Canopy Growth (CGC) risk factors, FY2025 10-K

Risks Relating to Our Growth Strategy

1. 01We may not be able to achieve or maintain profitability and may continue to incur losses in the future
2. 02We 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
3. 03In 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
4. 04As 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
5. 05There 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
6. 06We may not be able to secure adequate or reliable sources of funding required to operate our business
7. 07Controlled 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
8. 08Investments 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
9. 09may 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
10. 10We are subject to risks relating to our current and future operations in emerging markets

Risks related to Canopy USA

1. 11Our 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
2. 12As 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
3. 13We are unable to control Canopy USA
4. 14Canopy USA may divert the attention of our management or impact our ability to attract or retain key personnel
5. 15Canopy USA may impact our third party business relationships

Risks Relating to Our Products

1. 16We are subject to risks and uncertainty regarding future product development
2. 17We may not be successful in maintaining the consumer brand recognition and loyalty of our products
3. 18Our products have in the past and may in the future be subject to recalls
4. 19The 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
5. 20Future research may lead to findings that vaporizers, electronic cigarettes and related products are not safe for their intended use

Risks Relating to Regulation and Compliance

1. 21Cannabis is a controlled substance in the United States and therefore subject to the CSA
2. 22We 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
3. 23We 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
4. 24Changes in the laws, regulations and guidelines governing cannabis and hemp may adversely affect our business and that of our investments
5. 25The 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
6. 26Federal 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
7. 27We may be subject to heightened scrutiny by regulatory authorities
8. 28We are constrained by law in our ability to market and advertise our products
9. 29We 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
10. 30Anti-money laundering and other banking laws and regulations can limit our ability to access financing and hamper our growth
11. 31We 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
12. 32We must rely on local counsel and consultants with respect to laws and regulations in countries outside of Canada
13. 33Any rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business

Risks Relating to Competition, Performance and Operations

1. 34We may not successfully execute our business strategy
2. 35We 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
3. 36We 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
4. 37The adult-use cannabis market in Canada has in the past been and may in the future become oversupplied
5. 38We 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
6. 39We may be unsuccessful in competing in the legal cannabis market in Canada and in international markets
7. 40We face competition from the illegal cannabis market in every market we sell our products
8. 41Regulatory non-compliance by licensed cannabis competitors may have an adverse effect on our business, results of operations and financial condition
9. 42The Canadian excise duty framework affects our profitability
10. 43Failure 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
11. 44We rely on third-party manufacturers and distributors to manufacture and distribute certain of our products, and those third parties may not perform their obligations
12. 45We are vulnerable to third-party transportation risks
13. 46The 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
14. 47Our business may be impacted as a result of increased rates of inflation
15. 48Our 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
16. 49We, or the cannabis industry more generally, may receive unfavorable publicity or become subject to negative consumer perception
17. 50The 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
18. 51We are subject to liability arising from any fraudulent or illegal activity by our employees, contractors and consultants
19. 52Our 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
20. 53We are subject to risks inherent in an agricultural business, including the risk of crop failure
21. 54The 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
22. 55We 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
23. 56information 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
24. 57We are and may become subject to, or prosecute, litigation in the ordinary course of our manufacturing, marketing, distribution and sale of our products
25. 58We may be subject to product liability claims
26. 59We rely on third-party testing and analytical methods which are validated but still being standardized
27. 60We may decide, or be required, to divest or restructure certain of our interests
28. 61Fluctuations in wholesale and retail prices could result in earnings volatility
29. 62Our Credit Facility contains restrictive covenants that may limit our operating flexibility
30. 63We 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
31. 64We are exposed to counterparty risks and liquidity risks that may impact our ability to obtain loans and other credit facilities on favorable terms

Risks Relating to Our Intellectual Property

1. 65We 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
2. 66Our 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
3. 67We 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

Risks Relating to the Canopy Shares and the Exchangeable Shares

1. 68The market price for the Canopy Shares has in the past been volatile and may continue to be volatile and subject to significant fluctuation
2. 69the realization of any of the other risk factors set forth herein
3. 70The 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
4. 71restrictions on the issuance of securities, each of which may make it difficult for us to conduct our business and raise working capital
5. 72limits 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
6. 73It is not anticipated that any dividend will be paid to holders of the Canopy Shares for the foreseeable future
7. 74Investors in the United States may have difficulty bringing actions and enforcing judgments against us and others based on securities law civil liability provisions
8. 75Future sales or issuances of securities could adversely affect the prevailing market price of our securities
9. 76Sales 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
10. 773,542,716 options exercisable into 3,542,716 Canopy Shares at an average exercise price of $31.08 per Canopy Share
11. 78The Exchangeable Shares have different rights from the Canopy Shares and there may never be a trading market for the Exchangeable Shares
12. 79Future sales of the Canopy Shares and/or Exchangeable Shares by the CBI Group could cause the market price for the Canopy Shares to fall
13. 80The 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

General Risks

1. 81We are dependent on our senior management
2. 82Our business, financial condition, results of operations and cash flow may be negatively impacted by challenging global economic conditions
3. 83Natural disasters, pandemic outbreaks, boycotts and geopolitical events or acts of terrorism could adversely affect our operations and financial results
4. 84Our business may be negatively affected by climate change, weather conditions and the availability of natural resources
5. 85Our 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
6. 86We 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
7. 87Tax 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