Canopy Growth Corporation

Item 1A. Risk Factors. 

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A in the Annual Report. Except as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A in our Annual Report.

The 2025 Budget, if passed, could adversely affect the Companys profitability and medical cannabis revenues.

The Company's revenue from medical cannabis sales could potentially decline due to changes announced in the Government of Canada's proposed 2025 federal budget released on November 4, 2025 (the "2025 Budget"). Among other things, the 2025 Budget proposes adjusting medical cannabis benefits by decreasing the reimbursement rate for medical cannabis offered by the Royal Canadian Mounted Police (the "RCMP") and Veterans Affairs Canada ("VAC") to eligible RCMP members and veterans respectively, from $8.50 per gram to $6.00 per gram (the Proposed Reimbursement Adjustment). The 2025 Budget is expected to be voted on by the House of Commons in November 2025. The Company cannot predict the entire impact of the Proposed Reimbursement Adjustment or the date upon which the Proposed Reimbursement Adjustment would be implemented if the 2025 Budget is passed. The decreased reimbursement rate for eligible RCMP members and veterans will require that these RCMP members and veterans pay for any un-reimbursed cost of medical cannabis unless we reduce the price of our medical cannabis products. As such, there is a risk that our medical cannabis revenues and gross margins may materially decline if the 2025 Budget passes. This reduction could adversely impact the Company's profitability, financial performance and cash flow.

There can be no certainty that all conditions to the MTL Arrangement will be satisfied or waived.

There can be no certainty, nor can the Company provide any assurance, that all conditions precedent contained in the MTL Arrangement Agreement will be satisfied or waived. The MTL Arrangement is subject to certain conditions precedent which, among other things, includes the receipt of MTL shareholder and regulatory approval. There can be no certainty, nor can the Company provide any assurance, that these conditions will be satisfied, or if satisfied, when they will be satisfied. If such conditions precedent are not satisfied, it may result in the acquisition of MTL not being completed. In such event, the price of the Canopy Shares may decline to the extent that the current market price of the Canopy Shares reflects a market assumption that the acquisition of MTL will be completed and that we will realize certain anticipated benefits of the acquisition.

In the event Acreage or Wana, as guarantor, cannot satisfy the debt obligations as they become due, the Acreage and Wana Debt may not be repaid and the Company may lose the entirety of its investment in the Acreage and Wana Debt, and, in the event Acreage or Wana are unable to continue as a going concern, which may occur in the event that the ARCA Lender enforces its security over the Acreage and Wana Debt, there would be a negative impact on Canopy USAs business, financial results and operations and have an adverse impact on the Companys U.S. strategy, and, potentially, negatively affect the share price of the Canopy Shares.

Acreage is currently in default under the Third ARCA. The portion of the Acreage and Wana Debt owing to the ARCA Lender ranks in priority to the portion of the Acreage and Wana Debt owing to the Company and may be exercised by the ARCA Lender over the assets pledged as security under the Acreage and Wana Debt. In the event that the lenders exercise any remedies under the Third ARCA, the Acreage and Wana Debt may not be repaid, and the Company may lose the entirety of its investment in the Acreage and Wana Debt. In addition, Acreage and/or Wana may be required to terminate or significantly curtail their operations or enter into arrangements with third parties that may require Acreage and/or Wana to relinquish rights to certain aspects of their business and/or dispose of certain assets, which would have a negative impact on Canopy USAs business, financial results and operations and have an adverse impact on the Companys U.S. strategy, and, ultimately, the Companys financial results and operations.

In the event Acreage or Wana are unable to continue as a going concern, which may occur in the event that the ARCA Lender enforces its security over the Acreage and Wana Debt, this would have a negative impact on Canopy USAs business, financial results and operations and have an adverse impact on the Companys U.S. strategy, and, potentially, negatively affect the share price of the Canopy Shares.

Acreages and Wanas continuation as a going concern is dependent upon their continued operations, which in turn is dependent upon, among other things, Acreages and Wanas ability to meet their financial requirements. There is no assurance that Acreage or 

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Wana will be successful in their plans to fund their operations and debt obligations as they become due and payable, which for greater certainty includes the debt obligations in favor of the Company in connection with the Acreage and Wana Debt.

As of December 31, 2025, the aggregate principal amount of the Acreage and Wana Debt outstanding was approximately $274.8 million (US$200.5 million), of which approximately $166.5 million (US$121.5 million) was owing to the Company and such amount is subordinate to approximately $108.3 million (US$79.0 million) owed to the ARCA Lender.