976 | $487,213 | Condensed Interim Consolidated Statements of Operations and Comprehensive Loss Reports 9% YoY net revenue increase to $72.1 million for Q1 FY2026, with net loss significantly narrowing to $41.5 million Statement of Operations Summary (in thousands of Canadian dollars) | Metric | Q1 FY2026 (3 mos ended Jun 30, 2025) | Q1 FY2025 (3 mos ended Jun 30, 2024) | | :--- | :--- | :--- | | Net Revenue | $72,134 | $66,212 | | Gross Margin | $18,038 | $23,031 | | Operating Loss from Continuing Operations | $(22,624) | $(29,108) | | Net Loss from Continuing Operations | $(41,527) | $(129,191) | | Basic and Diluted Loss Per Share | $(0.22) | $(1.63) | Condensed Interim Consolidated Statements of Shareholders' Equity Shows a slight increase in total shareholders' equity to $489.0 million, driven by $38.3 million from share issuances offsetting net loss - During the quarter, the company issued common shares for gross proceeds of $38.3 million through its At-The-Market (ATM) program15 Condensed Interim Consolidated Statements of Cash Flows Highlights a significant reduction in net cash used in operating activities to $10.3 million, with a net increase in cash of $12.4 million Cash Flow Summary (in thousands of Canadian dollars) | Cash Flow Activity | Q1 FY2026 (3 mos ended Jun 30, 2025) | Q1 FY2025 (3 mos ended Jun 30, 2024) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(10,337) | $(51,780) | | Net Cash Used in Investing Activities | $(705) | $(33,029) | | Net Cash Provided by Financing Activities | $25,460 | $105,775 | | Net Increase in Cash | $12,391 | $21,856 | | Cash and Cash Equivalents, End of Period | $126,202 | $192,156 | Notes to the Condensed Interim Consolidated Financial Statements Provides critical details on accounting policies and significant events, including going concern alleviation, Canopy USA deconsolidation, and debt management - Management concludes that the substantial doubt about the Company's ability to continue as a going concern has been alleviated due to actions taken, including the sale of common shares under the February 2025 ATM Program and other potential financing and cost-saving strategies333435 - As of April 30, 2024, Canopy Growth deconsolidated the financial results of Canopy USA following structural amendments to comply with Nasdaq listing requirements and after discussions with the SEC. Canopy USA holds the company's U.S. cannabis investments, including Wana, Jetty, and Acreage525673 - During the quarter, the company sold 21,006,528 common shares for gross proceeds of $38.3 million under its February 2025 ATM Program. Subsequent to quarter-end, it sold an additional 34.6 million shares for $54.3 million132170 - The company has changed its reportable segments to two: (1) Cannabis, which includes global cannabis operations, and (2) Storz & Bickel, which includes vaporizers and accessories165166 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2026 financial performance, highlighting 9% revenue growth, gross margin decline, narrowed net loss, liquidity, and going concern alleviation Business Overview Outlines Canopy Growth's global cannabis business, focusing on Canopy USA's strategic creation and deconsolidation for U.S. market entry and Nasdaq compliance - The company's core business is the production, distribution, and sale of cannabis and related products for adult-use and medical purposes globally183 - The company has restructured its reporting into two segments: Cannabis and Storz & Bickel186189 - Canopy USA was created to hold U.S. cannabis investments (Wana, Jetty, Acreage, TerrAscend). Canopy Growth has since deconsolidated Canopy USA to comply with Nasdaq listing rules, holding a non-voting, non-controlling interest until U.S. federal permissibility187196197 Results of Operations Details Q1 FY2026 operational results, including 9% net revenue growth, 25% gross margin, reduced operating expenses, and a narrowed net loss Net Revenue by Segment (in thousands of Canadian dollars) | Segment | Q1 FY2026 | Q1 FY2025 | % Change | | :--- | :--- | :--- | :--- | | Cannabis | $56,982 | $46,093 | 24% | | Storz & Bickel | $15,152 | $20,119 | (25%) | | Total Net Revenue | $72,134 | $66,212 | 9% | Gross Margin by Segment | Segment | Q1 FY2026 Margin % | Q1 FY2025 Margin % | Basis Point Change | | :--- | :--- | :--- | :--- | | Cannabis | 24% | 33% | (900) bps | | Storz & Bickel | 29% | 39% | (1,000) bps | | Total Company | 25% | 35% | (1,000) bps | - Total operating expenses decreased 22% YoY to $40.7 million, driven by a 21% reduction in SG&A expenses and a reversal in share-based compensation237 - Adjusted EBITDA loss increased to $7.9 million from $5.3 million year-over-year, primarily due to lower gross margins, which was partially offset by SG&A cost savings256 Financial Liquidity and Capital Resources Discusses financial liquidity, confirming going concern alleviation, with $126.2 million cash, improved free cash flow, and $295.3 million total debt - The company has alleviated substantial doubt about its going concern status by completing balance sheet actions, including raising $38.3 million from its ATM program during the quarter259262 Free Cash Flow (Non-GAAP, in thousands of Canadian dollars) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,337) | $(51,780) | | Purchases of property, plant and equipment | $(1,306) | $(3,920) | | Free Cash Flow | $(11,643) | $(55,700) | - Total debt outstanding was $295.3 million as of June 30, 2025, down from $304.1 million at March 31, 2025, due to paydowns and foreign currency translation280 - Subsequent to the quarter, the company agreed to make three additional prepayments on its Credit Facility totaling US$50 million, with the first US$25 million payment made on July 31, 2025294 Item 3. Quantitative and Qualitative Disclosures About Market Risk Details exposure to market risks, including foreign currency fluctuations, interest rate changes on variable debt, and equity price volatility - The company is exposed to foreign currency risk from its U.S. and European subsidiaries. A hypothetical 10% change in the euro against the Canadian dollar would affect net assets by approximately $19.3 million312313 - The company is exposed to interest rate risk on its floating-rate debt, which had an aggregate notional value of $205.0 million as of June 30, 2025317318 - The company holds financial assets and liabilities, such as investments in shares, warrants, and convertible debentures, which are subject to equity price risk319 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The Chief Executive Officer and Interim Chief Financial Officer concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective323 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls324 PART II. OTHER INFORMATION Provides additional information not covered in financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Details ongoing legal proceedings, including shareholder class action lawsuits and an SEC investigation related to BioSteel financial reporting - The company is a defendant in putative class action lawsuits in Ontario, British Columbia, and New York, all alleging misrepresentations in financial disclosures328329332 - The company is the subject of an ongoing SEC investigation as a result of self-reporting its internal review of financial reporting matters related to the BioSteel business unit330 Item 1A. Risk Factors Reports no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report have occurred336 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities during the period - None337 Item 3. Defaults Upon Senior Securities Reports no defaults upon senior securities during the period - None338 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable339 Item 5. Other Information Reports no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025340 Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including articles of incorporation, material contracts, and officer certifications - Exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer, and various agreements such as the Third Amended and Restated Credit Agreement341